If Nestle is out peddling toxic baby formula to other countries, I have to assume exactly the same thing will take place there as it does everywhere
else on the planet. People will stop buying it and sue for damages.
In the U.S. It is so cost prohibitive to sue large companies that it is near impossible. Let alone in third world countries where people commonly make
well below $5/day. Failing that, the company can buy the judges and politicians or forever hold it in status while quibbling about jurisdiction.
You don't need a government regulation to prevent bad baby formula from being sold.
Just like you don't need regulation to prevent a company from adding rat poison to cans of coke. They aren't going to do it because they will put
themselves out of business fast.
Much like the HIV tainted vaccinations in Asia a few years back? Countless tainted products are sold overseas instead of trashed because trashing is
much less profit.
And you keep blaming corporations for moving jobs overseas, while completely ignoring the fact that our tax rates are high, our regulations are
burdensome, and our excessive credit makes domestic production unnecessary.
These things are all due to government, not corporations.
Corporate tax is less than the middle class income bracket. Then they have countless loopholes to not pay. ie: most companies pay radically less tax
in percentage than any middle class family.
They move jobs overseas because they can pay radically less to employees without benefit overhead. This is a company thing. It's called
"Outsourcing" might want to look it up.
If I have an employee that I pay 10/hour in direct wages to, I am actually spending closer to 30/hour after breaking down health benefits, misc costs
such as training etc. This is known as "Total Economic Cost".
A couple more economic terms:
"The law of diminishing returns": This is the market equilibrium on a product or service. If I sell below value X I run out of inventory and my
profits are slim, if I am over Y then my stock remains for a long time but my individual sale of the item is much greater. The equilibrium is where
profits and production are sustainable over a quarter. This is where people get the idea of 'free market'. Unfortunately it does not work like
In the above example of the employee, I was paying out of pocket 10/hour, but economic cost is 30. OR, I can outsource to another company and pay them
20/hour. I am freed of the 10/hour overhead in eco. cost.
If I get tax credits for whatever reason, and am able to outsource to India for my tech support paying less than 20/hour, and my production to china
where there are no unions or regulations-my profit margin per unit sold skyrockets.
This leads to the third concept: Opportunity Cost.
What am I giving up to attain an objective.
This can be seen in day to day life. I have 20 bucks on me, I can buy a couple movie tickets, or a decent meal for one person, or put in savings etc.
etc. The concept comes into play by comparing what is gained and lost for each choice.
With the employee: Say my product sells for 40 bucks a unit. Of that my production cost in states is probably around 15 bucks since it is common for
more than a 200% markup-usually more. This leaves 25 bucks to pay salaries and more importantly make a profit.
If I chop 10 dollars per hour for my tech support guy, and easily 10 bucks on production costs by outsourcing to china. This means not only have I
reduced my production cost to $5 a unit, but I have greatly reduced my after sale service and created a much larger-per unit profit zone. (range of
profit and overhead is now $35/unit).
Now, say I make 100,000 units a year. To produce as I was in the U.S. my profit potential is in the neighborhood of 2,500,000 for my unit run.
My employee economic cost was 62,400/year (for one tech guy) If we give an arbitrary value to my one production guy, it would be the same for
simplicity. 124,800 for two employee wages in economic cost (health benefits, training etc.etc.)
This leaves about 2.4 million a year. This covers rent (prob at least 3k/month for office, prob closer to 8k/month for production area). Shipping and
distribution costs-prob 20k/year depending on the size of our product. Marketing, utility costs, licence fees, lawyer retainer, accountant etc.
What is left for my salary? Prob around 100k at the end of the year.
Now if I outsource:
production cost: 5/unit. Profit/bill range: $35 = 3.5 Million
Salaries: combined 83,200 (Being EXTREMELY generous with that amount).
All the rest of the costs are intack, only: I no longer have a production rent amount or similar. I also have reduced cost for my employee.
My base value is a million over what it was. This means my new yearly income for ME is closer to 1.1 million. A 10 fold increase in my income from my
In this case: The government would need to incentivise me over a million a year for me to consider keeping my production in the U.S.
As is I pay an accountant and get all sorts of deductions from charities (deduction value is much higher than donated value) to other loopholes.
You think some tax credits will keep me here?
I might also add that our military industrial complex takes up HUGE amounts of resources that could otherwise go to the private sector. All that
metal and machinery could be going to produce domestic goods if government wasn't out buying it all up.
Sure, though it doesn't seem connected. Would be great to have all those resources redirected into our infrastructure. But you seem to indicate it
would be best served giving it to companies.
An example of this issue: Insurance Companies; Whine constantly about rising costs to justify increase in premiums-yet each quarter they have record
[edit on 29-12-2009 by mnemeth1]