I have no mixed feelings about government getting involved in manufacturing. What's next? Perhaps a Department of Manufactuting with billions and billions of dollars in their budget increasing each year, with thousands and thousands of bureaucrats who have never manufactured telling companies what to do, what to produce, how to do it their way, and myriads of other hassles we can't even dream of.
No, keep the government out of my business, my home and my life as much as possible. I know how to run my life and my business and I don't need the feds to help me out. Name one thing the federal government is good at besides killing people?
There is a lot of bureaucracy in China, but in China there are a lot of ways to get around the bureaucracy. This is where the eneven playing field comes into play. On my last trip to Asia, several people were arrested for running an illegal mining operation that had collapsed. The mine was running for several years and employed over 100 employees. Basically, it was running on "incentives" that were given to local and national officials to look the other way for major safey violations and poor working conditions. If a mine could operate for this long, I can only imagine the amount of companies manufacturing goods bound for the US operate totally outside of the existing Chinese bureaucracy.
You know, on your second point, Greg, it is surprising there wasn't more of a shock to the economy during those years. We had our dot com crash and we have the financial meltdown, but the rush to China manufacturing did not have a noticiable affect on our economy.
As for an unlevel playing field, while it doesn't feel right, it's something we're accustomed to. We experienced the same thing with many, many trading partners before China. There are not many trading partner we have that don't receive government supports for business that are far greater than anything we're willing to do to support our own industry.
As someone who has both benefited and suffered from Chinese outsourcing, I have mixed feelings about the subject of government intervention.
First, I do agree that the playing field is not level between China and the US and overall these rule differences allow significant advantages for them. In addition to more relaxed EPA and IP regulations, they also have different safety, healthcare, etc. requirements for their workers. Some American factories have tried to respond to this challenge by using better Design for Manufacturing techniques into their products and by designing their products to be assembled using more robotic automation (to reduce costly direct labor times), but sometimes this disparity is still too great.
Second, I do agree that certain commodity products that are not strategic to our country's best interests need to go to China. However, the problem was how RAPIDLY this was done. When entire market segments moved to China too quickly, the sheer number of American workers that were displaced and unemployed was not healthy for our economy. In hindsight, I believe that our government should have slowed down this inevitable displacement so that the typical American manufacturing worker had more time to retrain and re-educate themselves for the new workplace.
Finally, in many cases that I have been involved with, the hidden and unintended costs and risks of going to China were not properly and accurately factored into the cost-decision model by the CFO's and Accountants and in actuality, going to China was not that cost-effective to begin with. In other words, by the time you factor in cost of higher defect rates, higher freight costs to overnight parts to keep the line going, hiring an additional Q/A inspector both state-side and abroad, and losing 30% of customer base due to perceived quality issues, the real cost savings (or losses) are not the same as the original calculations. I have seen products go out and then come back because of this. I think the company decision-makers need to carefully calculate ALL costs before deciding to go off-shore.
On the other hand, I've been involved with outsourcing programs which were a great fit and became a win for everyone, so under the right circumstances it works well. In closing, make sure all factors - different rules, unintended consequences, etc. - are considered when making decisions in this area.
Accept My appologies. I misconstrued your comment about dealing with foreign governments to mean that our own wasn't involved enough. I agree about many govenments being overly involved in day-to-day work. In my defense I am a working engineer dealing with the problem of government regulation changes, and their unintended concequences every day. The frustration level "out there" is getting to near a breaking point for my taste. My own frustration included. My company does business with firms in China and I agree that there everyone is looking over their shoulder to see what the government rep has to say. In my experience that can work both ways. At times the goverment official wants an extra fee, (read bribe), before you can proceed. Other times they will uproot an entire village because that is the location they desire for their new factory. In the past American firms could expect some intrusion, but could still plan 4-5 years ahead. Lately knowing what will happen 4-5 days ahead can require a prescience. Bill J
Did you roll over and fall asleep in 1920? In current US manufacturing the problem we have is the tail wagging the dog much too often. Is it ok for the government to screw all of Chryslers bond holders to make it "fair?" While there are occasional corporate transgressions in the United States potential penaltys make those things bad for business. The things I'm talking about are EPA regulations that change so often that manufacturers are involved in a game with loaded dice. In California doing business exactly thart same way you did before January first could land an honest small businessman in jail. Planning for the future is the key to progress, and if you can't plan you will fail. The question I always ask is how many employees do you have to have before you become an "evil corporation" worthy of being screwed? 20? 100? 1000? Many of the largest and best corporations treat their employees BETTER than average, only to be labled enemy by the US government because they won't spend themselves into oblivion. I still say, "get out of the way." Bill J
So when the playing field is not level, our companies climb to the top of the other side and roll crap down on their own people and country. Freedoms (like free trade) cannot exist without some code of ethics. So we trade with the unethical nations and unethical companies from our own country.
Now we want to bribe our own companies to stay here. This may help "free trade", but fair trade is long dead. What happened? Free trade by definition implies fair trade or it would not happen.
It's possible Rob meant something different by regulation--Rob?--but I have to agree with Dave on this one. China has what is probably the most massive bureaucracy in history. From the social systems standpoint, I find it amazing that it works at all. Why? Because as bureaucracies become larger they become more complex for a given size than for the previous given size of the social system they oversee, and therefore require a higher density of bureaucrats to population (I notice that the link Dave gives demonstrates this principle with actual numbers over China's history). But with that increased complexity, as in any system, comes less efficiency. So the bureaucracy itself becomes harder top administer, it takes longer to communicate among its elements, it takes longer to get things done. That may be one main reason why so many political systems become dictatorships or oligarchies at some point, just to stay funcytiooning. In addition, China has massively more regulation to help that bureaucracy keep everyone in check.
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