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Labor, Environment, Outsourcing

by John F. Tamburo, Editor in Chief, Publisher
Originally Posted: 7/27/2005 9:56:17 AM
Last Updated: 7/27/2005 4:25:14 PM

American industrial capacity has been largely outsourced to other countries: Mexico, China, Malaysia, Taiwan, Singapore, the Phillipines.  We make almost none of our own clothes.  An "American" car is usually about 65-70% American; the other 30-35% is imported.  Companies stumble all over themselves to get their factories the hell out of the United States.  Why is this so?

"Unionized auto workers, who assemble the foreign parts into vehicles, get paid about $29 per hour.  In Mexico, the same worker makes $3-4 per hour."

First, the cost of labor is driving industry out of the United States.  Unionized auto workers, who assemble the foreign parts into vehicles, get paid about $29 per hour.  In Mexico, the same worker makes $3-4 per hour.  This excludes healthcare and other benefits.  Over $1,100 of the sticker price of every American car is employee healthcare costs.  There are similar amounts that are the costs of pensions, etc.  Ever since NAFTA, the one smart thing Ross Perot ever said is coming to pass: the "sucking sound" from the South.

Second, our environmental laws drive up the cost of production.  Most of the countries to which we outsource labor have paltry environmental laws, if any.  Nonetheless, environmental activitists target the United States and demand that we further reduce pollution.  An example is the Kyoto accord, which made no effort to make "third world" countries reduce their "greenhouse gas" emissions.  These countries included Russia and China.  "Developing" countries are the place where our industrial capacity is migrating.  Why?  The lower cost of environmental responsibility.

"It’s insane for a corporate executive to intentionally choose a higher cost.  His or her competitors will do what they need to reduce costs.  It’s a numbers game."

It’s lawful for companies to move their capacity to where it’s the lowest cost.  It’s insane for a corporate executive to intentionally choose a higher cost.  His or her competitors will do what they need to reduce costs.  It’s a numbers game.  Stockholders will not reward patriotism or "corporate responsibility" if it results in lower profits.  Look at the Ben & Jerry’s fiasco.  They tried to ape the liberal ideal of a narrow gap between the lowest and highest wage in the company and hired a cheapie CEO.  Money was lost, the stock tumbled.  Exit cheapie CEO.

Can this be reversed?  Environmentalist wackos enact bloodthirsty ravenous protests every time someone suggests that we build a nuclear power plant or oil refinery.  They become apopleptic at the thought of keeping our already-choking environmental restrictions as they are instead of increasing them to an even higher level.  They are draining us of the tools we need to be competitive.  Labor unions served a noble and valiant purpose when robber barons were literally killing workers and were paying them in scrip redeemable only at company stores selling at outrageous prices.  How about now?  The AFL-CIO is falling apart because the only union employee bases that are not being decimated are government workers and teachers.  Their memberships are evaporating to overseas factories, where car workers are not pensioned, have no expensive health insurance, and make 1/9th the salary on average.

"The situation is grave because of stupid leftist activism.  Now, we are compromised both economically and in national security."

The situation is grave because of stupid leftist activism.  Now, we are compromised both economically and in national security. We have few options.  One non-option is governmental regulation.  You cannot enact laws to keep the corporations from outsourcing.  This would cause an economic disaster.  True foreign products would undercut our own domestic products, and the domestic companies would certainly fail.  If we were to embrago the imported products, then we would incite recession in our country as retaliatory embargoes would cause us grave problems.  We would furthermore risk a national security exposure from the lack of availability of certain imported items used in defense.

Could we use our power to force the "developing" nations to adhere to our environmental standards?  Now that may be worth considering.  Embargoing or radically tariffing all products originating in a country that does not have at least the same level of environmental regulation as ours would act to level the playing field.  Moreover, the environmentalists may interpret such an act as a good thing and direct their activism toward forcing the polluting countries, and the companies that outsource to them, to toe the line.

"[S]upply and demand will eventually lower the price of labor, and when that happens, the convenience of local production will lure companies to repatriate their production."

Will this eliminate the problem?  No.  We could attempt to embargo countries that don’t offer a standard of living comparable to ours, but our standard of living is so very high that this is nearly impossible.  However, supply and demand will eventually lower the price of labor, and when that happens, the convenience of local production will lure companies to repatriate their production.

Why are we here?  Leftists.  They never think of the ramifications of their ridiculous ideas, which is a big problem when none of these ramifications are beneficial.