What’s going on everyone today I want to discuss a trend that been happening for quite some time and what this means for us here.
This trend is called near-shoring and simply stated its companies moving their operations from China to Mexico.
Off-shoring or near-shoring are not beneficial in the long run for the average American. It makes the rich wealthier and suppresses wages for the everyday worker. It boosts stock prices for executives but hurts everyday wages for people. And I don’t want to get too off topic here, but essentially if jobs are shipped overseas, there are fewer jobs and wages stagnate because workers cannot demand raises.
Now why is near shoring happening?
First off, there has been tension between the U.S. and China that seems to be escalating consistently. Companies see this and they see that their factories could potentially get shut down in the future. And this is a bit obvious here.
Another reason is the supply chain disruptions that we have seen the last few years. Companies want some of their production close to their markets and with similar time zones. Companies that set foot in Mexico are going to have greater visibility, shorter delivery times, and influence the quality of their products. And those are some very intriguing options.
Right now, executives are thrilled with the prospect of moving manufacturing to Mexico. And what’s not to like for them, closer to home, same time zone or closer, and still getting cheap labor. But besides the problems I mentioned earlier and how off-shoring hurts Americans in the end, we have to factor one other thing.
And that’s the corruption in Mexico. Its rampant and has been consistently one of the most corrupt countries in the world for years. One of the biggest issues is the president himself, Mexican President Andrés Manuel Lopez Obrador has not only pursued a strategic uncoupling from the United States in lots of ways, but also, he has virtually no interest in boosting economic growth. His policymaking is described as erratic and the violent crime in Mexico continues to be a problem.
Now lots of time corruption may not matter for certain products. But there’s so many items where if quality is shotty it can cause health issues for Americans and be dangerous. For instance, toiletry items, medicine and probably most importantly auto parts. Auto is supposed to gain big from this near shoring. And corruption allows all this stuff to occur.
Now the whole concept or naming of near-shoring I find troubling.
To me this is a corporate ”Spin Term” basically because our leaders aren’t getting along with China, and we still want cheap labors.
In the end we need more jobs to come back home for wage growth. People have been struggling with inflation and we need less dependency on ither countries for manufacturing.
