Reply #9: In general I do agree with you

[drmeow]

about the tariff example you give. My problem with the automobile manufacturers is that they didn't make any effort to investigate why the Japanese cars were in such high demand. To apply it to the shoe parable - after moving the company to China, that company redesigns the shoes to provide better arch support and last longer. This makes the Chinese shoes more popular - they are better for American's health and they last longer making them better for the environment. So the American company demands a higher tariff making the Chinese shoes suddenly are more expensive for the American public. The American company has the technology to improve their shoes, too, but doesn't want to because it means an initial outlay of money. Because the Chinese shoes now cost more, the American company has no incentive to improve their shoe. The people can afford to buy the Chinese shoes will do so but the people who can't afford to will not have access to the healthier shoes because the American company has negated both the unfair competition (the lower wages) and the FAIR competition (higher quality) by demanding higher tariffs. Now, in a efficient competitive market, another American shoe company will start making shoes like the Chinese shoes but it will take a long time before the economies of scale will bring the cost of those new shoes in line with the cost of the shoes from the company that already has the infrastructure in place.

Anyway, some reasons why Toyota may be profitable with plants here:

1) if CEO salary is lower
2) if there is less middle and upper management
3) if Toyota pays lower dividends to its investors
4) Toyota has developed an extremely strong reputation such that people are willing to pay more for the cars giving Toyota a larger profit margin per car sold.

Saying that there may be too many 'chiefs' and too few 'Indians' is definitely an oversimplification but may be a factor that contributes to the problem. However I think a WAY bigger factor is the obscene CEO salaries. in 2007 Ford paid its CEO $28 million for 4 months of work (included a hiring bonus, salary, bonuses and base salary - base salary alone was $2 million). Take just a month of that salary ($7,000,000) away and you could pay 700 people $10,000 more a year. Give him nothing but his base salary ($2,000,000 - MORE than enough to live on) - and you could pay 2600 people 10,000 more out of what was left of just his 4 months worth of pay. And that's just one overpaid executive - how many others are there at Ford?

As for the middle class, the reality is that the part of American's middle class that is being destroyed is the 'Indians' who had middle class union jobs but now are being paid less and losing their jobs. Also, many of the better paying upper middle class jobs still aren't 'chiefs.' Until you become a partner in a law firm, you are still an 'Indian.' Same with programmers, tech support, etc. The well paid skilled labor that is not management has been a driving force behind the strong upper middle class and those jobs are being outsourced. There is also the change to a two income family which significantly strengthened the middle class and is all that is keeping many families afloat as they lose one but not both of those incomes. Finally there is the debt burden. People have gotten used to keeping up with the Jones and living beyond their means.