Tax breaks for the wealthy with no strings attached - before any corp gets a tax break it needs to prove how much they invested domestically in new technolgy R&D, how many domestic jobs did they create, how much energy did they conserve and so forth.
Tax breaks should never be given for offshore investment - if the market were truly free there should be plenty of incentive for doing so without taxpayer money. The taxpayer should never be financing the destruction of our own economic well being
They will claim those exist, but they were written by immigration attorneys (yes the same people lobbying for more Visas) to circumvent paying equal wages.
Honestly, there are so many people on the blogs focused in on the foreign worker (and yes I do care about the foreign worker) I tend to focus on what is happening to the US worker. On that front it seems perfectly acceptable to poop all over US workers by many of the left frankly but if they are a citizen of another nation, well then, it's all different.
S.1035 which would reform H-1B, L-1 is actually a great bill for guest worker rights as well as US labor rights so you don't have to be "one or the other" by reforms desired.
Just a side comment on the whole scene.
Gotta love that a lot of rhetoric about "racism" and "xenophobia" comes from these very same immigration attorneys making a huge business from processing these Visas and of course enabling corporations and employers to pay foreign workers much less and displace US workers!
The Department of Labor is a completely useless organization. They fail to investigate these actions, and act as if slavery was never outlawed in this country.
There is no way that this is legal -- every officer of these companies, all of the way up the chain should be indicted.
We need to get up off of our butts and start marching in the streets before everyone in this country is replaced by cheap foreign labor.
believe it or not Democrats (yes that's our party) passed some massive Visa increase today out of committee and even worse, the United States is trying to approve more guest worker Visas via the WTO.
They are just hell bent on selling out the US worker and it's incredibly sad.
How about "US VCs" get a "tax credit" of maximum absurdity on potential profits, when they invest in US ventures, US citizen workers first. Bonus tax incentive for all workers over the age of 40 and US domestic diversity status. :)
Our government is very good about tax breaks to the super rich, this one should be a no brainer maybe if they find out what specifically would entice them.
You are right about VCs forcing new ventures to offshore outsourcing at least part of the operations to get the seed, round 1,2,3 of funding.
Sure, there is the investment in nanosolar, the 23 California solar start-ups. Most venture capital in info tech space insists on outsourcing the development effort. These are followers, sheep, not real leaders. Long term ICs count only in a Schumpeterian-destructive sense.
The effort to Reconstruct may take a part of the $1Trillion
Pickens is discussing. Pickens is a leader and deserves much support the way Patton said of the Battling Bastards of Bastoigne "Sons of bitches like that are worth saving".
Believe me, there are billions out there from Venture Capitalists. That's all "private" financing. Although I doubt any of them would touch a proposal like the above.
As long as the loans are asset finance, this kind of finance
is as old as factoring, and absolutely not Socialist.
It's a given that no money goes offshore. Also, at this time,
private financing is essentially dead. Unless you are T.Boone Pickens or some well healed private source, the private capital is just not there. It's a Depression syndrome, but a big difference now is the SWF's.
Do nothing and China Inc etc. will pick clean the remains of U.S. Industry.
There was a tax law which allowed anyone to deduct losses and depreciation on rental property, i.e. a tax shelter. That led to everyone and their brother buying up rental property for a tax shelter, putting together limited partnerships and having passive losses.
Then, due to inflation, interest rates went through the roof and S&Ls were sitting on loans with low interest rates, so their value on the secondary markets plummeted.
They also couldn't do money markets, which caused depositors to move their money out to places for higher returns.
So, you've got this massive real estate boom going on because folks want that tax shelter and on top of it, they are buying up anything, because it's not the actual real estate value they are looking at, it's the tax shelter. So, you've got this market for residential, commercial real estate with interest rates going up to 19%!
Then, even worse, in 1986, Congress abruptly changed this tax shelter, catching tons of high income middle class people in the pants with rental property they really couldn't afford and massive taxes owed. They didn't do a graduated enough or assuredly not a high enough AGI considering gross income required, this was a blunt change, too blunt.
