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Outsourcing Oxford

April 4 2002

There’s no Easy Street in Oxford, Mississippi. Median income in the delta town is just $20,383, making it one of nation’s cheapest labor markets. Just not cheap enough. In January, Burlington Industries uprooted 850 jobs from the town of 11,756. Days later, Emerson Electric, Oxford’s largest private employer, announced plans to close its plant - 25% of the local manufacturing base.

Burlington, which filed for bankruptcy last year, passed out 4,000 pink slips nationwide in its bid for survival. Emerson’s action was more pre-emptive. For the first time in 43 years, the country’s largest producer of telecom power systems showed declining profits. Shuttering 50 plants and shedding 10% of its workforce was just what the cost-cutters ordered. But those jobs didn’t go away. They went abroad.

As Oxford and others were closing their doors, Emerson was cutting ribbons at new factories in China, Mexico and the Philippines. CEO David Farr told the Los Angeles Times, “When we finish calendar year 2002, 70% of our manufacturing will be in low-cost countries.” And those jobs won’t wash back when America’s economic high tide returns.

The trade deficit’s apologists have long claimed that Indonesia could stitch our Nikes and China could sew our shirts because the U.S. would maintain a hi-tech edge. We’d concentrate on modern gadgetry and microchips while the rest of the world got dirty fingernails. Nifty thesis - if the numbers supported it. Instead, the $26.3 billion hi-tech trade surplus we enjoyed in 1992 has shrunk to $1.2 billion. Leading U.S. exports last year? Hides and skins, scrap and pulp. As for TVs and VCRs, office equipment and industrial machinery, those high-end, expert-built, big-ticket items that were supposed to make globalization worthwhile, all ran in the red.

Emerson isn’t the only American company packing its bags. Black & Decker is mothballing three U.S. plants in favor of new production lines in Mexico, China, and Eastern Europe. Battery maker Evercel, is sending its Connecticut and Virginia operations to Xiamen, China. Fords are now Mexican made. Ditto Levis, G.E., Honeywell, and John Deere.

The Wall Street Journal recently ran an essay on the trend - gently dubbed “global outsourcing” by consultants - that spotlighted an Indian firm that helps Fortune 500 companies shave 30-60% off their costs by relocating production to low-wage markets. “It has the potential to either cut costs for companies that ride the phenomenon or cut profits of companies that don't," the firm’s president said. Business 101 cost-benefit analysis. And it would be right, if we were consumers rather than citizens.

From 1996 to 2001, U.S. “outsourcing” soared from $100 billion to $345 billion each year. For politicians sold on kum ba yah notions that free trade equals free markets equals free institutions, that spells progress. For corporations unfettered by labor laws or environmental regulations, it means limitless profit. But in Oxford, this was as good as it got. And now that’s gone -- sacrificed to build someone else’s Global Economy.

Were industry not worth having, other nations wouldn’t lap ours up so eagerly. But like a prodigal heir endowed with an estate he didn’t build, we chipped off the outlying edges, then let larger parcels go to indulge prosperity’s taste. Like that careless steward, we’ll wake one morning to the bill collector’s rap at the door and realize that assets can only be sold off once. We can still buy more than China or Mexico or the Philippines, but we aren’t building. And if these competitors follow our path, they’ll soon be producing and purchasing both and we’ll have a nation of Oxfords…outsourced.

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