Hard Light Productions Forums
Off-Topic Discussion => General Discussion => Topic started by: SypheDMar on June 04, 2011, 05:00:28 am
-
What the author doesn't get is that Hollywood is successful the world over because it makes stuff THAT NON-AMERICAN PEOPLE OFTEN LIKE. Chinese media, despite being very heavily protected is almost totally uncompetitive even on its home turf, the Avatar Incident made that abundently clear.
I have no idea what the Avatar incident is, but I know that Red Cliff is still loved in China. Every other point I agree with. My Chinese friends still use PPS and all sorts of ways to watch Friends, How I Met Your Mother, Big Bang Theory, etc.
Because there aren't any. Despite living in China for 6 years except for a rare short story I haven't seen a single TV series or film based on space. Sci-fi in China in general is slim pickings.
I can tell. :p That's why I only watch their cop/crime movies. (Hong Kong ones.)
Does China even have Sci-Fi?
The last "Chinese" sci-fi movie I watched was actually a Hong Kong movie, and that had to do with with an alien Furby-Dog hybrid.
I think few months ago i've read that china actually banned SF not to give people ideas (possibly about democracy?). On the other hand, how else do you want to govern several planets that are lys away from each other? You have to give them autonomy, or else your empire will crumble...
This is far from correct.
That article a while back said time travel I think... with some hilarious reason ala "it makes for bad/implausible storylines so we won't have it!" attached. ;)
And the worst thing is, that is so true. :wtf: We should make it a constitutional amendment, at least.. :P
If you ever watched a Chinese TV show that had time travel in it, it's usually stupid. It's actually used in Chinese shows A LOT. I figured that the higher ups got annoyed at the stupidity of it all, and when they realized they were all watching American shows, they had no choice but to ban time travel. :p
-
I have no idea what the Avatar incident is, but I know that Red Cliff is still loved in China. Every other point I agree with. My Chinese friends still use PPS and all sorts of ways to watch Friends, How I Met Your Mother, Big Bang Theory, etc.
See qazwsx's post. Confucius was pwned by Avatar, which wasn't a particularly good film either. It wasn't for lack of trying on the part of the Confucious team, they brought in several heavy hitting actors from Hong Kong and it had a fairly large budget.
If you ever watched a Chinese TV show that had time travel in it, it's usually stupid. It's actually used in Chinese shows A LOT. I figured that the higher ups got annoyed at the stupidity of it all, and when they realized they were all watching American shows, they had no choice but to ban time travel. :p
That was something that only came up in recent years, but the reason it was banned wasn't really because it was stupid. One of Chinese people's biggest deficiencies is their blind worship of the past, despite having acomplished essentially nothing for hundreds of years and despite having a much better life now than what could have been possible a long time ago they still cling to it. Since the party is supposed to be leading them into a glorious future that doesn't exactly make it look good, hence the banning.
EDIT:
Blade Runner was doing the futuristic Chinatown stuff in the early 80's, that's old-hat now.
That was because back then the thinking was Japan would grow into a superpower and be the leading edge of technology innovation (having all the answers they're better than us blah blah blah) into the 21st century. With only a couple of exceptions this didn't happen, and in fact in many areas their competitiveness has significantly decreased. In 1989 in terms of sales out of the top 10 semiconductor makers 6 were Japanese, today it's only 2. That is rather telling and should serve as a cautionary example of why hype about China and India, despite their potential, should not be taken too seriously.
-
Hahaha the US already outsourced most of its semiconductor manufacturing to other countries too. Come wartime we'll be depending on China for our chips. And our steel production, along with the rest of the capacity to build **** we lost after deindustrialization.
Even the "American" chip manufacturers let cheap Chinese and southeast Asian labor get most of the actual work done. The decline of first world manufacturing didn't just happen in Japan.
-
Hahaha the US already outsourced most of its semiconductor manufacturing to other countries too. Come wartime we'll be depending on China for our chips. And our steel production, along with the rest of the capacity to build **** we lost after deindustrialization.
