"If we were to end outsourcing, we would replace American companies

[BlueEyedSon]

with foreign companies."
-- Net Gingrich on CSPAN just now.

He followed up with "would you pay the extra 40% retail price for an American product on the shelf vs. an import?" I'd say most people wouldn't or can't afford to.

The point is well taken, and makes some sense. Until you test his basic assumption.

What is an American company? Almost every major company is MULTINATIONAL.

Why is the Gap an American company? Because their CEO is payed in dollars? Every piece of clothing they sell is made offshore.

Why is Halliburton American? Because their ex-CEO is a public servant? After all, their headquarters are based everywhere but in the US to avoid taxes.

Come to think of it, I'm content with American companies folding so that overpaid CEOs get "outsourced" (remember that CEOs make, on average, 400 times their US employees' salaries... fuck 'em!).

[mhr]

1. I Would Challenge His 40% Increase In Price As Well

This is tired arithmetic used by the republicans to scare people.

That is all the modern republican party has become, scare mongers.

They have no more ideas.

[BlueEyedSon]

2. Arguably, it would be much worse.

If it's anywhere near proportional to the cost of labor.

[Cat Atomic]

4. It isn't.

When companies send plants to China and start paying 15 cents an hour for labor instead of $15, the price of their products doesn't drop back home.

[BlueEyedSon]

8. But, the COST does. The price stays high because of the greed

of the executive management, and the need to produce profits for shareholders.

If the company was ENTIRELY foreign, maybe they wouldn't feel the need to pad their prices so much....

[mhr]

19. The Price Would Rise Very Little If At All!

This is part of the republican con game!

The jobs are going to India because the corporations can get away with it.

As others have noticed, the final price here does not decline.

The only benefit is to the shareholders and executives.

They are playing an internal game to feather their own nests and use people like Newt to justify it.

Show us hard data to support the claim not unsubstantiated rumor and fear mongering.

[w4rma]

3. I agree. I don't care one whit about a corporation whose only American

employees are the upper-management, making obsene income amounts. If that's what passes for an American company, I'll just complete the cycle and buy totally foreign, if the buisness environment isn't changed to be condusive to real American buisnesses.

[JoePizz]

7. Also, don't forget many foriegn companies are now sending jobs here

Honda builds their minivans in Alabama, as well as Mercede's "M" class Sport UTE.

I think the whole thing about outsourcing overseas saving money is a myth, when you factor in the HUGE transportation costs. Heck, if it wasn't for "Free Trade", the tarrifs alone would make it worthwhile for almost all manufactures that build in foreign contries to move plants into the US.

As for non manufacturing jobs, it really isn't any better. Hiring people in India for $10k per year to do Tech support may sound like a better idea than hiring people domestically to do the same thing for $30k per year, but the hold times and call resolution times have quadrupled. Dell had to move their corporate support stateside because of the complaints and the drastic decrease in timely resolutions.

[BlueEyedSon]

10. Everything you are saying is completely at odds

with the behavior of the marketplace. Outsourcing IS increasing, our balance of trade is at an all time high (in the WRONG direction), and the US has not been a manufacturing powerhouse since 30 or more years ago.

Good thing the dollar is dropping like a rock, soon labor here WILL be competitive with China and India.

[JoePizz]

12. That's because too many companies are run by bean counters

...and not very good ones, at that.

The fact of the matter is that many US companies are outsourcing like crazy. However, I think a lot of this is simply the result of people not taking every facet of outsource costs into consideration. If you can pay your outsourced employees 1/3 of what they would make dirtside and that is the only factor you consider, then you end up with what is happening here in the US- companies moving jobs overseas as fast as they can.

However, when you factor in other things- such as the extra time it takes a tech support guy overseas to handle a call (technical skill aside, it takes a lot longer because of the differences in accents) and the extra personell required to do that. Or you can consider the massive training costs of these people- not just in technical matters, but also on US culture and language.

I think many foreign companies are starting to realize that the labor market in the US probably costs less for them to exploit then it would cost to build elsewhere and try and ship it in. Again, though, ALL costs have to be considered for this to happen.

If only domestic companies would get their collective heads out of their rear ends and do some friggin' math...

Ah, well.

[BlueEyedSon]

16. All those guys went to business school.

They are taking all the "beans" into consideration (shipping, time, training). I have more than a few friends whose last assignment was training their FOREIGN REPLACEMENTS.

