Silicon Valley Is Dead

I am pretty sure many people will disagree with the conclusion of this article. That's OK -- a healthy debate on this matter will probably help clarify my own thoughts.

I don't really think Silicon Valley is completely dead. Maybe it's just in the emergency room, or attached to a respirator. However, something needs to be done -- not just in Silicon Valley but across the U.S. -- in order for our economy to regain its health and competitiveness across the world.

The good old days
Throughout the latter part of the 20th century, Silicon Valley was a treasure chest of new ideas and fantastic innovations. There was the exciting "guy in the garage" mentality: think up an idea, find a venture capitalist to help with funding, prove viability, take your company public, and hopefully get rich. For the most part, this idea worked well. Companies like Intel (Nasdaq: INTC  ) , Sun Microsystems, and Cisco Systems (Nasdaq: CSCO  ) are all great examples of what Silicon Valley could help produce; companies rich in mind and healthy in spirit.

But what is often forgotten is that those companies had to build factories, figure out how to make products affordable, and hire droves of new employees. In short, they had to scale up and scale out, and this not only benefited those at the top of the knowledge hierarchy, but also lower-level workers engaged in areas like supply chain management and process control.

Sometime after the tech bubble burst, things changed in Silicon Valley. And unfortunately, the rest of America seemed to follow.

What have you done for me lately?
It should come as no surprise to anyone that the U.S. has become a service-based, high-tech-oriented economy. We ship low-paying jobs abroad, we outsource and subcontract; companies do anything to cut costs and increase margins, and with pride we boast some of the most successful companies in the world.

Between 2001 and 2008, the average high-tech worker in Silicon Valley saw his wage increase by 36% (to $132,351). In addition, this industry generated $57.7 billion in wages in 2008, a 14% increase from 2001. That sounds great, right?

Well, first of all, even though wages increased, jobs fell dramatically. Following the tech boom, employment in Silicon Valley fell by about 17%, which represents a loss of about 86,000 jobs. Of the 11 industries identified by the North American Industry Classification System (NAIS), eight have seen jobs diminished; the only areas to increase employment have been pharmaceuticals, aerospace, and scientific research. Some of the segments that put Silicon Valley on the map, such as semiconductor manufacturing, data processing, and computer equipment manufacturing, have seen jobs evaporate or move across the Atlantic.

Today, manufacturing employment in the U.S. computer industry is about 166,000, less than when the first PC was assembled in 1975! Dell (Nasdaq: DELL  ) now makes most of its computers in Malaysia and Cisco Systems has transferred employees to India. Some of the best manufacturing is done in Asia, where government subsidies and support helped spur enormous amounts of economic growth.

Take, for instance, the Taiwanese company Hon Hai Precision Industry, also known as Foxconn. The company manufacturers all the things we used to manufacture, but then decided that high-wage knowledge work should take its place. It makes computers for Dell, cell phones for Nokia, and motherboards for Intel. Last year, its revenue topped $60 billion. That's more than Apple (Nasdaq: AAPL  ) , Dell, or Intel.

It employs more than 800,000 people. That's also more than Apple, Dell, Intel, and Sony combined.

There are about 250,000 workers in southern China making iPhones and other Apple products; there are only 25,000 Apple employees here at home. So to break it down, there are 10 workers in China for every one worker here in the U.S. That 10-to-1 relationship holds true for Dell, for data-storage device maker Seagate Technology (Nasdaq: STX  ) , and for countless other high-tech companies.

Why does it even matter?
I know what you may be thinking -- as long as our employees are getting paid well, what does it matter if the lower-paid jobs move abroad? Well, with unemployment at 9.5%, I think there are a lot of people out there who care.

It matters not only because there are a vast number of people who are out of work and don't have the wherewithal to obtain a knowledge-based job, but because the U.S. as a whole has forgotten that innovation doesn't just mean high tech. Complex manufacturing and having a presence in mature industries helps provide opportunities for future innovation. Our lack of manufacturing has not only cost us assembly-line jobs, but future knowledge-based jobs as well.

A case in point is the battery. When American companies stopped producing consumer electronic goods, Asian companies took over and ultimately the U.S. lost its lead in battery production (that was about 30 years ago). The problem is that now batteries play an integral part in PC manufacturing, mobile technology, and the automobile market.

Ford Motor (NYSE: F  ) will come out with its electric vehicle, the Ford Focus Electric, in 2011, and it will be using Korea-based LG Chem's lithium-ion cell packs. So will Chevrolet when it comes out with the Chevy Volt. Both companies chose not to use Ener1 (Nasdaq: HEV  ) , an American-based company that does the same thing as LG Chem.

This is just one example of American companies losing their competitive advantage because of decades of outsourcing, only to have it come back and bite them in the, well, you know what. Other manufacturing capabilities that are currently at risk: flash memory, LEDs for solid state lighting, thin-film solar cells, core network equipment, and much, much more.

The Foolish bottom line
I hate to be the guy complaining about high-tech, high-paying jobs, especially considering I work for an Internet-based company that is far from a job site or assembly line. But I have to believe that there is some kind of middle ground where we can foster places like Silicon Valley that have rich traditions in innovation and problem-solving, while separately building back the manufacturing sector that used to play such an integral role in our economy.

The way I see it, there are three options:

  • Continue on the path we are on and let the free market allocate resources.
  • Have the government levy taxes on items produced using offshore labor.
  • Help subsidize companies that choose to maintain domestic manufacturing.

To me, none of these seems like a fantastic option. I am certainly not a protectionist, so the thought of taxing offshore labor and potentially starting trade wars is not my idea of a good time. However, I also don't think the status quo will produce economic success in the future. As former Intel CEO Andy Grove recently said, "Abandoning today's 'commodity' manufacturing can lock you out of tomorrow's emerging industry."

Should we be focused on reinstating manufacturing or should we concentrate just on high-tech jobs that provide higher incomes? Are they mutually exclusive? I'd love to know what Fools think of the three options listed above?

Sound off in the comments box below!

Jordan DiPietro owns no shares mentioned above. Intel and Nokia are Motley Fool Inside Value choices. Apple and Ford Motor are Motley Fool Stock Advisor recommendations. Motley Fool Options has recommended buying calls on Intel. The Fool owns shares of Intel. Try any of our Foolish newsletters today, free for 30 days. The Motley Fool has a disclosure policy.


Read/Post Comments (54) | Recommend This Article (112)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On July 27, 2010, at 1:39 PM, demodave wrote:

    As I semiconductor manufactuirng engineer with the right applicable degrees (admittedly, no doctorate), I absolutely agree that we have made poor decisions in giving away our manufacturing base. I agree both as an engineer who thinks the technology is fascinating (and still evolving) and as I guy who walks the floor and watches the less well-ducated direct laborers doing jobs that pay better than flipping burgers down the street. I've seen the effects of moving packaging lines from the US to China. It's not good for the process. I've see the results of shrinking already Lean operations to the point of anemia. Also not good. But being in favor of American jobs, manufacturing, and industry does not directly equate to being protectionist (although the line is in there somewhere).

    I like option three ("Help subsidize companies that choose to maintain domestic manufacturing"), but I am not a payroll manager.

    Every four years, we hear about lowering income tax rates. What about increasing the number of taxpayers and rewarding the companies that make it happen?

    Every four years, we hear about candidates being "pro-business", but we never find out in concrete language how they will *act* on their "position".

    Lots of doors to progress will be closed if we don't have factories dedicated to manufacturing the products of the ideas of American Entrepreneurs. That does not inspire a lot of hope.

  • Report this Comment On July 27, 2010, at 1:41 PM, corbett13 wrote:

    Agreed that none of your options sound that great. The first one is to keep marching down a path that looks troubling at best and the other two rely too heavily on government intervention. I do believe the last option to be most valid be it a subsidy or a tax credit for "on-shoring" jobs. There is a revolution going on with Lean Manufacturing that is allowing companies like Fast Cap (http://www.fastcap.com) and Vibco (http://www.vibco.com) to manufacture products that domestically that most companies would look to outsource. These companies are profitably manufacturing high quality products with a domestic workforce dedicated to constantly improving products and processes. Any help that can be provided to spur the growth of companies like this would only help speed American manufacturing's recovery.