So, with that change, well, real estate was heavily overbuilt and add to that the interest rates were absurdly high and didn't make much sense unless one was getting a tax shelter out of it.
Oops, big crash in Real Estate. Guess who is left holding the bag on foreclosed properties? S&Ls.
How badly did it catch your typical high income middle class individual? Bad! New York Times piece breaking down how an individual couldn't write off passive losses and because their income was limited, well, they plain got stuck.
So, one can point a finger at the Reagan administration and at Congress for suddenly changing the tax code and assuredly the ones they did not watch out for where those higher income middle class professionals hunting for tax shelters they could afford. They were the ones never bailed out.
I've been mulling some idea on the auto industry now that GM reported in the US 15.5B in losses. Somehow the UAW and the employees of GM should plain be "given" GM by the government in some subsidiary spin off/write down deal from GM and they get subsidized to create the ultimate alternative energy/fuel efficient vehicles. i.e. in one fell swoop, throw out GM executive management period, spin it out and get managers from labor and the employees who are not going to get a huge bonus and absurd executive pay for mergers, acquisitions, offshoring vs. real products and technological advances.
The US, has some successes in government funded enterprise but this would cause an uproar as "socialist" but more importantly such an initiative is at strong risk of plain being mucked up. I don't see how the employees could do any worse than GM executive management though frankly.
Put a mandatory condition that US citizens get the jobs and the production is in the US unless it can be proven with utmost certainty whatever component or material is not available domestic.
Then, in terms of rebuilding the US manufacturing base, one needs to identity key industries that are in the economic national interest or national security interests.
i.e. take power infrastructure, that is assuredly in the US national and economic interests and the US power grid is antiquated. They sold off huge sections of the Internet backbone to foreign enterprise.
Another is steel, a nation needs access to steal, especially in times of war.
I'd say vaccines. Those are being moved offshore and the implications are pretty obvious as to why that is in the national interest.
The crisis of U.S. Manufacturing transcends any current set of economic conditions.
The crisis effects and is effected by the currency, energy, and housing crises. The role of U.S. manufacturing is pivotal in solutions to energy and housing, because the dearth of manufacturing has exacerbated both housing and energy. When U.S. industrial might led the way in WWII, industry pulled the U.S. from
Depression and made half of the materials and weapons needed in the War effort for all Allies. A crisis of equal gravity is at hand, and an effort to match the gravity of the crisis is needed. Nothing proposed here is any more dangerous than the construction of the Canals of the Washington Administration.
The solution is the reconstruction of the U.S. industrial base. The starting point must be basic industries then move outwatd. The plight of automobile industry is grave enough to warrant help even without externalization of auto industry crisis. Externalization of the automotive crisis effects other industries, the environment, the dollar, and economic recovery and trade. We cannot put metal in the ground for wind turbines or drilling pipe when there is no metal to buy. The siren song of the supply chain is over when supply of commodities are short, expensive, and both import prices and trade debt are so high.
Needed for the auto crisis is a U.S. authority with the capacity and deep pockets to turn around domestic production. Turn-around will focus on manufacture of auto,steel,chips and other domestic plants, American and foreign owned. The objective is to provide bridge financing for a distraught industry. The bridge financing authority will seek take-out substation of the loans made by private capital after the factory floor and plant capacity is built and ready, most likely a 2 to 3 year window.
A carefully planned first year budget should be less than the original cost of the Marshal Plan ($45Billion). Net cost to the taxpayer is planned to be zero.
A prime objective is to protect taxpayer funds and recycle loan money in the window. The authority will help in of the early production for federal, state and local government fleets. Without Reconstruction, the goal of creating fuel fleets may exceed ten years.
