Recently, I read an article written by Joe Biden (I cannot explain why I would ever have done that, except the title was something to the effect that “China is not a threat to US manufacturing”). Additionally, I regularly see TBP members calling out CEOs of corporations for destroying American jobs by sending product (and, more and more, services) overseas. Biden implies that we can overcome difficulties simply by working smarter and getting smarter. Additionally, some TBP members believe, apparently, that the CEOs are simply evil and are eliminating jobs out of spite. In combination, these two things have prompted the following article.
I believe that Biden, and many Americans, simply do not understand the cost differential (not to mention the regulatory differential and costs thereof) between running a manufacturing company in the US versus running a similar company in China. Following are the comparative costs of employing a manufacturing employee in the US versus employing one in China.
I do not wish to make this too technically complex. I have made a lot of assumptions herein, but in general terms the figures are accurate. Some of the assumptions relative to a manufacturing employee in the US are as follows:
– Average salary of $20 per hour
– Family health insurance of $12,000 per year
– Pension of 5% of total pay
– Worker’s compensation and payroll tax of 7.5% each
– Minor other miscellaneous costs of approx.
– Indirect labor costs (ie. managers/engineers/planners/QA/etc.) calculated at $75,000 per year plus above costs, and at a ratio of 4:1
– Vacation of 3 weeks/year, 10 national holidays, 8 days sick leave
–
When you blow through all the USA numbers, you get a cost per hour of employing a manufacturing worker of $47.91. But this number is at 100% efficiency – and allows for no coffee breaks, going to the toilet, chatting with co-workers, coming back late from lunch, etc. When these items are factored in, the cost per one hour of actual work is approx. $59.89 per hour. Major corporations have costs far exceeding these.
Is anyone out there surprised? And please remember these costs do not include profit, materials, indirect expenses like rent/property tax/electricity/ etc. Some indirect compliance costs are included (ie. the costs of EPA compliance, etc. are largely captured in overhead personnel.).
Following are the costs associated with employing a Chinese manufacturing worker. Assumptions are as follows:
– Monthly wage of $600 per month (this is highly variable subject to location, etc. but seems to be a reasonable number) inclusive of overtime
– On-costs (pension is the largest percentage at approx.. 20%), et al of 40%
– Cost of indirect workers at $15,000 per year plus 40% on costs
– 2 weeks of vacation and 10 annual holidays per year (widely variable but considered the norm)
– Direct to indirect of 4:1. This assumption is overstated, as there is far less regulation to attend to (EPA, etc.), and thus should really be reduced, but I have left it the same for comparison purposes.
When these assumptions are entered, the standard rate for a manufacturing employee in China is $6.54 per hour, and $7.70 when allowing for inefficiency estimates.
So we get a per hour DIFFERENTIAL between the cost of labor in the US versus China of $41.37 gross and $52.19 net. Stunning, isn’t it? Generally, when I am asked to quote on a part, I consider the likelihood of the part being eventually offshored to China. For simplicity, I simply assume the labor component of the Chinese made part to be zero, so insignificant is it to the process of making a comparison.
Further, there are huge differentials in cost of rents, cost of purchased materials (sourcing materials locally in China is obviously cheaper than sourcing materials locally in the US), etc. Plus there are often incentives granted by the Chinese government, and company tax is lower in China.
So let’s take a look at what this means to a manufacturer. Let us assume we have two manufacturing plants, one in the US and one in China, each having 100 direct manufacturing employees. The labor cost differential between the two is approx. $9.2 million per year. That is $9.2 MILLION PER YEAR! Plus all other cost differentials. I estimate the total cost differential would be approximately $15 to $20 million when all other cost differentials are included. Again, I ask, is anyone astonished?
Stuck, in a recent post, made comment about a $15 dollar Chinese made toaster. Let us look at that particular case. I am not a toaster manufacturer, but I can make some estimates that should be close.
First, the retailer probably has a $5 mark-up on this item (50%). That leaves $10. I have calculated shipping costs to be approximately $2 per toaster, leaving $8 dollars. Of this, let us say $1 is profit (10%), leaving $7. Assuming a material rate 70% for this item (the most expensive item will almost certainly be the carton!), that leaves a labor cost of $2. Going back to our cost per hour of $6.54, we can calculate the toaster is assembled/handled in 18 minutes. That seems reasonable, perhaps even overstated, to me, in my experience.
So what would the toaster cost to make in the US? Eighteen minutes of labor would cost $14.50. Materials would be more expensive, so let us say $7 in materials. Profit of 10% would be $2.15. Retail mark-up would be $11.80. Therefore, the retail price of the US made toaster would be in the order of $35.45. So a toaster can be made in China, shipped to the US, and sold for $15 dollars, where an identical US made toaster would sell for $35. Who on earth is going to buy that US toaster? Not your average Walmart shopper, that is for sure.
