07 June 2011

The Chinese are Killing Our Economy, and It's Our Fault

I don’t like it anymore than you do. But the fact is, that so-called backward bunch of peasants in China are kicking our economic asses. While we sit back and talk about the superiority and the glory of the Land of Liberty, the Land of Regimented workers is cleaning our collective economic clock.

I am not a fan of China. It is a land of repression, inhumanity and a 1984 group think. China has built itself with slave labor and intellectual rigidity. Hooray for us – they’re still kicking our asses.

American factory worker makes $12 - 20 per hour, with at least another $3 - 5 dollars going to generally accepted minimal benefits such as health insurance and something for a retirement. Add to that labor cost the expenses of maintaining a safe workplace. Some of those are eminently reasonable, but they are still costly. The Chinese factory worker makes the equivalent of $2 per hour. There is a basic social system which provides medical care and old-age pensions to maintain retired Chinese workers at the low standard of living they enjoy during their working lives. (The Chinese worker’s $2 has greater purchasing power in China than it would in the U.S., but to a U.S. manufacturer or buyer, it’s still $2.) This assumes, of course, that they get to retirement age - The Chinese are fairly blase about worker safety.

As a result partially of the cheap labor, in-country materials cost in China is also low. Essentially identical fabrics cost American manufacturers nearly twice what they cost the Chinese. Similar cost savings run across the board: Steel, forest products, plastics and other raw materials. Chinese energy costs are minimal, again because of cheap labor and cheap materials, together with a willingness to burn coal without remediating significantly the release of pollutants.

So, China produces goods so cheaply that China can afford to load everything onto container ships to sell in the United States, still far cheaper than the identical items which were produced here. It torques me. For instance, I will no longer purchase from my former favorite manufacturer of fine knives, Buck Knives. They took their fine Idaho factory and off-shored their production to The Land of Green Ginger.

So significant is the advantage China (and, for that matter, the rest of Asia) has in manufacturing is that they even screwed the Mexicans, who a few years earlier had screwed the United States out of manufacturing jobs with low-cost Mexican labor.

Every politician promises to revamp American manufacturing and create jobs, jobs, jobs, all without any increase in taxes. Bullshit. It’s just bullshit. When the jobs left, the infrastructure left. Some American workers were given the demeaning task of dismantling their own factories to send manufacturing machinery overseas. (You can find an interesting discussion of the permanence of factory job losses in The Day After the Dollar Collapses, by Damon Vickers.)

And every politician has an easy answer. Now, the easy answers vary. Dismantle the unions. Provide greater tax incentives to corporations. Abolish the EPA or OSHA or even the DAR. Raise tariffs. With respect to tariffs, that is one of the most commonly misunderstood “just one thing will fix it” hobby horses. Raised tariffs raise prices on imported goods which, presumably, make domestic goods more available. Did you hear the keywords? “Raise prices.” Tariffs are not paid by foreigners. Tariffs are paid by domestic consumers - us.

We talk about United States becoming a service economy, but I don’t think we understand how extreme that is. As a percentage of gross domestic product (GDP), the industrial sector is 22% of the American economy and the service sector 76%. By comparison, the Chinese industrial sector is 47% of its GDP and service sector only 43%.

Another player to consider is India which has been a 28% industrial sector and a 55% service sector. However, remember the off-shoring of service jobs? The last time you called customer service for just about anything, where do you think you were calling? India is the hot call center site these days, so India’s service sector is soaking up a lot of our money serving us.


20 years ago, West Virginia’s junior senator, Joe Manchin, handed out a whole bunch of lapel pans – I still have mine. It consists of the word “ATTITUDE” in block letters. If you can think of a better one word recipe for progress and success, I’d like to hear it. It’s easy to poo-poo those who a call for a change in attitude by asking for specifics, specifics. That is even valid. But the truth is, we pretty well know what constitutes a good attitude, and know that it goes a very long way in progress, whether it be national or personal. Part of a good attitude is a respectful attitude. Consider the comments from the China Daily News (US edition) this week about a student putting himself through school as a cafeteria worker:

“Unlike some rich young men who attract attention online by showing off their families’ wealth, Chen is widely praised by the netizens for his struggle. People know that he is hard-working, committed and dedicated, traits which are becoming increasingly scarce in society. Also, diligence and optimism among youth are not easily found in society today.

“As a poor young man in a society with a wide wealth gap, Chen has to put in a lot more effort than others to achieve success. That compels him to struggle with more firmness and confidence. It is this spirit that has enabled him to support himself to acquire higher education.

* * *

“We cannot change our family backgrounds but we can change our fate through hard work. Chen has won for himself dignity and hope and reminds us that labor in all its forms deserves our utmost respect.”

A respect for education matches a respect for work. That backward land of peasants, China, is attaining a literacy rate (95 to 96%) comparable with that of the United States (97 to 98%). (The United States is still about 50th among the nations of the world, nations as to literacy rate.) (By contrast, India has about 74% literacy rate.)

If I had a quick fix, I’d tell you what it is. Perhaps that’s the point: While we’ve been yakking and slapping ourselves on the back about what free and superior people we are, we have been overtaken by those we have long considered simple and ignorant peasants. I am reminded of a original Star Trek episode from the 1960s where legendary trial lawyer Melvin Belli portrayed some kind of minor demi-deity. He kept repeating, “As you believe, so shall you do, as you believe, so shall you do.”

And it works both ways. If you believe in work and respect, and act on that belief, you get different results than if you believe in sitting on your ass and consuming.

That is the lesson we teach young people today, how to sit on one's ass and consume.

Eye on the ball people, eye on the ball.


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