Am I the only one who is getting sick to death of all the outsourcing-bashing going on in today's local and national political campaigns?
First of all, I wish someone would explain to the American public that "outsourcing" and "offshoring" are not the same thing. Maybe it is just semantics, but it bugs me!
Now to the meat of the issue. America is not just a democracy, but an industrialized society. We have gotten to the place we are today -- whether or not it is actually a "good" place is up for debate -- in large part due to the industrial and technological advances made by business pioneers like Henry Ford, J.P. Morgan, John D. Rockefeller, etc. These individuals built businesses and industries to provide products and services that promoted growth, convenience, luxury, and wealth. And they succeeded, perhaps even beyond their own expectations, because they traded value for value. A desired product or service in return for a fair, and profitable, compensation.
But somewhere along the line, things changed. Consumers began to demand more value for less, while workers and unions demanded greater compensation for the same or even fewer man hours of labor. After squeezing as much efficiency as possible out of their processes and suppliers and paring profits to a barely sustainable level, manufacturers were left with little choice but to seek alternative means of supporting their bottom line. This was not -- and is not -- a matter of greed, but simple economics. A business cannot survive if it is not profitable.
For decades now, American consumers have been more than happy to look the other way and ignore where products were made just as long as they got what they wanted -- cheaply. I remember as a kid, there was just about no electronics product that wasn't "Made in Taiwan." Today, it's "Made in China," often for US-based businesses. Is it really so different? Why, now, is this being treated as some form of economic treason?
People lament the lost manufacturing jobs. Yes, the unemployment rate in the US is at tragic levels. But, that is not the fault of those who sent manufacturing offshore. What is their option? Maintain their manufacturing in the US and pay wages four to five times higher than in low-cost regions, pay exorbitant fuel and tax rates, and maintain huge legal teams to navigate the mire of regulations imposed by the government? Where do people expect that money to come from? There are only two options: off the bottom line or from the consumer's pocket in the form of higher prices.
If manufacturers carry the loss internally, they fail to live up to their fiduciary responsibilities to shareholders, fall behind in innovation because they do not have the resources to invest in R&D, and eventually go out of business. If they pass it along to the consumer, their sales plummet, profits decline, and they eventually go out of business. Which one of these scenarios serves the US economy or its workers? No wages, no tax revenue, and no product.
Instead of playing the role of victim and blaming those businesses that have "followed the money" offshore for the decline in US manufacturing dominance, perhaps it's time for the US worker and government to step up and admit the role they have played in forcing manufacturers to abandon their homeland.
Labor unions, once the defenders of the blue-collar worker, have grown so big, powerful, and demanding that they put a stranglehold on manufacturing management. The government's corporate tax structure, lopsided import/export policies, and inaction in the face of currency manipulation by our economic competitors have further disenfranchised the nation's largest manufacturing enterprises.
We reap what we sow; if you take away a business's ability to make money, you remove the incentive to innovate and produce. I can't say exactly what can be done to bring manufacturing back to the US, but I do believe that if you make it profitable, they will come.
Its practically impossible for developed countries like USA to stop outsourcing. The amount of business revenue associated if the manufacturing is outsourced to low wages countries like Asian regions is huge and no one in business can deny that. And also the labor laws in these countries are not very strict so its another plus point for businesses. So the heading of the article is quite apt that stop knocing outsourcing. I guess its just a polictical scenario.
Diane--I hope everyone who reads this forwards it to a US voter. The difference between outsourcing and offshoring is not well understood outside our industry. You can actually outsource and never leave the US. Offshoring has been the main job-killer, with outsourcing a contributing factor. There is also a difference between creating jobs and creatng wealth. A VC investment that takes hold does create jobs (Staples, as an example) and waelth. A failed venture costs jobs but creates wealth for those that strip the company bare.
Outsourcing public roles to private entities is a problem. Outsourcing to chase lower costs is also potentially a problem.
The fundamental problem in the US (and perhaps less so in many other OECD countries) is the quarterly perspective on performance.