If you are suggesting that intangibles are not taken into consideration ("quality"), that may be true.

Certainly, the effect on American society is not something with a dollar value that interests them.

[JoePizz]

5. Possibly, but the increase in well paying jobs...

... would result in an overall increase in the middle class and the median income, so that more people could afford to buy these products.

Also, just because a product is made overseas means it would be 40% more to make it domestically. My Jeep Liberty is made in Ohio, and probably better built than the RAV4 or MPV. It's certainly more capable off road. Plus, it's often times cheaper than it's foreign counterparts.

[BlueEyedSon]

6. Plenty of that car is "made" in Japan and/or Mexico

even if it is ultimately assembled here.

[JoePizz]

9. Part of it, but many of their supliers are moving plants stateside too

...I (unfortunately) live in Alabama, so I get to keep up with this crap.

There have been several plants that have moved stateside to feed Honda and Mercedes plants.

And heck, even if most of the stuff still came from Japan originally, it still puts people to work here doing final assembly.

Anyway, I am starting to think that manufacturing like that should not really depend on the labor costs anyway- most of it is automated, so if the company only has to pay people $0.15 an hour over $15 an hour, the relative lack of employees should mitigate most of that cost. I could understand it it, say, making a car was mostly done by hand rather than machines.

[Zero Gravitas]

11. Why should I care about "American" corps

who treat the American Middle Class as if they were parasites? The only parasites are the ones that inhabit th board rooms of the entities. If what is good for Wall Street is now BAD for Main Street tell me again why I should give a crap about Wall Street?

[Mountainman]

13. The right ducking this issue plays into our hands

Every time some Repub talks up outsourcing they help Kerry.

[denverbill]

14. When have prices ever gone down as a result of outsourcing?

Does anyone recall auto prices plummeting when they started building cars in Mexico?

Seems to me they've pretty much kept pace with inflation.

[BlueEyedSon]

17. You don't have to be a mathematician to figure there was more PROFIT.

if the cost of manufacture was cheaper.

[shanti]

18. i have to say something...

your avatar is very creepy!

[BlueEyedSon]

21. Self portrait

after eye exam (kinda dilated).
And it is right side up.

[LeahMira]

20. They won't.

Does anyone recall auto prices plummeting when they started building cars in Mexico?

I'm sure the stock dividends improved. So much larger a profit to distribute to the shareholders!

Sooner or later, no matter how much a corporation cuts its costs, it will be impossible to post even greater profits than were posted in the last quarter. That will be an interesting time.

[Deb-Ter]

23. Well, actually....

The price of new cars have 'dropped' in the sense that they are giving so many rebates, discounts and low to no financing charges. They are allowing you to double up on discounts etc.

So if you take this into consideration the price is down right now...but it is down because of the downturn in the economy....so it seems that if we want the price to go down, we need to stop buying new cars for a while :-)

[Joanne98]

15. We could eliminate taxes for small company's

with less than 50 employees. With the requirement that they stay privately owned. Then we can cancel the patent protection for all multi-national corporations and let the small companies produce their products instead. As long as we get rid of the shareholder, workers can make a living wage and it won't effect the price of the products at all.

[jpgray]

22. Eh, the US market is pretty important--paging ProfessorGAC

But I don't have enough knowledge of the economics to make a claim on this.

[Nikia]

24. It depends on the product

I would think for products that sell for more money or require a lot of heavy machinery, like automobile manufacture, labor cost is not a huge factor in cost. For cheap items that are labor instense, like clothing, companies do save a lot of money by manufacturing overseas. Transportation costs are also a factor as are raw materials. It would make less sense for a manufacture to outsource if their raw materials could be bought relatively cheaply somewhat locally or if transportation costs were high. If raw materials are being bought overseas anyway and it is cheap to transport the product to the U.S., a company will probably be more likely to outsource.
We must remember though that if there are fewer American jobs or they are paid less, cost reduction is little consolation. If you are taking a 50% rate in pay when your decent job gets moved overseas, you are further behind if you are paying 40% less for things you buy. The problem is that every company excpects other companies to keep consumers employed.
I know that Japan is exporting jobs to the U.S. The town that I was raised in has two fairly new Japanese companies. The newer one had problems since none of the management, who were all Japanese, spoke enough English to communicate and none of the workers spoke Japanese. I wonder if most American companies plan better.