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Where Will Your Next Gadget Be Made?
hackingbear writes "The New York Times is warning of the possibility of price inflation for gadgets, cars, and many other items, not from our skyrocketing government debt, but rather the increasing cost of doing business in China. Coastal factories are raising salaries, local governments are hiking minimum wage standards, and if China allows its currency, the renminbi, to appreciate against the US dollar later this year, the cost of manufacturing in China will almost certainly rise. (The report missed the biggest cost factors in China — electric and water utility costs.) 'For a long time, China has been the anchor of global disinflation,' said Dong Tao, an economist at Credit Suisse. 'But this may be the beginning of the end of an era.' The shift was dramatized Sunday, when Foxconn, the maker of the iPhone and everything else, said that within three months it would double the salaries (rather than the rumored 20% increase) of many of its assembly line workers."
"And last week, the Japanese auto maker Honda said it had agreed to give about 1,900 workers at one of its plants in southern China raises of between 24 and 32% in the hopes of ending a two-week-long strike, according to people briefed on the agreement. However, while big and famous manufacturers, like those in the US and Europe, may worry about their PR images and give in to labor demands, it is unclear if thousands of smaller ones will follow. And given the millions of people waiting for work in other countries, from India to Vietnam, the only thing that may have changed is the prevalence of Made in China labels of your gadgets."
Since I live here in the US, I'd really like to see a return to the US for manufacturing. We're still teetering on the brink, don't let day to day market-droid speak fool you.
The US is not anywhere near out of the woods yet.
So...I'd like to see my next gadget have "Assembled/Made in the USA" on it.
Just as I'd suspect anyone from another country would prefer their country to be the country of assembly for their next gadget.
Sent from your iPad.
I'm not sure it's so much "out of the woods" as much as it's beginning to be "sweep the undesirables (long-term unemployed) under the rug" to make things look better.
Twitter supports and protects racists - by smearing their critics with the "Hate Speech" label.
The fact is, most of us can't afford to live in an america where everything is made by people who are paid $46,000 a year.
It's been said, a pair of $75 nike's would cost $300 if made by americans.
I think the next step will be more versatile machines (aka robots). Which leaves the issue of jobs for americans still unsolved.
Pay $50k for a robot, and run it 3 years, and you undercut even a $20k job. (not including social security taxes, etc.).
She was like chocolate when she drank... semi-sweet at first and then increasingly bitter.
The Chinese are in a wonderful and unique position to take over as the number one superpower and number one consumer of goods, turning the USA into a number 2 or 3 within a few years. Let's start off with the fact that China now has a "middle class" of fairly affluent working class people that is over 300 million strong.
Let me repeat that in case you missed it: Their middle class is as large (or larger) than the entire population of the USA. This middle class is buying. China can now self-sustain. In other words, there are enough people now in China with the money to buy stuff made in China.
So, we, the USA, need the Chinese more than than China needs the USA. Furthermore, the Chinese are smart enough to both "outsource" to cheaper countries than themselves, while acting as middle-men to their USA 'bosses', and while we will eventually get around to cutting them out (as we did to Japan), it will be too late by then, China will be selling in the USA directly (as the Japanese do, with established brands), and, as I said, they can self-sustain.
China, however, may "import" slave-labor (or nearly so, within boundaries of international law), allowing the Chinese a more relaxed lifestyle while imported workers do the grunt work for low wages. This will allow them to keep prices low and maintain their existing infrastructure of factories.
We just need to be careful though that *we* aren't the slave labor they decide to import.
If telephones are outlawed, then only outlaws will have telephones.
Anyone remember "Made in Japan"? Then "Made in Taiwan"? Now, "Made in China". Manufacturing moves to the cheapest location. This is how globalization works, for better or worse. If China becomes too expensive, somewhere else will arise to take up the slack and open near-slave labor factories.
Hopefully, this results in a rise in living conditions for everyone - My personal pessimism has doubts.
Yep, another hell-hole almost definitely. But, is that really a bad thing? It seems to me that outsourcing menial labor is the one international aid package that has a long term history of success. There's a lot of countries that are prosperous, developed nations today that were poor, developing nations when we started sending jobs there.
I'm betting that the next manufacturing center will be Africa, maybe even Somalia (no taxes! (Only joking obviously)). Guess what, anywhere that people can work for pennies on the dollar compared to the competition is going to be a tempting target for industry. And generally anywhere that people are willing for so little is by definition a place where very little is better than what they have now. Eventually, after enough money gets dropped into their economy pennies isn't enough anymore and we move on, but the factories, businesses, and trained workers remain and their economy is much better for it.
I'd love to see manufacturing jobs return to the US, but that isn't going to happen until automation is cheaper than developing nation manual labor. And when that does happen it's going to put the brakes on every developing country who relies on rich countries outsources to them for cheap labor.
Globalization is the way that capitalism wrote an IOU to itself. That IOU is coming due.
No thanks.
Never mind the corruption(making Chicago look saintly) and contempt for the US that still exists there.
Twitter supports and protects racists - by smearing their critics with the "Hate Speech" label.
This also illustrates why in the USA, *small business* success is so critically important to any hope of "economic recovery".
When we talk about such items as $75 Nikes that "would cost $300 if they were made in a factory full of USA union labor, paid $45K plus per year", we neglect the possibility that SMALL companies making unique shoes could compete nicely - providing a truly USA made shoe at more like an $85-100 price point - while still earning respectable salaries for the people working there. Sure, they won't employ nearly as many people as a big factory, or even sell as much product -- but the point is, MANY smaller companies can co-exist, all offering alternatives for footwear.
