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January 25, 2011 AT 12:00 am

The Competition Myth

The Competition Myth @ NYTimes.com

Meet the new buzzword, same as the old buzzword. In advance of the State of the Union, President Obama has telegraphed his main theme: competitiveness. The President’s Economic Recovery Advisory Board has been renamed the President’s Council on Jobs and Competitiveness. And in his Saturday radio address, the president declared that “We can out-compete any other nation on Earth.”

…Take the case of General Electric, whose chief executive, Jeffrey Immelt, has just been appointed to head that renamed advisory board. I have nothing against either G.E. or Mr. Immelt. But with fewer than half its workers based in the United States and less than half its revenues coming from U.S. operations, G.E.’s fortunes have very little to do with U.S. prosperity.

By the way, some have praised Mr. Immelt’s appointment on the grounds that at least he represents a company that actually makes things, rather than being yet another financial wheeler-dealer. Sorry to burst this bubble, but these days G.E. derives more revenue from its financial operations than it does from manufacturing — indeed, GE Capital, which received a government guarantee for its debt, was a major beneficiary of the Wall Street bailout.


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5 Comments

  1. Paul J. Ste.Marie

    Amen to that. We need strong industries and long-term goals, not financial manipulation and short-sighted outsourcing that saps our abilities in order to juice up quarterly earnings statements.

  2. I agree thoroughly with the above two statements. If things keep going the way they are, what was once America will just be a hollow shell with a fancy package and nothing to show for anything!

  3. fthe accountants

    If is costs $10 to make something in the US and $5 of that cost is labor, somehow the cost to buy the same widget wholesale in China is $4.

    Clearly the cost of labor in the US is the problem and why we should outsource our remaining manufacturing and focus on financial scams where we are most competitive.

  4. One question. What are you going to do about it? Just curious to hear other peoples take on what they are doing about a challenge like this.

  5. fthe accountants

    I’m not giving up yet. I think the solution is to make things and sell them, and don’t hire accountants who can’t figure out when the game is rigged. Look beyond short term profits and look towards long term sustainability, work to achieve the highest quality for a reasonable price, not the lowest price. I don’t know if I’ll succeed at this but I’m going to try.

    I suggest reading "Poorly Made in China: An Insider’s Account of the Tactics Behind China’s Production Game" by Paul Midler for insight into why we aren’t "competitive" and how China can produce products for below the cost of materials.

    For example, you can produce a stainless steel sink a lot cheaper when it isn’t actually stainless. Can a customer tell the difference between high quality stainless steel and a steel that rusts? By the time it rusts through it will be to late.

    The other thing we should probably do is realize that we have been in a trade war and we have been losing. Punitive tariffs may be a solution, but change is limited politically. Nominally "American" companies make money selling low quality products made in China and they are willing to donate to campaign funds to prevent regulations and keep the import duties low.

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