Saturday, October 12, 2013

Will History Repeat Itself?

Jeff Rubin, the former CIBC economist turned author, has suggested in his books that as energy costs rise, some manufacturing will return to North America. Indeed, there are growing signs that his prognostication will prove to be accurate.

An article in the online edition of the Hamilton Spectator offers this assessment:

Manufacturers are lining up to come back to North America, but a desperate labour shortage is hobbling their efforts.

Dubbed "reshoring" in industrial jargon, the trend sees companies that fled North America for low-wage countries such as China and India drifting back as Chinese wages rise and the costs of moving their products from the other side of the world becomes a burden.

While the situation may be grounds for guarded optimism, one part of the piece, in discussing why a return to North America is becoming increasingly feasible, must give one pause:

Other factors making North America attractive again are continuous innovation that has dramatically improved the cost performance of some companies, and wage erosion during the recent financial crisis. (Emphasis mine)

"There has been a sharp wage correction since 2009," said John Rose, chief economist of the City of Edmonton. "The positive note there is that it allows you to position yourself to move forward. When you come out of the downturn your cost structure is closer to what it should have been."

The fact that the 'cost structure is closer to what it should have been' has, I think, rather disturbing implications. Is the assumption underlying the statement that a severely chastened and disciplined workforce is one that will be willing to work in manufacturing for, say $12 an hour to start, so grateful will it be for the chance of reemployment?

If that is indeed the scenario fated to unfold as costs for overseas manufacturing continue to rise, will we eventually see a reechoing of labour history? Given the current low rate of unionization in this country, will we see, as workers once more become dissatisfied with being exploited, a resurgence in union drives so that once again, as in the days of yore, the employer will be forced to share more generously the profits made possible by the worker?

One can only hope for a return to both prosperity and equity in the workplace.


  1. And North American wages will rise once more then off shoring will become more attractive and the cycle repeats itself. The issue is unregulated capitalism, until we address that nothing truly changes

    1. And of course that won't happen until a leader/party emerges that refuses to be the lapdog of corporate interests, Kev. I see no hope for any change with our current crop of politicos.

  2. History never actually repeats itself, all it ever does is mumble and stutter.
    Most of these economic predictions based on the price of oil fail to count that technology has changed in different ways than just producing cheaper manufacturing methods. One point unmentioned is it will be only low value products are strongly affected by higher shipping costs while high value products (like knowledge) have become even cheaper to transport.
    Hopefully we will have wisdom and try becoming high value producers instead of the low value raw material suppliers to more highly technological countries.
    If we only get the old technologies back then all we are getting is a low value third world type economy, while the countries we thought of as third world become the new leaders in knowledge based industries.

    1. While there certainly seems to be some development of a knowledge-based economy emerging in parts of Canada, Dan, our government, unfortunately, seems fixated on keeping us in our historical mode of hewers of wood and drawers of water. Harper's stunted and myopic nd monomania about the tarsands is probably the best indicator of this problem.