  • Report this Comment On July 27, 2010, at 1:48 PM, wigginsrl wrote:

    Let's face the truth. Multinational corporations now, not governments, actually rule the world. If we find the good ol' USA (not the town in China) in another war, will we be "supposed" to win, or will it depend on how the multinational monetary interests need it to play out? Nobody likes to think about war, but should it come will we buy guns and ammo from Asia and fuel from the middle east? Maybe tanks, planes, and electronics overseas too?

  • Report this Comment On July 27, 2010, at 1:58 PM, MelMac50 wrote:

    Isn't there a fourth choice--choosing to compete hard with other countries for manufacturing jobs? This would mean having a government sympathetic enough to business to get out of its way and coming up with real solutions to lower the expense of doing business in this country. This in turn would likely mean getting industry out of the business of insuring the health care of their workers (in favor of some type of HSA) so they can concentrate on their core competencies; streamlining the myriad regulations and environmental requirements so that they are timely and of reasonable cost; a reworking of unemployment insurance costs, perhaps giving tax credits to companies who manage themselves thru economic downturns without mass layoffs as Solution #1, etc. etc. Granted these are superficial, lightly thought-out recommendations but the main idea is that we need to start competing for jobs just as hard as Asia and India are competing for them. What is the unique characteristic of our salvation being in "green jobs" that will prevent them from going overseas as well? Full-on government subsidies can only keep them here for so long.

  • Report this Comment On July 27, 2010, at 2:11 PM, mDuo13 wrote:

    Eh, you're a couple decades late. May as well move to China where the money's going to be.

    I jest. But seriously, I think a lot of American companies underestimate the value of domestic work: better communication (guess what? the people working for you share a culture and language with you!), stronger regulation (instead of finding lead paint in kids' toys yet again!), and shipping to domestic customers (which has to count for something in this increasingly fuel-strapped economy). Outsourcing looks great on paper, but that's because many of those overseas companies are not just cutting costs, they're cutting corners.

    This applies to information/support jobs at least as much as manufacturing, if not more. If I call tech support and get routed to India, I'm wasting my time because the personnel on the phone aren't trained to respond to anything below the level of patronizing. Get me someone who's a native English speaker and I'll be able to convey my problem and get a straight answer out of them much faster. (Case in point: Southwest Airlines. Wonderful customer service reps, 24/7.)

    It's time people paid a little more attention to the *real* quality of outsourced services, not just the advertised one. They're not always the same.

  • Report this Comment On July 27, 2010, at 3:23 PM, jackanderson1 wrote:

    Interesting points in the article, so many points can be agreed or disagreed with. The part that intrigued me was:

    Companies sent the jobs overseas to help their bottom line and to help their stock prices

    Yes it's true there are 250,000+ employees in southern china doing assembly and labor work for these electronics. As living standards improved in the USA you can ask how many average joe's want to work for minimum wage assembing electronics. I feel many average employees have a sense of entitlement whether it be their "right" to collect their 99 weeks of unemployement benefits or having a "too good for that job" mentality.

    Also as living standards improve everybody wants comfort and convenience, working 12+ hour days for minimum wage is not something most Americans are going to jump at or to vote for their policiticians to enforce.

    just my opinion.

  • Report this Comment On July 27, 2010, at 3:23 PM, SkepticalOx wrote:

    I was wondering why your article sounded so familiar (you mentioned Andy Grove). Check out Andy Grove's take on things here: http://www.businessweek.com/magazine/content/10_28/b41860483...

  • Report this Comment On July 27, 2010, at 4:06 PM, TMFPhillyDot wrote:

    @SkepticalOX,

    It may sound familiar because that was where my original inspiration for the article came from; and in addition to a large handful of other articles, I used his piece as a main source. I was hoping to take his argument one step further by addressing specifically the job loss/creation that has occurred in Silicon Valley over the last decade, as well as trying to figure out plausible solutions and what it may mean for the service/manufacturing sector in the future.

    Thanks for the comment!

    Foolishly,

    Jordan (TMFPhillyDot)

  • Report this Comment On July 27, 2010, at 4:37 PM, bucheron wrote:

    It's like trying to stop water falling with your hands, just let it go to the right direction and move with it.

  • Report this Comment On July 27, 2010, at 4:42 PM, yttire wrote:

    I think it would be helpful to clarify the complaints, and then attempt to address them specifically.

    1) too many electronic manufacturing jobs are moving overseas.

    This represents a sad position for the American worker. But more importantly, it represents a security threat against the United States. The federal government should address this as a security threat, and subsidize accordingly.

    2) America is not competitive with other countries manufacturing bases.

    This is partially because other countries underwrite their manufacturing through government largess (such as low interest loans to Chinese manufacturing plants) but also represents the differential in labor. For example, if workers are non unionized and being worked 16 hours a day, this represents a situation where the US can not compete by virtue of our human rights. Thus, to compete here, we should provide tarrifs against countries which do not allow unions, or who work their people like slaves. Note, I am not suggesting tarrifing specific countries, I am suggesting tarrifing specific employment policies appropriately.

    I think it is inevitable that the corporations have, and will, take control of Congress through lobbying efforts. This has undermined our national security and also undermined our ability to compete as a nation. As long as we allow continued corporate donations to Congress, we are no longer ruled by our elected officials.

  • Report this Comment On July 27, 2010, at 5:10 PM, acssgt316 wrote:

    Interesting that you noted Hon Hai. Don't you think it is a bit easier for that company to be more profitable since it has low labor cost by virtue of its location and high demand by virtue of the economy it is selling to? U.S. firms cannot duplicate that kind of advantage so comparing them to Dell, Apple or Nokia doesn't seem fair. Your right that there seems to be no palatable solution so I choose the market first and maybe an import tax second. I hope I never see a subsidy program.

  • Report this Comment On July 27, 2010, at 5:31 PM, jay2004a wrote:

    It's hard for the U.S. to compete when a manufacturing job in California pays about $35 an hour plus about $8 more per hour in benefits. Not to mention the additional taxes, environmental concerns, the unions, etc that employers have to worry about and spend money on.

    Chinese workers assembling phones and pc boards make about $9 per hour including everything.

    Consumers want to pay $500 for a computer now and not $2,000 (the cost if the same computer was manufactured in the U.S. and sold here).

  • Report this Comment On July 27, 2010, at 5:36 PM, renitentInv wrote:

    I tend to agree with jackanderson1.

    I believe it is important to keep manufacturing capabilities at home, but I find it difficult to believe that many Americans would work in the conditions many Asians are willing to, nor would the Gov. allow them to.

    I don't know many people that would be willing to live in a corporate dorm right next to the factory they work in. This is a pretty standard practice in Asia. Visit nearly any major city in China and you can witness some of the most impressive demonstrations of industrial might, alongside some of the most absurd population density.

    The point here is it is much easier for an Asian company to make the argument that they are improving their employees lives. Companies here have much more strict standards.

    The only viable option for balancing trade deficiencies would seem to be adopting gov policies, which allow companies to operate in what most people would consider, a more morally reprehensible fashion. Then you just have to convince the workers it is worth the risk.

  • Report this Comment On July 27, 2010, at 5:53 PM, TheKoz72 wrote:

    There is one other component and that is the fact that the US can no longer to continue to export dollars. When we were major manufactures the dollar could be the worlds reserve currency because the trade stayed in balance as the world bought our products. Now we owe trillions overseas and can no longer respond to inflation by raising interest rates without destroying our government's cash flow.

    The solutions open to us now are to create internal inflation by either high import taxes or limiting entry of foreign product by balancing customs licenses to equal import and export accounts.

    Or, we could restart our production resource through buy American programs, producing our own oil and power and limiting import of finished goods.

    Having the dollar as the worlds reserve currency only works when we are able to sell lots of stuff to balance trade.

    Once we are unable to afford competitive interest rates on overseas borrowings, foreign countries will be forced to unload dollars and the inflation will arrive. Then it may be cost effective for Hon Hai and LG to bring production to the US because we will have economically become a third world country.

  • Report this Comment On July 27, 2010, at 6:11 PM, bradjo2 wrote:

    It wouldn't be so cheap to manufacture in China if China's currency weren't pegged against the US dollar, but were allowed to float instead. China has had this special status since Nixon, and has only made tiny steps towards rectifying it.

