samboct
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"The reason our products are as good as they are (in the knowledge based products) is because we know we have to be better, smarter, faster...thanks to competition. Those products which don't require much brain power (Tupperware, garbage sacks, TV's, etc.) have long ago been ceded to foriegn manufacturers, and it's a good thing. The money we save not spending ridiculous amounts on things others can produce for less allows us to put our money and effort into things that produce a higher return."
"All true, but the minute you gate yourself off from other manufacturers of similar products, you stifle innovation. East Germany was a perfect labratory for this experiment. Both East and West Germany were essentially identical in values and productivity at one point (because they were in fact one place)....and then 50 years of a walled off, protected economy proved the fallibility of a walled society."
Nonsense-China gets away with manufacturing these goods cheaper for several reasons:
1) no payments for IP (if you steal the technology, it costs less than doing it yourself)
2) No environmental protection- Chinese workers are going to be dropping dead at earlier ages- things like black lung, tuberculosis, and extremely elevated cancer rates.
3) An artificial quota system for "primary industry" such as energy production which amounts to controlling an economy for export. Look at the example of Romania- when under Communist control- made the world bank ecstatic because they were paying down their debt, but they cut consumption at home to the point where their people were starving. Remember all those malnourished kids that were coming out of these orphanages in the 90s? Did that make the Romanians a powerhouse when the system collapsed- I don't think so... China is far from a free society- or have you forgotten?
4) China's mfg is inefficient- it generally takes them an additional 60% in energy to produce the same goods as Western countries. Your example of Eastern Germany is well taken- remember that Communist countries used to claim that they had output greater than the West in "primary" economic goods such as power, steel, concrete, etc? Then when the wall came down, and West Germany said that we'll give you Western marks at parity with Eastern marks- how screwed the Westies were because the East German economy was in a terrible mess? Accurate info out of China is nearly impossible to come by- and we know damn well that in terms of population growth- where all regions magically made their quotas, they were lying through their teeth. Our companies are effectively trying to compete with state owned enterprises with tight control over the labor used-highly repressive (remember Tianamen Square) and underpaid.
Then, we are told that "we should develope foreign markets to buy our goods and services."
Oh? And why is that?
"I believe I already explained that, and it doesn't take a rocket scientist to understand that when you have more people capable of purchasing a product, sales increase."
Increasing the market of well fed, well educated consumers increases the market for US goods. A labor force composed of limited literacy and education, paid close to starvation wages, does nothing for US trade. Hence trade with Western countries works well for the US and those countries- trade with China does not. We've got plenty of experimental evidence to back this up-but the idea of free trade with everybody is a sick joke on us.
"Absolutely...now you're getting it. Except for one thing. The Japanese already opened up a store there 20 years ago...and their products are cheaper, get better gas mileage, etc., so there's really no point. However, those folks do need software, which those who studied and went to school, now have the skill sets to make and manufacture...and at highly profitable margins."
Interesting theory- wish it were true- but it's unfortunately not backed up by experimental evidence. Retraining workers in this country hasn't worked-the retrained people generally earn less money 5 years later (think that's 2/3rds of them). Software writing is now being offshored to India quite rapidly, the US programmer market is not wonderful. Companies in the San Jose area offering salaries of $60k- well, with housing starting at $800k, that really doesn't get you very far. US firms seem to be very good at paying large salaries to executives these days- but their employees are getting hammered. The lesson of Henry Ford that you pointed out hasn't been learned and applied- not anymore. I wish it were, but the evidence strongly suggests that it hasn't.
"All of which flows back to our shores. If I had a choice to be selling the world our software and airplanes, or our Tonka Trucks and our zip lock bags and frisbees...I'd choose the former every time."
Again- the rest of the world is making inroads into the aviation market. Microsoft is hiring engineers from China and India and opening up research centers in China- bellyaching they can't find smart US folks. True- Microsoft doesn't pay well- their employees did well when the stock was climbing, but not so fast anymore. The idea that software will continue to be dominated by US firms is extremely myopic.
