6 ms·

Surely though there's still plenty of places in the world that, on the basis of labour costs, it would be vastly cheaper to operate than in the US. On that basi

Surely though there's still plenty of places in the world that, on the basis of labour costs, it would be vastly cheaper to operate than in the US. On that basis I'm not convinced wage growth in SE Asia is the primary reason the US manufacturing industry is deciding to reshore. Is the same phenomenon occurring in other wealthy countries that haven't put in place taxpayer funded incentives to do so?

kneebonian 3y ago
> there's still plenty of places in the world that, on the basis of labour costs, it would be vastly cheaper to operate than in the US. Keep in mind costs aren't just what you have to pay people but also things like regional security, the risk of the government nationalizing your company and assets, ability to get skilled/capable/honest people. Basically there has to be a degree of stability, including a centralized government that can provide a certain level of law and order in order to attract capital. Otherwise you have to price in the costs of missing a day of work because the factory is being shelled by government/anti-government groups, etc. Corruption is fine, bribes are fine, because they can be priced in and managed, what can't be managed, planned for and predicted is instability. For the record my bet on where the next big booms will be is Indonesia, Mexico and to a lesser extant west Africa.
- tshaddox 3y ago
  > Keep in mind costs aren't just what you have to pay people but also things like regional security, the risk of the government nationalizing your company and assets, ability to get skilled/capable/honest people. Also a lot of those same stability/security concerns, but applied to the trip from here to there, likely across the ocean, which is something that people have largely taken for granted for years now other than some stories of Somalian pirates.
- wizofaus 3y ago
  Mexico stands out to me as a country that hasn't lived up to its potential in that regard. Certainly there's no shortage of potential cheap labour, given the number of refugees making their way across it. And regional security and ability to get hold of necessary skilled workers shouldn't really be an issue, when you have the US right next door. It's hard not to see why it wouldn't be significantly to the US's benefit to ensure Mexico (and other central American countries) can become a global manufacturing hub, so I do wonder what the primary forces working against it might be.
  - midoridensha 3y ago
    >so I do wonder what the primary forces working against it might be. Extreme corruption, lack of rule of law, extreme violence to name a few. Mexico is basically a failed state: the government doesn't even control large parts of the territory it claims, ultra-violent drug cartels do. How is that a good place to build factories? Other central American counties are at least as bad. El Salvador has a higher death rate from violence than war-torn Syria during the height of its civil war. Countries farther south would be much better bets, but they still have huge problems with corruption. Brazil, Chile, Peru, etc. aren't nearly as bad, and do have their own manufacturing industries (Brazil is home to Embraer, for instance).
    - Xorakios 3y ago
      Uruguay as well
    - matheusmoreira 3y ago
      > the government doesn't even control large parts of the territory it claims, ultra-violent drug cartels do > Brazil, Chile, Peru, etc. aren't nearly as bad Brazil is just as bad. Drug gangs essentially own their territory. Brazilian state is legitimized by the police's monopoly on force. Gangs don't allow police in their territories which implies the laws of Brazil don't apply there. They have seceded from brazilian territory and established their own parallel government without anyone noticing. It's common knowledge that local businesses operating in those places are doing so with the blessing of these drug lords. They even took on the role of police by punishing small time criminals who interfere with with their drug dealing operations by scaring away customers. They implement barbaric punishments like cutting off the fingers of thieves or shooting their hands. People living in those places may not even get mail because it's too risky to send mailmen in there, I've seen people who had to go to some remote post office to pick up correspondence. It's actually kind of impressive. Shows what a people can do when it has the balls to organize and most importantly to arm itself.
    - wizofaus 3y ago
      Assuming your assessment is accurate (I don't pretend to have any expertise in the matter!) then the question becomes why certain countries/ regions suffer such corruption and lack of rule of law, and more importantly, why is it so hard to fix?
bobthepanda 3y ago
Japan and Korea have plenty of domestic manufacturing. Europe also has some off shoring into the peripheral countries into its customs union. The issues are generally that in the next largest potential cheap manufacturing sources (South Asia, SE Asia, Africa) they’re either not big enough or have extremely poor logistics and red tape. A big part of the East Asian miracles have been extensive infrastructure and bureaucratic emphasis on making exports as efficient as possible.
- wizofaus 3y ago
  How is south Asia possibly not "big enough - it's literally based around the most populous country in the world! But yes, obviously logistics and friendly regulatory regimes are a big part of it. (FWIW I was including China/Japan/Korea in "SE Asia" in my post. Obviously all three have now developed beyond the good sources of cheap labour that they had started out as in the last 50 or so years. But there are still other plenty of potential candidates to follow the same path, both in Asia and elsewhere in the world).
  - treis 3y ago
    They said "either"
- throwaway2037 3y ago
  Japan and Korea have plenty of domestic manufacturing. This is industrial policy, not free markets. Both countries strongly encourage domestic manufacturing (including farming / food production) through a wide range of social pressure ("lifetime employment"), tax breaks, tariffs, and regulations. There is no doubt that a lot of that manuf could be moved to much cheaper countries, which would enrich a few, at the expense of many.
edgyquant 3y ago
They’re deciding to restore because the US population has made it clear on both sides of aisle that they want these companies to be employing Americans to start reversing the economic rot we’ve left outside a small number of tech hubs. It has nothing to do wages or even economics for the most part. It’s policy to rebuild once wealthy areas of America that also happens to be good for the defense sector so.
- FrustratedMonky 3y ago
  Well. The reasoning is still valid. The corporations will follow cheap labor (or total cheapest cost, which labor is big variable). What you are saying is that both sides have agreed to put policies in place to make foreign goods more expense, to the point that domestic labor can be competitive, and corporations will move manufacturing back to the US. But as others have posted as questions. Is this sustainable? If the US is not competitive unless barriers are put in place, can that be done indefinably, or will this naturally reverse again when the US Gov can no longer afford to prop up a more expensive and inefficient workforce.
JoeAltmaier 3y ago
Folks bring factories back to the US once they scale to the point that automation can be afforded. It has a high buyin, so volume has a threshold where the marginal cost is justfied. In all those cases, there's little or no job growth. Just a couple administrators and engineers. Nobody on the line, because there is no line, just robots and conveyors.
- quickthrowman 3y ago
  > In all those cases, there's little or no job growth. Just a couple administrators and engineers. Nobody on the line, because there is no line, just robots and conveyors. Someone has to maintain the robots and conveyors, unless you’re assuming that has also been automated. I suppose this could also be contracted out if it hasn’t been automated.
  - JoeAltmaier 3y ago
    Yes that's often mentioned. But the human cost is a percent of what old-style factories employed Sure factories employ skilled labor. But very few. And what are unskilled laborers supposed to do? American has 30M folks who's employment has descended to service industry (teller, cashier, food service). They can't all be retrained as Engineers, even if we needed 30M more Engineers which we don't.
jstarfish 3y ago
> I'm not convinced wage growth in SE Asia is the primary reason the US manufacturing industry is deciding to reshore. It's not. This is disaster planning. We're being forced to bring production back home because we can't keep outsourcing to a region subject to control by a potential adversary. If war breaks out with China, access to Taiwan for chips or Vietnam for socks is going to become difficult. Blockades will be immediate. If this were about money, we'd move production to South America. That we're keeping it this close to home after years of shopping everything globally suggests we're building infrastructure for a supply chain that can't be interfered with by foreign governments.
- red-iron-pine 3y ago
  It's already moving to Mexico in droves; north MX near the border is where a ton of stuff gets made. Canada supplies the resources and Mexico does the Hencho-ing.
bluGill 3y ago
You also need a stable government where you can invest and have your factory survive long enough to be worth it. War and corruption makes many cheap counties not worth investing in.