So this is what US manufacturers are up against. American CEOs are not sending jobs overseas just because they are evil – they are sending jobs overseas because they cannot sell their $35 dollar toasters when the same toaster is available for $15 dollars. They simply have no choice but to compete – otherwise their companies will go broke.
It is this reality that proves when Joe Biden says China is not a threat he has no idea what he is talking about. Not only does China have a massive cost advantage with respect to labor, China does not have the headache of the massive regulatory requirements of the US (EPA/OSHA/NLRB/state and local regs/et al).
There was a time when US manufacturers could make a case that they offered far superior quality of product. While China still has some issues in this regard, they have dramatically closed the gap, and manufacturers can no longer assume American made is more desirable from a quality perspective.
Similarly, the US was once much, much more efficient in its manufacture of goods than was China. It was not unusual to find that it took five Chinese laborers to do the job of one American laborer. Again, those days are gone (largely), and China has tooled up and equipped itself to compete much more effectively on this front. As an example, next year China is scheduled to complete a heavy truck manufacturing facility capable of producing 4 million trucks per year. Let me say that again for effect – 4 MILLION trucks per year! This facility will be highly efficient – you simply cannot make that volume of trucks inefficiently. What will that do, in the long-term – to truck manufacturing in the US/world-wide?
So where does that leave US manufacturing? I think that only companies with the following characteristics will have any chance of survival in the long run: First, the product will need to be difficult or expensive to transport relative to the cost of manufacture, or highly susceptible to transport damage. Second, the product will need to be specialized and largely unique/special made (think custom painted/special ordered/etc.). Third, the product will also need to have very tight delivery time requirements (ie. the product is special and it is required now, not in six weeks).
Even these specialized products will gradually be squeezed out, as China finishes off “low-hanging fruit” (low hanging fruit is the fruit that is easiest to pick). Right now, China is going for the volume items, but will eventually turn its sights to the lower volume, and more specialized, manufacturing fields. In the end, most true manufacturing will disappear from the US, and any that remain will more likely be assembling of foreign made components rather than true manufacturing as such. The perfect illustration of this is US automotive manufacture – the US really does not manufacture automobiles any more, but rather assembles parts, a great many of which are imported, into the finished vehicle.
So in summation, this article was intended 1) to clarify the huge cost differential between the US and China cost of labor, 2) to refute the general argument that US CEOs are choosing to manufacture in China, and show that they have no viable alternative, and 3) to paint a realistic picture of what is the likely future of US manufacturing. The regulatory red tape that is drowning small manufacturers is a further obstacle and makes the prospects of overcoming the cost pressure being applied by China (and its ilk) even more unlikely.
Clearly, I am very pessimistic about the future of manufacturing in the US. Surely, the cost differentials will close over time. But it will be far too late for the vast majority of US manufacturers, as they will have long disappeared before this happens. The next thing that will come under attack will be service industry that can be done electronically. Right now, call centers are the perfect example. But soon it will include accounting, etc. The cost of labor in the US is simply uncompetitive internationally. The US is moving far too slowly to improve its skill base sufficiently to justify the current differential. China and similar countries are educating and training their citizens by the millions, while the American standard of education continues to fall. The coming collapse will be monumental. It is unlikely that even the most skilled and innovative Americans will be able to ride out this storm unscathed.
I have a client who was the youngest VP at one of the first box stores, he then went to start a tech company that flopped. He consults to China. Even where they regulate it is a mess. He has a contact over there that makes stainless steel kitchen shit for restaurants. By day it is a factory that makes some non polluting widget, a front. At night when there are no inspectors they make the stainless steel shit and dump the pollutants into the water.
I’m sure Summers would be proud, his memo encouraged moving polluting factories to LDC’s which China is no longer on that list.
Davos – the shit they get away with is unbelievable. A guy I know visited a casting plant over there. He said employees were killed in the plant of 5000 almost daily. They simply carried the body out back for the family to collect – end of story. The employees worked in vats of acid without protective clothing because it was cheaper to replace dead/mutilated employees than it was to buy the protective equipment. Try to compete economically with that kind of evil.
LLPOH, good article in educating people about general costs of manufacturing.
Thanks for taking the time to write it.
A couple of additional points to consider.
1. China manipulates their currency. That’s what gives it a significant percentage of that advantage.
2. Generally accepted multiplier for pay and benefits is 150% (based on F500). 250% to 300 % seems questionable.
3.US worker productivity (on average) is much higher than Chinese productivity – largely due to automation.
3. US is still world’s #1 manufacturer – so we still make a lot – very efficiently. Not many jobs. J
4. Our Government trade reps have sold us out to the Chinese — so that a few favored manufacturers get preferrential treatment and nobody else can compete head to head.