When you outsource you lose flexibility since commitments are based on contracts with specific terms of service etc. What would work is that 'management' and 'workers' recognize that they are in-it together. That management doesnt look for ways to transfer most of the rewards of performance to themselves and deny to the workers. That management compensation is several thousand times that of the floor workers. That money shufflers (private equity) get the preponderance of reward.
But then, who am I kidding. People in power (and wealth) will continue to try to garner ever more. That greed cannot be legislated away, or 'niceness' be required for citizenship. That cultures do not change except after a major national or even global trauma.
Coming back to ground level: when outsourcing one needs to be sure that the lower costs are not just teaser rates, and that one factors in the 'cost' of loss of flexibility and control.
I am very impressed with your article, Diane. To help the naysayers understand your points, I'll direct them to a place they'll find to be very uncomfortable:
"To trade by means of money is the code of the men of good will. Money rests on the axiom that every man is the owner of his mind and his effort. Money allows no power to prescribe the value of your effort except the voluntary choice of the man who is willing to trade you his effort in return. Money permits you to obtain for your goods and your labor that which they are worth to the men who buy them, but no more. Money permits no deals except those to mutual benefit by the unforced judgment of the traders. Money demands of you the recognition that men must work for their own benefit, not for their own injury, for their gain, not their loss-the recognition that they are not beasts of burden, born to carry the weight of your misery-that you must offer them values, not wounds-that the common bond among men is not the exchange of suffering, but the exchange of goods. Money demands that you sell, not your weakness to men's stupidity, but your talent to their reason; it demands that you buy, not the shoddiest they offer, but the best that your money can find. And when men live by trade-with reason, not force, as their final arbiter-it is the best product that wins, the best performance, the man of best judgment and highest ability-and the degree of a man's productiveness is the degree of his reward. This is the code of existence whose tool and symbol is money. Is this what you consider evil?"
Yet we hope that they realize the happy existence they have while typing away on a smartphone was brought forth by people who did not follow the juvenile theories of "greed" they profess.
Until and of the populace understands that human dignity is not a product of gov't force, restriction of trade, or taxing the rich, they will continue to periodically enslave themselves.
thanks for your comments. Just curious though, it seems like you equate the motivation to build on one's wealth with greed. Why is it that if a CEO seeks to grow his wealth he is greedy, but it is OK for a shop worker to aspire to higher wages? Why do you vilify the executive for his success? It seems to me that without his ambition the shop worker may not have a job in the first place.
Motivation to building wealth in an equitable way is fine and good. But building while pushing down on those below you is greed; just like consensual relationships are fine, but relationships with subordinates are not. I am not bothered by the CEO making more as long as when things go south they take the fall as hard as the workers do. They play by the rules of the game, so they are not doing anything illegal, but perhaps lacking in 'ethics', and marginally 'immoral'.
The management set their own rules, the shop worker has to live by the rules set by the management. I know firsthand of a few cases where management established the incentive plan, made the decisions to maximize their own rewards, and 2 years later the comapny was so far behind the technology curve that it essentially was bankrupt. Now you tell me if any floor worker could have done that.
The management compensation multiple is the clearest indicator of greed.
I have been around a while and know, from inside, that when things are going well the 'management' takes full credit, but when things go poorly there are any number of excuses, but never their own fault. Just like the claim that 'I built it all on my own', when in fact a lot of the credit for entrepreneur success rests on the infrastructure that they start with and depend on. Would they really have 'succeeded' if the great schools were not supported by the 'taxpayers'.
As long as the rules are neither influenced nor set by those playing the game, I have no problem with the thinking. Our problem is that the system is 'rigged'.
@Azmatmalik "Coming back to ground level: when outsourcing one needs to be sure that the lower costs are not just teaser rates, and that one factors in the 'cost' of loss of flexibility and control." Excellent point!
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Peter Drucker famously said "Trying to predict the future is like trying to drive down a country road at night with no lights while looking out the back window." Yet in the razor's-edge world of electronics—with a lean supply chain and just-in-time demands—the need to know the future is vital.
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