Even the "American" chip manufacturers let cheap Chinese and southeast Asian labor get most of the actual work done. The decline of first world manufacturing didn't just happen in Japan.
isuppli disagrees (http://en.wikipedia.org/wiki/Semiconductor_sales_leaders_by_year#Ranking_for_year_2010)
Given that China has yet to produce a single world class semiconductor company I wouldn't count on it. In fact their entire industry is several generations behind.
Even the "American" chip manufacturers let cheap Chinese and southeast Asian labor get most of the actual work done. The decline of first world manufacturing didn't just happen in Japan.
Semiconductor fabrication isn't labor intensive, so making chips here isn't much cheaper than it is elsewhere.
-
That was because back then the thinking was Japan would grow into a superpower and be the leading edge of technology innovation (having all the answers they're better than us blah blah blah) into the 21st century. With only a couple of exceptions this didn't happen, and in fact in many areas their competitiveness has significantly decreased. In 1989 in terms of sales out of the top 10 semiconductor makers 6 were Japanese, today it's only 2. That is rather telling and should serve as a cautionary example of why hype about China and India, despite their potential, should not be taken too seriously.
The difference with China is that they have the population, skill, and the resource to match. Also, unlike Japan, they have an influence and are an alternative to the U.S. Countries back then could survive without Japan. Countries now cannot survive without China. The biggest difference, though, is that Japan is a vassal state of the U.S. By that I mean that Japan did whatever the U.S. told it to do because they had little choice given the situation at the time. When Japan was told to increase the value of the yen, they did so. When they were in a recession, we ignored them.
I don't believe that a Chinese-dominated Asia is the inevitable future, but I'm more skeptical of a continued, more permanent America-centric West lasting for much longer.
That was something that only came up in recent years, but the reason it was banned wasn't really because it was stupid. One of Chinese people's biggest deficiencies is their blind worship of the past, despite having acomplished essentially nothing for hundreds of years and despite having a much better life now than what could have been possible a long time ago they still cling to it. Since the party is supposed to be leading them into a glorious future that doesn't exactly make it look good, hence the banning.
I was joking. :p Of course they don't ban stuff because it's stupid. As far as accomplishing essentially nothing goes, up until the 18th century, Asia was the economic powerhouse of the world. Up until the Opium War, China and Japan accounted for 35% of the World's GDP whereas the US and Britain was only around 7%. I don't know about the Chinese blindly clinging to the past, so I can't argue that point.
-
Up until the Opium War, China and Japan accounted for 35% of the World's GDP whereas the US and Britain was only around 7%. I don't know about the Chinese blindly clinging to the past, so I can't argue that point.
China also had the largest population, but due to its internal fragmentation and heavily conservative mindframe, was on an irreversible decline until the 20th century. Their great technical innovations, economy and other unique aspects essentially evaporated as the state devolved in a myopic sideshow. The other thing to note is how many of China's great endeavours were specifically driven by the state: from Cheng-Ho's great voyages in the 15th century to the maintenance and routine reconstruction of the Great Wall, the state was able to employ at the time the worlds greatest technology and expertise for these exercises, but then turn towards of a period of stagnation that only was changed by a substantial challenge posed by an outside force.
The Japanese on the other hand, were quite determined to avoid getting into the political mess the Chineses government had devolved into and being dominated by the European powers, so their growth and temporary empire is nothing short of a miracle, but they lacked substantial domestic resource production like the US or Russia.
-
The difference with China is that they have the population, skill, and the resource to match.
So did Russia, look what happened to them.
Countries now cannot survive without China.
If China didn't exist there are still dozens of other improvrished nations we export our ****ty toy making jobs to. The adjustment would kind of suck, but it would be temporary.
The biggest difference, though, is that Japan is a vassal state of the U.S. By that I mean that Japan did whatever the U.S. told it to do because they had little choice given the situation at the time. When Japan was told to increase the value of the yen, they did so. When they were in a recession, we ignored them.
