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Old September 27th, 2011, 09:21 AM
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Default Why are so many businesses going multinational

I just heard on the news that the CEO of Coca-Cola says that China is more business friendly than the United States. Matter of fact, it's not just China. Most developed nations (including most European nations) are much more business friendly than the US with it's taxes and regulations. Other CEO's say that the best way to grow their businesses (and increase investors in those companies) is to go multi-national.

They almost all say they'd love to move jobs back to the United States if the taxes and regulations would be more on a par with most other nations around the world. This, by the way, has been growing for some time so it's not just one political party versus another.

What are your thoughts and how would you address this problem?

Todd
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Old September 27th, 2011, 11:48 AM
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Ease of doing business index (1=most business-friendly regulations) | Data | Table

I don't know if you've ever spoken to anybody who actually does business in China, but anybody who suggests doing so is "easy" relative to the West is teasing you.

The Coke guy doesn't actually believe it is easier to do business in China; his agenda is lower taxes in the United States for his company. And he knew a quote like that would get everybody talking, which it has.

Last edited by Aidan; September 27th, 2011 at 11:58 AM.
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Old September 27th, 2011, 12:38 PM
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Todd,

It's not the "ease" of doing business, or the regulations in China; it's the cost of labor.

That is the reason the richest company in the US, Apple, does all their manufacturing in China.

The US labor market would never work for the wages the Chinese are williing to accept. The government in China makes tons of money from the manufacturing done there. The workers make next to nothing.

As for Europe, the "global economy" demands certain products (e.g. Coca Cola" manufacture their products to reach the market there because transportation costs to send their products to Europe add to the costs.

There's many countries around the world that have protectionist policies with high costs in place to deter importation. In other words.... they are more regulated than companies exporting the same products to the US.

The deregulation "mantra" is a red herring. Deregulation is what led to the collapse of the US economy, when Wall Street and bank systems were allowed to run amok in the name of profit making.
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Old September 27th, 2011, 12:41 PM
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Aidan,

Is that the reason Google, GM, Ford and dozens of other major corporations are moving jobs to not just China but to South America and all over the world?

The US has the 2nd highest corporate tax rate in the world. We were number one but that has been exceeded a few months ago by Japan.

If one is a CEO, their main obligation is to the investors who in fact own the corporation and that obligation is to make as good a profit as possible. It's truly a shame that so many Americans actually believe that multimillionaires control most of the stock owned in American companies. These poor folks haven't a clue. Probably the overwhelming amount of stock is owned indirectly by the average worker who has a retirement plan the money for which is invested. Just check the New York State Retirement system for example. You can easily access that info on line.

Should or could the very rich pay more in taxes? Possibly and maybe even probably but it really isn't going to make that much of a difference.

If 100% of every dime every millionaire makes in this country today were taken away for taxes, it wouldn't even begin to make a dent in our astronomical budget. I'm going out on a limb here because I'm far from a financial wizard but I wouldn't be surprised if all of those billions would even last but a few months. And after that, then who would be next?

Stock ownership is Capitalism, pure and simple. Also, if you can build a better mousetrap in this country then bust your butt promoting it the chances are fairly good that you're going to make money. It happens literally everyday. I have a nephew by marriage who is, let me be judicious, and say "extremely" wealthy and you want to know how he made it? By working up to 18 to 20 hours a day, often seven days a week, that's how. He also possesses an excellent business education. And he's done it all in 24 years. So, should people like he be overly penalized when there are literally tens of millions of Americans who have never worked a day in their lives, are not disabled or out of a job because of the recession (and have been for decades prior to the Recession) who sit on their heinies all day watching TV and playing video games on the taxpayer's dime?

Now to modify what I've said I also happen to believe that the Salaries of many CEO's are horrifically way too much, just as I believe sports players, entertainment artists, etc. fall into the same category. But that is how the system works. It's called "Free enterprise." With all it's faults, it's nevertheless the very system that made this country the most powerful economic power in the world......which it remains even today despite all its woes.

Todd
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Old September 27th, 2011, 12:53 PM
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Kuki has hit the main reason. Cost of Labor.

My wife's financial company has quadrupled their workforce in India. The reason for this is that they can hire someone to do the exact same function as my wife does for 1/4 the wage with no health insurance, limited benefits and far lower employer expenses in everything from taxes to facility costs. They have now over 1000 additional employees in India. They have also lowered their U.S. workforce by about half that amount. Even though it may take two people to perform the same function it is still a huge cost savings for the company.