    Of course we don't have much leverage in getting China to float it's currency, since we need them to buy our debt.

    And, yes, this isn't the whole problem, but it is one important part of it.

  • Report this Comment On July 27, 2010, at 6:37 PM, twilight100 wrote:

    I have lived in SE Michigan for the last 28 years while watching the dramatic shrinkage of the domestic auto industry. It has been painful to watch. When you lose the enormous wealth creation which manufacturing represents, society loses as a whole (schools, parks, hospitals, public safety, mental health overall). I don't think the American public has the will to change our disastrous course. Congress has no clue and is a part of the problem.

  • Report this Comment On July 27, 2010, at 7:46 PM, DrXman wrote:

    I think the innovation will come from fewer restrictions placed on software and hardware by the same companies that rule Silicon Valley and technology in general.

    Unlocking handsets is a start. Here's an article I just wrote about the IPhone "jailbreak" and the roots of "closed" networks in the U.S. - http://www.examiner.com/examiner/x-1424-LA-Tech-and-Business...

  • Report this Comment On July 27, 2010, at 8:29 PM, pinestholdings wrote:

    The big issue is that Americans are pretty entitled. My company has a plant in Guetamala. The people over there basically beg us for work at any wage. The people in America won't even show up for an interview for less than $10/hour. I don't want to get into a huge political debate, but there it is. Once things get desperate enough that Americans are willing to work for what the market says they are worth the jobs will come back. Until then, they won't. Nothing will change this.

    Everyone loves subsidies and tariffs and protecting the American worker until they try to buy a car and it costs $30,000 instead of a $12,000 Hyundai. Then everyone complains. If we did any of this, the cost of goods would skyrocket. Our standard of living would go down as a result.

    The issue is not whether or not other countries are catching up to us. The issue is whether or not our standard of living is advancing or declining. These are easy issues to confuse - just because China is living better does not mean we are living worse. In fact, I would argue that 2010 has the highest average standard of living at any point in American history. By quite a bit. China may be an 80, and we may be a 90. I'd rather have that than China be a 60 and we be an 89. Don't confuse other countries' advancement for our decline - its not a zero sum, mercantilist game.

  • Report this Comment On July 27, 2010, at 8:36 PM, MelMac50 wrote:

    RE yttire's comment "...we are no longer ruled by our elected officials."

    Might wanna look up what it is supposed to mean to be living in a democracy. We aren't a monarchy and we don't elect officials to rule us. They are supposed to represent us. And it isn't corporate bribery that has led to our being saddled with regulations and work rules that make manufacturing in the U.S. so uncompetitive. That is strictly the domain of do-gooding politicians.

  • Report this Comment On July 27, 2010, at 8:37 PM, koolkrissy wrote:

    We are being bit in the you know what already! When there are no manufacturing jobs to provide jobs for the 9.5% (and higher in many states) unemployed, there is no way to support millions of Americans who would prefer to work to provide for their families' every day needs such as food, clothing and shelter. Homes are lost, health is lost, lives are lost. Our country loses its strength in being able to defend itself should "war" come to our part of the world. A country that cannot manufacture goods that support its defense and/or its supply of necessary goods to live has weakened itself economically and in every way. What a price is paid for greed's sake!

  • Report this Comment On July 27, 2010, at 11:31 PM, PaulEngr wrote:

    For those of us who are old enough to remember it, we heard the same thing about Japan back in the 80's. Guess what happened? Japan's cost of living skyrocketed. Japan began outsourcing to their neighbors such as Taiwan. Eventually Taiwan began outsourcing as well. Right now the "cheap labor economy" is moving from the shores to inland China, and eventually even there too it just won't happen anymore as the economic "differential" vanishes as their standard of living approaches that in the U.S. Japan is mired in an economic doldrum of sorts that has lasted for a lot longer than our current woes in the U.S.

    I agree that our current government is hell bent on converting the U.S. into a clone of the pathetic European attempts to emulate the Soviets. Still, we keep electing these fools and we get what we deserve. The fact is that we keep getting hung up on equality of RESULT and not equality of OPPORTUNITY. The end result is that in the end game, the only thing we achieve in terms of equality is equal misery. The Soviets demonstrated that in spades. If we as a culture ever get religion and get back to a culture of opportunity, perhaps this will change. If not, we are doomed to continue down the same road.

    However, there is a different direction to take in spite of this doom and gloom. When the steel industry and the automotive industry were pushed hard by outside, foreign sources, they were facing virtual extinction in the 80's. Instead, they buckled down and turned things around. How did they do it?

    Simple. There's a conceptual idea that the purpose of a corporate (from a stockholders point of view) is to extract maximum money with the least amount of cost...aka gross margins! The easiest, most spineless method to improve this is to cut costs. However, have you EVER heard of anyone cost reducing themselves into prosperity by cost reductions alone? No, it simply doesn't happen. What usually happens is that you scrap a little of that above-the-line number, the money side along with it. In the end, you end up hopefully with just a constant. Same profit MARGIN, smaller COMPANY. Now, how many U.S. companies can you point to that tried to play the "outsourcing" game or the "layoffs" game and lost with this strategy? The alternative is to grow the MONEY side...selling more product, driving your organization to be more productive. This is hard, and it requires leadership and creativity, not management and politics.

    The number of companies who failed to understand this fundamental factor is legion. Look at what has happened to Microsoft in the past 10 years. How about GE since the mid 90's? How about Allen Bradley, once a powerhouse in the electrical world? How about IBM? Chrysler since Iacocca left? What ever happened to the innovation pipeline at 3M? Ok, now how about Ford since Mulally's influence has started to kick in?

    Vision is a real thing. Being competitive requires real vision. The United States work force is the most productive, highest educated, best skilled labor force in the world. We are blessed with an amazing transportation network, raw resources that even today are still some of the richest. We still have one of the best government systems in the world (although that last point may be arguable at this point). However, all that power and talent goes no where without leadership. We are lacking leadership not only in our government but in many of our largest and most powerful corporations. We have instead filled them with short sighted management figures who's best gift is in creating ever greater amounts of paperwork and bureacracy.

    Now, if history is any gauge then we can be assured that what we are going through now is but a bump in the road. If you believe in Kondratieff waves, we are nearing the end of the cycle:

    http://greatdepression2006.blogspot.com/2007/08/surfing-kond...

    If you follow John Mauldin, then we have a few more years of "muddle through" before things start to heat up again.

    If you are a believer in "bear/bull" cycles then we are in a sideways market because valuations are still too high. Once they drop down to historical averages, things will take off again.

    Further, the high unemployment scenario is typical, and tends to be self-correcting, believe it or not! Like it or not, our economy has converted slowly from primarily agrarian to primarily manufacturing, to heavily service oriented. In an agrarian society, growth is just plain slow no matter what. In a manufacturing environment, unemployment spikes up quick, but also drops quickly. Service-oriented economies fall some place in between the extremes. Fortunately the longer that some of that raw talent stays out of work with nothing to do, the quicker they will roll up their sleeves and find a way to dig their way out of a hole. Hence I believe that this is the reason that small businesses always flourish during a down economy...because when you force someone into a corner, especially an American, they come out fighting. In war, we demonstrated it time and time again throughout history. In business, what happened in the 80's is the best example yet. In politics, look what happened once we recovered from the Carter years? Obama is kind of like a combination of FDR who did everything possible (though he may have been well meaning) to keep us in a Depression and Carter's second term. The great liberal/conservative cycle that happens in politics will pull us out of that slump, too.

    Now as to your 3 options:

    * Continue on the path we are on and let the free market allocate resources.

    --We need to reverse course and let the free market actually exist. Free markets are the natural enemy of corporations. They benefit "the economy" and the consumer, but since they slowly, inexoribly destroy economic moats and force all companies to grow by innovating, they are the natural enemy of fat, lazy big corporations that you railed against so much.

    * Have the government levy taxes on items produced using offshore labor.

    --Stupid. Restricting the flow of trade simply hurts the economy. History has demonstrated this over and over.

    * Help subsidize companies that choose to maintain domestic manufacturing.

