Competing With Cheap Labor Costs

We know about the foreign sweatshops, cases brought before the World Trade Organization, and America's leaders' boasts that American workers can compete with anyone in the world.

So far, the emphasis and complaints have centered around cheap labor costs, government subsidies, and either shipping jobs overseas or failing to be competitive.

Let's introduce something into the debate which seems to be sorely missing! Better still let's introduce several things.

First of all, Americans know that small business drives the American economy, while "Big Business" usually takes the rap...especially during elections and downturns in the economy.

If small businesses are the pit bull of the American economy, then let's see the federal Small Business Administration (SBA) do more than just manage SBA loans, and get busy gearing up small businesses to compete internationally. The majority of America's small businesses do no foreign trade at all! And it is not for lack of a profit motive; it's for lack of knowing how! Most are so concerned with simply surviving, that they have never gone on to the thrills of really thriving, especially in exporting their products and services.

The foreign sweatshops are, by and large, run by foreigners who make our own corporate meanies look like fair weather sailors. They will always exploit their workers, and that is true of sweatshops located in so-called socialist, "workers' paradise" countries.

To balance our imports and exports better, we will have to compete internationally in an often dog eat dog world economy, an economy where bribes, patent infringement, and theft of intellectual property are standard practices in some of the markets we need to penetrate.

How then do we compete with the competition?

The American politicians, who generally know more about legal loopholes and politics than they ever knew about business, brag about Made In USA quality. But, if fine quality were what sells a lot of goods around the world, Walmart(R) and other box stores' shelves wouldn't be filled with Made in China stuff, or some of the shoddy stuff from such international salesmen as Bangladesh and Pakistan.

Americans have suffered a long enough period of recession with its lost jobs, stagnated wages, and huge deficits. Is it surprising that they look to cheap "stuffs" to stretch their already stretched budgets? "Make it 10-cents cheaper, and I'll buy it" is the American shoppers' motto. And they do buy the cheap stuff. Quality stuff seems mostly out of reach.

Meanwhile the Chinese have said for centuries that "Expensive things aren't expensive. Cheap things aren't cheap." It's their way of saying "You pay for what you get....if it cost too little, it's too cheap to last very long. Paying more for quality workmanship is cheaper in the long run."

That doesn't keep them from shipping the cheap stuff to Americans. If they keep it up, at the rate their stuff is flowing into America (and rapidly into American land-fills) we are in danger of tilting the earth's axis!

For a moment, look at the derelict mills in New England which used to produce the world's finest shoes, linens, and manufactured goods....when Made in USA was the goal of the buyers around the world! Those products lasted. Their prices and quality were sought after. Now those factories stand as monuments to inept business and union practices, and failure to modernize while there was still time. Things were so good that everyone cashed in. Labor wanted and got more of the pie, management said they deserved a bigger slice, too, and, of course the shareholder owners had their shares of the profits, and all of these forces combined to kill the goose that laid the golden eggs.

So what can turn things around now? Can we get unions back to an ability to protect workers' true best interests, managers back to something worth managing, and shareholders and owners back to investing in good companies for the long-term prosperity we need?

Congress gets poor grades because they lack bipartisanship. Business has teetered on the brink too often due to a lack of cooperative effort. between all the elements (labor, management, and owners) involved in good business practices.

One more example, a formerly well-known company poured a large portion of its annual profits back into building the company. It grew more and more successful in those early years. It gained name brand recognition and a legitimate share of its market. Then the "get rich quick ethic" started to make itself felt big time. Unions said their workers had sacrificed long enough and it was time for their definition of "a fair share", managers said their business acumen deserved greater rewards, and shareholder owners said they had been patient long enough. Another precious goose was cooked in the name of cashing in, and "what's in it for me right now." That brand is no longer found in the marketplace.

Business economics has always been based on Supply and Demand, but that is an oversimplification. Supply of what and where? Demand of what and where? Demand at what price break and by whom? Supply of what raw materials and at what price? On and on with enough variables to fill the classrooms and give tenure to professors of MBA classes.

While we expect the federal government to accomplish more in leveling the international playing field, and we expect state governments to do more also to encourage more exports, we need to use American ingenuity and worker skills to beat the competition at their own game. It is after all "the only game in town."

Worker productivity is at an all-time high in the USA. The US dollar's value is low enough to make our products more price competitive. There are attractive new sectors in the international market for which our existing industrial capacity should put us in the first rank of competitors. This is happening at a time when we have a large pool of idled workers from this recession, and not all of them need some big government retraining program to function now.

The SBA needs to catch up with the times. I have had a small business corporation and a small business company during the past 20 years and not once in those two decades have I been contacted by the SBA to show what they have to offer in the way of loans, expertise, or assistance; nor have they ever encouraged me to look at markets overseas to expand these businesses and employ more workers. I am not unique in being out of the reach of their outreach.

Being an entrepreneur and starting a new business is scary enough. The record for new businesses lasting even three to five years is not encouraging. Success can be elusive. Enough new businesses fail that the question is not "who built it?" but rather "what could have been done to save it and help it (and America) to grow?"

Our major embassies have an office for a commercial attache and their staff. Like most embassy staff members the staff of those offices are probably overworked and led by what are typically retired businessmen whose resume showed some previous success back in America. They remain, however, a largely untapped resource, often mired in the old business strategies the attache once used stateside. If a hot-blooded go getter arrived on the embassy doorstep with a business plan for competing in the local market, it would be because he sought them out, and not because they sought him out. If he was politically connected, he would be more likely to get real attention, than a solid American businessman whose sole focus was on doing good business in that market.

I have the impression that the long string of annual import/export trade imbalances is not a priority national concern except for economists who see its dangers. We not only borrow from some of our competitors, we buy more of their goods than they buy of ours....and the trade is still not carried out on a level playing field.

American workers and businesses need to have a first class team working for them at both the state and federal level with a real agenda for competing in international trade. So far that agenda is hit and miss, with more misses than hits, and it has to improve.

The best part? It can improve, if we become a little less parochial and a lot more international.

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© 2012 Demas W. Jasper All rights reserved.