kneebonian 3y ago

> there's still plenty of places in the world that, on the basis of labour costs, it would be vastly cheaper to operate than in the US. Keep in mind costs aren't just what you have to pay people but also things like regional security, the risk of the government nationalizing your company and assets, ability to get skilled/capable/honest people. Basically there has to be a degree of stability, including a centralized government that can provide a certain level of law and order in order to attract capital. Otherwise you have to price in the costs of missing a day of work because the factory is being shelled by government/anti-government groups, etc. Corruption is fine, bribes are fine, because they can be priced in and managed, what can't be managed, planned for and predicted is instability. For the record my bet on where the next big booms will be is Indonesia, Mexico and to a lesser extant west Africa.

tshaddox 3y ago
> Keep in mind costs aren't just what you have to pay people but also things like regional security, the risk of the government nationalizing your company and assets, ability to get skilled/capable/honest people. Also a lot of those same stability/security concerns, but applied to the trip from here to there, likely across the ocean, which is something that people have largely taken for granted for years now other than some stories of Somalian pirates.
wizofaus 3y ago
Mexico stands out to me as a country that hasn't lived up to its potential in that regard. Certainly there's no shortage of potential cheap labour, given the number of refugees making their way across it. And regional security and ability to get hold of necessary skilled workers shouldn't really be an issue, when you have the US right next door. It's hard not to see why it wouldn't be significantly to the US's benefit to ensure Mexico (and other central American countries) can become a global manufacturing hub, so I do wonder what the primary forces working against it might be.
- midoridensha 3y ago
  >so I do wonder what the primary forces working against it might be. Extreme corruption, lack of rule of law, extreme violence to name a few. Mexico is basically a failed state: the government doesn't even control large parts of the territory it claims, ultra-violent drug cartels do. How is that a good place to build factories? Other central American counties are at least as bad. El Salvador has a higher death rate from violence than war-torn Syria during the height of its civil war. Countries farther south would be much better bets, but they still have huge problems with corruption. Brazil, Chile, Peru, etc. aren't nearly as bad, and do have their own manufacturing industries (Brazil is home to Embraer, for instance).
  - Xorakios 3y ago
    Uruguay as well
  - matheusmoreira 3y ago
    > the government doesn't even control large parts of the territory it claims, ultra-violent drug cartels do > Brazil, Chile, Peru, etc. aren't nearly as bad Brazil is just as bad. Drug gangs essentially own their territory. Brazilian state is legitimized by the police's monopoly on force. Gangs don't allow police in their territories which implies the laws of Brazil don't apply there. They have seceded from brazilian territory and established their own parallel government without anyone noticing. It's common knowledge that local businesses operating in those places are doing so with the blessing of these drug lords. They even took on the role of police by punishing small time criminals who interfere with with their drug dealing operations by scaring away customers. They implement barbaric punishments like cutting off the fingers of thieves or shooting their hands. People living in those places may not even get mail because it's too risky to send mailmen in there, I've seen people who had to go to some remote post office to pick up correspondence. It's actually kind of impressive. Shows what a people can do when it has the balls to organize and most importantly to arm itself.
  - wizofaus 3y ago
    Assuming your assessment is accurate (I don't pretend to have any expertise in the matter!) then the question becomes why certain countries/ regions suffer such corruption and lack of rule of law, and more importantly, why is it so hard to fix?

