By Jack Towe
For Northwest Asian Weekly
We have two elephants in our national living room, and we’d better deal with them before they crush us.
First elephant: Why do our major corporations outsource work to other countries? Cheap labor, of course.
That was the initial reasons for shipping production work abroad. However, there’s also a byproduct we don’t talk about. The byproduct is that companies have also outsourced 80 percent of their problems.
Running a manufacturing operation in the United States is complicated, expensive, hazardous, and exhausting. You have to deal with unions, government regulations, payroll taxes, lawsuits by employees, customers and government regulators, and a hundred other problems.
But, supposing you, as a corporate CEO, discovered a way to make these problems vanish?
Outsourcing. It’s magic. With the Internet, you have immediate contact with manufacturing suppliers anywhere in the world. You provide specifications and negotiate contracts, and the foreign company ships your firm the completed products. You market them in the United States and throughout the world.
Alternatively, if you run a multinational corporation, you can set up your factories in other countries, and the other countries can be quite cooperative in providing land, utilities, and loans.
It’s wonderful. You’ve not only outsourced the manufacturing, but you’ve also outsourced most of your problems.
Your supplier companies or factories may employ child labor. They may grind up their employees in the machinery. They may cripple people and leave them destitute for life. Chemicals may eat them up. The air may be unsafe to breathe. Not your problem (until the media and Doonesbury find out). If emerging nations don’t look after their own people, it’s their problem, not yours.
The result? Emerging nations are moving into new prosperity. The United States is gaining an underclass of the permanently unemployed. And many, many, many U.S. corporate owners and managers think they’ve died and gone to heaven. Life is so good. Their jobs have become less stressful, and the profits, sometimes obscene, keep rolling in.
Second elephant: We’ve outsourced our means of production. We’ve outsourced our future.
In any plant, people regularly develop ways to improve their products and how to make them better and cheaper. With outsourced work, those ideas may be passed up the line to the U.S. corporate offices. Or the ideas may be hoarded at the site.
These supplier-manufacturers and their people, understandably, have national pride and personal ambitions. They are already thinking, “Why should we be subject to a company in the United States? Let’s do our own thing.”
In the decade ahead, we can expect many established U.S. companies to go bankrupt. Why? Because their foreign suppliers will go into competition with them, with better and cheaper products.
And the irony is — we trained them. Not just in their factories. We did it in our #1 industry — the best in the world — our university graduate schools.
A marketing manager from a Chinese firm will go to Wal-Mart or Walgreen with a line of products cheaper and better than those from major U.S. firms. The Chinese marketing manager will have a Stanford or Harvard MBA — and she’ll be backed by engineers educated at MIT and Cal Tech.
This is not a theoretical problem. For example, a friend from Cincinnati, Ohio, wrote me the following: “A few years ago, I taught a graduate level marketing research class at the University of Cincinnati. There were 12 students in the class, but only two from the U.S. Five of the 12 were Chinese women, all of whom intended to take their prestigious U.S. graduate degree back to China and run various firms. While I enjoyed all of them, it definitely struck me that at some point, they probably would be competing with companies in the U.S.”
What can we do about this? Our solution right now is mostly to hunker in the bunker. We can wring our hands and feel sorry for ourselves.
And I don’t have a major solution for the problem. But I do have a small one. A mouse between the elephants.
The mouse: In the United States, unemployment and underemployment [rates] are higher among recent immigrants than among people born here. Let’s take Vietnamese citizens as an example. About 11,000 Vietnamese now live in Seattle.
Back in Vietnam, the economy is booming. Their unemployment rate is 3 percent, in contrast with the U.S. rate that hovers at [around] 10 percent. By population, Vietnam is the 14th largest nation in the world with 90 million people. Their gross national product is growing at a rate that rivals [that of] China. Nike products [represent] 5 percent of their gross national product. It’s becoming one of the Southeast Asian tiger cubs.
So, here’s the irony. Many Vietnamese in Seattle are unemployed or underemployed, while their cousins in Vietnam have jobs making products to be sold in the United States.
What could Vietnamese in Seattle do to build their own economic future?
Form industrial co-ops for insourcing.
That’s the mouse.
How? As the Nike slogan says, just do it.
Organize a group of good workers into a co-op. Get a location, probably temporary at first, in an abandoned factory, in a neighborhood church or temple, or in a community center.
Research local companies — find out which ones outsource sub-assemblies. Go to them with competitive bids. There are hundreds of sub-assemblies, with lots of handwork, which anyone can do with proper coaching.
In spite of media portrayals, many corporate executives are good citizens who would prefer to employ fellow citizens rather than send work overseas — if they can be shown how to do it locally and still prosper. You have to educate them.
Get media publicity about your efforts. Also, contact your senators and representatives — both state and federa — to see what aid is available, including start-up loans. Contact the city and county governments about factories taken for back taxes — [perhaps] you can use [one] for a start-up site.
The co-op has to develop its own manufacturing, marketing, finance, engineering, research, human resources, and public relations operations — all with little or no money. It’s not easy, but it’s exciting, and it can be done.
If people don’t have real jobs now, a co-op gives them career potential.
For example, Japan is today a highly industrialized nation. Modern Japan began in the mid-19th century making bicycle parts. Then, they made bicycles. Then, they began manufacturing other products – including the equipment for a modern army, navy, and air force. After World War II, they began manufacturing cameras – until they rivaled the best of the German and American cameras. Then, even though they lacked local supplies of coal or iron, they began manufacturing cars. Toyota is now the largest auto producer in the world. Yes, it can be done. (end)
Jack Towe is a writer living in Ballard. To read more of his work, visit his blog, leadings.squarespace.com.