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Why President Obama’s 'Insourcing' Strategy to Revive American Manufacturing Will Not Work

As the election season heats up, Barack Obama is wooing manufacturing states by promoting his efforts to stop outsourcing and even to reverse it in a strategy he calls “insourcing.” Last week he visited the Master Lock Company in Wisconsin to promote insourcings' effects in bringing manufacturing jobs back to America. Though this is a politically beneficial move for Obama (important swing states like Wisconsin, Michigan, Ohio are all big manufacturing states hard hit by the recession), the strategy of insourcing is a misguided and unsustainable solution, and will do little to reverse outsourcing or bring manufacturing jobs back to America.

Outsourcing, itself, is the byproduct of a larger trend of globalization and increased competitiveness among multinational corporations; it is not something that can simply be reversed with a few tax breaks. In his book of the same title, former Labor Secretary and Berkeley professor Robert Reich calls this trend “supercapitalism.” In his book, Reich shows the evolution of our economy from one dominated by oligopolies to one based on hyper-competitive capitalism (in large part driven by advances in technology). It is impossible to target and solve one facet of this global economic shift without addressing larger trends, most of which have also been beneficial to the U.S.

We as consumers play a huge role. We want to see laborers paid fair wages and demand corporations be socially and environmentally conscious, yet we also want the cheapest deal we can find from Wal-Mart. Reich calls this the ‘citizen vs. consumer’ conflict, and it exists in all of our brains. It’s clear that in our society today, the consumer half is the dominant force. Many Americans support moving manufacturing jobs back to the U.S. on principal, and think it presents a viable solution; when a 2011 Gallup poll asked respondents what they thought was the best way to create more jobs in the U.S., the most popular answer given was to “keep manufacturing jobs here/stop sending overseas.”

Yet these same people probably sought out the cheapest option last time they went to the store, and few would be willing to pay three times as much for the clothes they were wearing or the latest gadget they bought from Best Buy. And unless Americans consumers are willing to consistently pay more for our products, these manufacturing jobs, even if insourcing does pull a few back, are not sustainable. Americans that want manufacturing jobs back in the country contribute every day to a system that led to the demise of manufacturing. We all do it when we shop; it is not necessarily wrong or unethical, but it’s a choice we make, and we can’t have it both ways.

There are other cultural factors at work here as well. Simply because the unemployment rate is high does not mean that there is a ready and willing workforce to take up an influx of manufacturing jobs. They do exist, but not in the numbers it would take to revive the manufacturing industry. America’s ability to manufacture such large quantities in the past was the same reason China has dominated the industry today: the consistent availability of mass amounts of super cheap labor. This was previously filled by women, children, immigrants, and other demographics of low-wage workers that are no longer viable in this country (which is not necessarily a bad thing, either – child labor laws, women, and immigrants entering the educated workforce, strong unions, are all reasons for this). Higher education is now the gold standard, and our strong cultural bias towards the highly educated will continue to deplete any store of manufacture-ready workers that currently exists. A significant portion of unemployed people today have college degrees and are not about to take up a routine job at a Master Lock Factory because it’s there. Unless there is a shift in our current cultural norm that elevates manual labor to an equally valued path along with higher education, the number of Americans who out-educate themselves for these jobs will only increase.

The President points to similar issues in the Chinese context, citing rising labor costs in Chinaas potential for companies to insource back to the United States. Production costs may be rising in China, but these heightened costs still fall far below anything companies can match in this country. The real effect of rising production costs in China is a continuation of the outsourcing chain from China to even lower wage countries like Bangladesh, not back to the U.S.

America can still compete globally in a lot of areas if we invest in them: R&D, education, clean energy, and many others. But as long as our global economy is driven by this hyper-capitalism, manufacturing is no longer one of them; any tax breaks or incentives the President offers to these companies are minute in comparison to the larger trends and will not “reverse the long slide of U.S. manufacturing” as he suggests. He certainly should not abandon those workers laid off, but instead should solely focus on using the resources available to train the unemployed manufacturing workforce in new skills relevant to jobs of the future (green, tech jobs) that hold greater promise and staying power.

Photo Credit: Wikimedia Commons

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