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Contemplating Open Borders

Open BordersOne of the objectives of my starting this blog was to share with people like you just a touch of what I’ve learned in a lifetime in manufacturing and decades spent running my own company. But you know what? A funny thing happened on my way to all that teaching. I started learning. A lot.

Like this week.

Let me explain. This Monday I found myself stewing as I thought about two long-time employees of mine who had run recently afoul of U.S. immigration laws for some falsehoods and half truths they put on their applications decades ago when, as young men eager to carve our new lives for themselves, they first came to this country. As a result, both were summarily deported and their lives left in tatters. And in the process, I lost two of my best employees and hardest workers, machinists who were as skilled as they were dependable.

That’s why I got on my computer this week and why I started researching. And in the course of my research I stumbled upon a relatively unknown economist at George Mason University named Bryan Caplan.

Open Borders 3As an unabashed and unapologetic libertarian, Caplan has emerged as perhaps the leading and most articulate proponent of a number of radical ideas, not the least of which is something for which he’s becoming especially famous or infamous, depending upon your perspective; opening nations’ borders the world over and granting people to right to move in an out of countries as they please.

He is advocating, in other words, a world – a job market – without any political borders and one driven almost exclusively by market forces and the tenets of free enterprise.

Now, I know what you’re thinking. That would be nuts. As people in dirt-poor countries like Haiti would undoubtedly flock to developed places like America, if only for the health care and quality of life.

Open Borders 6But that’s exactly the crux of Caplan’s hypothesis. His theory is by eliminating geopolitical boundaries we would virtually wipe out the crippling poverty that grips the third world (placing a drag on the overall global economy) and create a level of global wealth, the likes of which man has never known.

Because the difference in salaries between, say, Haiti and the U.S. or Brazil is not 20%; it’s 2,000%. And that money would do more naturally to alleviate global poverty than the trillions earmarked over the years to do the same thing.

What’s more, because jobs would be awarded based on skill level – and those skills in this country would, for example, include facility with the language, ownership of a car and/or real estate, knowledge of the area, and, of course, willingness to work, the current job force in a country would not necessarily be replaced. To the contrary, many workers might qualify for positions supervising such immigrants.

Would some members of the current workforce be displaced? Absolutely, according to Caplan. But only the lowest skilled and least motivated; and they would represent less than 10% of the population. Meanwhile, 90% of the people would benefit as the economy grew and the additional wealth such growth generated got divided among them.

Open Borders 2And as Caplan argues, what kind of system puts the interests of an uneducated, unmotivated and unskilled 10% over a more capable and motivated 90%?

Now, understand, I’m not necessarily buying into the whole notion of open borders. But given how frustrated I am over having just lost two of my best machinists and members of my work family, you can bet I’m more open to it than ever before.

And my sense is the idea of opening the world’s borders is like any radical idea; it may sound insane to some, but there’s more than a whisper of logic to it.

For example, would legalizing the world’s oldest profession be insane? Maybe to many women and those on the religious right. But I’ve also heard it argued that legalizing prostitution would improve public health, reduce crime, free up police assets, ease the burden on the courts, and generate tens if not hundreds of millions in state and local revenues.

20121206_FRCC_SHOP_CLASS_393And, in addition to granting scholarships, would recruiting our best high school athletes with cold hard cash and paying them openly to play college ball be insane? Perhaps. But it would also eliminate cheating, allow them to share, however lightly, in the billions in revenue they help make possible, and allow the poorest student athletes (kids who will most likely never sign a pro deal) to assist their families to not merely watch them play once or twice a year, but often eat, stay warm, and maintain a roof above their heads.

Look, I’m not saying that open borders are the answer. But I will tell you this; I’m sitting here this morning thinking of my two employees and how much both meant to me, both personally and professionally. And right now, the idea of opening our borders to hard working and motivated workers – even those without
Open Borders 5skills – no longer seems that far-fetched.

Besides, lest we forget; such concepts as the emancipation of slaves, giving a woman the right to vote, an economy built entirely on free enterprise and lasses faire capitalism, and the everyday use of the internet by everyday people were once ideas deemed so radical and far-fetched most thought – no, most knew – they would never, ever see the light of day.

The Lessons of Lobster

lobster 2I’d like to talk to you about lobster briefly.  What’s lobster got to do with manufacturing, you say?

Well, hear me out, because that odd little crustacean – and our unique relationship with it – may just hold an important lesson for us manufacturers.

I bring this up because there is something truly special about lobster. Whereas other foodstuffs, including meats like beef and pork, are commodities through and through, and as such experience price fluctuations that vary as the market dictates. Lobster, on the other hand, while still a commodity, never seems to be subjected to fickle marketplace whims like supply and demand.

lobster 3Consider; even though in the past decade the global supply of lobster has exploded, perhaps due to a warming of the waters in which it breeds, the retail price for lobster has not fluctuated accordingly. Even though a glut of lobster at the point of harvest has caused its wholesale price to plummet from around $6 a pound to just over $2 a pound, the retail price has remained steady, and in some cases actually risen.

