"Bruce in Bangkok" wrote in message
...
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.

Well, that should make the point clear, then. It isn't manufacturing costs,
if they're being manufactured in the same place. A-Z manufacturers in 20
countries around the world, though (they were my client for four years) and
it's not likely yours is coming from the UK. Most likely it's coming from
IPR Pharmaceuticals in Puerto Rico, which is A-Z's high-volume manufacturer
for Zestril. I should point out, too, that A-Z markets Zestril under license
from Merck. Like most drugs, it was developed in the US. That's the benefit
from not having price controls. They can sink all of those development costs
in the US market, so they develop the drug here, develop the worldwide
marketing for it here, and, if you want to include PR as part of the US,
they manufacture it here. With our liberal patent laws they'll make most of
their money on it here, too.

Thailand's pharma price controls are most likely making the difference. Or,
in the case of Zestril, it may be competition from a generic that's being
made under compulsory license (and being fought over in the courts as we
speak). The competition varies for generics from country to country. There
are some known side effects with the generics (lisinopril), which, depending
on where you are, may make them a bigger or smaller competitive factor.

The big point, however, is that pharmaceuticals don't operate in anything
like a real market. It's totally convoluted and twisted by everything from
government regulations in use, to price controls, to patent fights. The
closest thing to a "free" market for drugs is the US. And even here the
normal market forces of supply and demand, choice among competitors, and so
on, is so distorted that "markets" are hardly recognizable.

If you want to compare manufacturing situations you'd do better to avoid
pharma. I worked in that industry long enough to know that it's totally
screwed up, in market terms.


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.

Because there are no price controls in the US.

AstraZeneca does it the same way as all the other big pharmaceutical
companies. Actual manufacturing costs are so low that they can jimmy their
accounting to make a profit at almost any price, in an individual market, as
long as they can cover the up-front costs somewhere -- which is to say, in
the US. I don't know specifically about Zestril, but ACE inhibitors in
general are really cheap drugs. I use a generic and it's dirt cheap.


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

Again, it's probably made in Puerto Rico. The company name and addess on the
package insert and the label doesn't tell you where it's made.

But it wouldn't matter. You aren't paying based on the manufacturing cost.
Neither are we. We're both paying based on what the market will bear, and
the market, in your case, includes government price controls.


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.

Right. It's going to take some intrusive management of trade. There's really
no way around it, unless we want our true incomes, based on the falling
dollar, to drop to third-world levels.


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.

Sure. And it will continue. But it won't reach US levels in our lifetimes.
Economists are predicting 30 - 50 years.


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 ...

1776. But Adam Smith actually favored some controls on trade. Most modern
commentators miss that point. Of course, very few of them ever read it,
anyway. d8-) My edition is 1052 pages long. I've read it twice.

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.

It's not equitable; it's a license for them to print money. There's nothing
wrong with that as long as we aren't paying for it.


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.

With lightning speed. GM basically packaged an engine-manufacturing plant in
crates when they set up their Chevy engine line in Shanghai, which now makes
the engines for Chevy SUVs assembled in Canada and sold in the US. No theory
ever predicted that things like that could happen. No theory is capable of
dealing with the consequences.

--
Ed Huntress