The Reconstruction will target factory and movable shop floor capacity for a range of new technology, fuel efficient vehicles. Such vehicles will include the plug-in hybrids, conventional hybrids, fuel-cell vehicles, very high mileage conventional vehicles, natural gas and methanol vehicles and other new technologies still to come.
Tiers of the reconstruction are ordered by critical path. Reconstruction as a whole, is the critical path out of the recession, manufacturing and energy crises.
Some tiers of the plan may start early but all tiers have critical paths in earlier tiers.
Each of the industries in question are short of capital except for the funding of polymer lithium ion batteries. That is where help at a national level comes in.
Phases of INDIREFI Reconstruction
· First Tier - basic auto component industries - specialty steel, generic microprocessors, copper, aluminum
· Second Tier – fortify and build capacity of Polymer Lithium Batteries, direct solar, wind turbines, specialty steel tubing (oil drilling), and custom microprocessors
· Third Tier – increase cement and non specialty steel capacity
for highway construction and railroad rolling stock and rail and airport runway and management systems
· Fourth Tier – auto shop floor capacity and automation for building
next generation automobiles, local financing to utilities for wind turbines, nuclear power, land fill methane, small hydro, co-generation
· Fifth Tier – nanosolar fabrication capacity, next generation wind turbines, advanced vehicle designs and identifiable cutting edge technologies entering production stage but short of capital
Let's not get into one of those personality wars or even "what that other blog is doing". There are certain wars that go on in the blogosphere that to me have little to do with what the Congressional record is, the positions are, the policy is, the money behind a candidate is, what's in the national interest is, working America's interests and probably #1, what is in those details that the Devil loves so much.
What are we doing? Well, we are trying to bring about civil debate, discussion and awareness on all things economic and get some fact based policy as well. We don't give a rats ass what those other political blogs are doing.
Consider us the Switzerland of blogs. The only thing we're interested in is the money.
Ever read anything about the Sugarscape or in the new field of '...agent based generative social science'? Or The Origin of Wealth?
Basically, Kos got big in the 'sphere because he got there first and with his resources deriving from his sports blogs he was able to dominate. None of this means he has the skillset, knowledge practical and theoretical, nor character to lead a progressive movement. He does not.
We see that now with the disaster of Obama looming.
More importantly we see 'Exodus' the movement of many who are sick of the ignorant ranting at CheetoLand and the rest of the top ten political blogs not only to new blogs The Confluence, Anglachel's Journal and Allegre's Corner but....
And this is my main point.
Here.
To economic blogs where folks are grappling with the theory and practice of a science about to explode in in it's effects on not only policy but the citizenry's ideas about social and economic justice.
If you accept that the L-curve distibution of income is what is the ineveitable and natural result of the conservative 'free market' mantra then you be wantin' you some....
Big time Gummint regulation.
No messin'
Hi Robert, good to see some folks contributing some thoughtful stuff here.
Gotta love those neandertal UAW dudes a little....
I have another one that will shock you, outsourcing is counted as US growth when it should not be. This link is a great article. Here's the gist:
The underlying problem is located in an obscure statistic: the import price data published monthly by the Bureau of Labor Statistics (BLS). Because of it, many of the cost cuts and product innovations being made overseas by global companies and foreign suppliers aren't being counted properly. And that spells trouble because, surprisingly, the government uses the erroneous import price data directly and indirectly as part of its calculation for many other major economic statistics, including productivity, the output of the manufacturing sector, and real gross domestic product (GDP), which is supposed to be the inflation-adjusted value of all the goods and services produced inside the U.S.
And it really messed up productivity (as you say a topic for another day).
Consider the infamous HR 1955. This bill is against 'domestic terrorism' on the face. But look deeper and you can see it seeks to muzzle anyone with influence casting them as terrorist. Its very quiet now on the domestic terror front. It is populist ferment that is so feared by the elite, not terror
Goverments like Czarist Russia, Britain's Charles II, France, Louis XVI France, and George III make laws like this. Governments who stumble and goad their peoples into revolt. Doomed regimes behave this way, for no reason.