Sometimes, I think we're so fixated on the concepts of "economies of scale" that we forget it's not a universally beneficial thing? When a business grows to a certain size, they have to spend a LOT of money on advertising/marketing to convince people their product is the one they want to buy/keep buying. (And how is all of THAT paid for? Yep ... rolled right back into the price tag of the product.) They also tend to make so much product, it starts making economic sense for them to automate/mechanize all sorts of processes that allow hiring cheaper labor (employees who don't need as many skills or as much intelligence, because they're pressing a button or pulling a level repeatedly, instead of *understanding* how to do whatever process happens as a result). That leads to a lot of low-paying jobs, vs. a relatively small number of higher-paying ones.
With many smaller businesses turning out similar, competing products - you tend to encourage people to buy more regionally/locally from whichever supplier is nearby -- and they can sell to those folks without needing to launch multi-million dollar marketing campaigns with celebrity sponsors, etc.
Nationalistic bickering aside, this is very good news. As living standards rise around the globe, labor will get more expensive, sure, and our iPods might cost 20% more or something, and in return, human beings on the other side of the planet have food on their table and work to do. It's good for the world that labor in china is getting more expensive in every way except the most short-term "I want my shit cheap right now" way.
We are not going to be able to bully China into submission like we are used to doing around the world. How about if we start trading with her and learning to respect their culture? That doesn't mean ignoring human rights abuses, but it means respectful engagement.
Currently hooked on AMP
Well, they are going to be using a lot more resources - eating more meat, driving more cars, more precious metals, all that good stuff. Energy costs will soar when the global economy recovers. But don't get me wrong, I can hardly complain when their consumption is on average still a fraction of mine. And maybe their armies of engineers will figure out a post-fossil-fuel economy.
There are two commonly held misconceptions in your post:
1) the US manufacturing sector is in decline
The US export per GDP is now #179 in the world. That sounds pretty bad to me. Now, we have such a large economy that the raw numbers look great, but saying the US manufacturing sector isn't in a decline is pure nonsense. If I remember correctly, we're on the same performance level as Burma.
The US economy will cease to exist as you know it within your natural lifetime. I say "natural" lifetime because with the pending socio-political-economic collapse, many people will probably come to unnatural ends much sooner than they expect... ...The United States Federal government, as well as the governments of 49 of the 50 states, are legally insolvent. Not only is the federal government out of money, but the largest area of spending growth is debt servicing...
And more bullshit. Our external debt level is not even at an all time high (which was 120% after WWII). People are flocking from the Euro to the Dollar as we speak. No, really:
Global investors flock to US debt at record speed
Gregory Daco, economist at HIS Global Insight, said the investment trends were clear evidence of trust in the US. "As the sovereign debt crisis in Greece intensified in March, foreign investors mostly sought refuge in the safe-haven US Treasury bonds and notes," he said.
"Nonetheless, government agency securities and corporate debt provided very attractive alternatives for investment – an encouraging sign that investors have faith in the US recovery."
Nationalistic bickering aside, this is very good news. As living standards rise around the globe, labor will get more expensive, sure, and our iPods might cost 20% more or something, and in return, human beings on the other side of the planet have food on their table and work to do. It's good for the world that labor in china is getting more expensive in every way except the most short-term "I want my shit cheap right now" way.
That's a bit shortsighted.
Gadgets are not something like food; their novelty/luxury items. If (when) the cost goes up across the board, people will spend less of their hard-earned money on the things they don't need - ie, gadgets. (Perceived) quality will need to go up a similar proportion as the increase in cost for the product to remain competitive (remember the 'high quality' Erickson, etc. cell phones from a decade ago? - they were supplanted by other products offering a better price value).
In return for the decreased demand, there will be less manufacturing done; this will further increase the manufacturing cost per unit, likely leading to a loss of jobs in the foreign plants (unless they're able to cut costs). Increasing costs to your customers NEVER results in more business unless it is paired with a (perceived) equitable increase in the product.
As for respecting China's culture... sure, I'll get right on that. My first cultural taboo to learn to respect is child labor. After I've gotten over that, I'll work on violent persecution of belief systems I don't agree with (Christianity, Islam, etc.). Then I'll work on agreeing with overt state-controlled censorship, and finally, the wanton destruction of the ecosystem and disregard for dumping toxic waste. In fact, I might start on the toxic waste thing: it's easy, because all I'll have to do is pour some waste oil into the municipal sewer. I figure that by this time next year, I'll have matured enough as a person to start accepting China's particular brand of threats and imperialist encroachment - just in time for their wholesale invasion of Taiwan or Tibet, maybe.
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You should educate yourself on Chinese policy. I'd recommend the USCC (Unites States China Commission) as a start. They're only being nice to us until they can build a bigger military, infrastructure, and 'catch up' with the rest of the technological world.
Yes, letting the renminbi float would drastically help world markets, which is exactly why they won't do it. Not until it's actually to their advantage to do so.
"Our goal each year should be to increase the number of goals we set for ourselves!"
They are building many nuclear reactors:
http://english.peopledaily.com.cn/90001/90776/90884/6640166.html
http://en.wikipedia.org/wiki/Nuclear_power_by_country#Countries_with_nuclear_power_plants
http://www.iaea.org/programmes/a2/index.html (search/highlight "China" on that page)
And I think they are trying to control the supply of materials used for motors and batteries.
Go figure :).