On Wed, 12 Mar 2008 02:17:54 -0400, "Ed Huntress"
wrote:


"Bruce in Bangkok" wrote in message
.. .
On Tue, 11 Mar 2008 11:27:26 -0700 (PDT), Millwright Ron
A whole bunch cut

Ed Huntress- Hide quoted text -

- Show quoted text -

This thread is going off at a tangent. I responded to Hawke's
statement that "In fact, they are kicking our asses", by stated that
the U.S. has priced themselves out of the world market and gave the
example of the cost of Zestril in Thailand vis-a-vis the U.S.

You respond that "it isn't relevant to the situation in
manufacturing", and then go on to explain that your salary in the
medical business was higher then in the manufacturing business.


My point is that costs in the U.S. are higher then in much of the rest
of the world and that is basic problem. It costs more to do something
in the U.S. then it does in other countries, whether it is building
something or doing something -- even answering the telephone has moved
offshore -- and as a result we have the situation that exists in the
U.S. today.

I don't disagree that prices here are too high to be competitive against
low-wage countries. But your example was a bad one. The pharma business
isn't driven by competition or manufacturing costs. Manufacturing costs in
the pharma business, for all except a very few drugs, mostly certain
biologicals, are trivial. The costs are in development (typically $200
million - $500 million for a new drug) and marketing.

Zestril, manufactured by AstraZensca, in the United Kingdom, and
imported into thailand, costs 12 bucks in Thailand and 48 bucks in the
U.S. The same stuff, made in the same factory.

If a Thai pharmacy can sell it for 12 dollars, and I can assure you
that they make a profit, how come the mail order houses in the U.S.
are selling at a higher price.

That is not a matter of manufacturing in a low wage (actually low cost
of living) country. the U.K. is hardly cheap.

If I wanted to get into it, which I don't, I would argue that we don't
*want* to be competitive with low-wage countries on present terms. We'd be
working for $1/hour if we did. The solution lies somewhere else.


Now, this is not a simple problem and there are a host of underlying
reasons for the situation as it exists today. frankly I feel that they
are unsurmountable.

If your solution is to make us "competitive," then yes, they are
insurmountable.


It is easy to blame it on the notion that the cause is the greedy
unions with their insatiable demands for pay increases.

Only for those who don't have a solution for competing with $0.80/hour wages
in China. They'll blame the unions, which is foolish on its face. The
problem would be the same if our wages were half what they are now. We're
already the most productive manufacturing country in the world. Most people
don't realize that.

And probably the most technically advanced. But unfortunately that
isn't helping Ohio (was it) where jobs are evaporating like water on a
hot sidewalk.

Or the greed
of CEO's ,which probably, is not that far out of line in reality --
Exxon, the largest company in the world? How much should we pay for
the guy that runs that company? But trying to assign blame to a single
entity, or cause, is an over simplistic point of view.

True.


The root cause is that developed countries, simply by the nature of
the beasts, increase the standard of living of the population and the
demand for bigger, better, more, and as a result costs of doing
business in the country increases. So, as long as there are less
developed areas business will move to the cheaper, less developed
areas.

Right. The Chinese are counting on Africa next.


In fact there is already problems in China because of increases in
cost of living.

This happened, in the U.S., after WW II with industry leaving the N.E.
states (with the result of lost jobs and failing economies) and moving
to the South. It is now happening again, except industry is now moving
outside the U.S. because there is no longer undeveloped areas within
the country.

All true. As trade theory is evolving and as we're learning from harsh
experience, a consensus is developing that free trade is a very good thing
for countries of roughly comparable levels of development and costs. When
one country is rich and the other is poor, it's a good thing for the poor
country. The rich country generally comes out a wash on paper -- higher GDP
but lower wages and fewer jobs -- but there's hell to pay in terms of social
disruption. One consequence is a deepening of the economic divide. But
that's not the only ugly consequence.

The basis for the "free trade" theory comes from "the Wealth of
nations" published, what? In 17-something describing the wool/cloth
trade between two roughly equally advanced nations. It certainly is
not an equitable system when applied to developed and undeveloped, or
even worse, newly developing countries.

This, of course, contradicts the Washingon Consensus (neoliberal economics),
which is the theory we're operating under today. It won't last much longer.
Our current accounts can't take much more of that theory. The neoliberal
idea (promoted by Milton Friedman) is that the dollar will decline when
these imbalances occur, and trade will restabilize. But neither Friedman nor
anyone else counted on China and India, nor upon the speed with which
manufacturing technology could disperse.

We face a choice. We either come up with new trade terms for dealing with
the developing world and the underdeveloped world, or we become the
underdeveloped world.

It isn't China or India, per se, it is actually the developing
countries, or perhaps I should say, industries in developed nations,
Cummins diesel for example, put in an engine building plant in China a
few years ago. Foreign expertise, foreign designs, foreign money. Now
they make several of the Cummins engines and sell them around Asia,
and perhaps in other places, much cheaper then competing engines made
in the west. It wasn't the Chinese that discovered how to make Cummins
engines, it was a U.S. company that taught them

Not that "localization (for want of a better word) doesn't happen by
itself but help from the West certainly makes it happen faster.

Bruce-in-Bangkok
(correct email address for reply)