Luckily SEC regulations prevent a total shift in the workforce to India or my wife would have been out of a job years ago.

Corporations, unions, individuals and the government have all cut their own throats through greed and mismanagement. There is no single villain in the equation. They all share equally in the migration of jobs overseas.

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Mike
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Old September 27th, 2011, 01:12 PM
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Mike and Kuki,

Absolutely!

As for your points Kuki, the deregulation to which you're referring I refer to as the gutting of the Glass-Steagle act in 1984 by a Republican controlled House and Senate and signed into law by President Clinton. By doing so, they literally took away the protections that act afforded in 1938 to preclude what has happened from happening. This was one of the major precursors to our present situation. As for the housing market, that was extremely exacerbated by the Fannie May- Freddie Mac debacle both government organizations which now have the actual gall to turn on the banks when they were the ones who were pushing for everyone to get a home whether the homeowner could afford it or not.

As for cheaper labor, that too has always been true. The American worker has traditionally been paid far more than those in most other countries.

Do we need more regulating? I don't think we need more per se, but definitely a change in the ones that exist. What I'm referring to is the type of regulations American business DOESN'T need and there are reams and reams of such regulations that are nothing short of ridiculous, have very little purpose and only serve to generate more expense for the American corporations. It prompts the old adage, "The road to hell is paved with good intentions."

And yes Mike, it's everyone's fault. In short, it was the perfect storm, albeit when all was said and done, in great part an unnecessary one.

Todd
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Old September 27th, 2011, 02:19 PM
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To get a very clear picture I highly recommend reading All The Devils Are Here - the hidden history of the financial crisis.

The story begins decades ago, names names, and specific transactions along the way. Yet, none of those names have ever taken any kind of action against the authors attempting to deny their participation or inventions of systems designed soley to dump worthless paper for huge profits.

Greed is good, in that it can inspire and energize people to work very hard towards goals that can result in great and significant financial reward.

Greed, when unaccompanied by a moral barometer leads people to chase those financial rewards with no regard to the harm it causes others.
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Old September 27th, 2011, 02:22 PM
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One important fact has been overlooked in this thread. These low-paying manufacturing countries also have an emerging middle class, with disposable income to spend. They now drive nice cars, wear designer clothing etc. and even want to travel as tourists. It makes sense to set up shop close to where the buyers are. Relying on the US market for all your sales in a declining economy is equal to corporate suicide.
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Old September 27th, 2011, 03:57 PM
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Ship to Shore,

Good point BUT where applicable. I mean you're not going to ship hamburger or fried chicken overseas if you get my drift or even Coca-Cola.



But what does hurt us are the manufacturing jobs that are going overseas or the telemarketing or telephone help lines that are going overseas. Most people don't know that GE just shipped two enormous divisions (one being their radiological department and I forget what the other one is), I mean the entire departments to....where else...China! Know who the CEO of GE is? Our wonderful new "Jobs Czar" Jeffrey Immelt!!!!!! With support like that, we'd all better move overseas!

Most people don't know this but a huge amount of Federal Income tax returns are not done by accountants in this country but by folks in INDIA! In short, you could drop your taxes off at an accountant and he just sends them to India where they are completed at a fraction of the cost yet when you get them back you pay the accountant's bill for something he had done for peanuts! I'm not saying the average accountant does this but some, possibly many major accounting firms do, especially the ones who charge a fortune!

Todd
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Old October 2nd, 2011, 12:39 PM
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Cruise lines were outsourcing and dodging taxes before outsourcing and dodging taxes was cool.

This book has more information on it.

China and India didn't waste billions of dollars looking for non-existent weapons of mass destruction in Iraq. They also don't pay for women to have 6 kids by 5 different men.
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Old October 2nd, 2011, 01:03 PM
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Juanito,

I have the book, which chronicles more about how the industry really started growing in the late 60's and early 70's and is primarily about how Carnival Cruise Lines was born and grew and then how other companies then jumped into the game.

You are absolutely correct about billions on wars. Nevertheless, the Defense Department Budget when John Kennedy was President made up 50% of our National Budget. Today, it's around 20%.

I don't think you want the government to practice China's dictates as to birth control effective though they may be and to the best of my knowledge, India doesn't really have any form of responsible birth control in general use. I could be wrong there, but I don't think so.
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