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Pitt County automotive plant closing and global economy The closing of Pitt County automotive plant in 2004 is just one of many examples that define economical trends in America these days. The TRW Automotive, which is based in Michigan, has laid off 150 of its workers, after an announcement that it will relocate these jobs elsewhere. The reason upon company based its decision, can be explained in purely economical terms but not in terms of lack of professionalism on part of its workers. Apparently, there are also some other motivations played role. The decision to close down a plant came despite of Pitt County local authorities to encourage economical growth in the area with the means of offering location incentives for manufacturing companies.
Among the assistance programs that Pitt County offers for new and expending manufacturing facilities are: Water, Sewer and Natural Gas Extensions, Railroad lead Track Extensions, Industrial Site Access Improvements and what is most important Employee Screening, Testing and Training. The local authorities assume the responsibility to screen and test potential employees to determine the most suitable employees for any given occupation at no cost to the employer. Yet even such measures prove to be ineffective in order not to just attract new businesses to Pitt County, but also as mean of, at least, retaining the present employment rate. What are the factors that cause manufacturing companies to relocate from Pitt County? The classical way to analyze any economical phenomenon is to apply a specific economic theory to every particular case.
It appears clear to us that the Export Base Theory will have to be applied, in order for us to understand the event from economical point of view. Export Base Theory says that the health of every local economical system if defined by the ratio between basic industry (selling goods and services on outside market) and service industries (serving local markets). According to this theory, basic industry attracts dollars to local economy that are later being recirculated through local service industries. Thus, growth of basic industry is what defines the growth of local economy as whole. Yet in recent times, more and more economists think that this theory is being outdated and cant be used to effectively address the issue of economical development. Richard Florida in his article The Rise of Creative Class argues that what defines economical trends in modern American society, is establishing of so-called creative class, which he defines as: a fast-growing, highly educated, and well-paid segment of the workforce on whose efforts corporate profits and economic growth increasingly depend.
Members of the creative class do a wide variety of work in a wide variety of industries -- -from technology to entertainment, journalism to finance, high-end manufacturing to the arts. According to Florida, members of this class form tendencies of how effective workforce is being spread throughout the nation. What they strive for is diversity, which they they value in all its manifestations. Florida goes great length describing visual and psychological characteristics of those who are being a major driving force behind present economical trends.
Here is a typical member of creative class- young man had spiked multi-colored hair, full-body tattoos, and multiple piercing in his ears. Author thinks that once local communities create recreational facilities to attract these geniuses that like interesting music venues, neighborhood art galleries, performance spaces, and theaters, it will make them to relocate to this particular area, automatically causing an economical boom. The reason why authors native city Pittsburgh is in the state of economical decline he explains by the fact that it is too family oriented, instead of being more gay oriented. In my opinion, authors approach is clearly misleading, as he confuses economy with popular culture, thats why it cannot be considered seriously.
Andrew Zimbalist and Roger G. Noll in their article Sports, Jobs, & Taxes stress out that importance of having state of art sporting facilities in every city, in order to revitalize its economy, is often exaggerated: a stadium can spur economic growth if sports is a significant export industry that is, if it attracts outsiders to buy the local product and if it results in the sale of certain rights (broadcasting, product licensing) to national firms. But, in reality, sports have little effect on regional net exports. Sports facilities attract neither tourists nor new industry. Authors rightly notice that even maintaining those sporting facilities that are being already paid off, still involve Federal Subsidies.
Sport can attract consumers but it can never cause manufactures to alter its strategies in the long run. Although high-tech sector within American economy has gained much bigger importance, even comparing to situation that we had 20 years ago, still manufacturing goods provides job for nearly half of American employees. According to Noll and Zimbalist, federal subsidies should be cut to minimum when it comes to financing the professional sports in every particular town: Some citizens apparently know that teams do little for the local economy and are concerned about using regressive sales taxes and lottery revenues to subsidize wealthy players, owners, and executives. In my view, authors of this article fully realize the fact that making cities more recreational appealing wont pay off as mean of revitalizing local economies. This is because of the fact that decline of local economies is defined by the global economical trends and it has to be dealt with on appropriate level. The author of the next article The Competitive Advantage of the Inner City, Michael Porter, seem to fully realize this fact.
He points out: sad reality is that the efforts of the past several decades to revitalize inner cities have failed. The establishment of a sustainable economic base and with it employment opportunities, wealth creation, role models, and improved local infrastructure still eludes us despite the investment of substantial resources. An example of Pitt County automotive plant shows us that local authorities attempts to encourage manufacturers to remain in the County are bound to fail as they are being fragmental and lacking strategic approach. such programs have treated the inner city as an island isolated from the surrounding economy and subject to its own unique laws of competition.
They have encouraged and supported small, subscale businesses designed to serve the local community but ill equipped to attract the community's own spending power, much less export outside it. says Porter and adds: While social programs will continue to play a critical role in meeting human needs and improving education, they must support, and not undermine a coherent economic strategy. In my understanding, Michael Porter came to realization of the core of this problem better than any of above-mentioned authors. If there are lesser profits to be made, manufacturer will consider relocating its business elsewhere, and it wont matter much whether there are an adequate recreational facilities in the area or not.
The article about Pitt County automotive plant closing, doesnt mention the specific locations, to where plant might be moved. But we can come to the logical conclusion that the new location will have an abundant number of potential qualified employees, who would be willing to work for less, somewhere closer to Mexican border... Still, it will only be intermediate step, in the long run were to expect TRW Automotive moving its business in some Third World country, where people will be happy to work for this company, getting paid as low as one dollar a day. Apparently TRW companys economists are much better strategists than those, employed by the government. The only way for local communities to retain its jobs is when Federal Government reconsiders its Global Economy policy, which is being promoted now at very high level.
This policy will enable small portion of population to increase its profits dramatically, at the expense of laying off our own qualified workers. Economical principles are never defined by politics, but economy as a whole is. Bibliography: Florida, Richard The Rise of Creative Class. Washington Monthly.
May 2002. web 21. 10. 2004 Pitt County Development Commission. web 21. 10. 2004 Pitt County Automotive Plant Closing. The Associated Press. September 23, 2004 web 21. 10. 2004 Porter, Michael The Competitive Advantage of the Inner City. Harvard Business Review.
web 21. 10. 2004 Noll, Roger and Zimbalist, Andrew Sports, Jobs, & Taxes: Are New Stadiums Worth the Cost? . The Brookings Review. Summer 1997. web 22. 10. 2004 Faux, Jeff A Global Strategy for Labor Economic Policy Institute. February 4, 2002. web 22. 10. 2004
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Research essay sample on Pitt County Automotive Plant Closing And Global Economy
