PDX Dad

Apple, America, and the Loss of U.S. Jobs

For everyone who doesn’t understand why companies move jobs overseas (hint: It’s not just the wages). And for those who don’t understand why the government can’t do anything about those jobs.

I’ve worked in international trade so much, I don’t even really see where the questions come from. It’s pretty self-evident when one looks at the actual facts and numbers. We do not have the production base with the technically skilled workers needed for such large-scale production. We’re on the wrong end of the supply-chain. We have a different mentality on mobility, work ethics, and needs.

That, in no way, suggests the Chinese model is better as a value judgement. Just more economically efficient. And it really, really, really is efficient. 

I’ve spent some time in Shenzhen when they were first building it up. Hong Kong was still the place for international trade, and the movements back and forth were cumbersome (anyone remember the cardboard border pass?). It wasn’t until Shenzhen became a free trade zone that it really blew up. Twelve lane highways connecting Shenzhen to different ports, all full of container trucks. The explosion of port facilities in Dalian, Fujian, Xiamen, etc. I wouldn’t go so far as to say Hong Kong is a ghost town, but it’s not the international trade darling it once was.

As far as the working conditions, social benefits, etc for Chinese workers, that’s not something I can decide for them. I try not to take a relativistic viewpoint, but really, this is what the US did during our Industrial Revolution. Why should we dictate what their social and employment mores are, especially when we’re in our own social economic crisis. It’s working for them, and millions are being moved out of poverty and subsistence farming from the western areas (with plenty of hardships left to warrant their own constant protests). There are things they do incredibly correct, and things they do incredibly wrong.

The other problem is that China is a very labor-intensive society. They can be, because they have the population for this. The West, especially America, is very capital (machine) intensive economy. Even if American companies moved their jobs back to the US, the first thing they’d do is find a way to automate the system. It’s about leveraging your competitive advantage. China = massive workforce with low pay. America = mechanized workforce with minimal (but still expensive) labor force.

There’s a lot more to change between our systems than some simple bumper sticker taglines. The sooner people get hip to that, the sooner we can start coming to real, workable solutions.

Apple, America, and a Squeezed Middle Class: How U.S. lost out on iPhone work.

Not long ago, Apple boasted that its products were made in America. Today, few are. Almost all of the 70 million iPhones, 30 million iPads and 59 million other products Apple sold last year were manufactured overseas.

China Housing Bubble Has Burst

Oooh… It’s about to get interesting in China. Looks like the housing bubble there has started to burst. Developers have built up a huge inventory on unsold properties, and have started massive discounts. Prices are dropping, and they’re going to continue to drop fast. What makes this different from the US is that it’s inventory-driven, not buyer income or foreclosure driven (although some massive drops in certain areas have triggered localized credit crises). Also unlike the US, the global ramifications will be based on materials trade, not with the financial sector like US bad mortgages. 

“Real estate woes are already sending shockwaves through China’s broader economy. Chinese steel production — driven in large part by construction — is down 15 percent from June, and nearly one-third of Chinese steelmakers are now losing money. Chinese radio reports that half of all real estate agents in the southern city of Shenzhen have closed up shop. According to Centaline, more than 100 local government land auctions failed last month, and land sale revenues in Beijing are down 15 percent this year. Without them, local governments have no way to repay the heavy loans they have taken out to fund ambitious infrastructure projects, or the additional loans they will need to keep driving GDP growth next year.”

Possible good news for the US is that more raw production materials will be freed up globally for more competitive pricing. That’ll help temper our strengthening dollar with imports.

“The impact of a housing downturn would have a significant impact globally. International suppliers who have been fueling China’s construction boom — iron-ore miners in Australia and Brazil, copper miners in Chile, lumber mills in Canada and Russia, and multinational equipment makers such as Caterpillar and Komatsu — could be hard hit. Heavy losses on real estate and related lending could damage investment and consumer confidence, undermining the rising tide of Chinese demand that has been a much-needed growth engine for everything from Boeing airplanes to Volkswagen and GM automobiles to KFC and McDonald’s fast food.”

China’s Real Estate Bubble May Have Just Popped - Foreign Affairs

For years analysts have warned of a looming real estate bubble in China, but the predicted downturn, the bursting of that bubble, never occurred — that is, until now. In a telling scene two months ago…

Diplomatic Progress with Myanmar?

I would be extremely happy if Burma was to move towards real democratic processes, and establish universal rights. The military junta has mismanaged the county and repressed its people for decades.

At the same time, I wonder if the United States isn’t slipping back into a Cold War mentality. Only instead of Russia, it’s with China. And instead of threats of communism, it’s threats of natural resource protectionism.

‘History Opportunity for Progress’: Hillary Clinton to visit Myanmar.

Detecting “flickers of progress” in the long shunned and sanctioned nation of Myanmar, President Barack Obama announced Friday that he will send Secretary of State Hillary Rodham Clinton to the repressed country next month, the first official in her position to visit in more than 50 years.

China versus Democracy

Good write up in the Economist on democracy and China’s growing economy:

http://www.economist.com/blogs/democracyinamerica/2011/07/democracy-v-china

My views on this subject are influenced by having lived for many years in the world’s other fast-growing capitalist communist confucian country, Vietnam, and watching predictions that rising wealth leads to democratisation fail to bear any but the most modest of fruit. China and Vietnam have structures and cultures of governance that are about as similar as one can expect for cross-country comparisons. And what’s striking in both countries is the remarkable absence of any serious challenge to Communist Party domination of every corner of political life.

This is something I’ve often said for many years: capitalism does not require democracy. One of the main arguments by mainstream economists has been that capitalism and open trade eventually leads to democracy, because businesses need freedom of property and speech to make decisions for their own best self-interest. This freedom supposedly leads to better choice among consumers and producers, and as such freedom of economic choice (see Hayek, Friedman, and de Soto). But, China proves time and time again that this is not the case.

Ironically, this actually helps the corporate right wing in America. Who pushes for equality, voter rights, economic equalization, and equal access? Certainly not the conservative right, if their rhetoric and policy decisions of the past 30 years are any indication. Without democracy coupled with economic freedom then autocratic rulers have the ability to disregard the will of the people for social equality regulation and look at strictly cost-benefit analysis.

How will China react?

What will be most telling is how China reacts to the devastation in Japan. These two political, social, and economic adversaries can either create a new way forward in relations. Or, China takes advantage of the situation and claims disputed territories, enact harsher import regulations in the name of “safety,” and continue to hold up raw material exports.