Almost everybody else uses tariff’s to negate the devloped world regulatory burden.
Ewwwwwwwww! As screwed up as this shithole is it sounds like there is worse. Now that is sad!
llpoh
Do you think some of the advantages that China has in manufacturing are unfair?
If so, do you think we should put tariffs on Chinese products which could shift some manufacturing back into the US?
DD – referencing above:
1) agree.
2) the multiplier is accurate relative to pay vs benefits. HOWEVER it is not representative re pay versus COST PER HOUR ACTUALLY WORKED. When you factor in 3 weeks vacation, 2 weeks national holidays, 8 days sick leave, the cost per hour worked skyrockets way above the theoretical dollar per hour the employee is paid. Total benefits are admittedly not double wages as such. For instance, if you say the avarage wage is $50k, then you would have $12 k insurance, around 8K payroll tax + workers comp, etc. Plus a few miscellaneous benefits. Actual hours worked would be approx.1800 hours, or an hourly rate of almost $40 per hour. To this I add an indirect labour component (support staff cost that is unavoidable) of approx. a third of that – taking the actual cost of providing one hour of actual direct labour to well over $50 per hour for work actually done. Some break out the indirect labor separately, but I do not. By taking the combined figure I use it is much easier to get a full cost of labor figure for a plant of a given size without having to calculate labor components separately. In any event, both the Chinese figure and the USA figure I show includes the indirect cost in it.
Re your # 3) you are correct, but the advantage is falling. It really is getting close, especially if you take into consideration downtimes/work ethic (ie waste time) of employees. It is much closer today than ever before, and the gap is closing rapidly.
Re #4) I agree re tariffs.
Admin – the fact that we effectively have an open trade policy with China is extremely unfair. We are allowing imports into the US from a country that does not protect intellectual property, that virtually has no contract law, that has no enforceable health and safety protection for their employees, that does not enforce EPA, that effectively has no trade unions, etc.. Yes some kind of protection is required against that – the playing field is absolutely slanted. Even if wages were equal, there is absolutel no way that the US could compete in the long given the regulatory burden. The US needs to require importers to meet the same regulatory requirements as do local manufacturers.
“Free Trade” is a bullshit concept and has been one ever since it was coined.
You can’t have “free trade” without an even playing surface and carting out dead employees to the back loading dock for their relatives to pick up is not a level playing field.
We need to go back to the import tariff model of financing government – at least in sufficient quantities to allow in-sourcing of manufacturing jobs to this country. No country can sustain itself as a “consumer” economy driven by printed money and credit beyond a point where no one wants to hold the fiat money. We are there right now……..
No Smoot-Hawley please.. No replay of the 1930’s (although what is going to happen is going to be far worse) by trade protection to the extreme. There is no argument that “free trade” coupled with fiat money and unlimited credit expansion has driven a huge increase in standards of living across the globe – the USA included.
BUT DAMMIT, it is pulling demand forward and eating its’ own young in the process. Sooner or later (like right NOW) you finish eating your tail and start munching on parts that are required to live. Then you stop munching or die. The illuminati have decided to eat until we all die.
This didn’t happen overnight – it took 40 years of mismanagement, credit creation, growing debt and funny money creation to get us where we are today.
If we take our medicine (and throw some big fat asses in jail), we can start producing again but it’ll be a long haul from a much lower level and resource exhaustion and lack of oil will limit where we can climb back to. But we’d survive at a lower level.
Right now, it appears we will extend and pretend until we are (as Davos wrote) “totally finished” and that will cause a die off of significant proportion and probably the end of this country as we know it today.
Fret not, resource exhaustion will hit China too, sooner than later. They’re in worse shape than we are as far as over-extention of stupidity in the building department is concerned and when they fall, it will be crunch hear round the world.
Europe first, US second, Chine third? We will – WILL – see.
MA
I love hearing the pearls of wisdom emerging from our VP’s pie hole about working smart. This coming from a man that isn’t the brightest bulb on the tree and has never worked an honest day in his life.
I would love love love to see Joe “Gaffe-o-matic” Biden take over from the Obama-nator. If we’re going to crater the country in an ocean of debt, let’s at least get some entertainment out of the deal.
Steve – lmao! Biden isn’t the sharpest tool in the shed, for sure!
Muck – nice. Hope you are right re China. I think they are survivors, tho.
Another profound difference between the US and China is the culture. I’m certainly no expert – but from what I’ve seen – we’re somewhat naive about assuming the rest of the world shares our ideas about ethics and fair play. Europe does somewhat because we have common cultural roots. Not so with China or Asia.
The Chinese look at that as simply foolishness and another reason to take advanage of somebody too stupid to understand how western values and morals aren’t shared in the east.
Prime example, asians don’t have a high regard for life. The story above is hardly unique.
