The Mexico is to the US as the _____ is to Europe?
News stands here in Florence are much like those in New York City. They carry every paper you can image, in every language you can think of. The obvious ones (English, French, German, etc) plus several Arabic and Asian languages, Dutch, and others. They carry the New York Times, the Financial Times and US Weekly.
However, a New York Times is somewhere around €7 (about $10.00). Needless to say I don’t buy any English newspapers.
But this morning I discovered something wonderful. Yesterdays newspapers are placed in a pile outside the news stand at the end of the day. So, aside from breaking news, which I don’t care much for anyhow, I am free to rummage all I want through the pile and pick out as many papers as I like completely free of charge. And they don’t remove the covers like they do in New York.
This morning over toast and coffee I read the European edition of the Wall Street Journal. I am finding that living here, reading these papers, and talking to the people in my community, I am now on the outside looking in at what is going on inside the United States. I am now a bit of a bystander.
One article in particular stood out to me as amazing. Basically, it was talking about European car manufacturers, mainly Volkswagen, Mercedes-Benz, and BMW. These automakers lost billions (VW lost almost 4 billion alone) over the past several years due to an unstable American dollar that has dropped sharply against the euro. The dollar used to outweigh the euro in both worth and stability, but this is no longer so. These car companies cannot afford to pull out of the American market, because sales are far too high, but their bottom line is being hit by the fact that when they take their money back here to the European Union, they are loosing upwards of 37%, and this being on goods built in the EU, with workers paid in euros. This essentially makes their manufacturing cost high in comparison to their return. Much like a car built in New York City being sold in Mexico City. Financial planning is also difficult when dealing with unstable currencies as payment for products manufactured in an area with a strong one.
Because the dollar has dropped so low against the euro, with no signs pointing towards a recovery, it is no longer cost effective for them to manufacture their cars within the EU, as they have always done, and ship them to the United States. So instead, Europe’s largest automakers are planning to largely increase their production within the United States. They figure, the dollar can go up and down all it wants: American cars will be built using American dollars, and the workers will be paid with that same currency, therefore the car companies are more immune to a rising and falling US dollar. A falling dollar merely means lower manufacturing costs, a rising dollar means a stronger return on their monetary transfers to the EU.
In other words, the US is becoming cheap labor. It might sound good at first: America’s big automakers are cutting jobs by the tens of thousands to go to China and Mexico, so hopefully this will make up for some of the losses. But what are the implications? What are the losses both short and long term? To me, it appears as if the US is becoming Europe’s China or Mexico. Yes, factory workers may make a decent wage working for BMW or Volkswagen, but at what long-term cost? Will the US stifle itself, and become a processing plant for goods bought up by middle and upper-class Europeans whose money, in the global economy, is worth twice that of their American counterpart’s? This is also an ironic shift, what with America’s big five off-shoring their own labor.
Where does something like this put us on the totem pole? Somewhere in the middle I suppose.
However, a New York Times is somewhere around €7 (about $10.00). Needless to say I don’t buy any English newspapers.
But this morning I discovered something wonderful. Yesterdays newspapers are placed in a pile outside the news stand at the end of the day. So, aside from breaking news, which I don’t care much for anyhow, I am free to rummage all I want through the pile and pick out as many papers as I like completely free of charge. And they don’t remove the covers like they do in New York.
This morning over toast and coffee I read the European edition of the Wall Street Journal. I am finding that living here, reading these papers, and talking to the people in my community, I am now on the outside looking in at what is going on inside the United States. I am now a bit of a bystander.
One article in particular stood out to me as amazing. Basically, it was talking about European car manufacturers, mainly Volkswagen, Mercedes-Benz, and BMW. These automakers lost billions (VW lost almost 4 billion alone) over the past several years due to an unstable American dollar that has dropped sharply against the euro. The dollar used to outweigh the euro in both worth and stability, but this is no longer so. These car companies cannot afford to pull out of the American market, because sales are far too high, but their bottom line is being hit by the fact that when they take their money back here to the European Union, they are loosing upwards of 37%, and this being on goods built in the EU, with workers paid in euros. This essentially makes their manufacturing cost high in comparison to their return. Much like a car built in New York City being sold in Mexico City. Financial planning is also difficult when dealing with unstable currencies as payment for products manufactured in an area with a strong one.
Because the dollar has dropped so low against the euro, with no signs pointing towards a recovery, it is no longer cost effective for them to manufacture their cars within the EU, as they have always done, and ship them to the United States. So instead, Europe’s largest automakers are planning to largely increase their production within the United States. They figure, the dollar can go up and down all it wants: American cars will be built using American dollars, and the workers will be paid with that same currency, therefore the car companies are more immune to a rising and falling US dollar. A falling dollar merely means lower manufacturing costs, a rising dollar means a stronger return on their monetary transfers to the EU.
In other words, the US is becoming cheap labor. It might sound good at first: America’s big automakers are cutting jobs by the tens of thousands to go to China and Mexico, so hopefully this will make up for some of the losses. But what are the implications? What are the losses both short and long term? To me, it appears as if the US is becoming Europe’s China or Mexico. Yes, factory workers may make a decent wage working for BMW or Volkswagen, but at what long-term cost? Will the US stifle itself, and become a processing plant for goods bought up by middle and upper-class Europeans whose money, in the global economy, is worth twice that of their American counterpart’s? This is also an ironic shift, what with America’s big five off-shoring their own labor.
Where does something like this put us on the totem pole? Somewhere in the middle I suppose.
posted by adampaul at
11:38 PM
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