HR 1955 was passed in secret without debate. There is no Committee Report. The typical spin on such bills by Reid-Pelosi is that these bills are way too trivial. But there is nothing trivial about 1955. This is the point about
stumbling, military misadventures - this pattern has happened over 400 years with the same outcomes for the doomed regimes.
is nothing trivial about HR 1955.
What concerns me on this is while shipping costs might help enable a return to US manufacturing, on services, or things zipped around the Internets there is no real supply chain cost increases to curtail it.
So a standard 40' shipping container is 2,385 cubic feet.
Which means that each $1000 rise in shipping costs, means that it costs an additional $0.42 per cubic foot.
So at $2000 per container the cost per cubic foot is $0.84.
Now at $10000 per container, the cost is $4.20 per cubic foot.
The irony here is the the cost advantage for clothing (which takes up little space is much better than for many higher value goods. Think about something like a big screen plasma tv. It takes up 50-75 cubic feet in a container.
So at $2000 per container, it costs $42-$63 to ship that TV.
If the cost is $10000 per container then it costs $210-$315 to ship that TV.
That's just the ocean trip, not inland transport.
So the question is where's the tipping point at which wage arbitrage matters less than transport cost?
Think of it in these terms. The $167-$273 increase in transport costs is enough to pay for 6.5-9 hours of labor at $30/hr (with benefits).
If it only takes 6 hours of labor to make that plasma tv, then it doesn't make sense to ship it from China assembled.
I mean you can say that but China is a different political system, assuredly not a market economy as much as folks like to believe it is and the people there have different attitudes and beliefs than the United States generally.
I don't know about their peg. They now hold US debt by the, well, certain hairs not on the head, so while US is pressuring them extensively on the pegging of their currency, so far it hasn't done much.
Maybe it should be those who manufacture for the world control the world.
China's currency peg won't go on much longer. And many of China's billionaires have (frequently familial) connections to important party officials. If an economy that had been booming shifts into reverse, those cronies are going to be protected. And that is a recipe for civil disorder.
Tax breaks for the wealthy with no strings attached - before any corp gets a tax break it needs to prove how much they invested domestically in new technolgy R&D, how many domestic jobs did they create, how much energy did they conserve and so forth.
Tax breaks should never be given for offshore investment - if the market were truly free there should be plenty of incentive for doing so without taxpayer money. The taxpayer should never be financing the destruction of our own economic well being
They will claim those exist, but they were written by immigration attorneys (yes the same people lobbying for more Visas) to circumvent paying equal wages.
Honestly, there are so many people on the blogs focused in on the foreign worker (and yes I do care about the foreign worker) I tend to focus on what is happening to the US worker. On that front it seems perfectly acceptable to poop all over US workers by many of the left frankly but if they are a citizen of another nation, well then, it's all different.
S.1035 which would reform H-1B, L-1 is actually a great bill for guest worker rights as well as US labor rights so you don't have to be "one or the other" by reforms desired.
Just a side comment on the whole scene.
Gotta love that a lot of rhetoric about "racism" and "xenophobia" comes from these very same immigration attorneys making a huge business from processing these Visas and of course enabling corporations and employers to pay foreign workers much less and displace US workers!
The Department of Labor is a completely useless organization. They fail to investigate these actions, and act as if slavery was never outlawed in this country.
There is no way that this is legal -- every officer of these companies, all of the way up the chain should be indicted.
We need to get up off of our butts and start marching in the streets before everyone in this country is replaced by cheap foreign labor.
I know that you don't mean too, but don't forget the foreign worker being paid only $2.86 hour.
This is yet another case in which prevailing wage law (From the port at which the depart for the rig) should apply.
believe it or not Democrats (yes that's our party) passed some massive Visa increase today out of committee and even worse, the United States is trying to approve more guest worker Visas via the WTO.
They are just hell bent on selling out the US worker and it's incredibly sad.
