Monetary economics, offshore manufacturing, sustainability and domestic job creation of multinational companies—Examples and comparisons from Apple Computers, See's Candies, and Volvo Cars

We develop a two-tier model on manufacturing offshores with the “gravity rule” for manufacturers to stay competitive (tier one); and then create jobs on domestic turf to fulfill corporate responsibilities (tier two). When large companies flourish, the smaller ones in the chain also prosper. Companies in United States and worldwide (particularly the ones with overvalued currencies) have outsourced their manufacturing and assembly tasks to countries of undervalued currencies for their affordable labors and materials, and for the countries current and potential consumption powers. [Note that undervalued currencies are good in their respective local purchases of labor and material but otherwise can only be exchanged for smaller number of other overvalued currencies.] We say such practices follow the “gravity rule”, a condition derived from monetary economics for cross-border trade. The results are piles of cash earned in companies of blockbuster products, only at the cost of shrinking number of payroll checks and increased governments' welfare checks to the unemployed. When the population falls into the rich and poor extremes, the burden of welfare checks falls upon governments which are often already burdened by worsening fiscal deficits. How should we create incentives (e.g., providing tax credit on “net” job creation) for cash-rich manufacturing companies to enter into service and retailing sectors to help boost home country employment? We can relate the corporate governance performance (and management compensations) to the unwanted laying-off behaviors; and better still we can promote the practice of extending the domestic service tier (to compensate the job loss caused by globalized manufacturing operations). The service tier may open up opportunities of hiring additional workers. We propose a two-stage conceptual model to uncover and feature the successes of Apple Computers and Sees' Candies; and to contrast such successes with the dilemma faced by Volvo Cars prior to its ownership shift in 2008. In addition, we study remedies and exceptions to the “gravity rule” of outsourcing.