BillFZ1, I wasn't thinking in terms of government regulation so mush as government support for business. But you have a good point. Certainly China does not face nearly the same level of regulation as we see in North America and Europe.
@Rob: Actually, there is tremendously more bureaucracy and regulation in China than there is in Europe or North America. In spite of the reforms of the past couple of decades, it's still a socialist country with a centrally planned economy. China ranks far lower on the World Bank's ease of doing business index than the United States, Canada, Mexico, or any European country except Greece. Companies don't move to China because of the ease of doing business; they move there because of low wages.
Good points, Dave. What I was talking about is the lack of restraints on manufacturing, particularly indigenous manufacturing. While there are environmental regulations on manufacturing, they are not enforced. There is also very little enforcement of IP regulations. Those two areas alone give China an advantage we can't match.
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.
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.
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
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
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.
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