How about "US VCs" get a "tax credit" of maximum absurdity on potential profits, when they invest in US ventures, US citizen workers first. Bonus tax incentive for all workers over the age of 40 and US domestic diversity status. :)
Our government is very good about tax breaks to the super rich, this one should be a no brainer maybe if they find out what specifically would entice them.
You are right about VCs forcing new ventures to offshore outsourcing at least part of the operations to get the seed, round 1,2,3 of funding.
Sure, there is the investment in nanosolar, the 23 California solar start-ups. Most venture capital in info tech space insists on outsourcing the development effort. These are followers, sheep, not real leaders. Long term ICs count only in a Schumpeterian-destructive sense.
The effort to Reconstruct may take a part of the $1Trillion
Pickens is discussing. Pickens is a leader and deserves much support the way Patton said of the Battling Bastards of Bastoigne "Sons of bitches like that are worth saving".
Believe me, there are billions out there from Venture Capitalists. That's all "private" financing. Although I doubt any of them would touch a proposal like the above.
As long as the loans are asset finance, this kind of finance
is as old as factoring, and absolutely not Socialist.
It's a given that no money goes offshore. Also, at this time,
private financing is essentially dead. Unless you are T.Boone Pickens or some well healed private source, the private capital is just not there. It's a Depression syndrome, but a big difference now is the SWF's.
Do nothing and China Inc etc. will pick clean the remains of U.S. Industry.
There was a tax law which allowed anyone to deduct losses and depreciation on rental property, i.e. a tax shelter. That led to everyone and their brother buying up rental property for a tax shelter, putting together limited partnerships and having passive losses.
Then, due to inflation, interest rates went through the roof and S&Ls were sitting on loans with low interest rates, so their value on the secondary markets plummeted.
They also couldn't do money markets, which caused depositors to move their money out to places for higher returns.
So, you've got this massive real estate boom going on because folks want that tax shelter and on top of it, they are buying up anything, because it's not the actual real estate value they are looking at, it's the tax shelter. So, you've got this market for residential, commercial real estate with interest rates going up to 19%!
Then, even worse, in 1986, Congress abruptly changed this tax shelter, catching tons of high income middle class people in the pants with rental property they really couldn't afford and massive taxes owed. They didn't do a graduated enough or assuredly not a high enough AGI considering gross income required, this was a blunt change, too blunt.
So, with that change, well, real estate was heavily overbuilt and add to that the interest rates were absurdly high and didn't make much sense unless one was getting a tax shelter out of it.
Oops, big crash in Real Estate. Guess who is left holding the bag on foreclosed properties? S&Ls.
tax code revision, 1986
How badly did it catch your typical high income middle class individual? Bad! New York Times piece breaking down how an individual couldn't write off passive losses and because their income was limited, well, they plain got stuck.
So, one can point a finger at the Reagan administration and at Congress for suddenly changing the tax code and assuredly the ones they did not watch out for where those higher income middle class professionals hunting for tax shelters they could afford. They were the ones never bailed out.
I've been mulling some idea on the auto industry now that GM reported in the US 15.5B in losses. Somehow the UAW and the employees of GM should plain be "given" GM by the government in some subsidiary spin off/write down deal from GM and they get subsidized to create the ultimate alternative energy/fuel efficient vehicles. i.e. in one fell swoop, throw out GM executive management period, spin it out and get managers from labor and the employees who are not going to get a huge bonus and absurd executive pay for mergers, acquisitions, offshoring vs. real products and technological advances.
The US, has some successes in government funded enterprise but this would cause an uproar as "socialist" but more importantly such an initiative is at strong risk of plain being mucked up. I don't see how the employees could do any worse than GM executive management though frankly.
Put a mandatory condition that US citizens get the jobs and the production is in the US unless it can be proven with utmost certainty whatever component or material is not available domestic.
