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Detroit's recent file for bankruptcy: a possible look into the future of what could happen to other cities here in the U.S.

Detroit just recently filed for bankruptcy, if you did not already know. The city was once a economically thriving city. The city's booming auto industry kept that city afloat since its birth. However, the auto industry here in the U.S. has saw drastically declined; we recently saw that with through GM. Labor costs here in the U.S. have pushed companies to international grounds.

Could we possible see other U.S. city's crumble because of off shore labor?
Also, what can we learn from Detroit's file for bankruptcy?


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    Jul 23 2013: 'Labor costs here in the U.S. have pushed companies to international grounds.'

    This is one way to see it, a very popular one indeed, but do you think the principle of profit maximization needs to be pushed at all? Isn't it part of its intrinsic nature to flee in advance whenever there is a better option to flee to?

    There is no natural law that a society has to allow a company who left the very country for their benefits to keep their right of that very market. But when we allow it, we shouldn't be surprised, that they do it, and that old grown structures fall apart.

    I think we should rethink the current system. Because on international salary levels 'we' as 'employees' could only be competitive again on levels we wouldn't be able to keep our current standard. Not even close. Or is there anyone who could afford to work for $38 a month, 70 hours a week? I have my doubt on this.

    So why is apple allowed to produce their iconic, high profit products in China? Do you think, that an average US income would be able to destroy that profit margin? So as long this happens, prepare for more bankrupt cities to come ...
    • Jul 23 2013: Are you pushing an isolationist point of view?
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        Jul 24 2013: Isolation? No, balancing! If there is no incentive to move to low labor cost countries, a given infrastructure remains balanced within a 'higher' labor cost country. Before the 'global market idea' was introduced, import duty was a balancing regulative measure to avoid 'job drainage'. Any capitalistic economy goes where the profit is, thats its rule. What is not the rule is to create a stable foundation for the people of a nation, which we can see quite drastic at the moment.
        • Jul 24 2013: very good point. to use your example of apple, they depend on american consumers and hence they depend on americans having jobs where they earn a salary decent enough to be able to buy their products, yet they pay as little of those salaries as possible.

          when i moved here to japan years ago i thought the idea of mandating employment (basically the labour law is if you make X amount of money you have to employ Y number of people) was ridiculous, but recently i get it. it ensures that as many people as possible have a disposable income, which means that japanese companies make more sales. far from costing them more in employment costs, it ensures they enjoy high profits, while also making sure that one company can't leech off the country and damage other companies by unfairly taking money from the economy without putting anything back in.
        • Jul 24 2013: let me disagree - what you are proposing is a protective tariff, similar to the Tariff of Abominations/Tariff act of 1829 and the Tariff Act of 1930 which deepened and caused the great depression to last a lot longer.

          The act of putting on a tariff to protect jobs in a country is isolationist
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        Jul 24 2013: One of the major concerns of any nation should be the stability of its very economy. But the major concern of most companies is profit maximization which comes without loyalty to the very nation they form in. Large scale tax evasion to the cayman islands may serve as one example on this.

        By this, the very moment a nation allows 'free global trade' it loses any effective measures to ensure for a stable and solid inland economy against drainage of all sort, currency, taxes, resources, etc., so it becomes only a matter of time for the collapse to settle in.

        When China opened up to the world economically, all German car manufactures got very exited about the new opportunities of this huge untapped market. Yet China did a very clever thing. They granted access to their markets under one important condition only, which was, that German cars for the Chinese marked was to be produced in China to the highest percentage. Imports from Germany were restricted. This clever decision not only created high-grade jobs in China, it also allowed for large scale technology transfer in car production 'for free'. The Chinese pretty wisely enriched their economy this way and controlled the drainage of financial capital towards Germany on substantial levels.

        And even though China has become the biggest market for many German car manufactures, this boom did not result in an explosive 'job creation' in Germany. And due tax evasion measures of the same companies, Germany can't even participate on the profits made in China.

        'Isolation' as you prefer to name it was smartly used by China, as it demanded to produce within THEIR borders to consolidate their economy and not to weaken it. And even though I do not consider the Chinese 'economic miracle' to be solid in itself, under the ruling principle of capitalism it did manage to gain a dominant role in it and so far.

        On the 'great depression' exist several theories about what have caused it, and it depends on which economical view one has.
        • Jul 24 2013: That is what Japan did during the 50's and 60's. Most people did not know that to sell something in Japan you had to have a Japanese partner that owned 50 % of the subsidiary in Japan. This lead to a short term gain but its goal was to learn the technology.

          The example of car is rather interesting. I believe the most American made car (i.e. has the most American made parts and assembled in America) is a Toyota model.
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        Jul 24 2013: What makes you conclude, that Japan's strategy was only a 'short term gain'? Don't you think such 'balancing' could consolidate the economy of a country also longterm?

        The risk of any open global market is, that it seems to run fine at the beginning. Companies produce their product in 'low labor cost countries' and sell them with higher profit in 'high labor cost countries', because the purchasing power is higher there BECAUSE of the higher 'labor costs'.

        But as more and more companies are using this gradient for their profit maximization, as more and more jobs get lost in the 'high labor cost countries', which consequently reduces the overall purchasing power of that nation. And not only that, because increasing unemployment will further degenerate the wealth of that nation, by either higher taxation to compensate for the losses in taxes or in reducing social services and cultural attainments and finally both of it.

        Therefore I think it is in the interest of all people of any nation to protect themselves wisely from 'open markets'. Not to isolate, which would be the other extreme, but to carefully balance the stability on long terms and not on short term profits of just a view.

        Very interesting and perfectly working business models have been put in to praxis already, which would balance a home market pretty effectively on its own. The concept is based on the idea, that all workers own their very company. All have an equal share and all have the same vote. Not only tabs this democratic system directly in the motivation of those workers, it also avoids purely profit driven decisions, as it is unlikely that workers would vote for their jobs to be sent to a foreign country due to lower labor cost ... A self correcting mechanism, in which each company has to compete on the market, mainly the home market, yet based on the interest of all working people involved.

        This is my favorite concept, as it dermatitises our economy in favor of ALL of those who run it.
    • Jul 24 2013: Globally, America has been building the middle class in several countries for decades. At the very same time our middle class here in America has been dwindling. Capitalism, indeed, will migrate to where maximum profit can be obtained, but at what cost?

      Perhaps, possibly one day the economic clock with tick our way and we might be a nation with no middle class and cheap labor.
      • Aug 6 2013: the system works

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      Jul 24 2013: Well said.
    • Jul 24 2013: Yes things would be different with you sell it here - you build it here.
      That was advoacated by Ravi Batra in The Pooring of America.

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