A popular OpEd that speaks to the controversy about off shoring. Read it with an open mind.
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The subtitle of Beth Macy’s new book, “Factory Man” — “How One Furniture Maker Battled Offshoring, Stayed Local, and Helped Save an American Town” — gives every impression that it is going to be an upbeat read, a capitalistic feel-good story.
And, indeed, Macy, a former longtime reporter for The Roanoke Times in Virginia, doesn’t skimp on the story of a furniture baron named John Bassett III, her colorful main character, a Southern charmer with a fondness for quoting General Patton. After being pushed out of his family’s furniture company in (where else?) Bassett, Va., JBIII, as Macy calls him, buys into another, smaller company, Vaughan-Bassett, in the nearby town of Galax, right around the time that Chinese furniture manufacturers began to move seriously into the American furniture market with low-priced knockoffs of American furniture designs.
As furniture manufacturers all around him — including his family’s company — begin shuttering plants and start marketing and selling the Chinese imports, Bassett decides to fight back. Although he, too, has had to shrink his work force, he refuses to shut down his company, and he mobilizes others in the industry to charge the Chinese with dumping their goods on the market — that is, selling them below the cost of manufacturing them.
In 2005, the government did indeed conclude that the Chinese had been dumping furniture, and it put tariffs on Chinese furniture that helped make the Americans a little more competitive. Thanks to something called the Byrd amendment, some of the money from the Chinese went directly to Bassett’s company, which “invested $23 million in new plant equipment, put some in the employee profit-sharing plan, and used some of it to start a companywide free health clinic for families,” writes Macy. “The money saved upwards of 700 jobs in Galax, which, in turn, as some have argued, have saved the town.” Vaughan-Bassett has since become the largest wooden bedroom furniture maker in the country.
Surely, if they make a movie out of “Factory Man” — and I think there is a pretty decent chance they will — that will be the story line.
What is striking about Macy’s first book, though, is how little she does to make that made-for-the-movies plot stand out. Her wonderful central character notwithstanding, she’s really after something else: the effects of globalization on her little corner of the world, that is, the regions of North Carolina and Virginia where furniture making was once king. From her point of view, that story is anything but upbeat.
Nor does she miss the historic twist in her tale: as she notes early on, in the years after the Civil War, Southern entrepreneurs like Bassett’s grandfather capitalized on “cheap, hungry labor and all those tree-stocked hills” to shift furniture manufacturing from places like Grand Rapids, Mich., to the South, where it thrived for a century or more before the Chinese began doing the same thing to them.
But again and again, she comes back to the factories that have been closed, the jobs that have been lost. “Between 2002 and 2012, 63,300 American factories closed their doors and five million factory jobs went away,” she notes. She finds people who, having been laid off, do exactly what you would hope they might do: go to college and become well-paid knowledge workers.
But far more often she introduces us to people who have been displaced by the Chinese furniture manufacturers and can’t see a better future. It is especially difficult for people who have lost their jobs in what amount to company towns — where there really isn’t any other work to be had. She asks, “What good did it do to have access to cheap consumer goods if you had no money to buy themI happen to think Blonigen is right — that is exactly what we should be doing to make globalization work for us instead of against us. But I also find myself deeply sympathetic to Macy’s essential point, which is that globalization inflicts a great deal of suffering on millions of people, something the news media should do a better job of acknowledging and the government should do a better job of mitigating.She quotes the University of Oregon economist Bruce Blonigen, who tells her, “In reality, we shouldn’t be making bedroom furniture anymore in the United States. Shouldn’t we instead be trying to educate these workers’ kids to get them into high-skilled jobs and away from what’s basically an archaic industry?”
Toward the end of her book, Macy travels to Indonesia, where she talks to a factory executive. “What I do worry about every year is the future of the factory,” he tells her. “I worry that someone somewhere else, somewhere cheaper, will start to make furniture, and that will be that for us.”
It never ends.