Then, in terms of rebuilding the US manufacturing base, one needs to identity key industries that are in the economic national interest or national security interests.
i.e. take power infrastructure, that is assuredly in the US national and economic interests and the US power grid is antiquated. They sold off huge sections of the Internet backbone to foreign enterprise.
Another is steel, a nation needs access to steal, especially in times of war.
I'd say vaccines. Those are being moved offshore and the implications are pretty obvious as to why that is in the national interest.
Industrial Reconstruction Finance
INDIREFI
The crisis of U.S. Manufacturing transcends any current set of economic conditions.
The crisis effects and is effected by the currency, energy, and housing crises. The role of U.S. manufacturing is pivotal in solutions to energy and housing, because the dearth of manufacturing has exacerbated both housing and energy. When U.S. industrial might led the way in WWII, industry pulled the U.S. from
Depression and made half of the materials and weapons needed in the War effort for all Allies. A crisis of equal gravity is at hand, and an effort to match the gravity of the crisis is needed. Nothing proposed here is any more dangerous than the construction of the Canals of the Washington Administration.
The solution is the reconstruction of the U.S. industrial base. The starting point must be basic industries then move outwatd. The plight of automobile industry is grave enough to warrant help even without externalization of auto industry crisis. Externalization of the automotive crisis effects other industries, the environment, the dollar, and economic recovery and trade. We cannot put metal in the ground for wind turbines or drilling pipe when there is no metal to buy. The siren song of the supply chain is over when supply of commodities are short, expensive, and both import prices and trade debt are so high.
Needed for the auto crisis is a U.S. authority with the capacity and deep pockets to turn around domestic production. Turn-around will focus on manufacture of auto,steel,chips and other domestic plants, American and foreign owned. The objective is to provide bridge financing for a distraught industry. The bridge financing authority will seek take-out substation of the loans made by private capital after the factory floor and plant capacity is built and ready, most likely a 2 to 3 year window.
A carefully planned first year budget should be less than the original cost of the Marshal Plan ($45Billion). Net cost to the taxpayer is planned to be zero.
A prime objective is to protect taxpayer funds and recycle loan money in the window. The authority will help in of the early production for federal, state and local government fleets. Without Reconstruction, the goal of creating fuel fleets may exceed ten years.
The Reconstruction will target factory and movable shop floor capacity for a range of new technology, fuel efficient vehicles. Such vehicles will include the plug-in hybrids, conventional hybrids, fuel-cell vehicles, very high mileage conventional vehicles, natural gas and methanol vehicles and other new technologies still to come.
Tiers of the reconstruction are ordered by critical path. Reconstruction as a whole, is the critical path out of the recession, manufacturing and energy crises.
Some tiers of the plan may start early but all tiers have critical paths in earlier tiers.
Each of the industries in question are short of capital except for the funding of polymer lithium ion batteries. That is where help at a national level comes in.
Phases of INDIREFI Reconstruction
· First Tier - basic auto component industries - specialty steel, generic microprocessors, copper, aluminum
· Second Tier – fortify and build capacity of Polymer Lithium Batteries, direct solar, wind turbines, specialty steel tubing (oil drilling), and custom microprocessors
· Third Tier – increase cement and non specialty steel capacity
for highway construction and railroad rolling stock and rail and airport runway and management systems
· Fourth Tier – auto shop floor capacity and automation for building
next generation automobiles, local financing to utilities for wind turbines, nuclear power, land fill methane, small hydro, co-generation
· Fifth Tier – nanosolar fabrication capacity, next generation wind turbines, advanced vehicle designs and identifiable cutting edge technologies entering production stage but short of capital
Let's not get into one of those personality wars or even "what that other blog is doing". There are certain wars that go on in the blogosphere that to me have little to do with what the Congressional record is, the positions are, the policy is, the money behind a candidate is, what's in the national interest is, working America's interests and probably #1, what is in those details that the Devil loves so much.
What are we doing? Well, we are trying to bring about civil debate, discussion and awareness on all things economic and get some fact based policy as well. We don't give a rats ass what those other political blogs are doing.