Japan only got where it did because of unfair trading practices and a massively undervalued currency. And no, they were not ignored when their economy crashed. Time and time again recommendations were made for reforms that would have corrected the issues that stalled the economy, but they were ignored for being "unjapanese". What happened and continues to happen was entirely their fault.
The other thing to note is how many of China's great endeavours were specifically driven by the state: from Cheng-Ho's great voyages in the 15th century to the maintenance and routine reconstruction of the Great Wall, the state was able to employ at the time the worlds greatest technology and expertise for these exercises, but then turn towards of a period of stagnation that only was changed by a substantial challenge posed by an outside force.
Not entirely accurate. A very long time ago it had a very open and inquisitive society (by the standards of the day) and were making many advances which lead it to become a major force in the region, but starting from ~500 years ago that all changed to become the inward, automoton like people they are today. That is what caused their decline.
-
Not entirely accurate. A very long time ago it had a very open and inquisitive society (by the standards of the day) and were making many advances which lead it to become a major force in the region, but starting from ~500 years ago that all changed to become the inward, automoton like people they are today. That is what caused their decline.
More like a very large generalization; the Chinese decline is a highly problematic and very complex issue, they indeed had an open minded society, but with conclusion of Cheng-Ho's voyages the Chinese had hit the apex of their power, but a number of changes within the government and policies, not too mention rulers and societal changes pushed it towards a conservative mindset focused on the past. Or simply put, the government ossified and gradually the majority of the populace as well. While China did have a big economy, during the last 500 years its attitudes towards merchants (whom were usually foreigners) got very condescending to the point they were regularly expelled or had their assets seized - this is similar to Europe at the time, but the European leaders painfully learned that kicking the merchant also destroyed their ability to raise cash to fight wars.
The minor problem with decline related studies is that there are several reasons for the decline and eventual collapse/stagnation, much like how the Western Roman Empire had essentially evaporated, the startling reversals in Chinese history fall within the same complexity, and you've heard me say before, would require a seperate thread.
-
The difference with China is that they have the population, skill, and the resource to match.
So did Russia, look what happened to them.
China is like almost ten times as bigger as Russia. Please don't compare.
-
China is like almost ten times as bigger as Russia. Please don't compare.
It also has ten times a bigger problem trying to modernize, whereas Russia after WW2 came to the table with a reasonably modern economy capable of producing modern goods. The comparison is fairly valid.
-
The difference with China is that they have the population, skill, and the resource to match.
So did Russia, look what happened to them.
China is like almost ten times as bigger as Russia. Please don't compare.
Sorry, what? Russia has twice the land area of China.
-
In terms of population.
-
Okay that I can see.
-
Hahaha the US already outsourced most of its semiconductor manufacturing to other countries too. Come wartime we'll be depending on China for our chips. And our steel production, along with the rest of the capacity to build **** we lost after deindustrialization.
Even the "American" chip manufacturers let cheap Chinese and southeast Asian labor get most of the actual work done. The decline of first world manufacturing didn't just happen in Japan.
isuppli disagrees (http://en.wikipedia.org/wiki/Semiconductor_sales_leaders_by_year#Ranking_for_year_2010)
Given that China has yet to produce a single world class semiconductor company I wouldn't count on it. In fact their entire industry is several generations behind.
And? The biggest chip companies are American in name only. Their manufacturing operations are mostly outsourced.
http://www.manufacturingnews.com/news/10/0212/semiconductors.html
China led the world last year in new semiconductor factory construction, with six fabs, followed by Taiwan with five, and Korea, Japan, the European Union and Southeast Asia, all with one apiece.
As of 2009, the percentage of global semiconductor production capacity located in the United States was 14 percent, down from 25 percent in 2005 and 17 percent in 2007. Japan has the highest share of global capacity (at 25 percent), followed by Taiwan (18 percent, up from 11 percent in 2001), Korea (17 percent, up from 11 percent in 2001), Europe and the Middle East (11 percent), China (9 percent, up from 2 percent in 2001) and Southeast Asia (6 percent).
