Least cost management strikes again!

Another of Texas’ major, homegrown, successful companies has decided to outsource more of its manufacturing to Asia (read: Communist China). This is not as much of a surprise as it is a major disappointment, because a great many of the manufacturing jobs in the USA that have gone offshore have gone to Communist China.

The question that most executives need to ask themselves is, “when I replace a skilled worker making, on average $50,000 per year, with 10 much more modestly skilled factory workers making less than $2,000 per year… Who will buy my product?”

It has been the policy of the executives of most of the companies in the USA to seek the least cost solution to every problem; the panacea of modern manufacturing mentality. Why? Because least cost is most obvious, requires minimal thought, and generates the kind of immediate profits that inflate management bonuses.

In study after study, published in business journals, it has been documented that in the long run (longer than 3 months) the most efficient solution is ‘best value.’ That is the highly automated factory with a few highly skilled (read: well paid) workers generates the most efficient, highest possible quality output of goods. But this is risky (read as: more costly) because if, in that first three month period, ‘best value’ is not well managed and executed it will take longer to reflect the inherent operating efficiency; management speak for lower bonuses.

Another least cost management favorite is the imported, skilled worker. Why is this bad? Because, the least cost management practice brings these workers in to provide skilled labor who don’t expect to make as much as the prevailing wage. Instead of hiring good, local talent and training them for the job, least cost management brings in skilled foreign workers that are already experienced, and pays them less. Saves money in that critical three month window; better bonuses.

Yes, least cost management saves you money in that critical quarterly window, so be a good team player and don’t risk thinking about ‘best value,’ because if my bonus is negatively effected your long term employment…

Oh, just be a good team member!

W's subprime regulatory shuffle!

The W administration is proposing to shuffle the regulatory deck in response to the implosion of the subprime mortgage market. Of course, if regulation is the problem the solution would be to restructure the highly conflicted management of the agencies that are supposed to monitor Wall Street activity. The current regulatory agencies have senior executive ranks that are chock full of Wall Street professionals whose post-bureaucrat employment would be adversely effected were he or she to be too, or at all, strict as a regulator.

Of course tighter monitoring of more open financial reporting of all the chicanery on Wall Street would be desirable, because the depth of most recessions can be attributed to the irrational exuberance that Wall Street has always demonstrated during economic up cycles. But the most effective solution to this, and the historic Savings and Loan collapse of 1986, would be to grant authority to the bankruptcy courts to restructure the debt secured by one’s home.

The Wall Street alchemists scream most loudly at the latter suggested regulatory move, because it would interfere directly with their efforts to try to turn arcane paper into currency. This is, of course, the best reason to do it.

2009 New President, old problem in Iraq.

January of 2009 will bring a new president who will inherit an old problem; the Revolutionary War we started in Iraq. 

In 1990-1 the H.W. Bush administration organized a real coalition of nations to bring military operations to bear on a dictator/ally who’d gotten out of control.  Saddam’s Iraq was being used to keep the Ayatollah’s Iran in check.  Saddam had thrown a near decade long war against Iran while frittering away the resources of Iraq on himself and his toadies, and needed new resources to plunder.  Saddam, underestimating international objections, raided the neighboring, oil rich, sheikdom of Kuwait.

The coalition of nations that rose up against the travesty in Kuwait included Arab nations in the region.  Two keys to getting and keeping these allies were that Israel didn’t participate and we didn’t go to Baghdad after liberating Kuwait.  The H.W. administration went along with the latter under the assumption that the Iraqis would throw out a weakened Saddam after the war; the assumption was faulty.

Nearly 10 years had transpired and Saddam was as entrenched as ever in his self-serving regime when the W. Bush administration took office.  On the 11^th of September 2001 the tragedy of an attack on the USA took place, costing the lives of thousands of innocents in fortress America. 

The W. administration’s initial reaction to the invasion of our country was to attack the regime and country giving aid and shelter to those who had attacked the USA: the Taliban, Afghanistan and Al Qaeda.  The effort was not to be the full-scale attack that the US was capable of mounting, so a strategic alliance with the enemies of the Taliban was created.  The problem with the alliances were twofold: first, the allies (the Northern Alliances) were nowhere near the capability of the US military and second, the Northern Alliances did not all like the US as much as they admired one of their own (Al Qaeda’s leader Osama bin (forgotten) Laden).  Osama escaped from encircling forces and got out of trap set in a remote valley (in the rugged terrain of the Pakistan/Afghanistan frontier), and hasn’t been seen or seriously pursued since.

Meantime, in the W. administration, holdovers from the Reagan and H.W. administrations were attempting to take advantage of the fear and confusion following 9/11 to finish what they had started in 1990; felling Saddam.  Connections to terror were fabricated and tales of WMD (weapons of mass destruction) were phenomenally exaggerated, where possible, or created as needed.  In 2003 the W. administration employed the might of the USA to begin the Iraqi Revolutionary War.

The US troops were not allowed the time to come up to the required strength of 300,000 soldiers for the invasion, nor the 500,000 troops for the planned occupation of Iraq, so this effort was also pursued at less than the capacity the US military had determined the task required.   Still our forces managed to capture Saddam, kill his heirs, fire his Baath party and fire the Iraqi Army.  Five years into the effort and W’s administration still have not admitted, if indeed they realize, that the recovery of Iraq after the revolution faces the same obstacles that it did earlier, when it couldn’t muster the cooperation needed to oust a weakened Saddam, internal strife amongst the three groups of people in Iraq: Shi’a, Sunni and Kurd.

The USA can not reconcile the differences between the three ethnic groups that quibble in Iraq, they must resolve their differences amongst themselves or the next dictator will take advantage as did the last.  We can consult in the establishment of democratic institutions, even as we restore our own.  We can also help train the new Army, should the Iraqis decide to reconcile.  Other than that the revolutionary war we won for them is just a pause between dictators.   That next step is for the Iraqi peoples to make, or not.  The USA should stand down our forces till Iraq has displayed a capacity to make said next step, and return only if our presence is requested by the peoples of Iraq.