And why shouldn't we be selling the world Tonka trucks and ziploc bags? A Tonka truck was a well made toy, that could last through a number of kids. Compare that with the crap being sold today. Ziploc bags used a very sophisticated polymer (IIRC) that took some good R + D. Neither China nor India have spent the money needed to do really good basic R +D. You're living in a dreamland if you think that kind of research grows on trees. Simply put- its not getting done anywhere. Since this type of R +D is the "seed corn" of economic growth- I find this extremely troubling. Your viewpoint assumes that economic progress is a given. I make no such assumption- recall the dark ages.
"Everyone is going to read the statistics the way that best suits their argument, but the fact is, we're all driving cars today that had they been manufactured 20 years ago, would easily cost double what we currently pay, same with computers. Even when the product doesn't go down in price, it's capacity has generally increased over the last few decades."
"Houses that used to cost $200,000.00 now cost $500,000.00, but we're not paying 10% interest (200k payment = $1,700.00 a month) anymore either, we're paying 6% (500k payment approx. $2,600.00 a month)...and if you're like 99.9999% of the population, your income has surely risen over those same last 20 years...at minimum, doubled and more than likely much more, even if you didn't get a college degree.
In short, that $500,000.00 house is probably costing you less per month than the $200,000.00 house 20 years ago in real dollars. "
(And by the way...if it's not, your problem isn't with the govt. screwing you, it's more likely with you).
Nonsenes- housing prices have gone up astronomically- ask the Japanese if the real estate bubble in the 80s helped or hurt their economy. To Lady E's point of the distinction between wealth and money- our money may have increased- but our wealth certainly hasn't. This is why from having one wage earner (blue collar steel worker or auto worker) be able to afford a house, college education, and a certain amount of leisure activities, we now need two income earners, and the leisure activities of the 50-70s such as boating have been replaced with computer games and watching giant screen TVs. All you have to do is look at the wage concessions being wrung from US auto workers to realize that Henry Ford's lessons have been thrown into the garbage heap of history. Toyota claims that they can build cars in this country cheaper than US firms- and they're right- because they pay their labor about 1/3rd less. This is progress? Build a better car AND pay your people better than the competition- that's progress. This is regression.
I haven't heard the radio stories about Mattel- nor have I heard their apology- but I smell a rat- a large Chinese rat. If those toys were being made in the US- there wouldn't be lead processes nearby. Lead based pigments- generally lead acetate, is cheaper than titanium dioxide (you need less of it), but TiO2 is safe, and lead certainly isn't. Furthermore, lead acetate is sweet, which gives kids an incentive to eat the stuff. Is Mattel going to spec a lead based paint on their toys? I don't think so- but Chinese mfg have been well known for substitutions. This sounds like Mattel being held for hostage- you want us to mfg toys- you take the rap, not China. Note- this is pure speculation on my part- but should be yet another nail in the coffin of any US mfg that want to move to China. That our state department is sitting by with it's thumb firmly inserted in its posterior speaks volumes.
PoliteSub-
I do agree that Mattel needed better quality control- but then it's hard to justify moving to China. Overall, I hope that Mattel gets hammered- maybe they can serve as a horrible warning (nod to MsKatHouston).
In terms of CO2 production- China is bringing on a coal fired plant a week (I think in the 20 megawatt range). Basically in the past year, that's the entire CO2 output of Britain. They've already overtaken the US in terms of CO2 emission and far outweigh the US in particulates based on environmental analyses (look at the air in LA) The US could readily drop its CO2 output- its economy is not that tightly connected to energy production in contrast to what the imbecile in the White House babbles about (I hesitate to call what George W. Bush does "thinking".) most of the increase in energy usage in this country is tied to SUVs and larger residential homes. France and Japan have already shown that energy consumption and GNP are independent, the US really isn't that far behind technologically, but the political will is lacking. In contrast, both China and India have GNPs which ARE tightly coupled to energy production, and neither country is particular efficient in its energy usage.
Sam
< Message edited by samboct -- 10/11/2007 11:56:00 AM >
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RE: A hole in the theory of the global economy. - 
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