tag:blogger.com,1999:blog-5235419263414453422.post3000249962840083794..comments2024-02-23T01:30:06.101-08:00Comments on Early Warning: Chinese Labor Costs, Tea Partiers as True BelieversStuart Stanifordhttp://www.blogger.com/profile/07182839827506265860noreply@blogger.comBlogger29125tag:blogger.com,1999:blog-5235419263414453422.post-693863904419708072010-02-25T11:45:03.864-08:002010-02-25T11:45:03.864-08:00Germany has high labor costs yet exports TO China....Germany has high labor costs yet exports TO China. Costs are one thing, value another..<br />WeekendPeakAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-5235419263414453422.post-78890050747220686842010-02-23T07:32:42.741-08:002010-02-23T07:32:42.741-08:00Hi, Paul-
What I am hearing here is a fundamental...Hi, Paul-<br /><br />What I am hearing here is a fundamentally colonialist and repugnant attitude. We need to keep "them" down so that we can enjoy continued economic and military hegemony. Sorry, that is simply immoral. <br /><br />China's rise makes them richer, and makes us richer as well, due to gains in productivity all around. Do we have to share the world with others? Yes indeed we do, and if we do so within a peaceful ideology of world trade (as we do with, say, Europe and the Americas) and a rule-based international system, then we will have achieved a great deal more than we would by keeping the peasants down on the farm.Burkhttps://www.blogger.com/profile/11158223475895530397noreply@blogger.comtag:blogger.com,1999:blog-5235419263414453422.post-1372598370072534042010-02-23T06:17:05.031-08:002010-02-23T06:17:05.031-08:00Paul - many thanks for your fascinating comments!Paul - many thanks for your fascinating comments!Stuart Stanifordhttps://www.blogger.com/profile/07182839827506265860noreply@blogger.comtag:blogger.com,1999:blog-5235419263414453422.post-54961193336614225082010-02-22T23:48:47.924-08:002010-02-22T23:48:47.924-08:00Just read a very interesting excerpt from a speech...Just read a very interesting excerpt from a speech given by Charles Munger, Berkshire Hathaway partner, in 2003 at UC Santa Barbara:<br /><br />"You are more prosperous than you would have been if you hadn’t traded with China in terms of average well-being in the United States, right? Ricardo proved it. But which nation is going to be growing faster in economic terms? It’s obviously China. They’re absorbing all the modern technology of the world through this great facilitator in free trade, and, like the Asian Tigers have proved, they will get ahead fast. Look at Hong Kong. Look at Taiwan. Look at early Japan. So, you start in a place where you’ve got a weak nation of backward peasants, a billion and a quarter of them, and in the end they’re going to be a much bigger, stronger nation than you are, maybe even having more and better atomic bombs. Well, Ricardo did not prove that that’s a wonderful outcome for the former leading nation. He didn’t try to determine second order and higher order effects.<br /><br />If you try and talk like this to an economics professor, and I’ve done this three times, they shrink in horror and offense because they don’t like this kind of talk. It really gums up this nice discipline of theirs, which is so much simpler when you ignore second and third order consequences.<br />The best answer I ever got on that subject – in three tries – was from George Schultz. He said, “Charlie, the way I figure it is if we stop trading with China, the other advanced nations will do it anyway, and we wouldn’t stop the ascent of China compared to us, and we’d lose the Ricardo-diagnosed advantages of trade.” Which is obviously correct. And I said, “Well George, you’ve just invented a new form of the tragedy of the commons. You’re locked in this system and you can’t fix it. You’re going to go to a tragic hell in a handbasket, if going to hell involves being once the great leader of the world and finally going to the shallows in terms of leadership.” And he said, “Charlie, I do not want to think about this.” I think he’s wise. He’s even older than I am, and maybe I should learn from him."<br /><br />I think this sums it all up pretty well.Paul Dhttps://www.blogger.com/profile/05502764767681095502noreply@blogger.comtag:blogger.com,1999:blog-5235419263414453422.post-71895469859350288392010-02-22T19:11:12.240-08:002010-02-22T19:11:12.240-08:00I spend most of my time in China. For the past thi...I spend most of my time in China. For the past thirty years, the Chinese leadership has worked to upgrade the country's infrastructure through export earnings. Fortunately for them, this coincided with the west's push for globalization, giving Chinese exports largely free access to their markets, especially after China joined the WTO in 2001. <br /><br />A major reason for this push is to create what is as close to full employment in China as possible, since the country needs to create 25M new jobs each year just to keep its head above water. <br /><br />The downside of this is that many of the jobs created do