The United States does lead the world in one category, however: closures. In 2009, 27 fabs closed worldwide, with 15 of them in the United States (followed by four in Europe, four in Japan, two in China, one in Korea and one in Southeast Asia). The number of closures last year almost doubled from the previous year, when 15 fabs were shut down worldwide, again, with the largest number in the United States (at four).
Goodbye US manufacturing, hello Sisyphean service sector circlejerk.
-
This thread has gone off at one hell of a tangent...
I'll split it out later, too tired at the moment.
-
No need at this point. Just correcting a poor fo' who asked about something I said.
Let this be a message for the rest of the unwashed masses. Do not question the enlightenment I dole out to you. I do nothing but read Wikipedia all day. You do not.
-
Goodbye US manufacturing, hello Sisyphean service sector circlejerk.
From that list China and southeast asia are the only ones that have low labor costs. The rest are just as expensive as america, and they are supposed to be our allies. There are other reasons to source production elsewhere.
-
From that list China and southeast asia are the only ones that have low labor costs. The rest are just as expensive as america, and they are supposed to be our allies. There are other reasons to source production elsewhere.
Sure, wages aren't the only factor. But if that's meant as a "NO U" I think I'm done here.
Just thought I'd edit in that currency manipulation among other policies do push costs way down in countries like Japan and Taiwan, which is a major reason why they are such successful exporters.
-
Sure, wages aren't the only factor. But if that's meant as a "NO U" I think I'm done here.
No it was not a "NO U" thing, I don't play that way. One of the reasons to outsource is the rediculous regulations in the US about exporting hi tech products, the only way around it is to produce in the countries you plan to export to.
Just thought I'd edit in that currency manipulation among other policies do push costs way down in countries like Japan and Taiwan, which is a major reason why they are such successful exporters.
Yes they do push costs down, but Japan's economy has largely been stagnant for the last 20 years, I'm not so sure following their lead would be a good idea. Besides, with the dollar sinking like it is we'll soon enough know what it's like to have a weak currency, and it won't be pretty.
-
No it was not a "NO U" thing, I don't play that way. One of the reasons to outsource is the rediculous regulations in the US about exporting hi tech products, the only way around it is to produce in the countries you plan to export to.
You mean dual use restrictions, that kind of stuff? That alone makes little difference. It isn't just technology manufacturing that's being outsourced, rather it's manufacturing of every kind, and for similar reasons. And it does kind of make sense to prevent the Chinese from getting the technology to produce Raptors and modern submarines.
Yes they do push costs down, but Japan's economy has largely been stagnant for the last 20 years, I'm not so sure following their lead would be a good idea. Besides, with the dollar sinking like it is we'll soon enough know what it's like to have a weak currency, and it won't be pretty.
Stagnant in a relative sense insofar as Japan wasn't booming like it was for decades and it had a hiccup in the 90s. But when you control for demographics they've been doing as good or better than the US. Convenient and crappy wordpress link if you don't believe me, not that there would ever be any doubt.
http://www.thoughtofferings.com/2011/04/real-gdp-per-capita-and-myths-about.html
(http://2.bp.blogspot.com/-BbER4e0JwOY/TaSLJHFLZwI/AAAAAAAADdg/Wv11Nlj4dW0/s1600/RealGDPPerCapita_US_Japan_1980-2009.png)
Of course Japan is "only" going to grow maybe 1.5% this year thanks to the underwater Godzilla fart wrecking the entire country but per capita growth the last few quarters in the US has been disappointing too.
And why am I saying this. Economic growth differences are a whole new tangent, and there are several other successful Asian economies to look at (South Korea, Taiwan, Singapore, etc). The point is that the US is pretty much standing around doing nothing while it's industry is getting scrapped.
