Economic Geography in America - Essay Example

Economic Geography Introduction Economists of the world may be debating on the American manufacturing revival, after a couple of decades, as witnessed by the reversing trend of outsourcing by American manufacturers. Nevertheless, the fact remains that world economy is getting integrated at faster pace, resulting in higher living standards of people residing in developing countries, while American residents have learnt to make adjustments, post the 2008 recession. Manufacturers consider several factors, while taking the important decision of starting a new manufacturing facility, closing an existing one or expanding the activities at different locations. The most important factor, after taking into account the use of technology, is the availability of labor at reasonable cost. The main reason for outsourcing American businesses, including manufacturing, has been the relative lesser cost of production. This was due to the availability of labor in countries like China at a friction of American cost. Apart from this, available of quality services at the selected location is another factor, which manufacturers would like to consider. The other factors that go into making manufacturing location decisions include, business environment, easy access to raw material and components, overall quality of life at he selected location and marketability of the finished goods. Availability of labor This is related to the type of goods to be manufactured. For products, which require quantity output in limited time, the manufacturing becomes labor-intensive with high turnout, to achieve bigger sales volumes. In such cases, locations that can provide labor at considerably lesser cost remain the favorite of any manufacturer. This was the case of China getting most of the world’s manufacturing business, about two decades ago. American manufacturers outsourced their facilities to China, with the aim of cutting costs, which were high locally. However, the things are changing in China rapidly. The Chinese economy is in transition from ‘closed’ to ‘open’ market economy. The result is evident, as observed by the changing lifestyle of an average Chinese citizen. Wages are increasing, as the same have seen specific upside since last two decades. American manufacturers are finding it difficult to maintain their facilities, as the cost advantage is vanishing. This is truer for high turnout goods.(Hanink) The case of Foxconn manufacturing facility in China is an ideal example of the labor cost relation with the manufacturing location. China never wanted to display the living conditions of its citizens, particularly the factory workers. However, these conditions have been worse, if not inhumane. People had to huddle together for sleep in bunkers and dormitories. Wages like $400 per month were paid to a worker who would put around 50 hours a week on the plant job. People would go to market in factory uniform only. Foxconn recruited most of its interns and apprentices from the boys belonging to age group of 14-15 years, to reduce further the cost of labor.(Fallows) However, things are changing in China very rapidly. With the living conditions, as detailed above, reports of suicide attempts were frequent. That was the reason for Foxconn to introduce”suicide nets” for prevention of such attempts. Things could not be stopped there. The factory owners had to increase wages three to four times during last three years. It has created serious problems for the manufacturers and exporters. Chinese goods have been selling throughout the world, due to their lower prices. That advantage is now vanishing. American manufacturers are feeling the cost pinch from such outsourced units. Labor is available at competitive cost in America now. Reverse shifting has begun.(Fallows) Technology plays an important role in availability of adequate services The manufacturing activities for new start-ups relate to an idea, which is converted into the marketable product. In older days, the original idea needed further verification towards the cost, location and prototype of the product. However, in the present technological age, the three-dimension printing has made it possible to turn an idea into reality within a few days. The model of the product is ready within no time, using the 3-D technology. Similarly, the new start-ups in the field of technology like Google, Apple and others began with a modest labor force of 20 to 50 people. Every one is aware of the success of such ventures.(Fallows) Examples of the above are evident in the San Francisco manufacturing base of America. This location has seen hectic activity as the area has attracted many Asian immigrants, who have talent in apparel design. SFMade is a part of larger coalition that has almost 400 factories in San Francisco. These manufacturing activities require a work force of just 3000 people, which is certainly much lesser than the labor employed in China. The products produced by these factories range from apparels to food beverages, to bags. Similarly, Brooklyn has seen manufacturing growth on this pattern. As more than 120 firms started operations in San Francisco, during the three years that saw overall economic distress, the employment rate of these companies has registered a growth to 12.5 percent against 10.5 percent within a year. (Fallows) Environmental clearances are required In the wake of recent global environmental hazards, many countries have enacted strict laws for the factories, in the direction of stopping the pollution. Hence, it is essential to select a manufacturing location, where the prevalent laws can be followed rigorously. In this direction, it will be worthwhile to notice that many environmentalists had opposed the North American Free Trade Agreement among the nations of Mexico, United States and Canada, citing the poor environmental record of Mexico. They fear that many factories of America and Canada will shift to Mexico to escape the stringent laws in their own countries. (Hanink) Conclusion Manufacturing facilities that follow the pattern of San Francisco and Brooklyn have better chances of successful operation in America. At the same time, the American achievement in information technology will give an added advantage to expansion of local manufacturing activities. In addition, the drastic reduction in the gap representing labor and other costs for manufacturing in USA and developing countries will prove favorable for American manufacturers. With Chinese economy booming for its citizens, the labor costs in that country have spiraled during last three to five years. Similar pattern can be seen in other countries as well. This has set the ball rolling for reversing the trend of American manufacturing outsourcing activities. Works Cited Fallows, James. “Mr. China Comes to America”. The Atlantic. December 2012, Web. 03 Dec. 2013. < http://www.theatlantic.com/magazine/archive/2012/12/mr-china-comes-to-america/309160/1/> Hanink, Dean “Principals and Applications of Economic Geography” .John Wiley & Sons, New York, 1996, Print Read More