Dave,
If you had limited your remarks to something like, “Asians can’t drive worth a shit,” I’d be giving you a thumbs up. But to say that they don’t have a high regard for life? There are a couple billion Asians walking the planet. I know some of them. They value life plenty. That’s a very broad brush you’re painting with.
Here’s the side of cheap labour manufacturing you don’t hear about
Can’t remember the source – a Chinese news site as I recall..about a year ago.
You wanna compete against this shit ? Best of luck.
In Bangladesh, a garment worker makes 22 cents an hour. The wage in Cambodia is 33 cents an hour; in Pakistan, 37 cents an hour; in Vietnam, 38 cents; in Sri Lanka, 43 cents; Indonesia, 44 cents; India, 55 cents; the Philippines, $1.07; and Malaysia, $1.18.This is the globalized marketplace for labour in which we must compete. (Note that convicts at Federal Prison Industries make from 22 cents to $1.18 an hour.)
Wal-Mart, “with over $400 billion in sales and about 2.1 million employees…is the world’s largest retailer and private employer.” Under Wal-Mart’s “Open Availability” policy, all “associates” must be available 24/7. This puts its “associates” in a position in which they are forced to put Wal-Mart ahead of their families.
At Wal-Mart, “associates” have to ask for a day off four weeks in advance. There are no emergencies. And since “associates” get demerits for any absences – no matter what the reason – this encourages them to go to work sick – even food-handlers. “Associates” are not told how many demerits they’ve racked up ’til “D-Day” comes. On “Decision Day” “associates” have to “write an essay on why they like working at Wal-Mart, why they should keep their job, and how they’ll improve their future performance.” Based on this essay, they’re kept on or fired. If they keep their jobs, they’re put on a year’s probation and can be fired for the slightest infraction
Half of Wal-Mart’s “associates” get no health insurance, and those who do pay much of the cost and get very little for it. When “associates” opt out, or decline these magnanimous “benefits,” Wal-Mart saves the money it doesn’t have to pay in wages. Half of Wal-Mart’s American “associates” make so little money they need Food Stamps in order to feed their families. That makes taxpayers liable for the portion of their “associates'” wages that Wal-Mart refuses to pay
Overall, Wal-Mart’s “associates” are “overworked, underpaid, (many below the federal poverty line), denied benefits, discriminated against, punished for the slightest infraction, and treated like” property.
Let’s look into our future at work under globalized wages and working conditions. Let’s take a look at China. Jason Chen reported that “Microsoft, IBM, Dell, Lenovo, and HP keyboards were likely were made under horrific working conditions at a Meitai Dongguan City, China factory” where workers are forbidden to talk, raise their heads, or put their hands in their pockets. They lose 3 day’s pay for leaving their work stations without permission. They’re fined if they’re a minute late. They get searched when they come to and leave work.And if they hand out flyers or discuss working conditions with outsiders, they’re fired.
The assembly line never stops. Workers who need to go to the bathroom have to wait for a scheduled break. Taking Sunday off costs them two and a half days’ pay. They average up to 81 hours a week, including 34 hours of overtime, 318% over China’s legal limit. Their base pay is 64 cents an hour, and after deductions for room and board†(and in our case, that would include health insurance), their take-home pay amounts to 41 cents an hour. And they’re often cheated out of as much as 19% of it.
They lose two hours pay for “not lining up correctly while punching time cards or at the cafeteria”, for not working “diligently,” and for putting personal possessions on their work desks. They also face a loss of two hours pay for “not parking bicycles according to company regulations, riding them at the facility not according to company rules, and returning to dorms after curfew
They lose seven hours pay for switching dorm beds without permission, and one and a half day’s pay for getting to work over an hour late, “riding the elevator without permission, using dorm electricity without permission, using company phones for personal calls, producing low quality products, socializing with other employees during working hours, entering or leaving the factory without being inspected, or treating supervisors ‘with an arrogant attitude’
But perhaps that’s the pot calling the kettle black. China’s “Human Rights Record of the United States in 2009” found documentation on 5,057 workplace deaths in the US in 2007, the last year for which figures are available. That’s 17 of us – every day! And “Not one employer was criminally charged for any of these deaths.” The report also found child hunger combined with “rampant child labor in agriculture: some 400,000 child farm workers pick America’s crops. The US also leads the world in imprisoning children and juveniles…”
Last September, one “worker was burned to death while breaking apart a South Korean tanker,” and another was left in critical condition.† “Three more were seriously burned when their blowtorches struck a gas tank that exploded…” Workers are “often paralysed or crushed to death by falling metal plates.”
On average, each ship, in addition to “15,000 pounds of asbestos, contains 10 to 100 tons of lead paint.† As a result, workers are exposed to toxins from asbestos, lead, PCBs, mercury, arsenic, dioxins, cadmium, solvents, black oil residues and carcinogenic fumes from melting metal and lead paint.”