And about the weak dollar; that's been boosting US manufacturing, doing a bit to close the gaping current account deficit, and working to correct some of the huge global capital flow imbalances that contributed to the current mess.
-
:bump:
One question I have about that link, does it take into account all of the bridges to nowhere and white elephants that have been built at taxpayer expense to prop up the system?
And about the weak dollar; that's been boosting US manufacturing, doing a bit to close the gaping current account deficit, and working to correct some of the huge global capital flow imbalances that contributed to the current mess.
Things like manufacturing basic consumer goods are never going to come back, once China gets too expensive then there's plenty of other poor countries to make that stuff. So ultimately it is the middle class that gets hurt by this, not helped.
-
That's just bull****. I'm no right winger, but even myself can see that free trade is not hurting the middle class when you get to have basic consumer goods a lot cheaper. You are focusing on the visible lost jobs and forgetting all the rest of stuff, not only like the jobs that poor people get in other countries, but more to the point, the cheap goods that come to your country as a result, and the fact that when you pay the chinese with dollars, you'll eventually get that money back by investment. So you got not only good saves throughout the country due to cheaper goods (and thus people can spend in other things and create new markets, therefore new jobs), but now you also have new investers.
And this is no small feat. One could say that the chinese investment did a good job in protecting the USA from an economic meltdown.
-
One of the biggest problems in the US is that when it comes to things like manufacturing, the vast majority have no idea how; we can't ever employ welders, carpenters, etc, on a mass scale like China; most of our populace have little to no practical working skills; blame the mad rush for everyone to go to college instead of get "dirty" jobs like mechanics or electricians. This isn't news, but it's a cornerstone of our unemployment problems; we just don't have a labor pool that has large amounts of practical, useful skills anymore.
-
One of the biggest problems in the US is that when it comes to things like manufacturing, the vast majority have no idea how; we can't ever employ welders, carpenters, etc, on a mass scale like China; most of our populace have little to no practical working skills; blame the mad rush for everyone to go to college instead of get "dirty" jobs like mechanics or electricians. This isn't news, but it's a cornerstone of our unemployment problems; we just don't have a labor pool that has large amounts of practical, useful skills anymore.
The problem isn't that there's no supply of manufacturing talent, it's that there's no demand. Putting more people into the manufacturing sector would increase unemployment and create more Detroit.
Nobody wants more Detroit.
-
You are focusing on the visible lost jobs and forgetting all the rest of stuff, not only like the jobs that poor people get in other countries, but more to the point, the cheap goods that come to your country as a result, and the fact that when you pay the chinese with dollars, you'll eventually get that money back by investment.
The opposite is happening overall. In a nutshell, the US is running a current account deficit which means net investment is flowing into the country.
I don't assume you've heard of the balance of payments identity. The balance of payments is composed of the national current account and capital account. A nation's balance of payments must sum to zero when all components are included. The current account has several components; the largest of these is usually the trade balance. A country which imports more than it exports must finance its trade deficit somehow. This is done by selling assets (stocks, bonds, factories, mines, etc) to bring capital into the country. Therefore a country's capital account must move opposite to it's current account.
All this means is that the US economy is financing short-term consumption by sacrificing future profits from asset ownership. This is what is usually meant when the US is referred to as a "debtor nation": the private as well as public sector both depend on foreign asset purchases (Treasuries are an asset). Conversely a country which exports more than it imports and runs a current account surplus will run a capital account deficit and will invest in other countries faster than it sells assets to them.
This is all besides the point though. By outsourcing manufacturing, especially over the past decade, the US has traded its ability to produce goods for what turned out to be a brief period of service (mainly retail) sector and housing price fueled growth supported by an unsustainable coincidence of low but rising foreign wages and a pileup of liabilities. Now that seems to be ending, and the US will eventually have to make up for lost time and build an economy on production rather than salary inflation and debt.
The problem isn't that there's no supply of manufacturing talent, it's that there's no demand. Putting more people into the manufacturing sector would increase unemployment and create more Detroit.
