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Saturday, June 18, 2011

Protectionist pipe dreams

Someone on Yahoo Finance posted a comment that penalizing outsourcing is a solution to the jobs problem. His particular points were:

1. Taxing Outsourcing.
2. Incentives to hire Unemployed.
3. Build a Wall to keep illegals out and stop the "Reconquista."
4. Start Deporting all the illegals and their kids until we figure out who we want back on a work permit basis. Try crossing Mexico's Southern Border with Central America they will shoot you dead.

But, it's just a pipe dream. Ain't gonna happen, will never work, etc..

Here are some inconvenient facts:

No one wants to be without their iPhone/iPod/iPad, and will not take steps to jepardize that. They don't care where it's built, they just want it. Mostly, because they've been socialized at birth to consume, consume, consume, and continue to be bombarded by reinforcing brainwashing to that effect.

Much high-tech manufacturing is highly automated, which requires expensive up-front tooling costs, and US companies have a huge amount invested in outsourcing instead, a decision made years ago.

A Made In USA device would have to retail for about $1000, where none of those low-paid manufacturing workers could afford one. The sales drop, and the companies can't survive.

Because of its high cost, a Made In USA device would have to be designed to be repaired or upgraded every few years when it breaks or becomes obsolete, but charging $299 every three years instead is a much simpler subscription plan that does a better job of keeping Apple in business-- fixing old obsolete gear is labor intensive and requires significant training.

Circumventing import duties is not all that difficult, you just "assemble" in the USA, like Toyota, Honda, Nissan, etc., and people are willing to pay more for those cars because they're percieved as "better." (whether they are or not is beside the point).

Raising import duties causes other countries to respond in kind, which hurts American companies that do a lot of exporting, such as Ford, GM, etc.

The reason Made In China is so cheap, is their government doesn't care much about the human rights of their population, and the population has little voice in the matter. In the US, child labor was cheap once too, as was labor not subject to any kind of workplace safety regulations-- and that was at a time where the "Free Market" was more free than it is today, so clearly it doesn't fix itself. And the end result was, due to the abuses of the "Free Market," manufacturing in the US will have to be unionized because companies just don't protect their workers out of the kindness of their hearts, they have to be forced to do so, and US workers not only expect better treatment than Chinese workers do, they have more of a voice if they are not getting it.

Closing the borders at the same time as making Chinese products more expensive is a double hit-- eliminating the low cost labor force in the US that's low cost mostly because it's not subject to regulations (at least, they're not well enforced), and the workers don't have a voice (because they're illegals). Costs of food and manufactured goods all go up at the same time, profits dive because people can't buy as much, companies go out of business-- yeah, it's a great plan.

Both parties are in favor of "opening up" the borders and letting the "free market" reign. NAFTA started during the George H. W. Bush administration, and finalized during the Clinton administration. I don't hear either side clamoring to repeal it.

The only thing that us peons have control over, is our desire for the products-- but we're addicted. Can't live without our iPhones, Blackberries, Androids, HDTVs, Blue-Ray, Surround Sound, GPS, designer clothing, sports and recreation equipment, etc.

So how do you fix the jobs problem? Good question. The way it used to happen is to invade other countries and try to take their stuff. Both populations take a hit in the process, and one side or the other eventually comes out ahead. But that likely won't work this time. It will be interesting to see how it plays out-- to see if there's a better solution than the old method, or if we end up finding one that's worse.


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