Imagine. You walk into a store and pick up a boomerang. Not knowing much about it, you throw it across the store.
It flies in front of you. Enamored by its beauty, you keep watching. Suddenly, it takes a turn- it’s flying right back! Shocked by the sudden twist in events you’re unable to move. It knocks you right in the face. Ouch. After overcoming the stars you see, you bend down to pick up the boomerang. Feeling the thick plastic, you turn it over.
‘Made in China’, it says.
Much like the boomerang, most items in those were probably also made in China. China has developed into becoming the global hub of manufacturing. While many, including the article, might pin this to the nature of Chinese and other Asian sweatshops and low wages, the problem extends far beyond the spectrum of cheap labor and fast construction. The article cites the specialization of Chinese markets and even explain the ‘clustered’ system of manufacturers. China, in this scenario, has a comparative advantage- it can produce goods at a lower opportunity cost and marginal than American industries. If you evaluate the system holistically, American companies are at a disadvantage in terms of convenience and the immediacy of product changes. However, much like a boomerang, the choices that American companies have made a comeback. Many companies are relocating to the states. These companies may lack the luxury of low wage labor, but the surge of robotics in the product lines has expanded American markets. American markets, in this case, would have the absolute advantage. This overall achieves the “boomerang” effect.
There are two types of companies in America: big and small. Bigger companies tend to outsource because economically that is the most efficient option. Smaller companies tend to stay within the country to manage the various elements of manufacturing. Countries such as Brazil have shown more support for companies that choose to remain homebound. They have shown support to local business and have imposed harsher taxes on outsourced goods. For Brazil this works. Keeping businesses in the country enforces training, education, jobs, and specialization.