Nobody wants more Detroit.
What exactly do you mean by "putting more people into the manufacturing sector"? People are obviously going to go wherever the jobs are. Right now one of those places is manufacturing.
ISM's Employment Index registered 58.2 percent in May, which is 4.5 percentage points lower than the 62.7 percent reported in April. This is the 20th consecutive month of growth in manufacturing employment. An Employment Index above 50.1 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) data on manufacturing employment.
http://www.ism.ws/ismreport/mfgrob.cfm
Manufacturing remains well below capacity and there's no shortage of labor yet, but it is coming back and a weaker dollar will increase demand for US produced goods.
That's just bull****. I'm no right winger, but even myself can see that free trade is not hurting the middle class when you get to have basic consumer goods a lot cheaper.
Its a lot more complicated than that; most professional economists will say what you said in more theoretical terms but this is a narrow view. As a nation you get cheap plastic crap for a time but only by bleeding assets and accumulating liabilities. Large foreign capital inflows feed speculation. International wage competition slows wage growth. And you lose a lot of secure unionized manufacturing jobs for relatively tenuous service sector ones. Not a good deal for the average American in the long run. It is a good deal for exporting countries however.
-
From that list China and southeast asia are the only ones that have low labor costs. The rest are just as expensive as america, and they are supposed to be our allies. There are other reasons to source production elsewhere.
If you insist on sauce...
http://www.plantengineering.com/search/search-single-display/rising-labor-costs-in-china-may-cause-manufacturers-to-return-to-us/648179741a.html
Manufacturing is expected to return to America as China’s rising labor costs erase most savings from offshoring. Reinvestment during the next five years could usher in a ‘manufacturing renaissance’ as the U.S. becomes a low-cost country among developed nations, according to analysis by The Boston Consulting Group (BCG).
Within the next five years, the United States is expected to experience a manufacturing renaissance as the wage gap with China shrinks and certain U.S. states become some of the cheapest locations for manufacturing in the developed world, according to a new analysis by BCG.
-
Yeah, its a good deal for the exporting countries' people. And if you make a pause and temporarily forget that you are an american but not that you are an earth citizen, then you actually see that this is taking millions of people out of misery... and that this is good stuff, not bad.
So sure, the pressure is on the middle class, as if I am not aware of this myself!, but at the same time I can afford stuff that my parents couldn't, even despite the fact that their wages weren't so pressed as mine is.
-
One of the biggest problems in the US is that when it comes to things like manufacturing, the vast majority have no idea how; we can't ever employ welders, carpenters, etc, on a mass scale like China; most of our populace have little to no practical working skills; blame the mad rush for everyone to go to college instead of get "dirty" jobs like mechanics or electricians. This isn't news, but it's a cornerstone of our unemployment problems; we just don't have a labor pool that has large amounts of practical, useful skills anymore.
The problem isn't that there's no supply of manufacturing talent, it's that there's no demand. Putting more people into the manufacturing sector would increase unemployment and create more Detroit.
Nobody wants more Detroit.
No, that's car manufacturing, and that's not even manufacturing; I'm talking about people who know how to machine, weld, etc. Most of Detroit was unskilled people screwing in bolts or drilling holes; there was welding and whatnot, yea, but a lot of that has been mostly automated.
There is currently not a lot of demand for American manufacturing compared to China, but that's because American stuff isn't that great and Chinese stuff isn't that bad. There is a lot of demand for plumbers, electricians, etc, and all of those talents relate; if you can weld you can weld pipes in a house or a car or in an airplane.
The point is that there aren't a lot of people in America with real skills anymore. Most people don't know how to build anything - the vast majority of the American work force these days, especially those coming out of college, have no practical experience in many of the things they do. As Mike Rowe said, we've become a nation of people who put money on the table and expect things to be fixed.
-
I definitely agree that if you're a plumber or electrician you can actually do pretty well for yourself. Having worked construction, though, I can see why we as a nation prefer to hire Mexicans to do it.