“Helpers, often children, go barefoot or wear flip flops, use hammers to break apart asbestos, then shovel it into bags to dump in the sand.” There’s no basic protective gear. “Cutters using blowtorches wear sunglasses, not protective goggles; baseball caps, not hardhats; dirty bandanas around their noses and mouths, not respiratory masks; and two sets of shirts, not welders’ vests…” “They often work on ‘floating stairs,’ bamboo rope ladders. They hang on with one hand and operate a blowtorch with the other and use their teeth to turn liquid gas and oxygen valves on and off”
LLPOH,
Great article and comment stream.
The line that stood out to me, and speaks volumes, is where you said that you consider, for simplicity, the labor component cost of the Chinese part to be zero.
I also agree absolutely with your insightful comment that China, while going for high volume now, will eventually turn to lower volume, highly specialized manufacturing fields. I think that is an inevitable development in the coming years.
Agree with Muck that free trade is a fantasy and that without an even playing surface America has been taking it up the ass in that department for years.
And Dave Doe nailed it when he stated that China views the American adherence to ethics and fair play as simply foolish and stupid and is terrific reason for them to take advantage of us.
Going on midnight EST, so I’m through for the night.
ZD – that is the crap I am talking about. To allow goods to come in from countries behaving like that is disasterous for the US and for the people of the developing countries as there is no incentive for the companies to change their behavior.
Thanks Smokey – some fine work you did today. Fine indeed. It wouldn’t surprise me if the Admin doesn’t come out for a week after the beating you gave him.
llpoh
Great article, as usual.
Question on one of your statements, “The US needs to require importers to meet the same regulatory requirements as do local manufacturers.”
Uh, how’s that gonna happen? A Deparment of Import Regulatory Standards and Requirements for Manufacturing? Members of whom travel to foreign countries to inspect how products are made? Passing the buck to IMPORTERS? Who oversees the importers? Who does the comparitive analysis of U.S. versus foreign manufacturing of product X?
More bureaucracy and greater product cost are what I see out of your suggestion. Another fucking can of worms, amigo.
Sorry SSS – “imported goods” I should have said. Geez – picky picky picky. It would be up to the exporting countries to establish that they are meeting the US requirements. It would of course take some oversight. Get the Army to do it – they will have plenty of time on their hand when we bring them home. But of course we already have a Customs Agency – they would be the most obvious choice to oversee the requirements, it seems to me.
Zombie Dawg
More anti Wal-Mart propaganda bullshit. Give it a rest, asshole. You toss out a long tirade of cut-and-paste, unsubstantiated crap against Wal-Mart. Back it up with facts, dickweed. Average salary. Health benefits. Pension plans. Stuff like that.
Fucking loser.
Llpoh said, “It would be up to the exporting countries to establish that they are meeting the US requirements.” Well, damn, why don’t we just start supporting a “Fox Watching the Henhouse” policy on foreign trade?
You’re digging a hole here, llpoh, particularly on trade with China and other cheap labor countries. Look, take your pick. Tariffs or free trade. Those are the practical and least costly choices of the past, and they remain so today. Everything else is bureaucratic bullshit.
I have only been flying over the comments, but, really, the question is: What could be a solution to this problem?
What does Austrian Economics say here? What do major schools of economic thought have to offer here?
Next to financials gone casino, this is one of the main problems of globalization and I never seem to hear a good solution.
Otherwise I´d have to say: competition, tough shit?
I think we are at a stage were we must introduce the concept of a “fair, free-market economy”, repeat the term whenever we can, and begin to find out ourselves what that could practically mean.
How’s the saying go ?
“When you can’t back your position attack the poster” or something like that…
But feel free to provide facts to back your position…
You’ll note I mentioned it was 3rd party. No claims of verification made.
Here’s a starting point for you SSS :
http://www.clrlabor.org/campaigns/wal-mart/resources.htm#facts
Oh, be my guest and flame me – we aussies are as thick skinned as the average croc.
Water off a ducks back…go for it kiddo !
Of – when the labor rates are so out of whack as they are now, absent tariff intervention, there will be no stopping the outflow od jobss to the low-cost nations. As these countries improve efficiencies, the outflow may well quicken its pace. No one provides an answer as the only answer would sem to be intervention via tariffs. Not a pretty picture.
ZD – unfortunately, the link you posted was for a far left-wing union/greenie group. That organization can in no way be trusted to report anything.
There are geat atrocities committed by companies in developing nations vis a vis their employees, there can be no doubt. But I sincerley doubt that you can put Walmart in the same category. Walmart is certainly low-paying, but that is not a crime.
Zombie Dawg
Fuck you. You post some link to a far left article that accuses Wal-Mart of violating human rights. Are you fucking shitting me?
