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p.629 #9 · Mustang Air to Air " The Sequel" | |
Couple of quick comments here.
First, to Jon's post. Interesting, you've put lots of thought into this. Second, I mentioned Clinton's administration at one point (don't think anyone else has), so it's probably that comment which you remember. The actual comment was not that he turned the economy around: what I said is that I disagreed with many of the things his Administration did, but that I did appreciate that they eliminated the budget deficit entirely in a very un-Dem show of fiscal balancing responsibility.
Second, to the general manufacturing issues mentioned. One of the terms that is rarely mentioned is the "value chain", and it does need to be kept in mind. Low-end manufacturing carries very low margins and can only be done with commodity approaches and low-cost labor. More high-end manufacturing has a higher component of design and intellectual contribution, more precision and quality, and allows higher pay to the workers. Specialty or luxury products are obvious, and among the highest-margin (and highest-pay) pieces of the value chain are services, especially thought- or knowledge-intensive services.
There are lots of reasons why some things happen and why some industries move to different cities, states, or countries. I'm not contradicting any of the opinions previously mentioned... but I'd like to add this factor, so that each person can consider it: sometimes losing an industry is a very good thing. Silly example: if your country is heavily involved in low-value-added work (e.g. simple manufacturing, assembly, etc.) then you're going to have citizens with low pay. For those citizens to get wealthier, they need education and other things... but if they can successfully transition to offering more high-value-added products or services, then they as individuals and the whole country in general will get paid more and get wealthier. Sometimes people/industries make this transition intelligently and with prior intent, and sometimes it's the entry of a new and powerful low-price competitor that takes their jobs and forces them to reinvent themselves.
The value chain does require basic economics to be respected. Require a minimum wage of $7 or $9, and those jobs that would truly justify only $5 will either go unfilled, or outsourced, or off-shored. Pay people $25, and the product/service they make had better be competitive at those cost levels. But on the other side, make something for which the world will pay $100 an hour, and your people will thrive. I also note that moving up the value chain to make your people better off requires investment in them and in themselves: education especially. It's not automatic, and not assured.
The race to the bottom in price or quality is mutually destructive. And generally, any market/industry will allow only one or two dominant low-cost (read, minimum-value-added) players with pure price strategies. Everyone else must add value somehow to differentiate their product. Those who add the most value, get the best price, and should not have any trouble getting business (ever) because they are generating real value, not just a luxury expensive something. The value-chain model also argues strongly against price caps, since what good is adding value if you can't charge for it?
Again, not contradicting anything prior. Economics and business (the forest and the trees, respectively) require many tools to be used together. But in a simple forest analogy: some fires and burned-down-to-the-ground parts are actually healthy for the forest, since they provide the opportunity for new growth that's not starved by the overbearing powers of the past. Be those unions, or individuals with the sad combination of too much money and too little humanity, or whatever, some "creative destruction", death, and rebirth, is of great value.
But when one part of the forest burns down (an industry, a market segment) we must also care for those who are affected and help them regrow and recover. We must care for the forest, but we also have a duty to help each and every plant/animal/forest-dweller thrive over time.
Nothing is black and white in economics. There are plenty of grays, and there are also opportunities/threats built into every situation. Let China take the LVA segments, but make sure your people are able, educated, willing, and have the opportunity to move to more LVA jobs or businesses. If possible, do so in advance! And also, note that the best source of innovation and value addition is the entrepreneurs and small businesses who also generate the most employemnt, the lowest operating costs, and the highest transparency in nearly any free-market economy. I never liked Hillary Clinton either.
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