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The Laptop Supply Chain
Carl Bialik from the WSJ writes "When a U.S. consumer orders a laptop from HP or other big sellers, how does the machine get made? Often via a complex supply chain in Taiwan and China, shaped by rocky cross-Strait relations, according to the Wall Street Journal: 'Outsourcing to low-cost, high-quality Taiwanese manufacturers has helped make Dell and H-P the world's top two PC companies in terms of sales...But the relationship between U.S. computer firms and their third-party manufacturers can be tricky. In the struggle to retain an element of control over their suppliers, H-P, Dell and others play contract manufacturers against each other to keep prices falling and ensure no supplier gains too much leverage.'"
As a consumer, if you want your products nice and cheap, then these sorts of negotiations are par for the course. If they didn't do it, you'd take your money elsewhere.
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From TFA:
So, IBM used to keep most of it's own laptop production in-house. Which may partially explain why the ThinkPad's are, by far, the best laptops around. Let's see what happens to the ThinkPad now that Lenovo runs the show.
"High Quality Manufacturers?" Seriously, has anyone ever used a HP laptop before... If hospital equipment functioned at the same "High Quality" that HP laptops do then we wouldn't have to worry about pulling the plug on our loved ones. The machines would work for two weeks, start getting really slow, the screen would break, and then it would fail and kill the patient.
America's tech industry might take a temporary hit, but since its not their assets in Taiwan, they'd quickly find a contractor willing and able to make the parts elsewhere (India).
I'm more concerned that if the US will be compelled to intervene if China invades.
Check out this Tomshardware link
http://www17.tomshardware.com/howto/20050504/
I don't know about anyone else, but I have a problem buying the cheaper Laptops.
I inevitabley run into hardware problems on the sub $1000 laptops.
I would rather pay a little more and not have the down time for my users. Strahd
I wonder if there will ever be an "Organization of the Computer Exporting Countries" cartel?
True... but it would probably trigger an almost instantaneous revolution amoung the people who benefit from US relations, which is a lot of relatively rich people.
Sure, China could "pull the plug"... but guess who gets the worse end of that deal?
Metaphorically, we get hurt. Badly, even. But they die. (Possibly literally for the gov. leaders.)
China may threaten this. They may do little things here and there. But they aren't going to pull the plug enough to do more than minorly inconvenience us. (To a large degree, that works out even less in their favor than a complete plug-pull; the less reliable they are the more people build things elsewhere.)
I can see your point on assembly. However, we are facing a potential brain drain when highly educated jobs are being shipped out of this country. While it may be good in the short run for the economy it is not good in the long run for the U.S. economy or our position in the world. U.S. companies enjoy the protection and influence of the U.S. government on a global scale. Therefore it would be good for the U.S. companies to keep the brains in the U.S.. However, for that to occur you have to keep some of the less intellectual work domestic. How else will you train the next generation of workers. I like the H1B program and wish they would open the gates a little more. Having highly educated people coming into the U.S. and contributing to our local economies makes us stronger.
I am well aware of the difference of Cost of living having lived in Florida, Atlanta and London. However, we are also comparing the modern world with proper access to food and good labor laws. You can pay some one much less in Missippi than NewYork. However, both locations have good labor practices. What concerns me are the countries that do not have those standards and have no incentive to improve their standards. Having people work in sweat shops in unsafe conditions is not a matter of cost of living it is a matter of regard for life. low regard of life really shouldn't be justified by cheap labor.
The division of labor is a good thing, but we're talking about something completely different here. The US built its industry based on high tariffs and high labor costs. The original EU was such a success because they implemented policies which aimed to slowly raise up poor EU countries' wages in combination with a slow lowering of the tariffs in wealthy EU countries.
Now the voters in two wealthy countries shot down the EU constitution. The opposition was overwhelmingly from the working classes. They're not stupid, they knew that constitution would force them to compete against Turks and other poor countries and their wages would go down the tubes along with the social benefits it took them decades to win.
I'd urge you to read some independent views on the subject of outsourcing. As I mentioned, Paul Craig Roberts writes extensively on the topic. Hell, even mainstream types like Lou Dobbs have begun to question the "free" trade gospel. Look at the type of jobs which are created now in the US -- they're overwhelmingly in low-paying service industries. Those service jobs do not generate anywhere near the amount of wealth as manufacturing jobs do; as the dollar plummets, those service jobs won't pay for our imported oil, let alone our other import demands.
On a consumer level, take a look at the PBS Frontline documentary "Is Wal-Mart Good for America?"; it's viewable freely online in Real video format.
When you see the part where Wal-Mart literally tells a mid-western hosiery company to shut down its US plants and move to China, ask yourself: Is that really good for America? Yes, we get cheaper socks. But hundreds of Americans get thrown out of good paying jobs and are tossed into the unemployment line.
With unfettered "free" trade, we're in a race to the bottom. American workers are literally forced to compete against the poorest workers in the world, workers who, in China's and many others' case, have no labor rights and work under appalling conditions.
Do you honestly think we can maintain our standard of living in such a situation? We're selling off and mortgaging our economic industrial power to produce things that we could easily produce here. We're in a race to the bottom forcing Americans to compete against the poorest laborers in the world. Who do you think is going to win that competition?
You don't know much about economics, do you?
First, the American military is impressing nobody. The swelled head bubble about the US being so militarily invincible has been popped by brave Iraqis defending their country with little more than assault rifles and light arms. The weakness of the US military is shining clear for all to see. While the US is dangerous, the world is no longer in awe.