Jesus Christ, you live in Australia, and you buy some bullshit that says Wal-Mart is violating your human rights. Ok. Then kick Wal-Mart out of the country, you weak-kneed twit. File suit with the International Court of Justice. Do something to stop this egregious injustice!! Has ANY of that happened? Not from you limp-wristed Aussies, that you can be sure.
You answered none of my challenges. Typical of left-wing assholes. Particularly Aussie assholes.
If the expensive American toaster were of a quality that would make toast for me for 35 years (like the 50’s toaster my mother got as a wedding present and gave to me decades later) I would gladly pay the extra for a US product that would function every morning and that I wouldn’t have to replace—
— every 2 fricking years at $15 per purchase X 35 years =
17 goddam Chinese toasters costing me a whopping $255 for the same thirty five years of toast.
Fuck the Chinese. We can make toasters in the US and turn a profit. I’ll be the first one to buy one, count me in.
You have unwittingly touched on one of my soft spots ~toast~
My favorite food group. I eat toast every day and if I don’t get my toast I’m a grumpy curmudgeon.
And these crappy no good Chinese toasters that burn one side and don’t heat the other then fritz in a few months are a bane in my life. Then I have to throw the piece of shit away and buy a new toaster that does a piss poor job of making toast.
By god if the Chinese may be able to build bullet trains and skyscrapers and dams galore but they sure as hell don’t know shit about making toasters. Utterly incompetent.
Marissa,
The problem now is that even if you wanted to buy an american toaster (or many other items) you can’t. There no longer made here.
That’s the unfortunate one way nature of going too far with offshoring. The consumer who could vote with their dollars no longer can.
Perot certainly looks more prophetic today. I actually voted for him in 92 but mostly because of his budgatary stance (I was under the free trade delusion at the time).
Sir James Goldsmith also made some prophetic statements.
He predicts what has happened with almost scary accuracy.
Steve,
My comments weren’t meant to be derisive to asians. They have as much right to be here as any of the rest of us.
However, I do think there are some profound cultural differences which are often left out of discussion of how the two countries clash. Weirdly enough for us, American Culture has been one of our most successful exports.
Chinese accepting people being routinely killed in their plants is a pretty big cultural differnece but speaks more to the “culture” of the people running the country than to the people getting killed.
3 weeks of vacation, 8 sick days, and 10 national holidays? Fuck’s sake, I gotta get out of this company… working for LLPOH sounds like a wonderland. Got an email address there LLPOH?
5 days vacation, 5 sick days for me. I’m quite sure I don’t get 10 national holidays either. How are some holidays more national than others? Goddamnit.
Here I go with fusion again. With unlimited energy, manufacturing becomes obsolete completely. It becomes entirely automated by nanobots that can build shit on a molecular/atomic level. World’s unemployment rate = 100%? Dream big.
I want a 3d printer. I’m not sure what I would make with it…
Perhaps a replica of every great sculpture ever in my front yard? 3d printed cherubs on my patio? Take pictures of LEGOs and print them out, sidestepping the cost of paying LEGO 50 bucks for a pile of plastic that costs 10 cents? Any good ideas out there? 3d printers seem so cheap… But I’m still trying to think of a compelling reason to get one.
The second world war was one of the driving factors behind the U.S economic power of the 20th ct.
Huge orders for arms prior to and during, vast amounts of patents and economic concessions wrangled form the brits in exchange for obselete eqiupment.
Then the vast amounts of resources poured into europe in the shape of the marshall plan twinned with massive war debts of the allies.
Finally the huge injection of money form returning G.I’s eager to enjoy life again.
This led to the U.S being more economically powerfull than the next six countries PUT TOGETHER.
The Chinese rise is down to massive demand for its products from the developed world, demand made possible with huge debt.
Everyone has a plasma t.v, a laptop, coffee maker etc.With the 1st world now reining in purchases of luxury or even anything not essential to daily life ( food clothing) where is the demand that has fuelled Chinas rise coming from?
Every time I go to the shops the products made in China are marked down cheaper and cheaper, and everytime the number of people buying these items diminishes.
China has the worlds lowest internal consumption (30%, the U.s the highest at 70%) and although this is still a large volume of people is it enough to drive 9-10% growth?
The other developing nations can make their own products so where will the chinese turn to for new markets for their goods.
This is why they are so keen to bail out Europe/U.S because were using that money to prop up their economy.
If the 1st world treid to stop borrowing and actually live within their means Chinas rise would be stunted maybe even reversed.
Sadly I think we are too far down the road to stop now.
What will come first, Chinese hemegony or global collapse?
We have the Chinese goods and they have pretty pieces of paper called T Bills.
You borrow a $100 from me and you have a problem. You borrow $1.5T from me and I have a problem. China has a problem. That’s why they’re quietly trying to exchange their fiat TBills for hard assets.
