Monday, March 10, 2008


A Lingering Question Regarding the Importance of Leadership

American workers are the most productive in the World and have been for a long, long time, although the rate of increase began to drop off about the time of The Great (Socialistic) Society in the 1960s. So why would CEOs and boards of directors forego using the World's most productive workers and relocate to foreign shores, with the unending problems of foreign investment and manufacture? Not to mention the added costs of shipping.

The answers are clear even to economic tyros like myself. The organized workers here have priced themselves out of the World market, the local and federal government have demanded too big a piece of the pie (with, for example, the World's second highest (after Japan) corporate income tax), and our legislators and bureaucrats have created a frustrating skein of regulation which are best avoided overseas.

Thomas Sowell, not surprisingly, says it much better here. Money quote:

Like the United Automobile Workers union in its heyday, unions in the steel industry and other industries piled on costs, not only in wage rates having little relationship to supply and demand, but in all sorts of red tape work rules that added costs.

State and local governments in what later became the rust belt also thought that they too could treat the industries under their jurisdiction as prey rather than assets, and siphon off more of the wealth created by those industries into state and local treasuries with ever higher taxes -- again, without considering repercussions.

In the short run, you can get away with all sorts of things. But, in the long run, the chickens come home to roost. The rust belt is where those rising costs have come home to roost.

While American auto makers are laying off workers by the thousands, Japanese auto makers like Toyota and Honda are hiring thousands of American workers. But they are not hiring them in the rust belts.

They are avoiding the rust belts, just as domestic businesses are avoiding the high costs that have been piled on over the years by both unions and governments in the rust belt regions.

In short, the rust belts have been killing the goose that lays the golden eggs. That is a viable political strategy, so long as the goose doesn't die before the next election and politicians can avoid leaving their fingerprints on the weapon.

Hack, empty suit politicians blame NAFTA or unfair trade for the decline in manufacturing jobs here. A statesman would help make investment in the land of the most productive workers in the World more economically attractive. Another reason these coming elections are too important to sit out.



This a poor attempt to politicize economics. More than a generation ago, textile mills abandoned the NE for cheaper labor in the south. A generation ago, the texile industry abandoned the south for cheaper labor overseas, in Asia and elsewhere.

The reason why our economy has become one based largely on consumerism (which includes the housing industry) and the provision of services is related to the cost of labor.

The problem, or the issue, is that the cost of everything in this country has risen to the point that many things which were considered part of the American Dream are beyond the means of the average American.

To blame rust belt industrial laborers or unions for the decline in manufacturing in those areas is an excercise in mean spirited myopia. W/ the advent of globalization and the driving influence of maximizing cooporate profits, the only way manufacturing jobs in this country will be saved will be if the workers arfe willing to work for competitive wages--competitive w/ Chinese and Indian workers, although look for manufacturing jobs in those countries to migrate to ones where labor is even cheaper.

Perhaps the costs of transport will slow or in some cases reverse thois trend, but I do not think so.
Unless American workers are willing to work for miimum wage, manufacturing will stay where labor is cheapest.

This is the free market. If it results in the poliferation of Pottervilles or even Hoovervilles, you will consider it the natural and beneficent way of the world.

But we don't stay where labor is cheapest, we stay where it is most productive, unless there are other things making it a bad place to have a factory. I agree that there are a lot of things which cause a CEO to flee the country, but who's being myopic to ignore unions, taxes and regulation? I believe in the power of enlightened self interest. Nothing else more powerful, in fact.

Unless US workers are willing to work under the same cionditions as workers in China and India, they are screwed. Only now some jobs are leaving China to go where labor is even cheaper.

I don't agree. Not cheapest, most productive is what the modern robber barons want. The Chinese and Indians may be good workers and may be happy to work for less than half the wages of Americans but if they produce less than half of the widgets the Americans would produce, the capitalist is in the hole after shipping is included.
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