Globalization: A Good Thing for U.S. Economy?

As we learned in class, globalization seems to have its perks, and the primary reason for that is the “reduced costs.”  However, that is no longer true in China.  Higher wages for laborers and increased shipping costs have led to increased prices because they cannot afford to manufacture at such a low cost anymore.  U.S. companies have recognized this truth and are beginning to realize that outsourcing to China is not as lucrative as it once was, or seemed to be.

I have witnessed this first-hand working at Rahco Rubber, a rubber manufacturing plant in Des Plaines, IL started by my Grandpa and owned by my Dad and two uncles.  In the past 10-15 years, China slowly, but surely, began to take customers from Rahco and other U.S. manufactures because of the low cost product that China provided.  At the time, it seemed ignorant to turn away from that kind of deal because there was such a huge margin between what companies like Rahco would sell product for compared to companies in China.  Many U.S. manufacturers went out of business because they simply could not match those prices, thus thousands of companies outsourced to get a cheaper, yet lower-quality product.

This trend, however, is coming to a close.  Yesterday, President Obama addressed the state of the U.S. economy and manufacturing stating: “After years of undercutting the competition, now it’s getting more expensive to do business in places like China,”  He continued: “American workers are getting more and more efficient.  Companies located here are becoming more and more competitive.  So for a lot of businesses, it’s now starting to make sense to bring jobs back home.”  Although Obama made comments that small businesses, like Rahco Rubber, were built by the government and communities and not the owners is an absurd remark, he is right about the economy and that manufacturing in the U.S. is on the rise, and outsourcing to China may no longer be a feasible option.

With a steady increase of business, and customers returning from China after horrible experiences with quality, logistics, and communication, companies like Rahco Rubber are starting to see the backlash of working with China.  I am really surprised that it has taken people so long to see that China is not the answer to reducing costs in manufacturing.  If you have to sacrifice quality products, not to mention your reputation, in order to save a buck, then your head is not in the right place.  Companies go in business to provide a service.  Making a profit is a huge deal, but at what cost?  if anything, the threat of China has made companies like Rahco think about lean manufacturing, which is about cutting costs in-house and trying to be as efficient as possibly.

What do you guys think about this?  Why is globalization good or bad?

http://dawn.com/2012/09/23/made-in-america-more-attractive-to-manufacturers/

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