not offer much value added, but since the Chinese government owns and finances many state owned enterprises, it is able to do this. Unlike in the west, for many businesses, labor is the lowest cost input. <br /><br />Why does the Chinese government do this? China has a long and often bloody history. One of the causes of internal unrest in China is large numbers of economically disrupted men of working age (men without jobs), so, for any Chinese ruler, it's better to keep that at work even though there may be little value-added. In the west, these people would most likely be living on some kind of unemployment compensation. In China that doesn't exist. <br /><br />Through this policy, China will most likely be the last man standing in the world economy, since other economies can either choose to impose tariffs on Chinese exports, or allow Chinese imports to eat away at their workforce.<br /><br />What most westerners fail to understand is that cheap Chinese exports are the logical result of the country's employment policies.<br /><br />No matter what happens, the outcome is not pretty.Paul Dhttps://www.blogger.com/profile/05502764767681095502noreply@blogger.comtag:blogger.com,1999:blog-5235419263414453422.post-83666610720210983952010-02-21T08:36:01.845-08:002010-02-21T08:36:01.845-08:00Gary:"Isn't Libertarianism self limiting?...Gary:"Isn't Libertarianism self limiting? Once those opposed to government become the government - do they just disband and go home?"<br /><br />hahahabretthttps://www.blogger.com/profile/05280209182671727081noreply@blogger.comtag:blogger.com,1999:blog-5235419263414453422.post-20699253097564543492010-02-20T14:30:35.763-08:002010-02-20T14:30:35.763-08:00What an excellent article! Eric Hoffer is tremendo...What an excellent article! Eric Hoffer is tremendous and so bookends Wendell Berry and E. O. Wilson. They are all children of their time ... whatever time that happens to be. The 19th century, perhaps or the Eocene.<br /><br />Certainly there is no more modernism in this future which is unraveling under our feet. Why do fools continue to look toward industrialism and its ever- shiny, 'New!!!' iterations? Repeat an experiment enough times expecting a different result ...<br /><br />Four- hundred years of industrialization and what do we have to show for it besides bulging landfills and world- wide ugliness and despair, billions of hungry people who cannot have enough to eat because the factories cannot profit if all are given jobs. <br /><br />US slavery was an historical error and so was - and is - the industrial revolution. The price tag is a ruined and hollow Earth. We can hollow it out some more but the experiment will always yield the same result albeit with more ... feeling each time! <br /><br />We live the final death spiral of industrialization. There is no escape, only a furious mass suicide of humans ... out of disappointment. Maybe not. I suspect that Floyd or whatever his name is would be a fine master mason or vegetable farmer or wrecked house puller or seaman on a sailing ship or a shipwright or builder of streetcars or of houses close to the road which has no cars. He could become a blacksmith tomorrow and start making good knives and have a very good living until he could branch out into making other valuable things that people really need ... rather than what some ad agency lies them into believing they want.<br /><br />He looks to the whistle and the time clock and the hated boss and the smoke and poisons and is lost in the past. He just doesn't go far enough ...Steve From Virginiahttps://www.blogger.com/profile/04002636865996847926noreply@blogger.comtag:blogger.com,1999:blog-5235419263414453422.post-75265433471682283052010-02-19T13:14:32.981-08:002010-02-19T13:14:32.981-08:00Stuart,
It seems to me that there are only two pl...Stuart,<br /><br />It seems to me that there are only two plausible things that might affect the manufacturing imbalance that exists.<br /><br />The first would be that oil depletion might eventually raise prices or volatility to the point that it begins to erase the existing cost advantages. It seems unlikely that this could happen solely due to peak oil, but, perhaps combined with a realistic exchange rate it might have a substantial impact.<br /><br />The other alternative would be to intentionally and systematically undo globalization to the greatest extent possible. I do not mean to imply that there should not be global trade. Rather, I would suggest that you basically reinstate the blocks that allow for the globalization of capital. Re-institute barriers to the free movement of capital and specifically protect the domestic labor force (and resource base), even at the cost of higher prices and some inflation. Now this probably cannot be done in the current political, economic or financial climate. However, eventually, the situation may change. The question is, will it be too late? Is it already?