    --Again, same problem. That's really worked out with the steel industry when every time things get a little "tight", they go crying for another bail out, right? Part of a free market is recognizing economic Darwinism. Are banks "too big to fail"? Well, how did they get that way? You can be the biggest in business, or you can be the best. You can't be both. If you are the biggest, then you must by definition compete by going after the worst customers. I can remain the best simply by going after the best customers and leaving you to eat the table scraps. You cannot be both. Eventually the biggest will always be toppled and disappear as something else takes it's place. Again as I said, it's economic Darwinism in action.

    If you want to truly subsidize American business, then go after the subsidies! Level the playing field and quit giving out subsidies of any sort. Use that money instead to cut tax rates. We have the highest corporate tax rates in the industrialized world. Doesn't that point to an obvious problem? Also, start working on reducing the regulatory burden. Last I knew (in the 90's), the EPA Code of Federal Regulations took up about 6 FEET worth of shelf space, and that was over 10 years ago. I'm sure it is much worse now. Shouldn't that be a hint?

    Everything that has "gone wrong" with the health care system is precisely because of government interference, starting with wage controls in WWII which brought about health care benefits. One of Kennedy's "brilliant" ideas was the HMO. How did that go over? Over and over, government interference CREATED the health care problem. Now they are, ahem, "solving it"? I fail to see how it is going to get cheaper when they are going to have fewer price controls and more moochers than ever on the new program, and a total lack of any sort of free market economics to drive costs down. How does this help "solve" the problem? It's the same all over...all your solutions involved increasing government involvement and largesse.

  • Report this Comment On July 28, 2010, at 3:29 AM, gf2043 wrote:

    Three things continue to play for the favor of the US. First, is that those other places don't enjoy the same level of freedom and high standard of living as the US does. As long as this is the case, the talented entrepreneurs from China, India, etc. would prefer to start their companies in the US and immigrate. Second, the US is the biggest market for high-tec products and being close to the customers also means you are more likely to be first to identify the need and first to come up with a solution. Third, the amount of VC money invested in green ideas is by far higher in the US compared to the other states mentioned. Not in too many places, a guy just out of college like Mark Zuckerberg would get funding so easily and start a multi-billion business in just a few years.

  • Report this Comment On July 28, 2010, at 4:11 AM, kpbpsw wrote:

    Wow lots of interesting stuff here but working in high tech manufacturing I think most of this misses the point.

    Worker costs in the US vs China vs Cheap places. The issue of burdened labor rates is way over stated for a number of reasons -

    a. Labor as a percentage of most electronic products is less than 5% of the BOM cost so that if you use the numbers referenced above the increase in US labor at $40 fully burdened vs $9 fully burdened that would be 4.44 x multiplier so looking at the iPhone for example and these are typical costs not based on real knowledge of Apples costs:

    Selling Price $600.00

    MFG Cost FOB China $280

    of that MFG cost Labor cost would be an estimated $14 in China and $62 in the theoretical US MFG operation.

    There is probably around 4% to 9% extra cost associated with MFG in Asia vs the US for duties, freight, longer supply chain capital costs and outsourced management overheads, so lets say 5% for higher volume products that would mean there would be a savings of about $14 making it in the US so the net increases in cost for a US built iPhone prices product would be $48.

    This is a significant number but much less than most people think - would people be willing to pay and extra $100 for what is now a $600 consumer device?

    Well you could get that differential down by not making in say California but rather make it in a nice new plant in Arkansas or Alabama where the fully burdened labor rate might be more like $14 to $18 an hour, so there would be not difference in landed BOM costs.

    But to do this you would have to build out the infrastructure of places like Arkansas and have low cost capital available to build modern factories there.

    This is what the government should be subsidizing along with building resources to help companies do this rather than making it hard for them. The funny thing is that we have been doing this for years for foreign companies (look at all those shinny new Car factories all over the SE US).

    The reality is we need to get the Banks and VC companies back investing rather than hedging the current financial mess. And we can not restrict the quality of the investments as to get the big wins like Cisco or google or Apple they need to be risky investments so the government should not regulate but make tax incentives.

    How about Taxing un invested VC capital, or charge higher insurance for banks that do not do x% of small business lending.

    The work that requires truly low cost labor has already moved out of China as their $7 to $9 an hour labor force is already to expensive, and that is why lower tech high labor jobs have been migrating to Viet Nam and Bangladesh.

    China's advantages today are more about low cost capital for MFG operations from buildings to new machinery and automation - their plants are a generation ahead of anything in the US. And the supply chain of most parts from microprocessors to basic electronic parts are considerably faster and better than the US.

    All of this is easily fixed with simple programs to build a new manufacturing base building the products or today and tomorrow in low cost regions of the US.

    Taxing oil and removing subsidies on ocean transport would also help increase the competitiveness of US Manufacturing.

    And lets not forget that when the US thinks of Business they think big as in multinationals, the future job creators are small companies man of then startups who will grow.

  • Report this Comment On July 28, 2010, at 7:56 AM, zoningfool wrote:

    "Continue on the path we are on and let the free market allocate resources."

    Huh? What's 'free market' about minimum wage laws, payroll taxes, OSHA requirements, EPA restrictions, the new healthcare mandates and all the other rules, regulations and requirements imposed on American businesses? Or for that matter the subsidies provided by the foreign gov'ts? All the rules, regs, etc imposed on American businesses by the US Gov't combined with the assistance provided by foreign gov'ts is at the root of the outsourcing. The 'free market' you reference simply doesn't exist.

  • Report this Comment On July 28, 2010, at 8:53 AM, Melaschasm wrote:

    If you want more manufacturing in the US, then stop punishing companies for successfully manufacturing products in the USA.

  • Report this Comment On July 28, 2010, at 10:10 AM, binkenhiemer wrote:

    Melaschasm, can you explain such a dramatic, but essentially useles, one-liner?

    "If you want more manufacturing in the US, then stop punishing companies for successfully manufacturing products in the USA."

  • Report this Comment On July 28, 2010, at 10:34 AM, binkenhiemer wrote:

    zoningfool,

    "All the rules, regs, etc imposed on American businesses by the US Gov't combined with the assistance provided by foreign gov'ts is at the root of the outsourcing. The 'free market' you reference simply doesn't exist."

    Do you mean rules like not being able to dump industrial chemicals in rivers like in Guetamala, or allowing companies to foul the air and drive the cancer death rate up as in China, or not allowing supervisors to beat employees who are late for their shift as a object lesson, like India, or use enslaved children to glue together tennis shoes as in Indonesia? Yeah, we have way too many regs.

    EVERY REG out there was put in place by companies that didn't care one whit about anything other than money. Who specifically urinated and defecated in their own "backyard" and had to be stopped. Just go back and read some history of the United States and you see the same thing.

    The companies that perform best balance the needs of their workers and the requirements of their consumers. Take SAS for instance. Look at what DuPont was able to do with its industrial processes. DuPont produces 1M x less polutants than they did in the late 1980s, and their profits rose. They exceeded regs and still do.

    The issue is that most businesses have lazy CEOs that can't think about anything more than next quarter's stock price, that don't see the long-term issues of high unemployment in their own backyard.

    For you who say its government regs and burdens, well, if run your business in a manner where no intervention is necessary, and there are many examples, then you could optimize your freedom of action and see fewer regs. It is hilarious how we in the business community seem to think that we are simply persecuted and have no responsibility.

  • Report this Comment On July 28, 2010, at 10:53 AM, binkenhiemer wrote:

    pinestholding,

    "The big issue is that Americans are pretty entitled. My company has a plant in Guetamala. The people over there basically beg us for work at any wage. The people in America won't even show up for an interview for less than $10/hour...."

    Did you read this? Can you conceive of living on $20K in the US now??? Are you that detached? The reason they don't show up is they can't live on a wage less than that. If you have more than one mouth to feed, on $20K??? Yeah, you take advantage of people who are clamoring to get out of even lower poverty and you call the people next door to you, paying the current prices for rental properties "entitled".

    So some basic math here. You have a house hold of two, a single parent and a child. You spend $7200 on a one bedroom apartment, though it does have a toilet! So now you buy hot dogs and rice to keep the costs down to $4000 annually. You have to buy clothes, used, at $2000 annually (these people are real clothes hounds). You have to have a car to get to work because all the industrial parks and condos force you further out for your apartment. So you spend $3000 annually for car expenses, mainly gas because you cheat on the insurance. Oh, you have to pay parole taxes of $1500. So they might have $2700 for everything else, certainly not medical from your company. Yeah, entitlement si the issue for those lousy American workers!

