A Running Commentary

“These jobs are going boys, and they ain’t coming back to your hometown”- Bruce Springsteen, “My Hometown” (playing today on Dougie’s iPod)

This week Dougie is puzzled about “globalization”. As near as he can tell, the term means we ship American jobs to China and get poisonous toys in return. That his customer service call to Sprint is answered by a heavily accented Indian who’s never used a Palm Treo in her life. Barack Obama keeps decrying the “loss of American jobs to globalization” and Dougie is starting to feel guilty because iPod says, “Assembled in China”.

But let’s not lose sight of reality. Globalization is, on the whole, a very beneficial concept. Where would the U.S. economy be right now if not for trade agreements like NAFTA and CAFTA-DR that open huge markets for American manufacturers? Think about this: Caterpillar (the heavy-equipment firm) suffered a double-digit sales decline in North American in 2007, while it’s business in Latin America increased by 24% (and over 30% in Asia-Pacific). As much as people bemoan the currently weak dollar, the resulting cheap cost to foreigners for American good as result is exports as I type.

The iPod is a great example that globalization isn’t quite the populist whipping boy the Barack Obama and Mike Huckabees of the world make it out to be. A June ’07 study by the University of California shows that “Made in China” doesn’t necessarily indicate big Chinese profits. In fact, according to the study, only a few dollars from the sale of $299 iPod stay in China with the assembly firm. More than 50% of the retail price goes to distribution, retail, and Apple profits. Thus, American employees, from the geek-geniuses at Apple to the blue collars who run L.A. shipping docks and drive American truck, enjoy an exponentially greater chunk of the pie than anyone in China.

Could Apple keep iPod assembly here in the US? Sure. But something tells me American unionized workers are going to cost a bit more. And where are those added costs going to go? Into the price tag of course; iPods would become more expensive for American consumers, probably prohibitively so. Consequently, Apple would sell far fewer units and need fewer employees to develop new models. Declined sales volume would mean reduced need for American distribution workers, and so on.

Are there complicated issues with global trade? Of course. But don’t lose you’re cool Dougie; you and your iPod are fine.

(see RE: The Dougie Watch for background on the continuing thoughts and adventures of Dougie)