It’s hard to see any of this ending well but who takes it in the rear the worst is yet to be seen.
From what I’ve read China puts a 20% import tax on all American made stuff going in; but shrieks bloody murder when we start talking about taxing their imports.
Doesn’t help when the US goobermint encourages companies to move their manufacturing base overseas either: http://www.naturalnews.com/033506_Gibson_Guitar_American_workers.html
LLPOH
Fascinating commentary and great comments. I agree with you on the future of US manufacturing. As our economy continues to decline, more and more companies will go overseas in order to stay competitive. As more American based companies move their operations overseas, our brightest manufacturing minds will help implement better quality systems at Chinese factories. As you pointed out, there will be limited ways for US manufacturers to stay in business in the future. US manufacturers will have to find a small niche and within that niche they will have to work very hard to maintain marke share. Based on my experiences, there are certain industries that will never completely go overseas due to the short lead times that the industry demands. Unfortunately, these industries will still go overseas with what they can but they will hedge their bets by maintaining relationships with US manufacturers in order to make sure they have a source when lead times demand it.
Why start a manufacturing business in the US where the risk is high when one can find a source in China and import goods from China to meet the needs of the US at a cheaper cost and lower risk? Does it even make sense anymore for an entrepreneur to start a manufacturing business in the US? If we continue to promote big government with more taxes and more regulations, we will continue to send jobs overseas not by choice but by the market forcing companies to do so.
llpoh
If you would be so kind, can you explain (guess, if you have too) why German manufacturing isn’t suffering in the same manner as American manufacturing?
Specifically, I think German labor costs are on par with ours, if not higher. And their indirect costs are waaay higher … Krist, I think the average worker gets 2 months vacation per year. Material costs can’t be that much different.
Yet, their manufacturing is booming. Their products are expensive yet, people buy them. How can they be competitive, and we can’t?
My dad was a dapper dresser. He wasn’t a clothes whore, but he only bought the highest quality stuff for himself and the family.
We used to travel to NYC to a store called “Salamander” to buy shoes. They carried mostly shoes from Europe, and they were expensive .. and we were not rich. When I once asked him why we do that he said cheap crap was too expensive. Quality shoes, he said, last for years and years. Cheap shoes fall apart after a couple years and he was to poor to afford that.
So, back to the toaster. Well … let’s make it a food scale. I’ll buy a $60 German scale (and did, in fact) before I buy a $15 cheap-ass Chinese made piece of shit any day of the week. Anybody even remotely interested in quality will never ever buy Chinese shit.
Stucky,
They use trade tarriff’s and other mercantilistic practices. They also make good stuff.
Germans also have a very nationlistic personality. They will buy German first and only an export if it’s not made in their country. Much different from our consumer behavior.
I’ll be interest in seeing LLPOH’s reply.
“They will buy German first and only an export if it’s not made in their country.”
That’s quite true. That’s why my dad bought me German-made shoes all the way through high-school! Nevertheless, Germans consuming their own stuff is not sufficient alone to explain their manufacturing success. I too look forward to llppoh’s response.
Stuck
Good question regarding how Germany is a leading exporter with wages and costs similar to the US. I was wondering the same thing and I’m curious to hear if anyone has any knowledge to why this is the case. Germany sure does a good job at making high quality products that the rest of the world wants to buy.
Stuck – I think Dave Doe is pretty spot on. I think a lot comes down to culture. They also are a very regimented people that like order and discipline in things – which suits manufacturing.
One thing DD did not mention is that I understand Germany sells a lot of stuff (lots and lots) to the old eastern European block. Tools and equipment to help them develop – plus I understand they provide a lot of funding for the purchases. This is a huge component of their success – they have a large and growing customer base right next door creating demand and they finance it themselves. I also understand that a lot of Greek debt was also used to buy German goods – financed by Gerrmany – which is one of the reasons they are hesitant to cut Greece lose – the hit to German banks would be substantial.
It is uncertain they can sustain their success as their markets mature and become more self reliant. Germany has a substantial debt problem of its own.
Poor old SSS..
You know, I see this anger and hostility all the time as a gym instructor.
People come into the gym fat and unhappy with their crappy lives and want vengeance against the world for making them the way they are and it shows !
They’re angry towards others in a futile effort to display pseudo superiority over them and somehow compensate for their inadequacies or psyche deficiencies..
As I said personal attacks are pointless,for you see I have the inner strength, health and fitness both mental and physical to shrug them off. You can use every expletive you know, make some up, and still be wasting your time, ‘cos I won’t bite.
From a psychological perspective it’s you that has the problem as evidenced by your inability to conduct yourself in a socially acceptable manner in a basic discourse. Regardless of who’s right or wrong on the Walmart issue or any other, rudimentary courtesy and maturity should apply in the discussion.