    Hmmm, who's the enititled one here?

  • Report this Comment On July 28, 2010, at 11:02 AM, binkenhiemer wrote:

    I truly believe the biggest reason for loss of American jobs was the subsidies that we allowed the Indian government to give their companies that provided outsourcing and the lack of any regulation and fixing the RMB against the Dollar. But it helped the profits of our companies so that was all that mattered. The free market, strangely attaining the same destination as Communism (no governement and everyone running in a field of lillies), would handle it all.

  • Report this Comment On July 28, 2010, at 12:19 PM, Glycomix wrote:

    What is this, "factories don't belong in America" nonsense? They produce huge returns in money for the worker as well as the owners and managers.

    The anti job legislation of the Democrats in congress is destroying local businesses and US jobs by adding useless regulation, by getting rid of the section 179 small-business investment tax credit, by stopping US oil drilling in Alaska and the Gulf of Mexico, and by extending unemployment insurance to twelve times the usual length of time destroys small, family run businesses because state employment taxes must rise 1200%.

    Destroying the small businesses and factory jobs also destroys the multiplier effect of invention because inventors place their factories overseas.

    Qualcomm has 1300 patents and is producing incredible new inventions, like the power-saver LCD screen, giving them an incredible competitive moat to invest in. However, there's no multiplier effect in this. However, its CEO spoke of setting up "Fabs", factories, in Taiwan because of the labor costs. Lumina outstripped the competition in producing faster gene analyzers. However, its factories are in Singapore and its newest American competitor put up a factory in Hong Kong. One of Intel's top advisers was recently spoke of his astonishment at the "emptying of Silicon Valley of factories by building them overseas.”

    American producers who have US factories like GM, Ford, GE, Hersheys and Catepillar are expiring in debt. GAAT is good, but it must be amended to include prohibitions of child and convict labor. According to the April Economist, the US trade deficit for 2009 was almost half a trillion dollars. More than the next 10 deficit nations added together.

    Who's responsible for this mess? OBama and the radical Democrats have increased the deficit more in one year than Bush did in eight years of war. German owned CNN and the liberal media, MSNBC and ABC sold us on radical Democrats.

    Show some economic morality. Divest yourself of CNN, MSNBC and ABC. Because of my distaste for strongman Hugo Chavez, I won’t buy a gallon of gas from Citgo or invest in the Venezuelan national oil company Petroleos de Venezuela, S.A. (PDVSA). If you wouldn’t economically support apartheid, why should you economically support those trying to economically destroy us?

    Monday, 7/26/2010, I saw a Democrat apologist on CNBC presenting the argument that the destruction of American Oil production by Democrats will increase production of alternative fuels. No one said that it'll also increase inflation and the cost of food to near starvation levels by increasing the cost of energy to exorbitant levels. It'll increase the price of food to exorbitant levels.

    It'll kill our last export, food. We can't farm without oil to run the tractors and combines. We can't export them without trucks.

    Europe is bleeding too. With the exception of Germany, socialism has caused them to have high trade deficits. However, they're 1/10th of the US deficits.

    FREE MARKETS PRODUCE PROSPERITY, BUT LEVEL THE PLAYING FIELD

    Command economies like those in Communist Russia, Maoist China, and Chile led to starvation while the free market though the intervention of Milton Freeman in Chile and Harvard Economist Jeff Sacs in South America, Poland and Russia led to abounding prosperity. (Though the Russian prosperity was delayed 10 years in Russia because of their ignorance of the market after 80 years of the extreme socialism of communism.)

    We can't abandon the free market if we wish to prosper. However, we should encourage businesses in America to keep jobs here though tax breaks and economic incentives for companies that manufacture goods in the US. To prosper, we need to enrich the poor person by giving him or her a job, not a handout.

    SUPPORT YOUR LOCAL SHERIFF: THOSE WHO CUT SPENDING

    Those who care and have money to invest could invest into our country. Invest into the election of politicians who have the courage to balance the budget, tea-party candidates.

    Throw out the rascals most directly responsible for our current mess out of office: most notably John Kerry, Chuck Schumer, Chris Dodd, Barney Frank. Refuse to watch Rachael Madow on MSNBC or Jon Stewart's "The Daily Show". Did Stewart goad congress into killing the country with his tirade over their not pushing a socialist agenda with the radical Democrat super-majority? How responsible is he for destroying the US economy?

    Who might we support? Ex-congressman Shays of Connecticut tried to warn us about Fannie and Freddie's excesses and the political cabal keeping them going as a pork producer at the economy's expense. To help the poor from which he came, Arkansas Governor Huckabee proposed a flat tax to help the economy. We can support his electoral choices like Florida Senate candidate Marco Rubio. Contribute to the campaign fund of Jay Townsend, Schumer's opponent. Give to PACs that oppose Dodd and Schumer.

    How else can you help? The tea party candidates seem long on courage and civic dedication, but short on experience. In addition to giving money, give your wisdom to them. Mentor them. I recommend short pithy stories to illustrate your point. Getting too much wisdom at one time is like trying to get a drink from a fire hydrant. A little information is great but a lot is difficult to absorb.

    Those of you who have the courage and wit to run for office should do so. In the foundation of our country depended upon people like John Adams, Thomas Jefferson and Benjamin Franklin. They had a "public spirit" and intentionally gave of themselves in the service of their country.

    Put your second in command in charge of your business and see how he or she does. If they can handle it, and run for office! Don't let John Kerry, Chuck Schumer, and Chris Dodd destroy what's left of our economy. Let your voice be heard. .

    The problem with socialism is that it robs the individual of responsibility for his or her life. We should help the poor by supporting what works, loans that provide individual incentives for repayment: Grameen Bank has a 98% repayment rate when they give loans to the ultra-poor entrepreneur and helps them help themselves. However, they use the principle of one's commitment to one's friends. The poor entrepreneur has to find five friends who also have good ideas. They vote as to which one gets the loan. When the first loan is repaid, the next person in line gets the loan.

    What's the opposite of individual responsibility? The welfare mortgages provided by Fannie Mae and Freddie Mac. They provide mortgages to the ultra poor without providing incentives for repayment.

    The result of a lack of individual responsibility in loans is that the GSE's (government mortgage banks) were bankrupt by 1.8 trillion by the end of 2006. Then, to increase pork and votes, Schumer, Dodd, Frank, Kerry, Pelosi and other Dems forced the regulators to increase Fannie and Freddie to make 76% of the mortgage market to welfare mortgaes, subprime and Alt-A mortgages. The increased pressure led Fannie and Freddie's officers to buy (guarantee) extremely poor mortgage and led to the 50%-62.5% subprime default rate.

    (I've given references ad infinitum. Those who want to see evidence of these facts, please review my past posts).

    Obviously we'll have to cut services, without persuasion the US populace won't stand for change until we hit the iceberg. We can mitigate the impact by keeping the banks and business afloat: Elect politicians who will avoid damaging the economy further by

    repealing the following:

    - the welfare mortgage, either disestablish Fannie and Freddie, or better, cut the welfare loan

    - loan requirement based upon minority status.

    - Cut unfunded entitlements in Medicare.

    Elect politicians who will improve the economy by improving business investment in jobs and ideas:

    - restore the section 179 small business investment deduction;

    - re-establish the "reserve" in the Federal Reserve;

    - fund small business micro-loans based upon the Grameen Bank model. That will help the poor entrepreneur.

    - advocate passing a balance budget amendment with no government disbursement excluded.

    Bernanke used the Reserve in Federal Reserve to bail out the Dems' poor choices and bought $1.25 trillion in the crap securities. However, now we no longer have any protection for a massive bankruptcy of our banks.

    If you don't speak out, what will be left of our economy in two years? Even the Titanic swerved, but the radical Democrats in congress are pushing even harder on their failed solutions. Here's an acid test. The Financial Regulation bill included the requirement that banks loan based upon race rather than merit. That is the requirement that destroyed our banking system though Fannie Mae and Freddie Mac. If your congressman or Senator voted for the Financial Regulation act of 2010, fire him or her. If your congressman or senator did not vote to dismantle Fannie or Freddie, fire her or him.