<br /><br />BrianAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-5235419263414453422.post-57412266537329328872010-02-19T12:05:03.979-08:002010-02-19T12:05:03.979-08:00If the situation of the US lower classes continues...<i>If the situation of the US lower classes continues to worsen, then such movements will continue to arise and strengthen, and ultimately will become dangerous.</i><br /><br />Ironically, here we were looking askance at the working class while one of own (i.e. a technologist) attempted mass murder yesterday.<br /><br />They don't have the same sense of entitlement as the middle class has : most from an early age have been subject to suggestion from all directions that they must lower their sights in life and accept being shit upon. <br /><br />The middle class is different. Many believe the world is rightfully theirs, if they put in the time and effort. They blame lack of success on a "war against the middle class." Many have a long way to fall and not much cushion.Datamungerhttps://www.blogger.com/profile/10697373189192242333noreply@blogger.comtag:blogger.com,1999:blog-5235419263414453422.post-28241739943719768032010-02-19T08:01:18.215-08:002010-02-19T08:01:18.215-08:00Chinaisn't quite what it seems: Will China Sur...Chinaisn't quite what it seems: <a href="http://crisismaven.wordpress.com/2010/02/13/bloom-of-doom-vi-will-china-survive-the-crisis/" rel="nofollow">Will China Survive the Crisis?</a>. I see you are interested in statistical research. I have put one of the most comprehensive link lists for hundreds of thousands of statistical sources and indicators on my blog: <a href="http://crisismaven.wordpress.com/references/" rel="nofollow">Statistics Reference List</a> (http://crisismaven.wordpress.com/references/). And what I find most fascinating is how data can be visualised nowadays with the graphical computing power of modern PCs, as in manyof the dozens of examples in these <a href="http://crisismaven.wordpress.com/references/references-subjects-covered/data-structuring/data-visualisation-references/" rel="nofollow">Data Visualisation References</a> (http://crisismaven.wordpress.com/references/references-subjects-covered/data-structuring/data-visualisation-references/). If you miss anything that I might be able to find for you or you yourself want to share a resource, please leave a comment.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-5235419263414453422.post-56419284963275949612010-02-18T22:24:42.676-08:002010-02-18T22:24:42.676-08:00Also, I don't rule out at all the possibility ...Also, I don't rule out at all the possibility that China could suffer some internal collapse or disorderly transition. There would not seem to be really any durable worked examples for the kind of society the leadership there is building, and so they are innovating it as they go, and that's pretty risky. OTOH, they've been doing it with considerable success for quite some time now, so I certainly wouldn't claim it's clear they'll fail, either.Stuart Stanifordhttps://www.blogger.com/profile/07182839827506265860noreply@blogger.comtag:blogger.com,1999:blog-5235419263414453422.post-12424652844739156062010-02-18T22:20:29.199-08:002010-02-18T22:20:29.199-08:00I should also say - I'm not claiming that the ...I should also say - I'm not claiming that the current Tea Party movement itself has any strong future. It may if it evolves a clear and charismatic leader, or it may not. Nor am I saying the Tea Party movement is an imminent threat to society. What I'm saying is that I buy Hoffer's dictum that all mass movements are a lot alike, and the existence of one is proof that the conditions are in place to grow others too. If the situation of the US lower classes continues to worsen, then such movements will continue to arise and strengthen, and ultimately will become dangerous.Stuart Stanifordhttps://www.blogger.com/profile/07182839827506265860noreply@blogger.comtag:blogger.com,1999:blog-5235419263414453422.post-57350403379248471402010-02-18T22:15:46.956-08:002010-02-18T22:15:46.956-08:00Gary - I would completely agree about "quite ...Gary - I would completely agree about "quite a ways". To use the German analogy, it's the equivalent of the early 1920s. Things could go many ways from here.<br /><br />What is bothering me is that it's not obvious what the off-ramp from this trend is for the U.S. Protectionism of our domestic industry of course, but that just transfers the problem to inability to compete for natural resources from abroad with more competitive Chinese industry. War is out of the question with a nuclear state. We would not appear to have any effective leverage in the situation. We can jawbone the Chinese, but they've already proven themselves amply capable of ignoring that.<br /><br />Of course, I retain an open mind and will be doing intensive research ongoing.Stuart Stanifordhttps://www.blogger.com/profile/07182839827506265860noreply@blogger.comtag:blogger.com,1999:blog-5235419263414453422.post-65351478319439237462010-02-18T22:03:31.304-08:002010-02-18T22:03:31.304-08:00Great post Stuart. A couple of thoughts...