While job displacement is devastating, I believe that globalization is inherently a good thing. Increased trade among countries leads to increased specialization, and this can lead to increased efficiency. The problems arise when those being pushed out of their industry cling on for dear life instead of giving way to globalization. On one hand, I understand the feeling of loss that comes with letting go of a industry one or one's family has been involved with for long periods of time. That being said, the idea that one has to be, or worse, *deserves* to be involved with / able to make a living off of an industry forever is ridiculous. Nothing is permanent, not even things that have been happening for decades. While fighting to stay in a industry may help one retain some status for a bit longer, likely in the end they will be pushed out. It isn't necessarily fair, but innovation rarely is. It is better to accept that one's reign has come to an end, and chose to re-educate and aim for more highly skilled jobs. As Bruce Blonigen says, “In reality, we shouldn’t be making bedroom furniture anymore in the United States. Shouldn’t we instead be trying to educate these workers’ kids to get them into high-skilled jobs and away from what’s basically an archaic industry?”
ReplyDeleteAn industry such as the one that manufactures furniture has been part of American culture for most of its history. American furniture has always been popular abroad for its designs and comfort. With the advancement in industrial China, the Chinese can now afford to be competitive enough to shrink, or even drive American furniture companies out of business. Most of the American furniture companies are located in small rural towns where resources are in abundance and production costs are lower. These furniture manufacturers are one of the primary reasons why small towns exist, as they employ most of the locals and generate a significant amount of revenue for the town and its people. Globalization is now being felt in the furniture industry as the consumers will opt for the cheaper, imported, knock-off furniture. It’s obviously beneficial to the consumers but it hurts the producers in the long run. Only the well-off and patriotic would purchase locally made furniture. The article concludes with the fear that this industry can eventually be specialized elsewhere, where the end of the furniture manufacturing era in America is likely.
ReplyDeleteJob displacement is dangerous for the future of the country and we all know how China causes displacement and offshoring.Countries need to take precautions against the devastating effects of offshoring. It is known that American furniture is highly popular and there are pretty designs in the coutry. However, China enters into industry with cherap labor and material. Even popular furniture factories are driven out of business because of Chinese effect. This can be prevented by amendments as American government does. Globalization is good but it has some important disadvantages as we see in this article. I understand that offshoring can be adventagous in terms of doing cheap business but it is not the issue. The procedures are hurt because of Chinese effect but it can be changed.
ReplyDeleteI think that this article emphasizes that globalization and the offshoring of jobs, whether we like it or not, is a reality that many industries are going to have to face. Specifically this article discusses the furniture making industry and the competition it faces from countries like China who are able to produce low priced furniture due to the access of cheap labor and resources. Unfortunately this means that many smaller sized American companies that are unable to compete with these low prices are having to shutdown, forcing people in America to lose their jobs. The problem is that "in reality, we shouldn’t be making bedroom furniture anymore in the United States." In this globalized world, the ability to trade with other countries has led to an increase in specialization. It is not advantageous for the United States to produce furniture so we will trade with countries like China and Indonesia who specialize and excel in this industry. However, the tragedy is that people are losing their jobs and the best way for the government to mitigate the devastating effects of offshoring is to invest in education. As the article mentioned some people who are laid off do go back to school to gain a different set of skills that will help ensure they get a high-skilled job. Others, however, feel that they are somehow entitled to working in this industry forever and expect the government to put into place laws that will prevent them from losing their jobs. I believe that this is just prolonging the inevitable. Offshoring of jobs doesn't just occur in the United States. Even people in Indonesia are living in fear that "someone somewhere else, somewhere cheaper, will start to make furniture" and that they too will lose their jobs. Simply put, when losing our jobs we are in a state of "survival of the fittest" and those that choose to "survive" are those that choose to re-educate, gain a better set of skills, and find a different job. We need to make globalization work for us instead of against us.
ReplyDeleteI believe the problem with offshoring and globalization is that we rely on them too heavily. Yes they generate many positives, such as low production costs, and greater expansion into foreign lands and cultures, but they are also greatly hurting us in the long run. It's no doubt that small businesses are the backbone of America, especially the manufacturing jobs. Taking away the culture and jobs of these businesses, especially those belonging to rural areas that dominate the middle of the country, is slowly disintegrating values, traditions, and history that the citizens of these parts adhere to.