bobthepanda 3y ago

Japan and Korea have plenty of domestic manufacturing. Europe also has some off shoring into the peripheral countries into its customs union. The issues are generally that in the next largest potential cheap manufacturing sources (South Asia, SE Asia, Africa) they’re either not big enough or have extremely poor logistics and red tape. A big part of the East Asian miracles have been extensive infrastructure and bureaucratic emphasis on making exports as efficient as possible.

wizofaus 3y ago
How is south Asia possibly not "big enough - it's literally based around the most populous country in the world! But yes, obviously logistics and friendly regulatory regimes are a big part of it. (FWIW I was including China/Japan/Korea in "SE Asia" in my post. Obviously all three have now developed beyond the good sources of cheap labour that they had started out as in the last 50 or so years. But there are still other plenty of potential candidates to follow the same path, both in Asia and elsewhere in the world).
- treis 3y ago
  They said "either"
throwaway2037 3y ago
Japan and Korea have plenty of domestic manufacturing. This is industrial policy, not free markets. Both countries strongly encourage domestic manufacturing (including farming / food production) through a wide range of social pressure ("lifetime employment"), tax breaks, tariffs, and regulations. There is no doubt that a lot of that manuf could be moved to much cheaper countries, which would enrich a few, at the expense of many.

edgyquant 3y ago

They’re deciding to restore because the US population has made it clear on both sides of aisle that they want these companies to be employing Americans to start reversing the economic rot we’ve left outside a small number of tech hubs. It has nothing to do wages or even economics for the most part. It’s policy to rebuild once wealthy areas of America that also happens to be good for the defense sector so.

FrustratedMonky 3y ago
Well. The reasoning is still valid. The corporations will follow cheap labor (or total cheapest cost, which labor is big variable). What you are saying is that both sides have agreed to put policies in place to make foreign goods more expense, to the point that domestic labor can be competitive, and corporations will move manufacturing back to the US. But as others have posted as questions. Is this sustainable? If the US is not competitive unless barriers are put in place, can that be done indefinably, or will this naturally reverse again when the US Gov can no longer afford to prop up a more expensive and inefficient workforce.

JoeAltmaier 3y ago

Folks bring factories back to the US once they scale to the point that automation can be afforded. It has a high buyin, so volume has a threshold where the marginal cost is justfied. In all those cases, there's little or no job growth. Just a couple administrators and engineers. Nobody on the line, because there is no line, just robots and conveyors.

quickthrowman 3y ago
> In all those cases, there's little or no job growth. Just a couple administrators and engineers. Nobody on the line, because there is no line, just robots and conveyors. Someone has to maintain the robots and conveyors, unless you’re assuming that has also been automated. I suppose this could also be contracted out if it hasn’t been automated.
- JoeAltmaier 3y ago
  Yes that's often mentioned. But the human cost is a percent of what old-style factories employed Sure factories employ skilled labor. But very few. And what are unskilled laborers supposed to do? American has 30M folks who's employment has descended to service industry (teller, cashier, food service). They can't all be retrained as Engineers, even if we needed 30M more Engineers which we don't.

jstarfish 3y ago

> I'm not convinced wage growth in SE Asia is the primary reason the US manufacturing industry is deciding to reshore. It's not. This is disaster planning. We're being forced to bring production back home because we can't keep outsourcing to a region subject to control by a potential adversary. If war breaks out with China, access to Taiwan for chips or Vietnam for socks is going to become difficult. Blockades will be immediate. If this were about money, we'd move production to South America. That we're keeping it this close to home after years of shopping everything globally suggests we're building infrastructure for a supply chain that can't be interfered with by foreign governments.

red-iron-pine 3y ago
It's already moving to Mexico in droves; north MX near the border is where a ton of stuff gets made. Canada supplies the resources and Mexico does the Hencho-ing.

bluGill 3y ago

You also need a stable government where you can invest and have your factory survive long enough to be worth it. War and corruption makes many cheap counties not worth investing in.