As I listen to the President give his speech on manufacturing I realize he knows nothing about running a successful business.
Gary North gets it right via Steve Jobs.
Before he died, Steve Jobs attended a meeting of Obama and senior executives in Silicon Valley. This is the heart of American high-tech entrepreneurship. Obama was cheerleading for a new deal in America, where jobs exported to Asia would come back. Jobs replied in front of the group, "Those jobs are not coming back." No one corrected him.
The New York Times ran an article on Apple's policies. Here is reality. Get used to it. Apple uses the services of a manufacturing company in China, Foxconn.
The facility has 230,000 employees, many working six days a week, often spending up to 12 hours a day at the plant. Over a quarter of Foxconn's work force lives in company barracks and many workers earn less than $17 a day. When one Apple executive arrived during a shift change, his car was stuck in a river of employees streaming past. "The scale is unimaginable," he said.
Foxconn employs nearly 300 guards to direct foot traffic so workers are not crushed in doorway bottlenecks. The facility's central kitchen cooks an average of three tons of pork and 13 tons of rice a day. While factories are spotless, the air inside nearby teahouses is hazy with the smoke and stench of cigarettes.
Foxconn Technology has dozens of facilities in Asia and Eastern Europe, and in Mexico and Brazil, and it assembles an estimated 40 percent of the world's consumer electronics for customers like Amazon, Dell, Hewlett-Packard, Motorola, Nintendo, Nokia, Samsung and Sony.
"They could hire 3,000 people overnight," said Jennifer Rigoni, who was Apple's worldwide supply demand manager until 2010, but declined to discuss specifics of her work. "What U.S. plant can find 3,000 people overnight and convince them to live in dorms?"
None. Not now. Not ever.
Those jobs are not coming back. They should not come back. There are willing workers who want those jobs in China. They will outbid any American who wants to work in such conditions. Obama can scream "unfair." Pat Buchanan can, too. It will do no good. Those jobs are not coming back.
This fact smashed the trade union movement in the United States. It's not coming back, either.
This fact has ended the hopes of graduates of inner city schools in America that they will ever have decent low-skill jobs in manufacturing -- or anything else. The public schools in the big cities are warehousing centers. They will never be anything else. The teachers know it. The students know it. Nobody in the media is allowed to say it. The rape of the local taxpayers must go on. "We must support our schools." Really? Why? Football, not education.
Can any American student with a mother in the house get a good education at home with an Internet connection? Yes. For free? Yes. He can get it here. www.curriki.org. Does the public know about this? No. Will public school systems adopt it? No. Why not? Because the schools could hire two local residents with a high school diploma at $15 an hour each to monitor 50 to 60 kids per room, and then fire most of the teachers' union teachers. The teachers know this. They will fight it.
This Asian job competition cannot be stopped. It will not end. In India, in China, there are 2 billion rural workers who want a better life. They can get it -- the first rung on the ladder -- by working for Foxconn and its rivals.
It amazes me that Obama cannot see this. Neither can Pat Buchanan. The dreams of mercantilists are hard to break, even after 250 years of refutation in the marketplace. "Pass another law against trade! That will make us rich!" No, it won't.
A foreman immediately roused 8,000 workers inside the company's dormitories, according to the executive. Each employee was given a biscuit and a cup of tea, guided to a workstation and within half an hour started a 12-hour shift fitting glass screens into beveled frames. Within 96 hours, the plant was producing over 10,000 iPhones a day.
"The speed and flexibility is breathtaking," the executive said. "There's no American plant that can match that."
Similar stories could be told about almost any electronics company -- and outsourcing has also become common in hundreds of industries, including accounting, legal services, banking, auto manufacturing and pharmaceuticals.
But while Apple is far from alone, it offers a window into why the success of some prominent companies has not translated into large numbers of domestic jobs. What's more, the company's decisions pose broader questions about what corporate America owes Americans as the global and national economies are increasingly intertwined.
"Companies once felt an obligation to support American workers, even when it wasn't the best financial choice," said Betsey Stevenson, the chief economist at the Labor Department until last September. "That's disappeared. Profits and efficiency have trumped generosity."
Betsy is living in a fantasy world. When did businesses feel such an obligation? When tariffs were higher, when foreign laborers had no skills, and Asia was mostly rural.
Profits and efficiency have always trumped generosity. Businesses are profit-driven. That was Adam Smith's point in 1776. It was correct then. It is correct today.
There is a right to bid. The workers in Asia are making better bids.
The mercantilists say: "No bids from workers allowed that the AFL-CIO doesn't approve of." The Democrats say, "Closed shops approved of by the National Labor Relations Board." Sorry, Betsy, but the AFL-CIO is horse meat, and the NLRB rules over a deserted kingdom, except for government employee unions. You lost.
Free trade broke American mercantilism that prevailed in 1950. Those jobs aren't coming back.
Competition benefits customers. That is a fundamental fact of free market economics. Politicians hate economics. They are innate mercantilists. But they cannot roll back competition. High bid wins (employers). Low bid wins (employees.) That is liberty. That is open entry.
Customers don't care what language the workers spoke who created the customers' iPhones. If the customers don't care, then the politicians shouldn't, either. But they do. They are trying to get votes from workers who refuse to compete and who do not like tougher competition.
Customers will win this political battle. Those jobs are not coming back.
Next on the list of protected workers in a mercatilistic industry: higher education.