Chin...Great post Stuart. A couple of thoughts...<br /> China is in the middle of a major growth spurt. Growth begets growth when conditions are ripe - which they are for China. The U.S. is a stodgy middle aged country. Our borders are full, our infrastructure aged, and further growth limited by our previous over-expansiveness. Our goal should be to age gracefully and with wisdom rather than pretend we are still in our countries youth.<br /> I'm still on the fence about the tea partiers. I certainly see us vulnerable to demagoguery when times are bad - but I think we are still quite a ways from fascism. Isn't Libertarianism self limiting? Once those opposed to government become the government - do they just disband and go home?Garyhttps://www.blogger.com/profile/08580497879135994296noreply@blogger.comtag:blogger.com,1999:blog-5235419263414453422.post-18864331793260150752010-02-18T15:23:51.044-08:002010-02-18T15:23:51.044-08:00John Michael Greer has a great post up addressing ...John Michael Greer has a great post up addressing some of these same issues: http://thearchdruidreport.blogspot.com/2010/02/why-factories-arent-efficient.htmlGeoffhttps://www.blogger.com/profile/15862419826845781150noreply@blogger.comtag:blogger.com,1999:blog-5235419263414453422.post-27431459078279443722010-02-18T13:34:06.027-08:002010-02-18T13:34:06.027-08:00Burk - labor is *mildly* fungible. Agricultural w...Burk - labor is *mildly* fungible. Agricultural workers could eventually go to the factory (though as Hoffer notes, that did lead to social upheavals such as the civil war in England along the way).<br /><br />But now, if you're a machinist and you'd like to get a job in Silicon Valley as a programmer, you have a snowball's chance in hell. So the lack of blue collar jobs is critical.<br /><br />Have a look at the data on employment population ratio for men eg (<a href="http://www.businessinsider.com/chart-of-the-day-employment-to-population-ratio-male-25-54-years-old-2010-2" rel="nofollow">here</a>), and you can see that we are not taking up the slack.Stuart Stanifordhttps://www.blogger.com/profile/07182839827506265860noreply@blogger.comtag:blogger.com,1999:blog-5235419263414453422.post-1261523221938637652010-02-18T13:25:56.104-08:002010-02-18T13:25:56.104-08:00Datamunger - Median to median, the comparison is...Datamunger - Median to median, the comparison is $30 to $1/ hour. Looking at <a href="http://www.cnczone.com/forums/showthread.php?threadid=25666" rel="nofollow">this discussion thread</a> it looks like machinist's make about that level of wage in the US. The degree to which the median manufacturing laborer in the US is much higher skilled is unclear - I can't find any data on it at present, or for machinists in particular.<br /><br />My guess is the 40-60% lower costs in the ad reflects similar capital costs plus dramatically lower labor costs.Stuart Stanifordhttps://www.blogger.com/profile/07182839827506265860noreply@blogger.comtag:blogger.com,1999:blog-5235419263414453422.post-37860997091590534282010-02-18T13:24:39.238-08:002010-02-18T13:24:39.238-08:00I don't get all the hyperventilation over manu...I don't get all the hyperventilation over manufacturing employment. Are we all exercised about not having enough farming employment? No- we take the gains from increased productivity (or beneficial trade) and pay the same people to give haircuts, or do economics, or play in rock bands. Labor is fungible.Burkhttps://www.blogger.com/profile/11158223475895530397noreply@blogger.comtag:blogger.com,1999:blog-5235419263414453422.post-63434655059269771292010-02-18T13:10:09.358-08:002010-02-18T13:10:09.358-08:00Chapter1: I'm 100% in favor of the kind of re...Chapter1: I'm 100% in favor of the kind of retrofit of US energy production you call for. Eg see <a href="http://www.theoildrum.com/node/3540" rel="nofollow">Powering Civilization to 2050</a>.<br /><br />That said, I still think that we are going to have a big problem if all the wind turbines, solar panels, and heat pumps get made in China, and all we do here is install them. And I don't see what the argument is for why they won't all get made in China. About the only argument I can come up with is if the factory is fully automated (which certainly some solar panel factories approach), in which case they are insensitive to labor costs. But of course, in that case, they aren't going to do much good for manufacturing employment.Stuart Stanifordhttps://www.blogger.com/profile/07182839827506265860noreply@blogger.comtag:blogger.com,1999:blog-5235419263414453422.post-86097503583299418412010-02-18T12:23:38.501-08:002010-02-18T12:23:38.501-08:00In general, I see mass movements as the flip side ...In general, I see mass movements as the flip side of hyper-individualism. What's weird is the libertarian bent of the Tea Partiers.Datamungerhttps://www.blogger.com/profile/10697373189192242333noreply@blogger.comtag:blogger.com,1999:blog-5235419263414453422.post-14018122950358863682010-02-18T12:06:58.296-08:002010-02-18T12:06:58.296-08:00Apologies, Stuart. Sloppily, I posted under "...Apologies, Stuart. Sloppily, I posted under "Black Lizard" above. I read your post in google reader..under a different username.Datamungerhttps://www.blogger.com/profile/10697373189192242333noreply@blogger.comtag:blogger.com,1999:blog-5235419263414453422.post-73313913472768874842010-02-18T11:52:06.396-08:002010-02-18T11:52:06.396-08:00This is a fascinating, and profoundly disturbing.
