Tuesday, March 06, 2012

Beyond outsourcing

I have the past months been occupied with renovating our recently purchased home, moving into it and most importantly, been busy with paternity leave. Hence it has been less of time for political commenting. Despite having had my head into carpentry and other handicraft, the mind has gotten a decent dose of what it craves. Some time ago, included with an issue of The Economist, I received a copy of the Ernst & Young publication Performance Preview, and a title caught my attention: Why manufacturing matters.

The article refers to studies claiming that as production has been outsourced, a widening knowledge gap has emerged because Western companies have failed to recognise the symbiotic relationship between research & development and the manufacturing process. These are constantly evolving and are thus intertwined, which can make outsourcing cheaper in the short term, but is also a good way of teaching your competitors. A quote is highlighted:

"New studies suggest that the decision to outsource your manufacturing capability may permanently impair your ability to innovate."

D'oh! I told you so. That is simple logic for any thinking person, no studies were necessary if the ideas had been rationally contemplated in the first place. Social engineering is dumb and evil also when it is called economic theorising.

Not only does the revenues diminish as production and refining move elsewhere, making it harder to maintain balance of trade and have the state deliver the goods in those areas where it is supposed to. The shift of power, especially as the inner strength of those brought up pampered often tend to be impaired, will obviously follow the means of production eastbound (no worries, I just like to paraphrase Karl Marx every now and then, despite being something of a liberal conservative).

Hopefully this predicament of ours will call for economic realism where we finally return to calling a spade by no other name than a spade. When looking at the coverage of fiscally sober Ron Paul in the Republican Party presidential primaries on the other side of the Atlantic pond, it looks like we still have got a long way ahead of us. A head in the sand still seems like a valid option for oh too many.