Say you want to build a house. You sit down and figure out how much it will cost you to do it all yourself. You are a carpenter and pretty good at what you do. You could dig the footings for the house, but there are rocks and roots. It is easier to hire a fellow who has a backhoe that moves rocks like they are pebbles and is not hampered by roots that would have stopped you cold. So of course you hire a backhoe. You pour the cement and once the foundation is done, you frame the house. Now you have another choice. You could wire and plumb the house yourself or you could hire a plumber and an electrician. You could do it yourself, but it would take you three times as long and they can get the materials cheaper than you can. Not only could they do the work faster, they can do it cheaper. So, what you do is frame somebody else’s house and use the $$$ you earned to pay the plumbers and electricians to plumb and wire yours.
There you have the principal of economic advantage. If you do what you are good at and trade with others for things that they are better at, you get what you want faster and cheaper and everyone wins. Now, let me ask you, how stupid would it be if the electrician wired your house, but charged you what it would have cost you, in time and materials, what it would have cost you had you done it yourself? The electrician does the work in two days but charges you as if he took two weeks to do it. Pretty dumb, Huh?
A couple things just happened there. Your house is no more expensive than it was when you first decided to build it, but your neighbor, the electrician just got a lot richer. It would be nice if you could do what the electrician did, but there are a lot of carpenters looking for jobs, so you can’t get away with it.
This is what is happening with the outsourcing of jobs in this country. It is a good idea to let people in countries with low per capita incomes manufacture things for us. Those items will be so much cheaper that even though we have lost those hard jobs, when we bring those cheap products back here, they will cost less than a tenth of what they cost when we made them here. BUT, there is the rub. When those products come back, the CEO charges the same amount as when you used to make them and the CEO pockets the difference.
Let’s look at this a little closer. What if the electrician buys knock-off parts and charges you the same as if he bought parts of the top shelf? Carry that further. Your painter uses cheap paint , thinned to the point of just covering. Your house will quickly break down while the Sub contractors walk away with all your money.
That is what is happening to this country. We are subbing out to countries, that can do our job cheaper, but we are paying the same as if we did it ourselves. In addition to losing our jobs, we are paying top-shelf prices for knock-off parts.
Do you remember, melamine in cat food, anti-freeze in children’s cough syrup, heparin that killed the patients, tires that delaminated, children’s toys enriched with lead, just to name a few? How bad is it really? Here are a few clips from a recent N Y Times’ article on corruption in China…
In recent weeks, China’s news media have reported sales of pork adulterated with the drug clenbuterol, which can cause heart palpitations; pork sold as beef after it was soaked in borax, a detergent additive; rice contaminated with cadmium, a heavy metal discharged by smelters; arsenic-laced soy sauce; popcorn and mushrooms treated with fluorescent bleach; bean sprouts tainted with an animal antibiotic; and wine diluted with sugared water and chemicals.
Even eggs, seemingly sacrosanct in their shells, have turned out not to be eggs at all but man-made concoctions of chemicals, gelatin and paraffin… After the 2008 milk-powder scandal drew international attention, the authorities ordered all melamine-tainted dairy products to be destroyed. But they have turned up again and again.
Last week, the police in Chongqing in southwestern China uncovered 26 tons of melamine-tainted milk powder at a factory that made ice cream bars, The People’s Daily reported.
I used to think that all we needed to do was charge a reasonable price, but there is no reasonable price for these tainted goods. There is no economic advantage to having China make anything. We get screwed and the CEOs get rich. So there it is, An Economic Advantage That Isn’t! . It is time to bring those jobs home. Read that as “MADE IN THE USA.”