ReplyDeleteOne can make the argument that these jobs will quickly die out as the digital age that has facilitated in revolutionizing the modern world continues to reign. However is it really worth completely adapting to change if it will decrease our exports, allow China to, (seemingly) inevitably surpass the U.S. economy, and solely live on foreign goods? Where is the globalization on our part if we allow the existence of American manufacturing to cease? There is still a small proportion of individuals who are willing to retain that old-fashioned, traditional life.
The advantage that America has is its prestige. Many countries will be willing to pay a large sum of money for American made products, and the furniture industry is one source that can help us in boosting our exports. Unfortunately the traditional American lifestyle will not last forever and these individuals will have to adhere to the rules of globalization and the modern world.
I would recommend everyone reading Frederic Bastiat's essay "What Is Seen and What Is Not Seen," or a more recent book with the same point "Economics in One Lesson" by Henry Hazlitt.
ReplyDeleteBastiat and Hazlitt explain a key concept each economist should always have in mind to avoid common fallacies this very article suffers with. It is easy to focus on what is easily "seen" such as people being laid off or businesses being shut down because of Chinese exports, but what is harder to see and, at least in this article remains unseen, is the other side of the coin.
What is unseen are the new workers who are willing to pay for lower wage or are more efficient. Who would we be to judge that the Chinese worker deserves the job less for some arbitrary reason. Even labor is subject to supply and demand.
Schumpeter's creative destruction applies to the closed factories.
As I described in detail in my previous comment in the first thread, it is not beneficial for a country to have larger exports than imports or vice versa, and any government intervention, i.e tampering with currency or setting tariffs with a goal of increasing/decreasing imports/exports is never gainful.
I believe that this blog post places an emphasis on the the globalization of trade, and how markets in international countries can endanger markets in other countries. In regards to Macy's furniture industry, her company was placed into danger when Chinese manufacturers of furniture began cutting their prices, and selling them below the standards price. Macy fought for what she believed in, and continued to stand with her business, claiming that the Chinese were dumping furniture. Her stand was eventually recognized, and a tariff was placed on Chinese furniture to allow Americans a chance to compete within the industry. I think this emphasizes how international competition works, and as my classmate above, Mandy stated, competition does generate many positives but at the same time, it causes threats for competitors within the states, which ultimately is a negative outlook.
ReplyDeleteMacy's fear at the end of the article is very reasonable and will forever be present. Competition in any industry will always try to knock the lesser one down. China, for example, found a way to cut prices and sell the furniture below the equilibrium price. Although, this is a gain for China, it was a huge loss for Macy. Having a tariff placed on the Chinese furniture was a great win on her part but also her own competitors because now it gives them leeway to compete in the furniture industry. She not only saved her company but also allowed other companies to push through and compete because of this tariff. In the long run, the way she saved her company might end up hurting it.
ReplyDeleteIn the past few years, Americans have often wondered if offshore outsourcing of jobs was good or harmful for our country. In my opinion, I feel that job displacement is not beneficial for the country. Corporate America has a short-term mentality when outsourcing their companies, which comes from bonuses tied to quarterly results, causing these US companies to lose their best employees (their human capital), but also the consumers that buy their products. Employees that are displaced by foreigners and left unemployed or in lower paid jobs have a reduced presence in the consumer market. This piece just further shows that international markets can affects countries, having the potential to ruin their own markets. The post stated that “between 2002 and 2012, 63,000 American factories closed their doors and five million factory jobs went away” in result to offshore outsourcing, which is terrifying. It goes to show that no company is completely safe within a specific industry. And that is a reality that we are going to have to deal with.
ReplyDeleteJob displacement could become a huge problem if we do not control it. There are plenty of ways for companies to decrease their costs by outsourcing, but this could in turn harm their company even more. I think that they need to realize that if they let go of their employees here and choose to outsource, they need to realize that many people in their country will be harmed and will not even be able to buy their product. I do not think that we need to let go of “archaic” businesses such as furniture companies. There are many people that rely on these businesses because of the skills that they lack to go elsewhere. Yes, I agree that we could invest more in developing skills so that these jobs are no longer necessary, but I still think that they ARE necessary. I think that we should have our hands in each industry so that we can be self-sufficient. By outsourcing, we may slowly lose industries and can ultimately harm our markets. We also need to make sure there are enough jobs available for our citizens. If the citizens are unemployed, then they do not have disposable income. Without disposable income, people will not be able to buy as much, which will still end up hurting the companies who chose to outsource.
