"Gary Coffman" wrote in message
...
On 6 Sep 2003 19:37:25 -0700, jim rozen wrote:
The problem that nobody anticipated is, the feedback time
constant is way, way too far short for this to work. To
boost their profits, they need to lay off american workers.
Sure the workers have some savings, but once you lay off
the worker, they stop buying - instantly, and almost
completely.

Which leaves no market for the goods that the companies are
trying to peddle.

You're assuming that *only* the laid off workers bought their
products. That would be a very unusual business indeed. In
almost all cases, a company's workers form a *very* small
subset of its customers.

Look at it this way, out of a potential domestic market of
nearly 300 million consumers, the manufacturers lost
93,000 potential customers. That's 0.031% of the market.
That *very* small drop in the potential market size is more
than compensated by the much lower production costs
of having the product made off shore.

As long as the cost reductions exceed the loss of market
size, the company comes out a winner. Look at the auto
industry. They're having a *record* sales year (in units
sold) despite continuing shrinkage of the number of US
auto workers.

They've had to discount their prices (via rebates and zero
percent financing) to achieve that, but as long as those
discounts are less than their cost savings due to outsourcing,
they're ahead of the game, and consumers have benefited
from lower prices.

Gary

Gary, I think you have been badly infected with Washington Consensus
economics. g

It isn't 93,000 workers. It's now 2.8 million manufacturing workers, because
each company contributes it's own little bit. One person ****ting in the
park is no big deal, but, when half the town starts doing it...

As for the health of the US automobile industry, it's now totally dependent
upon squeezing its supply base like an anaconda wrapped around a monkey. And
Ford and GM together, just two companies in the whole of US manufacturing,
are planning to increase their imports from China from (Ford) $1.1B and (GM)
$2.3B this year, to $10B in 2010 (Ford) and $20B in 2007 (GM), for a total
of a $30B increase in around six years. Even if the economy picks up at a
dramatic rate, there will be a net loss of jobs -- and of purchasing power.

This is no longer an ideological issue. Most of the "conservative" economic
sources, ranging from Bus. Week to the WSJ to The Economist, have agreed on
these points within the last few weeks. The rough consensus is that our
equilibrium unemployment rate probably will have to be raised by one point,
due to trade imbalance and productivity increases combined, and that it will
take GDP growth of over 4% just to stand still in terms of jobs.

So we may have some growth, but it won't go into the pockets of many
consumers. Where that capital accumulation will wind up is problematic as
well. With the US now the most productive country in the world (both in
terms of labor productivity and total factor productivity), those low-wage
countries are looking ever-more attractive as the place to invest. They have
the elbow room to grow faster. We're about tapped out for capital-efficient
growth.

--
Ed Huntress
(remove "3" from email address for email reply)