    Since they took over in 2006, Schumer, Dodd, Franks, Kerry etc. have produced an estimated $6.4 trillion in bad mortgages from Fannie and Freddie by 2008. [James B Lockhart's statement on Fannie and Freddie's conservatorship said that they loaned $5.4 trillion in welfare subprime mortgages (50% default) loans and Alt A mortgages (25% default). Our banks are capitalized to 5%. How long will they last?

    WHAT IS THE PROBLEM? DEBTOR SPENDING

    To prevent the destruction of what's left of our economy, and massive starvation, the US will have to truly balance the budget and cut social services to what we're able to bring in. The Democrat “paygo” or pay as you go is a lie! Obama and the Democrats should apologize to the congressman who cried “Liar” after his State of the Union Address. He was right.

    We can either add taxes or cut spending. We’ll have to add enough to provide essential services, but we should cut taxes on businesses that invest in American jobs. The more we cut taxes, the more jobs and prosperity we'll produce.

    We must balance the Medicare entitlement NOW. Our entire tax revenue stream is $1 trillion a year. The 50% of the Medicare entitlement that isn't paid for by taxes is adding $2 trillion a year in debt.

    OBama and the radical socialist Democrats added $3 trillion in unstimulating stimulus debt that increased unemployment to 10% and added $9 trillion in debt for $10.3 trillion in new welfare programs.

    Where's the money to come from? According to the IRS, the Adjusted Gross Income of everyone in the US is $8 trillion. That's Gross, Only God knows what our Net Income is. We pay 1 trillion in taxes, leaving 7 trillion. What's left to pay the $2 trillion a year in medicare debt and the $1.5 trillion a year in OBama stimulus debt.

    Add the numbers $6.4 trillion welfare mortgages, $3 trillion welfare stimulus in the past 4 years is $9.4 trillion. We have to add in $2 trillion a year, or $8 trillion in Medicare debt. That's $17.4 trillion in Democrat debt that has to be paid by taxes: $4.3 trillion in new debt per year.

    The tax revenue is currently about $1 trillion a year. To stay even with our current amount of acquired debt, we'll have to raise taxes by 540%. To pay any of it off, we'll have to increase it even more.

    This video shows how to solve the problem. Latin America faced destructive hyperinflation when they when governments spent more than they could collect in taxes. Click to view video (9 min):

    http://www.youtube.com/watch?v=ScXCBJkp3s4.

    CALL FOR ACTION:

    What can we do about it? Act. Speak up and financially support whoever is the fiscally conservative candidate. The person most responsible for our mess is Chuck Schumer, who has millions in his campaign war chest. Pour resources into his opponent's campaign. Give to conservative PACs that support the opponents of those who have murdered our economy.

    Speak in every venue, in every blog, in facebook and twitter. Put your shoulder to the wheel and help us push the US economy out of this ditch!

    Contribute your time to the future of our country. Sound the alarm. Alert the nation to our danger while providing evidence on the important points. No one will put their faith in unsupported opinion any more than we would.

    Be brief. Nobody reads more than two paragraphs. So write, edit and re-writing your contribution; when you cut ten pages to two paragraphs and provide reasoned evidence for every point, send your message out. If it’s too much, cut it into different independent messages with one clear short point for each message.

    What is this, "factories don't belong in America" nonsense? They produce huge returns in money for the worker as well as the owners and managers.

    The anti job legislation of the Democrats in congress is destroying local businesses and US jobs by adding useless regulation, by getting rid of the section 179 small-business investment tax credit, by stopping US oil drilling in Alaska and the Gulf of Mexico, and by extending unemployment insurance to twelve times the usual length of time destroys small, family run businesses because state employment taxes must rise 1200%.

    Destroying the small businesses and factory jobs also destroys the multiplier effect of invention because inventors place their factories overseas.

    Qualcomm has 1300 patents and is producing incredible new inventions, like the power-saver LCD screen, giving them an incredible competitive moat to invest in. However, there's no multiplier effect in this. However, its CEO spoke of setting up "Fabs", factories, in Taiwan because of the labor costs. Lumina outstripped the competition in producing faster gene analyzers. However, its factories are in Singapore and its newest American competitor put up a factory in Hong Kong. One of Intel's top advisers was recently spoke of his astonishment at the "emptying of Silicon Valley of factories by building them overseas.”

    American producers who have US factories like GM, Ford, GE, Hersheys and Catepillar are expiring in debt. GAAT is good, but it must be amended to include prohibitions of child and convict labor. According to the April Economist, the US trade deficit for 2009 was almost half a trillion dollars. More than the next 10 deficit nations added together.

    Who's responsible for this mess? OBama and the radical Democrats have increased the deficit more in one year than Bush did in eight years of war. German owned CNN and the liberal media, MSNBC and ABC sold us on radical Democrats.

    Show some economic morality. Divest yourself of CNN, MSNBC and ABC. Because of my distaste for strongman Hugo Chavez, I won’t buy a gallon of gas from Citgo or invest in the Venezuelan national oil company Petroleos de Venezuela, S.A. (PDVSA). If you wouldn’t economically support apartheid, why should you economically support those trying to economically destroy us?

    Monday, 7/26/2010, I saw a Democrat apologist on CNBC presenting the argument that the destruction of American Oil production by Democrats will increase production of alternative fuels. No one said that it'll also increase inflation and the cost of food to near starvation levels by increasing the cost of energy to exorbitant levels. It'll increase the price of food to exorbitant levels.

    It'll kill our last export, food. We can't farm without oil to run the tractors and combines. We can't export them without trucks.

    Europe is bleeding too. With the exception of Germany, socialism has caused them to have high trade deficits. However, they're 1/10th of the US deficits.

    FREE MARKETS PRODUCE PROSPERITY, BUT LEVEL THE PLAYING FIELD

    Command economies like those in Communist Russia, Maoist China, and Chile led to starvation while the free market though the intervention of Milton Freeman in Chile and Harvard Economist Jeff Sacs in South America, Poland and Russia led to abounding prosperity. (Though the Russian prosperity was delayed 10 years in Russia because of their ignorance of the market after 80 years of the extreme socialism of communism.)

    We can't abandon the free market if we wish to prosper. However, we should encourage businesses in America to keep jobs here though tax breaks and economic incentives for companies that manufacture goods in the US. To prosper, we need to enrich the poor person by giving him or her a job, not a handout.

    SUPPORT YOUR LOCAL SHERIFF: THOSE WHO CUT SPENDING

    Those who care and have money to invest could invest into our country. Invest into the election of politicians who have the courage to balance the budget, tea-party candidates.

    Throw out the rascals most directly responsible for our current mess out of office: most notably John Kerry, Chuck Schumer, Chris Dodd, Barney Frank. Refuse to watch Rachael Madow on MSNBC or Jon Stewart's "The Daily Show". Did Stewart goad congress into killing the country with his tirade over their not pushing a socialist agenda with the radical Democrat super-majority? How responsible is he for destroying the US economy?

    Who might we support? Ex-congressman Shays of Connecticut tried to warn us about Fannie and Freddie's excesses and the political cabal keeping them going as a pork producer at the economy's expense. To help the poor from which he came, Arkansas Governor Huckabee proposed a flat tax to help the economy. We can support his electoral choices like Florida Senate candidate Marco Rubio. Contribute to the campaign fund of Jay Townsend, Schumer's opponent. Give to PACs that oppose Dodd and Schumer.

    How else can you help? The tea party candidates seem long on courage and civic dedication, but short on experience. In addition to giving money, give your wisdom to them. Mentor them. I recommend short pithy stories to illustrate your point. Getting too much wisdom at one time is like trying to get a drink from a fire hydrant. A little information is great but a lot is difficult to absorb.

    Those of you who have the courage and wit to run for office should do so. In the foundation of our country depended upon people like John Adams, Thomas Jefferson and Benjamin Franklin. They had a "public spirit" and intentionally gave of themselves in the service of their country.

    Put your second in command in charge of your business and see how he or she does. If they can handle it, and run for office! Don't let John Kerry, Chuck Schumer, and Chris Dodd destroy what's left of our economy. Let your voice be heard. .

