Disruptor 2: Shifting Economic Power and Manufacturing
As more and more countries join the new global economy, the Unites States will be forced to go through some very bumpy growing pains in order to play catch up. Quite simply, our employees here make the highest salaries in the world while American manufacturers have spent years moving operations to Mexico or overseas.
So where does that leave us when companies can get six full-time employees in India for the price of one here in the United States?
It means we will be going through a depression while once impoverished countries overseas develop a manufacturing based begin to prosper.
But some of you are asking, “Brad, doesn’t the falling dollar make our goods more attractive? ” Yes, that used to be the case. Today we manufacture very little in the United States except construction equipment (that gets shipped to China) and Industrial Engineering And Management Ppt war machines. Companies like GM, Dell and Harley assemble their products here, but they are constantly balancing how many parts are shipped in from overseas to keep the “Made in America” stamp. “Assembled in America” is what it should say.
Time to face the raw truth-the factory floors have moved to the BRIC nations-Brazil, Russia, India and China…anyplace were a factory can be built and workers paid for less than a million dollars. This is going to shift union dominance here in the US, while creating the need for unions in countries that have very little regard for human rights.
In my first part of this series I covered how technology has lowered the cost of manufacturing, but another huge influence-and the main reason for outsourcing-is economies of huge in fact that many American companies have physically moved overseas in order to partake of lower building costs, lower employee expenses and no taxation. The United States is simply not competitive with the rest of the world’s pricing.
It’s economies of scale. Just look at the BRIC nations that have joined forces and formed a tight knit economy…where the United States is excluded.
With factories being built in 3rd World Countries for pennies on the dollar, the future looks very bright for manufacturing in newly emerging countries. It is cheaper to build a fully automated manufacturing plant in Brazil and ship products to the United States than to build them here or ship them to countries where their dollar is falling as well.
It is becoming harder and harder to sustain an $80,000 a year riveter here in the United States with medical and dental coverage when automobile manufacturers can hire ten riveters halfway around the world for the same still sell a car for top dollar.
It is a simple paradigm: Find a way to build things at the lowest cost possible, then sell the finished product to a prosperous market. It’s about how much profit can you generate after manufacturing costs. There is just no way Detroit can compete with Brazil or India.
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