You clearly have significant anger management issues which you should seek treatment for, as repressed anger is very self destructive both mentally and physically, as well as affecting relationships and your career. Ultimately YOU are the one who loses.
All your tirades against me ( and all Australians ) do is to demonstrate to the world that I’m right so you just make a fool out of yourself.
Unfortunately such anger is all too common both online and off which is a sad indictment of the modern world, but only you can change you. You need to address the root cause of your unhappiness fast before it becomes all consuming.
Releasing your anger in a controlled manner is a good thing so if you want to rant some more go ahead, but remember the root problem remains even though you won’t allow yourself to admit it.
Best of luck from me and all other fuckwit retarded loser jerkoff spineless asshole Aussies 🙂
Now, back on track :
Regardless of political stance, I believe (assuming I have a right to hold an opinion ) that Walmart has a significant record of employee discrimination.
The current massive class action case against them, while overturned for now, is a prime example and it will be interesting to see how it turns out. Not exactly what you’d call a small or frivolous case…
http://www.huffingtonpost.com/2011/06/21/walmart-case-supreme-court-aids-powerful_n_881301.html
Ah well, that’s enough time on the computer – the real world beckons.
Stuck, please don’t give away all the old timer secrets as I don’t want to have to wait in line at the local Red Wing / Danner boot store (one of the few left) 🙂
Quality still pays. If you can find it.
Work ethic and pride of product. If you can’t compete in quality your only out is a huge price advantage. I will always pay more and buy a top quality product and feel I come out ahead in the long run. If the US can begin producing best in class products, with our advantages in natural resources and technologies, there is no reason we can not compete and dominate in a global economy.
Making it a priority to not buy the cheapest consumable disposable Chinese product is a must. Buying generation quality items, and taking pride in making the best product available is the ticket.
The current crop of unemployed people will need to learn that the reward for hard work and a job well done is a good life, but not an easy one! Poor working conditions and unfair treatment of workers will have the same natural consequences that it has in every other post industrialized nation. It all comes out in the wash.
Freddy:
You ARE being watched. don’t start none, won’t be none…
I fucking hate cheap China Crap. I do go out of my way to by anything that is not made in China. My wife bought a cheap ass Mr Coffee maker made in China and it lasted a whole 6 months. After she watched me beat that thing to shreds with a baseball bat one morning when my coffee did not perk (I need my morning cup of coffee) I kindly explained to her why we buy quality items in this house. We now have a Krups coffee maker made in Germany and it works fantastic. But it is hard to find things that are of good quality anymore.
I think China or India (I am an Indian BTW) or any other Asian nation will be able to bring down America and the West in the long run, but Americans can do that themselves.
You take an average upwardly mobile Asian (Indian, Chinese, Philippino) and we all still look to the West as an ultimate destination. My personal choice is to spend my retirement in Austria, Germany Denmark or any such North European country. I could even settle for USA if they refuse to photograph my genitals at the airport.
Now ask me despite all the development happening in the East and the Arab nations why people prefer to be in the West. My one word answer would be the “Rule of the law” prevailing in these countries. Yes liberties are under attack, militant Islam is raising its ugly head, but still the rule of the law prevails.
India and China may become rich, but the quality of life will never match that of the West in the foreseeable future. The Rupee and Yuan or the Dinar or the Ruble will never become reserve currencies even if these become 100% backed by gold. I will never own any currency controlled by the Chinese or Russian government. What is it that makes the difference?
Societies are not made in 50 years by terrific economic growth, societies are built on much more stronger foundations. It is built on ideas and the West has been extremely fortunate to have been built upon the foundations of Christianity, reformation, democracy, individual liberties, renaissance etc. Just because China and India becomes materially prosperous does not mean these ideas will be automatically imbibed into culture in a span of a generation. Far from it.
I am a 35 year old (or young) person in the software field. In 15 years I will be decently wealthy to afford a lifestyle in the Western world and I’d be quite excited to spend a part of my retired life in the West. There are many Indians with similar aspirations. I will never be a burden on the society which gives me an opportunity to live there, rather immigrants with enough capital should be welcomed and that will become the West’s biggest strength. The Western government in its zeal to combat terrorists actually put restrictions on productive capital.
Will the West capitalize on its strengths and encourage capital, migration of highly skilled professionals, tourism, etc and such industries to get out of the current rut it is in? I think the current situation is temporary and it will pass, but not without some extreme pain and losses in the process.
Correction – Please read the sentence “I think China or India (I am an Indian BTW) or any other Asian nation will be able to bring down America and the West in the long run, but Americans can do that themselves.”
as
“I don’t think China or India (I am an Indian BTW) or any other Asian nation will be able to bring down America and the West in the long run, but Americans can do that themselves.”