    The problem with socialism is that it robs the individual of responsibility for his or her life. We should help the poor by supporting what works, loans that provide individual incentives for repayment: Grameen Bank has a 98% repayment rate when they give loans to the ultra-poor entrepreneur and helps them help themselves. However, they use the principle of one's commitment to one's friends. The poor entrepreneur has to find five friends who also have good ideas. They vote as to which one gets the loan. When the first loan is repaid, the next person in line gets the loan.

    What's the opposite of individual responsibility? The welfare mortgages provided by Fannie Mae and Freddie Mac. They provide mortgages to the ultra poor without providing incentives for repayment.

  • Report this Comment On July 28, 2010, at 1:16 PM, Glycomix wrote:

    Yikes!!!. Posted while trying to clear excess that I inadvertently added. Sorry! :~(

    The U.S. needs factories to get out of trade deficit and possible hyperinflation caused by government overspending. The easiest way to overcome hyperinflation is by exporting. We need an industrial base of factories to export.

    Micro-loans on Yunus' Grameen bank model will give us fiscally responsible economic growth and aid poor entrepreneurs who need finances. Grameen Bank model provides 98% repayment without collateral, http://www.gdrc.org/icm/grameen-article4.html (paragraph 16).

    Please think on these ideas for economic growth:

    1. Reestablishing the small business investment tax credit. The Democrats just cut the section 179 tax credit. This pays for itself many times over by increasing production and jobs.

    2. Tax-Free exports. Remove taxes on exports. Europe and Japan don't tax exports. We should follow their lead.

    3. Increase American 'Fabs' (factories) by providing tax credits to businesses depending upon the amount of US content in a business' product.

    The Titanic swerved, but not the Democrats. After the US hits the economic wall, please speak to preserve job-producing tax credits; so we'll have an economic recovery.

    If we don't provide for economic growth and exports, we may destroy our future. Argentina did this in it's turning to a command economy from the late 1930s until 2005, Brazil also destroyed itself by public overspending on Brazilia and by refusing to cut spending that caused 45 years of hyperinflation from 1961 to 2006.

    [[Fool moderator. You've been too generous. Please imposed a word limit on postings. I can't afford to lose another four hours on something that will never be read.]]

  • Report this Comment On July 28, 2010, at 1:40 PM, Glycomix wrote:

    zoningfool You're right!

    Perhaps GAAT could be amended to level the playing field:

    Penalties to nullify the advantage of

    - child or convict labor

    - the lack of OSHA and EPA

    What does the reader think? Amend GAAT?

  • Report this Comment On July 28, 2010, at 1:41 PM, Glycomix wrote:

    Thank you for your stimulating article Jordan.

  • Report this Comment On July 29, 2010, at 10:42 AM, zoningfool wrote:

    @ binkenhiemer & Glycomix --

    C'mon now--the necessity or desirablity of such rules, regs, restrictions wasn't the *point*. The point was it simply cannot be credibly stated that the 'free market' exists in reality and can bear 'the blame' for outsourcing. You both should know better--really....

  • Report this Comment On July 30, 2010, at 8:50 AM, zoningfool wrote:

    @ Glycomix--in regard to above response--sorry I think I misread your comment--I read it as sarcasm--I agree, leveling the playing field in some way (less regulation here, more overseas) would help mitigate at least some of the outsourcing--but think about it--cost of living differentials across nations would still exist--making labor cheaper elsewhere because a 'fair wage' would still be much lower than here in the US.

  • Report this Comment On July 30, 2010, at 2:42 PM, wordmouse wrote:

    Sometimes competing is not the answer. We are consumers, its what we do best. Let the rest of the world work their asses off and raise their standard of living. We should consume and provide military might for a price. WE had a good 100yr run now let some other country drive the efforts of the world production and pollute their water and air and land.

  • Report this Comment On July 30, 2010, at 5:30 PM, TMFPhillyDot wrote:

    @Glycomix,

    Thanks for your comments! I think the article is a great example of how we can just tap the surface of a complex issue, and Fools will always rise to the occasion and bring a variety of really intellectual viewpoints to the table.

    Fool on!

    Jordan (TMFPhillyDot)

  • Report this Comment On July 30, 2010, at 6:32 PM, 2beewise wrote:

    Re; first post, by demodave ~

    I wanted to say everything demodave but he said it so well that I need only to heartily cheer and applaud! Thanks for a very articulate and insightful statement!

  • Report this Comment On July 30, 2010, at 11:11 PM, SPQRusa wrote:

    After 20 years of being employed at many of the major companies in the Valley, I can tell you that the outsourcing scare is made-up. Every company I have worked at tried to out source their Valley talent, and it never really worked quite right. You simply can't replace a Valley knowledge worker with someone from India or China or <Name Your Favorite Outsourcing Local>. Most of us have grown-up as tech heads with parents who are tech heads, and we have a cultural and technological edge that can't be easily replaced. I have seen endless outsources technology projects cancelled due to logisitics, quality, management, etc...

    Since you can't really live in the Valley without having some degree of success, the less talented tend to leave for easier pastures. The less talented are the ones crying about outsourcing. Skilled engineers aren't scared in the least. We are easily employed and we are quite picky about the companies were we work. We have become so demanding that the top companies in the Valley offer benefits unmatched in the rest of the country.

    I would venture that the reason the USA has fewer and fewer lower skilled manufacturing jobs is : excessive litigation, govt. regulations, labor unions, and taxes (in that order). Why build a factory here where there is a locust storm of lawyers, govt officials, labor thugs and tax collectors? Most companies do the obvious - negotiate a better deal with another country thanks to our open borders...

    SPQR

  • Report this Comment On July 31, 2010, at 3:07 AM, njdo wrote:

    Hi-tech jobs and manufacturing go hand in hand and both are most efficient and innovative when they are part of a seamless process occurring in a fertile government, taxation and regulatory environment. Face to face interactive communication and discussion facilitates the rapid transfer of designs and processes from the drawing board to the plant floor and designers and engineers benefit from receiving immediate feedback and comments/suggestions from production supervisors and workers. Having schools and a well educated workforce in close proximity to design and manufacturing creates an atmosphere where ideas and processes are easily exchanged and innovation can cross-fertilize related industries. America is in an economic malaise now from the excessive growth of an inefficient and and corrupt government which has become a millstone around the neck of business and industry. Our government and industry are infiltrated by fifth column dual loyalists who have hijacked America's economic and foreign policy for our so-called "allies". America's military might and monetary resources are deployed in the wasteful and unjust destruction of foreign economies and of our own limited resources which should be being reinvetsed in or economy to develop new technology and compettive industries. Our bootlicking, incompetent congress appears to be stupid and silly (both parties) and they represent foreign money and political powers instead of the common interests of most Americans.

  • Report this Comment On July 31, 2010, at 1:46 PM, ikkyu2 wrote:

    The handwriting was on the wall when George Bush said, "Jobs that Americans are not willing to do." The expectations of American citizens, with regard to their standard of living, health, opportunities, and wealth, are simply not in line with those same citizens' abilities, talents, and work ethics. Americans are not willing to work hard, not able to do useful work, and certainly not willing nor able to accept a globally competitive wage for the work that they can and will do.

    Until this changes, the process described will continue. Mr DiPietro's 3 suggested "solutions" are not solutions at all; they merely redistribute the pain from the individuals involved onto the entire US economy, by placing a drag on it. The change will come with education, with new values, with different attitudes; or it will not come at all.

  • Report this Comment On July 31, 2010, at 1:52 PM, rmiers wrote:

    I have never purchased a japanese car because of their unfair trade restrictions. I have purchased german cars because you can buy an american car without tax or restriction.

    That said, I'm a buy american type of guy and it's getting harder everyday.

    If we are to be a part of a worldwide marketplace, we gotta compete.

    I love the comparison of two of my favorite stocks, Intuitive surgical (deep in the heart of silicon valley) and Garmin, the class act GPS company.

    Intuitive, with the miracle robot surgical system, pays average 40% tax yearly and is growing because it has no competition. Garmin has plenty. Garmin is structured with headquarters in Cayman, manufactured in china and distribution in kansas. They pay 16%

    enough said. You can live or die on 25% savings.

    California Crooks have killed the goose in partnership with Mz Pelosi and friends.

    And to the teachers and unions who can't seem to teach, your judgement awaits you.