What’s more, and far more important to my point, is that lobster is still perceived as a high end, highly coveted entrée that carries with it all sorts of implied value and social status.  To say one is eating lobster tonight is shorthand for saying that this evening I am sparing no expense in the pursuit of luxury.

lobster 4Why is that?  Well, that’s a complex question. And part of it, no doubt, has to do with the pricing strategy many restaurants employ. Listing lobster as “market priced” and not posting any set price on the menu, instills in it a certain allure and sense of mystery. And when products carry such things, price becomes more an emotional consideration than a microeconomic one.

In addition, having one item on the menu so much higher priced than the others, it makes all other entrees seem more affordable.  Plus, with the wholesale price so relatively low and the perceived value so high, it is possible to add new kissing-cousin items like lobster rolls, lobster mac ‘n cheese, lobster salad and lobster soup to the menu, and charge a premium for them, even though the inherent costs of such items is comparatively low.

But the fact remains that lobster has found a way to circumvent the whims of the marketplace and to rise above such otherwise bourgeois considerations as price.

lobster 6People buy lobster, and often don’t care what they pay for it, because in the end it has held its perceived value and remained a desired, coveted and even aspirational dinner option.

And how many of us, with manufactured goods to sell in an increasingly fickle global environment, wouldn’t benefit from that kind of relationship with our customers?

Yet, how do we achieve that kind of relationship?  By instilling in our products the kind of visceral, emotional value that lobster has.

And how do we do that?

Well, that too is a loaded question.  But we could start by being uncompromising in our pursuit of quality and relentless in our implementation of quality control.

lobster 7By providing service, maintenance and follow-up that goes beyond what is expected and regularly traffic in the unexpected, while testing the outer reaches of the customer’s sense of what’s possible on our end.

By standing behind our products fearlessly and with few, if any questions asked.

And by viewing any new sale or any new order as the highest form compliment in our sector, and by working to repay that gesture and show our gratitude for the balance of the life of that customer.

lobster 8The long and the short of it is, my friends, as manufacturers we need to start to find ways of instilling in our products the absolutely highest perceived value, and to get our customers viewing what we manufacture with their hearts as much as their minds.

Because once a sufficient number of companies in this country start doing that, and a sufficient number of companies start producing goods, products and components that build an emotional bond with them men and lobster 1women in charge of buying them, American manufacturers will have taken a giant step is making a Made in the USA label mean something much more than a rallying cry for those who would have us close our borders, bury our heads in the sand, and pretend the global market is simply a bad dream.

Enough companies do that, my friends, and I promise you; Made in America will suddenly mean as much to the global marketplace as a certain little crustacean still means to us.

The Wisdom of the Marketplace

I understand as well as anyone the impulsive, almost instinctive desire to want to use government – in the form or tariffs, import restrictions, subsidies, legislation, etc. – to try to limit the impact of cheap (and often subsidized) foreign competition and the incursion of (often below market-value) offshore products.

But time and time again, I’ve also seen that if left to operate on its own (and given just a modicum of patience), the market will invariably do naturally what so many knee-jerk types would cry out for our often ham-fisted federal government to do by artificial means.  What’s more what it does will always be better for those concerned in the long run.

Case in point; this week I read about yet another textile mill opening up in the Carolinas, once the cradle of U.S. textile manufacturing (and, therefore, world textile manufacturing).  The owner?  Some jingoistic, flag-waving, Made-in-the-USA investment group?  A bunch of private-equity Tar Heels or Gamecocks with emotional ties to the area?

Nope.  The company opening the mill is a China-based manufacturer named Keer, an offshore entity that looked at Indian Land, South Carolina, its closeness to the U.S. market, the extent to which its workforce’s salary demands had leveled off after years of outsourcing and foreign competition, its vast resources, and, just as important, the growing labor, energy and transportation costs it was experiencing stateside, and came to the conclusion it would be an ideal spot to open a textile mill (and add about 500 new full time jobs to its suddenly lean, hungry and motivated local economy).

The lesson?  The market got us where we needed to go – exactly where we needed to go – and did it without government intervention.

And while there was clearly a lean period for many locals, and there were (as there always will be) unintended victims of the ebb and flow of market dynamics, look at the incredible benefits that were realized in the process.  Workers in the area, many of them still trained and still job-ready, are now much more in tune to the reality of the global marketplace, more level-headed in their compensation demands, and more willing to partner with ownership and/or management to ward off future losses of jobs and plant closings.

What’s more, having gone through what they’ve gone through, those workers, along with their managers and elected officials, are now collectively even further ahead of their Chinese counterparts on what you might call the macro-economic learning curve.

Where once had been, at least to some extent, the kind of collective myopic, short-term and me-first thinking that one finds when people grow complacent, is now a far more big-picture understanding of global market dynamics and how such dynamics can impact a local economy, a wisdom that will only stand to benefit the men and women of Indian Land and positively impact their future decision-making, strategizing and economic planning.

Look, I am not one of those “ready-fire-aim” anti-government whack jobs.  In fact, I see a much greater role for a benign government in America than do many of my friends and colleagues.  But honesty compels me to admit that time and time again I’ve seen government prove itself to be ill equipped to lead economic prosperity and to protect companies (and its citizens) from a force more dynamic and relentless than it will ever be.

Because, believe me, as the little community of Indian Land, South Carolina showed us yet again, government is not only less capable than the marketplace in shaping the future, it’s also not nearly as smart.