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"THE 'INSOURCING' PROBLEM" PROBLEM

 

By Andy Fenner
December 12, 2004
NewsWithViews.com

In a recent Wall Street Journal editorial titled "The 'Insourcing' Problem" the writer explains how insourcing can be boon to the U.S. economy.

* It brings high numbers of jobs to the U.S. (5.4 million in 2002)

* The jobs are high paying, averaging over $56,000/yr (31% higher than comparable jobs in U.S. companies)

* The companies contribute to R&D and capital investment in the US ($28 Billion on R&D and $112 Billion on capital investments in 2002)

* 20% of the U.S. goods exports in 2002 were from insourcing companies

"That's fantastic!" you may say, and that's exactly what they want you to think. Economists, in general, have been presenting information like this for some time, but they fail to look at the issue from a national, long-term standpoint.

Here are a few reasons to question what the 'economic experts' say is great for America and make a decision based on all the angles, not just the ones presented:

* By relying on foreign countries to bring jobs to us, we are giving away our power at the trade negotiations table. Making demands on companies who are bringing us jobs is roughly the equivalent of biting the hand that feeds us.

* We are relying on foreigners to provide jobs for Americans.

Currently, it is advantageous for them to do this as we provide tax breaks and subsidies for them. These tax breaks are not always afforded to American owned companies causing the inability to financially compete. We are, in effect, subsidizing the demise of our own companies.

* The products made by the insourcing companies are typically sold to American consumers. This provides multiple benefits for the insourcer:

1. The costs of importing the goods are avoided, saving the company money.

2. The profits go back to the company?s home country and are used to buy out more American companies.

* As most of the jobs brought to us are assembly jobs, very few people are required to produce a final product; therefore the number of jobs created in relation to the output produced is very low.

* The advanced technologies and engineering used in the products are developed and maintained by the foreign owned parent companies.

By looking at both sides of the equation, you can see that while we are gaining short-term profit and a few jobs, we are eroding our manufacturing and industrial base. Eventually, we'll be left with few American owned factories and will be almost totally dependent of foreign countries for our jobs and living standards. We'll be a third-world country, begging for the jobs that others will give us. That is not the America that I know and love.

2004 Andy Fenner - All Rights Reserved

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Andy Fenner is the editor and webmaster for Concerned Citizens, LLC, a small grassroots organization dedicated to educating the American public about the problems with the US economy. His articles are based mostly on a lay-persons observation of the economy and are meant to provide a broad view of the issues. The organization maintains the website "Economy In Crisis" that can be seen at www.economyincrisis.com.

E-Mail: andy@mtbdev.com


 

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Eventually, we'll be left with few American owned factories and will be almost totally dependent of foreign countries for our jobs and living standards. We'll be a third-world country, begging for the jobs that others will give us. That is not the America that I know and love.