    Is Arrnold still commuting in his private jet?

  • Report this Comment On August 01, 2010, at 12:02 AM, footej wrote:

    Interesting observations, but the economic illiteracy is painful to read, especially coming form the MF. The reason why we have unemployment stuck at double digits is because we have a bloated, crushing government that that is spending itself to oblivion, trying to manage almost every aspect of the economy and the lives of its citizens, while moving at breathtaking speed to reduce the US to a European style welfare state. No amount of subsidies or protectionisms will reverse the unemployment trend. Only when the voters wake up and say enough is enough and start to demand some semblance of fiscal responsibility and constitutional restraint from our elected officials will the US regain its rightful place as an economic superpower.

    Please read some Milton Friedman or some other respectable economist (not holding public office) – the solution is simpler than the politicians would have you believe.

  • Report this Comment On August 01, 2010, at 1:04 AM, albeit wrote:

    Its worth pointing out that it is all of our borrowing that has caused jobs to head overseas. And immigrants to come here to work.

    When you borrow, you're not borrowing pieces of paper or ones and zeros in a computer. You're borrowing stuff. Someone must make it.

    When you borrow, you do it so you can consume more than you produce. Someone else must produce more and ship it to you.

    When our government stops borrowing so much and stops subsidizing the cost of borrowing, this picture will change. Wages will drop, workers will leave and imports will be expensive. And the cancer in DC will go into remission.

  • Report this Comment On August 01, 2010, at 4:45 AM, Alrib28 wrote:

    Good surprise! I am french, I live in France, and I am retired. I trade on Us stocks because this is cheaper fees thatn in France. And I see that the same problems are everywhere.

    The question is : do you accept to become poor, or to see your neighbour becoming poor, in a rich country.

    I have worked for german, english, french, japanase industrial cies and same problem : cheap handwork.

    Cheap handwork moves, it was in Hungary, communist east Germany, now Asia.

    The idea is to get cheap production, quality and no strikes. Only dictatures allow this.

    It means that all this is above our heads, that is big game involving managers of states and international companies, banks ....

    New countries want to take place of old countries, with no war but develop weapons in secret.

    I don't see any solution, except to spend money to avoid people to become too poor, have dignity, avoid wasting tax money the best we can do.

    Dignity is happiness, not useful to have big money for this. My father, who was in 2 wars, 5 years in prison in Germany, and in economic crisis, could not see a beggar without helping him.

    Now in France it is plenty of beggars, children have no work ... I don't see any solution except reduce government expenses and adapt them to help people in creating small jobs. You cannot help people giving only money, it is against dignity.

    You must give a purpose in life, being useful.

    Sorry not to have any solution. In fact solutions will happen from the side we don't see them coming : economic crisis, catastrophic events, as usual.

    Just keep in mind : dignity.

  • Report this Comment On August 01, 2010, at 10:49 AM, SmoothHughes wrote:

    I think option 3 is the only forward path to keep manufacturing in the US. I am a believer in the power of free markets but we have to acknowledge the reality that we are competing with subsidies from other government. Those nations have made manufacturing jobs a top priority and are willing to give grants and tax breaks to bring those kinds of jobs in. The US government has to follow suit to level the playing field.

  • Report this Comment On August 01, 2010, at 1:43 PM, lyndonevans wrote:

    This article is the best I've seen regarding the subject. I think that option 1 is the best, but given the situation we find ourselves in now, perhaps it needs a push. I would vote for a combination of 2 and 3. Specifically, US companies that farm out (off-shore) jobs to create locally sold products should be taxed extra on the sales of the products. That money should be dedicated to short-term incentives to keep the jobs here at home, and for innovation and expansion. Any company that moves it's legal entity outside the US should also be taxed accordingly. The only alternative to some mix of these things is to do a total reset of the dollar so that it is equal or less than the other major world currencies. Hmmm, we may already be well on our way the this latter method. And, anything we do other than option 1 will create even more big brother government and red tape.

  • Report this Comment On August 02, 2010, at 2:40 AM, Alrib28 wrote:

    Solution 1 is not a solution, the market exists by itself and adapts to datas. The market doesn't look for job employment in the US.

    Solution 2 is impossible to control

    Solution 3 is a sort of protectionnism also difficult to make work.

    You help a local factory of shirts for men : they produce at 80% discount to compete with India with your money. And if they don't sell? And why this factory? It works only if the shirts are the only ones in shops, like it was in communist countries.

    The good solutions are not very pleasant, as to become poor and poorer among rich people.

    This is the future of Silicon Valley as of many places in the world.

    Except using taxes to create jobs useful for all, roads, dams, unemployment will go on.

    The problem is that no money for this, too much debt.

    I see only 1 way : reorganize taxes, borrow money to rebuild the country for ex on 10 years, this would be deductible from income tax, and then decide what to do, at the condition taht companies working on these markets employ citizens, not in importing cheap workers!

  • Report this Comment On August 02, 2010, at 3:51 PM, safefool1 wrote:

    Well, I guess we would just have to wait for the rest of the world to catch up with the ability to design new products. For example, Apple iPhone was designed in USA but produced in China. Let's just project 20 years from now, China (or other less creative countries of the world, per se) will be able to design iPhone Equivalent product and their GDP has far surpassed USA's they will be outsourcing their manufacturing to USA. Barring multinational wars, and war between China and USA of course.

  • Report this Comment On August 03, 2010, at 3:47 AM, VintonCounty wrote:

    Local manufacturing energizes product design in ways that are hard to understand unless you have worked in a manufacturing environment. The designer sees deficiencies in products and inefficiencies in their manufacturing methods. He has an immediate market, and therefore incentive, for improvements he devises. He also has local capability to make prototypes, and wholesale customers for his improvements are available to critique his ideas. These conditions energize designers and shorten times-to-market.

    The same considerations discussed for product design apply also to manufacturing methods.

    If the U.S. manufacturing withers, we will lose skills for both design and manufacturing.

  • Report this Comment On August 03, 2010, at 9:53 AM, MikeW92103 wrote:

    Any and all of the suggestions might work.

    I like

    "Continue on the path we are on and let the free market allocate resources."

    except for one problem. We aren't on that path.

    The path we have been on for as many as thirty years is one that lets misguided fiscal and monetary policy allocate way to many of our nation's resources to the financial services industry. The results are as you'd expect. The best and brightest young Americans and immigrants line up to interview for jobs on Wall Street, not in Silicon Valley -- even if their education is in math and science that would be most useful to tech companies. Their choices are only rational. Why wouldn't they go to work in Finance, doing things that are net-useless for the economy, when they can get paid 3 to 5 times more than they could in tech, thanks to cheap money and Government guarantees to the Finance sector.

    Let's restore a free market, and it might allocate resources better.

  • Report this Comment On August 03, 2010, at 12:21 PM, luvthiscountry wrote:

    Customers pay our salaries, so the free market ultimately rules our decisions. Any government intervention usually raises prices and/or limits consumer spending due to higher taxes.

    In a perfect world, profits from one company's windfall would repair economic damage, and reduce taxpayer burden through turfed employee retraining, and domestic industry support; but that is awfully hard to measure, and ain't going to happen anytime soon.

  • Report this Comment On August 03, 2010, at 3:31 PM, goodbetterbad wrote:

    pathetic case of PLAGIARISM. a school kid will do better in covering his rip off. the original article is here: http://www.businessweek.com/magazine/content/10_28/b41860483...

  • Report this Comment On August 06, 2010, at 11:57 AM, INoFoolin wrote:

    Silicon Valley does not manufacture any silicon anymore. Asian capital from government controlled banks have killed US investment in technology manufacturing. Cheap totalitarian government capital stole the US technology base, and stole US intellectual property. These factories have insignificant labor cost. The first wave was Japan in the late 70's, then Korea in the 80's, then Taiwan in the 90's, and now China. When the manufacturing moved, the product engineering moved, and now design. Almost all new design is being moved offshore to China and India. Beyond the economic implications of the shift of all technology to Asia, our national defense is now completely dependent of 'smart' technology that China can one day prevent the US from accessing. If you invest in technology beware the geopolitical risk of China, which is a communist regime.

Add your comment.

DocumentId: 1247540, ~/Articles/ArticleHandler.aspx, 4/20/2014 5:54:35 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement