Outsourcing

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says...

Just for the sake of argument, why? Internal competition is great, but why do we have to compete with some country where the standard of living is 10% of ours?
Obviously it's good for that country, and for the corporate profits of the outsourcer, but I can't see where it's good for most of our citizens. And they are who our government is supposed to be for.
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Larry Blanchard wrote:

Say a company makes the right choice to outsource - that is, they improve their profits _sustainably_ by doing so. Who benefits? The stockholders because their stock is worth more. The remaining employees because their jobs are more secure in a healthier company. The executives because their variable compensation increases as the company does better. AND ... all their customers because the goods/services of that company are either better or cheaper.
You CANNOT legislate against this. Goverment cannot stop it. All they can do is slow it down. Economic reality always catches up with legislative silliness. Competition is global and money flows where it is most efficiently used. It makes no difference what the unions, the politicians, or the various other naysayers think. This is how it actually works.
We have to compete with countries with a standard of living 10% of ours because they ARE competing with us whether we like it or not. If we try to shut them out by legislating against outsourcing, one of our foreign competitors will take advantage of this artificial imbalance. For example, suppose we made it illegal to outsource, and all computer parts for machines sold in the US HAD to be made here. PC prices would go up _for us_ but no one else. Western Europe would promptly use outsourced manufacturing to build their PCs and ever company that uses computers in the US would be at a significant cost disadvantage.
Now, how many people would you think build computer components in the US in such a situation? Let's be generous and say that because of the ban on outsourcing, 10 Million jobs were "created" here in the US. That means the other 290 Million of us who want to buy and use PCs have to pay more to protect them. It just won't work. It is hideously inefficient (from a monetary point of view). Free markets are not always nice, but they are always efficient. Attempting to artificially interfere with them causes nothing but economic ruin, _for the country trying to protect itself_.
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Tim Daneliuk writes:

Someone needs to tell Japan that in their vehicle marketing set-up.
Charlie Self "I am confident that the Republican Party will pick a nominee that will beat Bill Clinton." Dan Quayle
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(Charlie Self) wrote:

The Japanese economy is _not_ in good shape, and it hasn't been for a long time.
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Charlie Self wrote:

Japan's economy has been a disaster for almost a whole generation precisely because of this sort of nonsense. They are just beginning to recover. And guess what ... they are discovering that sometimes layoffs are required. They are no longer the low cost producer on the block. I'd expect them to start outsourcing work themselves at some point.
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Tim Daneliuk wrote:

Agreed.
This is the part that only exists in text books and is not proven in reality. Companies that outsource or otherwise focus on the balance sheet almost universally take that focus to the exclusion of any other employee related thinking. The entire focus in corporate America and beyond into the global economy today is to do more with less. Outsourceing is not something that is done in a vaccum - it's not a stand alone process that the company does to buck up profitability so they can afford to support the cost of employees and the cost of doing business. It's a part of an enterprise process that is all about reducing cost and doing more with less. At first blush this may look like the model of efficeincy, but in a world of human beings, efficeincy has to balanced against other economic and social factors - specifically today, keeping a workforce employed at sufficient levels to remain in the consumer chain.

Executive variable compensation increases as merit based objectives are met. This is not necessarily coupled with the company doing better. Doing better is a very loose term. Cutting headcount by 50% can be defined as doing better - it does not in any way suggest or guarantee a better performance by the company. Cheaper labor does not correlate to better or cheaper goods and services. That again is text book, but reality does not bear it out. How much has the cost of a car dropped over the past 20 years as the automakers have implemented more and more robotic technology? Yes, American cars have gotten better but that comparison owes to the crap that the automotive industry was able to get away with for a decade before the Japanese cars invaded their turf. That decade was an anomoly if you look back over the entire history of the American automobile.

True. Nor should we entice our government to get any more involved in our lives than absolutely necessary. They have a scary way of screwing up everything they touch.
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Mike Marlow wrote:

Remember, I said they made the "right" choice to outsource which led to sustainable growth. It is surely possible to make bad decisions about outsourcing or anything else. But the point here is that a company driven to sustainable growth benefits all its principals: The stockholders, the employees, the executives, and the customers.

This is a corporate governance problem that the market also corrects. If The Board fails to set appropriate metrics for executive comp, then the company will ultimately fail...
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I agree.
Funny thing is -- plenty of folks are stockholders and don't even know it. Their pension plans are in equities. Heck, chances are their local government and Church is in the market.
Changes my perspective on this. Makes me worry more about my obligations, as an employee, to our shareholders. A lot of Blue-Haired Grandma's in the Corn Belt are depending on me for their returns...
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Who owns most od the stock? I say it is the CEO and his henchmen who own the lion's share.
How, pray tell, are the remaining employees secure in their jobs? If they can outsource parts of the company, they can outsource almost all of it. Not 100%, for sure, but a huge part of it.
And just how are the companies themselves going to survive? For this race to reach a fantastic bottom-line, companies will get overly greedy and start doing as much as they can in places like China, where there are nowhere NEAR the laws we have in the US or in Europe, and they will start to manufacture the exact same products as we make here. Hmmm, now they will undercut the US and European companies on the same products.
Yeah, I would say this is a real win-win situation--for the people who run the companies and the ones who own THE MOST stock in these comapnies because they will make out the most in the short-run.

I say this time it is a little different. WHy in the world is it better for a country to fire their own citizens and permit people from other countries to come in under things like H-1B, h-2B, and L-1 visas and perform the EXACT SAME JOBS that the people who were laid-off performed? How is that better? Because 24 of them live in the same 2-bedroom apartment and can live on substandard wages in the host country? How is it better when the host country is paying unemployment benefits to laid-off workers but nowhere near the same amount is coming in to offset the amount that is going out because the wages are nowhere near the same?
How does a country like the US maintain its infrastructure? How can people survive when they purchased a house at the going rate but have their real income get slashed by 75%? How can the people who live in the host country AFFORD to keep living there.

I disagree. Places like India are stealing the jobs from American citizens. They are performing THE SAME JOB. I say competition is when somebody makes a better widget in their factory and outsells your. It is not competition when they just push the employeee out of your factiry and take over.

Well, here is another truth: I have know American citizens who said they will just roll with the ounches and attempted to get jobs with places like Tata in Buffalo, New York--but they won't hire Americans. I have know a couple who attmepted to see if they could go to Bangalore to get a job in it--no way. They are not permitted to hire people outside of India.
I think this is artifically interfering with the market--jsut to make sure that the India IT Mecca isn't tarnished.
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Ray Kinzler wrote: <SNIP>

I see. So people who are wealthy or company owners are not entitled to optimize the use of their property in any (nonfraudulent) way they wish? Since when does _who_ benefits matter? Either you believe in fundamental fairness or you do not. If you have the right to dispose of _your_ property and money as you see fit, why shouldn't the wealthy individual also have this privilege?
Oh, and for the record, in almost all publicly traded companies of any size, the CEO and their "henchmen" (!?) own a very SMALL proportion of the stock. Stock in wealthy companies tends to be owned in large measure by institutional investors - people who invest the "little guy's" 401K money. Almost every working person in America today is a stockholder, at least indiretly, in one form or another. It is in _everyone's_ best interest that corporations maximize profits and do well.

Assuming a company survives, at some point the company will have trimmed all the fat that it can. This means it will be _healthier_. Healthier companies are better for the remaining employees. No, there is no guarantee that the remaining employess will have jobs for life. But an unhealthy company goes out of business and _everyone_ loses their jobs.

How many companies have you run, and how many payrolls have you ever worried about? I've helped start/grow, 4 different companies. You CANNOT outsource "almost all" of any company. Sales, marketing, and so forth, almost by definition, have to be close to the customer base, at a minimum.

Yes, some companies will cease to exist. That is the natural order of competition. Please reexamine the past 150 years of economic history in the West. For each major seachange where an industry was lost (electronics to Japan, clothing to China, manufacturing to the 3rd Word), the US economy and standard of living continued to GROW. The health of an economy is not measured in how many companies and jobs we "keep at home", it is measured by how _productive_ the economy is. Almost 300 years ago, Adam Smith (the father of economics) made the powerful case that wealth is only about productivity, not goods, land, cows, or any similar thing. Sadly, this generation of Westerners (who have benefitted enormously from Enlightenment thinkers like Smith) don't even grasp these fundamentals.

As I said, the middle-class "little guys" own most of the stock via institutional investors. You are sadly misinformed about how money and ownership actually works in public corporations - at least in most cases.

The "country" isn't doing it. This is not some Marxist state we live in. _Private sector_ companies are making decisions to optimize their return on investment. These decisions may- or may not be wise, but the marketplae will figure that out for them.

I repeat - please reexamine the last century and a half of economic GROWTH in this country. It involved plenty of "lost" jobs and industries.

This is a fundamentally racist position whether you intended it to be so or not. The word "steal" implies fraud or dishonesty. So you claim that India, as a nation, is dishonestly taking what is rightful the American citizen's? Could it be that India is doing a better job competing in certain sectors? Could it be that some Americans are overpaid for what they do in context of the global economy? No, no, it must be those pesky dishonest Indians...

Your view of competition is really flawed. Competition involves doing the same thing "better". "Better" can mean "with improved quality", it can mean "faster", it can mean doing it a whole new way so it is "more efficient", and most assuredly, it can mean "cheaper". If we take your view of economics, we should all get rid of word processors and go back to manual typewriters because, we're just doing the same thing we always did ...

And I know the exact opposite situation wherein American citizens work for foreign companies both here and overseas. Neither of our anecdotal observations in the matter prove anything whatsoever.

You have a lot of poorly informed options. So let me help your understanding from the perspective of someone who has actually _worked_ with Indian outsourcing. India is NOT an "IT Mecca". For certain kinds of repetitive IT tasks like call centers, production programming, and so forth, they _can_ offer superior value than what can be done domestically. However, Indian IT is nowhere near ready to replace the front-end/creative/design part of the IT process. When the task is entirely specified and more-or-less a manufacturing process, the Indians do really well. But where there is a large degree of innovation or risk or uncertainty involved in the design, the results are quite poor. This is, IMHO, an artifact of the very regimented and government-centric culture of the country.
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Tim Daneliuk responds:

Which sectors? Companies search for lower prices, not greater efficiency, in today's marketplace. Indians manage to take their place in line by providing, in my experience and that of many others, inferior services and low productivity at much lower prices.

Not necessarily Indians. The word now is that many Mexicans are very unhappy as their vaunted manufacturing revolution grinds to a comparative halt. The jobs are moving to China and Thailand (which also seems to be pulling jobs out of China).
Charlie Self "I am confident that the Republican Party will pick a nominee that will beat Bill Clinton." Dan Quayle
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Wrong, wrong, wrong. How '30's.
Insitutional investors and lil' Blue Haired Ladies from the Midwest are the correct answer.
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wrote:

And for bonus points, who are the institutional investors?
Answer: All of us who own mutual funds and/or some sort of retirement plan with investment options other than fixed income. <G>
Barry
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In rec.woodworking

This is where your plan fails Tim. It is a pyramid scheme. America is the consumer of the products. As more and more Americans lose jobs or take pay cuts, they are going to consume less.

You have to admit one thing if you have any intellectual honesty. Globalization is not good for America as whole. The countries that stand to gain are the ones that do the outsourcing. As they're standard of living rises, ours HAS to lower. There is no other way because it is a zero sum game. This is not a win-win situation.
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Bruce wrote:

<groans>
I cannot begin to correct the many implict wrong assumptions in these statements. Capitalism is the only system by which everyone can win. When market-based economies are employed, the up-and-coming nations can compete and win while _We_ also benefit. The wrongest assumption you make is that there is a net-sum-zero game going on here ... and there isn't. Our economy continues to grow and has for pretty much all of its history. This growth took place in the face of massive economic turmoil, war, and globalization, and we continue to grow consistently. That's why countries like China and India are moving towards market economies - they work better than anything else.
I am entirely "intellectually honest" (or as best as I am able to be), and globalization is mostly a good thing. The size of the pie the US gets in global markets might be smaller, BUT the pie is much BIGGER. Would you rather have 100% of $10 Trillion economy or 20% of a $100 Trillion dollar economy. Smart corporate leaders are betting on the latter, and I think they're right, at least in the long haul.
If you want to read a good intro to economics that is easy to read and not some politican's agenda, see Hazlitt's "Economics In One Lesson". He does a better job than I could ever do in explaining why pretty much everything you wrote is wrong ... ---------------------------------------------------------------------------- Tim Daneliuk snipped-for-privacy@tundraware.com PGP Key: http://www.tundraware.com/PGP /
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snipped-for-privacy@tundraware.com says...

OK Tim, you're a staunch defender of pure capitalism. Let's look at another example.
I'm old enough to remember when someone with below median intelligence (and that's half of us by definition) could get a job that supported his family at a reasonable level. Lots of blue-collar families with one wage earner bought their own house, owned two cars, etc. etc..
There are still a few of those jobs around. But in most cases, those jobs have been killed by automation and cheap imports. Now many couples both work, sometimes at multiple jobs, and still live at a subsistence level. What used to be referred to as the "lower middle class" is rapidly joining the poor. While the gap between workers and executives continues to grow.
Do you have a solution for this other than "Let them eat cake"? And don't say education, remember I'm talking about the "strong back and a weak mind" part of our citizenry.
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Larry Blanchard wrote:

Your facts are (sort of) right, but your analysis is wrong:

Yes. And they lived in homes far inferior in size and construction to what their modern counterparts own. Their cars were inferior in most ways to the ones driven by Joe Sixpack today. They had fewer opportunities for upward mobility. They paid more (inflation adjusted) for key goods like gasoline. They lived shorter lives, partly because of the drain of physical labor, and partly because the Big Evil Corporations had not yet commoditized medical treatment and new pharma. They worked more hours (and has less free time) than their modern counterparts. They worked in far more dangerous conditions than the modern worker.
The list is endless but the point is the same. The Good Old Days were not all that "good" when compared to life today. For an excellent discussion of this, see "Hoodwinking The Nation" by Julian Simon or even just read this:
http://www.cato.org/pubs/pas/pa-364es.html

Right - because MORE PEOPLE ARE MOVING UP on the economic ladder. The US Census data from 1980-1990 is instructive here. During this time the rich did get richer ... but so did the POOR. The percentage of Americans that are actually poor (per capita) is *declining*. Moreover, what constitutes "poor" is very different than it was even 50 years ago. "Poor" today includes the use of heat, running water, a color TV, and a microwave. i.e. Almost no one is living at "subsistence" levels.
It is not "subsistence" when you choose to work to own a house, a couple of cars, and have children at-will, no matter how meager those means may be.
Since when is it a requirement of any economy that people get a house, car, and comfort on one (or even multiple) incomes? Who says everyone is entitled to this? There are lots of smarter people than me, and most make way more money than I do. How am I disadvanged by this? When Bill Gates creates wealth, it doesn't hurt me, it makes my life better - I can affort more computer for less money. In fact, I can even share in his upward mobility, even if I'm a complete ignoramous - I can buy his stock and trust he will make it go up.

No one has a right to the lifestyle they *want*. They have a right to *try* for it unimpeded by their nosy neighbors and/or stuffy intrusive goverment. The fact that everyone does not have an equality of outcome is hardly and indictement of capitalism or our economic approach.
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Have you looked at house construction these days?
Yes, we're beuilding lots of McMansions, but they're cheap-a$$ SOBs.
I live in a 55 year old house, modest (very) size, with hardwood floors, solid masonry construction, little things here and there that would NEVER be done in a basic house today.
See, (among other things) back then, there were carpenters who had pride in their craft, not dipwads and furriners who don't know what the heck they're doing, have no pride 'cause they have no craft, but, hey, they're cheap.
And, I do believe I read that gas today is at a historical high, even inflation adjusted an' all.
Renata
wrote: -snip-

-snip-
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On Mon, 03 May 2004 08:57:50 -0400, Renata wrote:

Not true:
<http://inflationdata.com/Inflation/Inflation_Rate/Gasoline_Inflation.asp
-Doug
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