ReplyDeleteFor so long the U.S. was a producer of tangible goods. We manufactured goods and exported them all over the world. Currently, we buy so many of our goods from outside of the U.S. and import them. It comes as no surprise that furniture is now on that list. Personally, I don't have a problem with this, but I do see how this can cause problems. We, as Americans, have to adjust and transition into different fields. We must constantly change as the times change. If tariffs help, then that could work, but there is more than one option in this situation.
ReplyDeleteChinese furniture company got their comparative advantage compare to American firm by cheaper labors and cheaper shipping cost. As long as the global market economy system continues, this situation will last forever. American firms will be beaten by the price advantage and the people will lose the job. The way out is transit the existing first and second industry into third industry with high technology and high value adding goods. The market system which create by USA his own is eating himself.
ReplyDeleteThis article speaks about the disadvantages of globalization. Job displacement in America due to offshoring has become a serious issue causing high levels of unemployment especially in the manufacturing sector. Lower production cost in developing countries has allowed foreign imports to become more competitive. The article suggest that adding more barriers to trade, such as high tariffs, protects American interest, but in the long run it creates more problems. Adding tariffs to Chinese furniture only stops each country from specializing to their comparative advantage and creates an inefficient market. In the long run, it limits the need for innovation because domestic businesses are given an advantage that allows them to underperform. It also hurts the consumer because they are forced to pay higher price. If we place high tariffs on our imports other countries may do the same with our exports, which could outweigh the benefits of the tariffs and create an inefficient market. In the short run it may be difficult for Americans to make the switch from low skilled labor to high skilled labor but it is a necessary transition. Like the article mentions at the end, “In reality, we shouldn’t be making bedroom furniture anymore in the United States. Shouldn’t we instead be trying to educate these workers’ kids to get them into high-skilled jobs”. Our focus should not be to remain in markets where we do not an advantage but to educate ourselves so we can be the leaders in new markets.
ReplyDeleteI think this article is trying to tell American in general the downside of globalization. This is just one example of a process that started in Virginia leading to job displacement and many other problems for Americans and this works in cycle. This is definitely not an upbeat story. Vaughn-Bassett were able to compete with the sales from Chinese companies selling furniture. The benefits from this was low manufacturing costs and more sales but the downside is American companies running out of business. Due to this so many people lost their jobs and a sense of future. This is not good for any country's economy. America's future goals would be to increase jobs and education and we are working opposite of this. Other nations are benefiting from America's loss.
ReplyDeleteThis article does a great job in demonstrating how this global trade affects both parties of local and international. Many domestic furniture companies have gone out of business because the manufacturing and labor from china are much cheaper. The article mentions that from 2002 to 2012 about 5 million factory jobs have disappeared because of this outsourcing. The reporter from Virginia, Macy, goes to Indonesia and speaks to a factory representative and confesses to her that he is fearful of the future because the possibility of someone somewhere else making cheaper furniture will put the company out of business and workers left without jobs.
ReplyDeleteThese outsourcing benefits are only short-term and come with a price. Long- term affects will be the loss of jobs and ultimately skills of U.S. workers, and the investment in capital abroad rather than at home. Outsourcing emphasizes economics over artistic quality in furniture. This practice has a negative effect on the consumer’s ability to judge the quality of the objects they purchase. This further contributes to conditions where the value placed on skills required to produce greater quality workmanship is diminished and the opportunities for workers with those skills are reduced. A stable approach to consider would be to seek to maintain at least some part of these productive abilities at home. This balance benefits workers seeking to enhance their skills, or simply wishing for gainful employment. U.S. craft oriented businesses must find ways to retain capital at home. Also taking responsibility for creating training programs for workers and conduct ways to educate consumers about the quality of buying the products.