Consider us the Switzerland of blogs. The only thing we're interested in is the money.
Ever read anything about the Sugarscape or in the new field of '...agent based generative social science'? Or The Origin of Wealth?
Basically, Kos got big in the 'sphere because he got there first and with his resources deriving from his sports blogs he was able to dominate. None of this means he has the skillset, knowledge practical and theoretical, nor character to lead a progressive movement. He does not.
We see that now with the disaster of Obama looming.
More importantly we see 'Exodus' the movement of many who are sick of the ignorant ranting at CheetoLand and the rest of the top ten political blogs not only to new blogs The Confluence, Anglachel's Journal and Allegre's Corner but....
And this is my main point.
Here.
To economic blogs where folks are grappling with the theory and practice of a science about to explode in in it's effects on not only policy but the citizenry's ideas about social and economic justice.
If you accept that the L-curve distibution of income is what is the ineveitable and natural result of the conservative 'free market' mantra then you be wantin' you some....
Big time Gummint regulation.
No messin'
Hi Robert, good to see some folks contributing some thoughtful stuff here.
Gotta love those neandertal UAW dudes a little....
They brought us the weekend.
More than Kos will ever do.
I have another one that will shock you, outsourcing is counted as US growth when it should not be. This link is a great article. Here's the gist:
And it really messed up productivity (as you say a topic for another day).
Consider the infamous HR 1955. This bill is against 'domestic terrorism' on the face. But look deeper and you can see it seeks to muzzle anyone with influence casting them as terrorist. Its very quiet now on the domestic terror front. It is populist ferment that is so feared by the elite, not terror
Goverments like Czarist Russia, Britain's Charles II, France, Louis XVI France, and George III make laws like this. Governments who stumble and goad their peoples into revolt. Doomed regimes behave this way, for no reason.
HR 1955 was passed in secret without debate. There is no Committee Report. The typical spin on such bills by Reid-Pelosi is that these bills are way too trivial. But there is nothing trivial about 1955. This is the point about
stumbling, military misadventures - this pattern has happened over 400 years with the same outcomes for the doomed regimes.
is nothing trivial about HR 1955.
What concerns me on this is while shipping costs might help enable a return to US manufacturing, on services, or things zipped around the Internets there is no real supply chain cost increases to curtail it.
But great info middle!
shipping cost by volume.
So a standard 40' shipping container is 2,385 cubic feet.
Which means that each $1000 rise in shipping costs, means that it costs an additional $0.42 per cubic foot.
So at $2000 per container the cost per cubic foot is $0.84.
Now at $10000 per container, the cost is $4.20 per cubic foot.
The irony here is the the cost advantage for clothing (which takes up little space is much better than for many higher value goods. Think about something like a big screen plasma tv. It takes up 50-75 cubic feet in a container.
So at $2000 per container, it costs $42-$63 to ship that TV.
If the cost is $10000 per container then it costs $210-$315 to ship that TV.
That's just the ocean trip, not inland transport.
So the question is where's the tipping point at which wage arbitrage matters less than transport cost?
Think of it in these terms. The $167-$273 increase in transport costs is enough to pay for 6.5-9 hours of labor at $30/hr (with benefits).
If it only takes 6 hours of labor to make that plasma tv, then it doesn't make sense to ship it from China assembled.
I mean you can say that but China is a different political system, assuredly not a market economy as much as folks like to believe it is and the people there have different attitudes and beliefs than the United States generally.
I don't know about their peg. They now hold US debt by the, well, certain hairs not on the head, so while US is pressuring them extensively on the pegging of their currency, so far it hasn't done much.
Maybe it should be those who manufacture for the world control the world.
China's currency peg won't go on much longer. And many of China's billionaires have (frequently familial) connections to important party officials. If an economy that had been booming shifts into reverse, those cronies are going to be protected. And that is a recipe for civil disorder.
Pages