I agree, Jim. The manufacturing rush to Asia will look temporary historically. Asian costs are increasing, North American manufacturing costs are coming down (through advanced automation and labor give-backs). Logistics costs (and snafus) will tip manufacturing back to the region of the market.
I think the current outsourcing trend will (and is currently) reversing, not because of a modified Tax Credit, but because of multiple other Asian issues.It's been ten years since we collectively jumped on the outsource bandwagon, and look how the playing field has leveled in that time.Asia is not the low cost haven is was in 2000 and most teams I work with consider Domestic vs. Asian sourcing when placing programs. For those who have spent time and dollars on projects with 12-hour time zone differentials, experience has taught there are other factors besides labor cost that are bringing jobs back into the US.
but I'll spare you the book version. I find it "interesting" that they asked someone from Apple to comment on this. They are a textbook example of what the problem is. They design products that have so much labor content that they can only be made in the far east. Even Corning Glass (a New York company) built a plant over there to make the front glass for the products. Steve Jobs once commented on how they changed the design at the proverbial last minute and had to re-work the production line. Things like this are due to management (using the term loosely) can impose arbitrary dead lines (under the short sighted eyes of wall street) to turn a profit in the short term. Design cycles have been made to FIT the ability to put 10,000 engineers on a problem. A perfect example is the Iphone antenna fiasco. I guess they fired the RF guy who predicted this problem in order to keep the design moving.
One very simple way to encourage investment rather than trading (in the stock market) would be by imposing a small transaction tax (maybe 0.25%) on every trade. This would be of no consequence whatsoever to the long term investor, yet it would make day trading unprofitable.
These are two separate issues here. Whether there is R&D tax credit or not, manufacturing will go off shore because of economic pressure. If you want to fix that, then require worker safety regulation on Chinese made goods before import to even the playing field. You can't tax credit your way out of off shoring. Does not make economic sense.
As for R&D tax credit. Why is it even needed if R&D is so great for economy. Company would naturally do it anyway. Company don't do R&D because they are looking at next quarter's profit. R&D is a black hole. Stock holder demand next quarter profit so they can sell out again. Stocks are held by the minutes to days selling in and out. There are no long term investment in stock. They are dumped soon as there is a small dip or if stock holder expect a small dip. If you have to hold on to a stock for 5 years, the mentality would be totally different. Stock holder would demand quality R&D. Not just R&D like Apple use to spend millions on for show before Steve Jobs came and got nothing out of it.
If you and your buddy start a business, and you invest 10k into it, you can't take the money in and out every other week. That will collapse the business. Stock gain use to be taxed at 30%. Now is only 15%. If you want to get to the root cause, give tax credit to investor who hold on to the stock for the long term. Let the market dictate R&D investment then.
Alex, I agree with you in that it is a sticky mess. As you know, when you poke a rigid, well engineered mechanical system, you can calculate the direction in which your push will send it. But when you poke a fluid, multiminded social system, you either get little or no response, or send it off in an unintended direction, or worst of all, you get poked back in retaliation using teeth and claws that you didn't even know the system had. Treating our economy as a momentum-conserving, Newtonian system only works when the individuals are connected rigidly, as in a well-trained military or a tyrannical dictatorship. Our economy is an information-bonded, non-Newtonian fluid. When a bureaucracy uses the term "Force" in their language, it is predetermined to fail.
I agree with you completely, Naperlou. Education and research support is where it's at. You mostly avoid the "picking winners and losers" argument. (Of course, you have to pick where you allocate your research dollars, but all research at the beginning is kind of by definition at the "loser" stage, since it's not productized nor profitable.) More importantly, educational support tilts towards STEM, which is what we should be doing -- incentivizing the nation's K-8 kids to learn science and math, so that sci/tech careers are at least possible by the time they get to college. Making those careers economically and socially attractive is a separate task which we also need to do.
The first Tacoma Narrows Bridge was a Washington State suspension bridge that opened in 1940 and spanned the Tacoma Narrows strait of Puget Sound between Tacoma and the Kitsap Peninsula. It opened to traffic on July 1, 1940, and dramatically collapsed into Puget Sound on November 7, just four months after it opened.
Noting that we now live in an era of “confusion and ill-conceived stuff,” Ammunition design studio founder Robert Brunner, speaking at Gigaom Roadmap, said that by adding connectivity to everything and its mother, we aren't necessarily doing ourselves any favors, with many ‘things’ just fine in their unconnected state.
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