...This is a fascinating, and profoundly disturbing.<br /><br />I was a bit puzzled by your dismissal of building infrastructure as just something which would solve the problem for a few years (due to inability of American government to finance for much longer). I think you are overlooking climate change issues.<br /><br />Retrofitting American infrastructure to reduce emissions by what is needed (say, 80% overall reduction) would be a massive, multi-decade effort. Keeping all those wind turbines in good repair will generate a lot of work for metalurgists. Retrofitting our houses, installing solar panels and ground-source heat pumps will employ a lot of unemployed construction workers. And large portions of this retrofit would pay for themselves under today's economic conditions, and a lot more would with a decent carbon tax. So government spending won't be necessary- "just" a tax-and-rebate.<br /><br />Obviously, a carbon tax won't be easy. But trying to implement one sure beats the dark scenarios your post hints at.chapter1https://www.blogger.com/profile/06951516479402648382noreply@blogger.comtag:blogger.com,1999:blog-5235419263414453422.post-19620131886243804752010-02-18T11:51:27.606-08:002010-02-18T11:51:27.606-08:00Notice though that the Chinese Machining Services ...Notice though that the Chinese Machining Services ad only claims savings of 40-60% relative to the US. Machinists are tradespeople. The required skill and education level working with advanced machining equipment is many levels above a person working on an assembly line. No way machinists are only getting $1 an hour in China.<br /><br />Manufacturing remaining in the US is not the labor intensive type. But it certainly is extremely automated and you need machinists to maintain those production processes.<br /><br />Errol is skilled and isn't completely fucked. Worst case with his wages halved, he's competitive (but still above Wal-mart) But that's a big drop for him. <br /><br />Most of the unskilled manufacturing labor disappeared long before the current slump.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-5235419263414453422.post-26067773884713226672010-02-18T11:30:50.982-08:002010-02-18T11:30:50.982-08:00Hi, Stuart-
I agree, but where is it ordained tha...Hi, Stuart-<br /><br />I agree, but where is it ordained that Errol has to export manufactured goods? What he wants is a job. If the US is otherwise on an even economic keel, then running a solar installation crew or a medical marijuana shop might be a step up. And if the government takes proper control of the macroeconomic situation to promote worker interests in the broad sense, (i.e. the Fed/fiscal arms work for high employment), then there will be plenty of jobs around. Some amount of job flexibility is critical for any economic dynamics, as you have experienced yourself.Burkhttps://www.blogger.com/profile/11158223475895530397noreply@blogger.comtag:blogger.com,1999:blog-5235419263414453422.post-90271006113019205142010-02-18T11:14:59.254-08:002010-02-18T11:14:59.254-08:00Burke:
My point is that the exchange rate issues,...Burke:<br /><br />My point is that the exchange rate issues, significant as they are, are not the largest part of the problem. US GDP is $14 trillion in 2008, Chinese GDP is $4 trillion in 2008 at current exchange rates and about $8 trillion at PPP equivalence. So say the exchange rate halves to come in line with the PPP value. US manufacturing wages are then still more than 15 times greater than Chinese manufacturing wages. Errol is still fucked.<br /><br />It's quite true that we in the U.S. produce things of value to sell to the Chinese. Software, entertainment, financial services, etc, etc. My point is that these are all products of the educated classes. We (I include myself in the educated classes of course) may individually be relatively resistant to these trends. But the blue collar classes have no such immunity, and of course politically, they will not go to the wall without causing massive heartburn to the entire society.Stuart Stanifordhttps://www.blogger.com/profile/07182839827506265860noreply@blogger.com