Second, the US economy can also be easily popped. If China were to dump the 600-800 billion dollars its central bank holds into the international currency market, the US economy would implode and we'd be pushing around wheelbarrows full of currency to buy groceries just like they did in Weimar Germany. Sound extreme? Not if you read the mainstream economic journals. They all readily admit that such a move would quickly put the US into a deep economic depression.
Don't believe it? When, a few months ago, South Korea's central bank announced they were "diversifying" their currency holdings to lessen the amount of depreciating dollars they hold, Wall Street responded by dropping more than 200 points in 1 day. The US quickly talked to South Korea and they announced that they were not going to diversify their holdings (only later to do it slowly and privately).
But fortunately, it would not be in China's interests to dump their dollars, since it would also ruin the Chinese export market to the US. Hell, China's getting rich off from the US, why mess up a good thing? The only way China would do this would be if we were to mess about with Taiwan or something very serious.
Another weak point is the fact that the US pays for its oil imports in what can only be termed a shell game. We arm-twist oil producing countries to only price their oil in dollars. So Saudi Arabia prices their oil in dollars, we can print all the dollars we want (and we do!), and the Saudis have to take them. In the 80s we forced the Saudis (and similar puppet regimes, e.g. Kuwait) to invest those dollars into the US stock market or in US Treasury Bonds (because if the Saudis were to do anything else with them, it would illuminate how weak the dollar is). It's a shell game, but the end result is that it's another way we're selling off the country.
This oil scam can be easily popped. It will only take a group of oil producing countries to price their oil in currencies other than the US dollar. If this were to happen the US banking industry would lose huge transaction fees and we'd have to pay "real" money for oil.
And what do you know, Iran is in the process of setting up an oil market which would use multiple currencies to buy oil. Gee, you think that might explain a bit of the US hostility towards Iran?
And what do you know, Russia has talked about just that -- pricing its oil in Euros. Even though it's only talk, the US response has been harsh and explains a lot of the recent rhetoric about Russia's undemocratic policies (we had no problem with non-democracy under Yeltsin).
Of course there was one oil producing country who did break these rules and dared to price its oil in a currency (the Euro) other than the US dollar.
That country was Iraq.
But if you think the economic rules of empire don't apply to the "invincible" US military and economy, just ask the British about those rules.
Yes, I'm aware that the Yuan is pegged to the dollar. But in the case of a dollar collapse, the Yuan could easily be detached and allowed to float like any other currency.
As to the Chinese Yuan devaluing if the Chinese stop it from being pegged to the dollar, that just doesn't make sense. Are you sure you don't have that backwards?
The US gov't is trying to get the Chinese to allow the Yuan to float freely like other currencies. The Chinese refuse, primarily for two reasons:
(1) The Yuan would rise and thus make Chinese exports more expensive on world markets (which is the public reason why the US gov't wants the Chinese to float the Yuan; this is 180 degrees opposite of what you claim).
(2) It would open the Yuan up to currency manipulation by wealthy capitalists, int'l banks, and currency traders, such as we saw in the East Asian financial collapse during the 1990s. The Chinese saw what happened to their neighbors, and, well, they aren't stupid.
If outsourcing is bad for America, then isn't outsourcing bad for your state, your hometown and for your family?
Whether outsourcing -- in this case meaning outsourcing jobs overseas -- is bad for your hometown/family, etc., depends on a number of factors. Obviously, if my work is in a company reliant on exports, I'm going to think it's good.
But overall, stats from both the US gov't and labor organizations reflect that we're losing more jobs overseas than we're gaining jobs from exports or from other job creation. (Bush *still* has a net job loss record during his presidency.)
things i suspect aren't true:
- the US built its industry based on high tariffs and high labor costs.
Check any decent history of the 1800s. You'll find that tariffs were a huge source of gov't revenue and was -- decade in and decade out -- the perennial political issue. Working classes, in general, wanted low tariffs to have access to cheap goods, and capitalists wanted high tariffs to protect their industry (the capitalists typically controlled gov't and politics).
As for high labor costs, again, any good history of the 19th century will cover that. Though not recorded in typical US history books, there was a huge "push-pull" dynamic going on with European labor. Many Europeans came to America for free land and opportunity and became immigrants. But there were also many who were "pulled" to the US attracted by the high wages, and then were "pushed" back home during times of depression. Good economic texts will also document the labor costs as a driving force for US industrial automation and innovation.
- jobs being created in the US are overwhelmingly in low-paying service industries
I've mentioned Paul Craig Roberts repeatedly, so I'll quote a part of one of his articles, The US Labor Force: One Foot in the Third World: "In May the Bush economy eked out a paltry 73,000 private sector jobs: 20,000 jobs in construction (primarily for Mexican immigrants), 21,000 jobs in wholesale and retail trade, and 32,500 jobs in health care and social assistance. Local government added 5,000 for a grand total of 78,000. Not a single one of these jobs produces an exportable good or service. With Americans increasingly divorced from the production of the goods and services that they consume, Americans have no way to pay for their consumption except by handing over to foreigners more of their accumulated stock of wealth. The country continues to eat its seed corn."
"Only 10 million Americans are classified as 'production workers' in the Bureau of Labor Statistics nonfarm payroll tables. Think about that. The US with a population approaching 300 million has only 10 million production workers. That means Americans are consuming the products of other countries labor."
So that's the May 2005 stats. And I'll refrain from adding that it takes about 150,000 jobs per month to be created just to break even (the number of people turning 18, increases in population, etc.).