-
Yeah, its a good deal for the exporting countries' people. And if you make a pause and temporarily forget that you are an american but not that you are an earth citizen, then you actually see that this is taking millions of people out of misery... and that this is good stuff, not bad.
So sure, the pressure is on the middle class, as if I am not aware of this myself!, but at the same time I can afford stuff that my parents couldn't, even despite the fact that their wages weren't so pressed as mine is.
Doesn't really matter if it helps people, free trade (or what's usually referred to by that term) has done a lot to increase global competition and efficiency. The problem is when trade results in unsustainable changes to the world economy or a few countries practice currency manipulation. In those cases it slows world growth.
Would be nice if the US didn't just stand around while the Chinese government (among others) devalues its currency by 30-40%. It's unliateral disarmament: we say "free trade" and China stays mercantilist. A 20% tariff on all Chinese goods would be a start. The US is in a position of strength here; exporters depend on us for growth and employment more than we do on them. It just insists on staying the course of neoliberal dickery.
-
Doesn't really matter if it helps people, free trade (or what's usually referred to by that term) has done a lot to increase global competition and efficiency. The problem is when trade results in unsustainable changes to the world economy or a few countries practice currency manipulation. In those cases it slows world growth.
I'd like to know more about this. Why does currency manipulation slows down growth? It's a very useful tool to keep the balance sheets sane enough. I wished that Portugal could still "manipulate" their own currency, we wouldn't be in the mess we are in.
Would be nice if the US didn't just stand around while the Chinese government (among others) devalues its currency by 30-40%. It's unliateral disarmament: we say "free trade" and China stays mercantilist. A 20% tariff on all Chinese goods would be a start. The US is in a position of strength here; exporters depend on us for growth and employment more than we do on them. It just insists on staying the course of neoliberal dickery.
I happen to think like Milton in this respect (and no, again I'm not a neoliberal... I'm all for NHS and free education, etc.):
http://www.youtube.com/watch?v=j0pl_FXt0eM&feature=player_embedded
-
I'd like to know more about this. Why does currency manipulation slows down growth? It's a very useful tool to keep the balance sheets sane enough. I wished that Portugal could still "manipulate" their own currency, we wouldn't be in the mess we are in.
Currency manipulation artificially lowers costs and creates incentives to relocate production to more expensive, less productive countries that practice it. You make your exports more competitive not by actually improving their quality or developing more efficient productive processes but just by tweaking their price. Foreign countries give you their capital and assets so you can export more stuff to them; the manipulators sacrifice current consumption by shipping consumer goods off elsewhere in exchange for assets and fixed capital to increase future growth.
edit: You can see how this can affect growth imagining what would happen if the US manipulated production costs to attain the same result. What if instead of China subsidizing goods produced within its borders 40%, the United States placed a 40% tax on domestic production? If you think China having an undervalued currency helps us, then shouldn't we overvalue our currency even more?
Sure, currency manipulation would be good for Portugal (or whatever other nation that practices it). But it imposes greater costs on production in other countries because the market price of producing on Portugal is made inaccurately low.
Friedman claims manipulation hurts the country that performs it, as a form of "foreign aid". In practice, like with the example of Portugal you gave, it boosts employment and industrial capacity in these countries at the expense of others.
-
Currency manipulation is good if you have a pressing problem to solve, but if you devalue your currency, you are effectively empoverishing the population. You don't want to do that without a good reason, and the best solution for any country is to have its currency as high as possible.
So sure, it boosts production in the near term, but it is very bad in long term, since many technologies one country has to invest in to develop its own economy are built outside of that country. If you devalue your currency, you are making these technologies more expensive, and you'll be out-competed by richer economies which can afford these technologies.
So it all balances out, I think. There is no need for protectionist measures. But there's another question lurking here. I've heard many times that china's currency is "undervalued". And I ask, how the hell anyone knows? How does one get to know the "True" value of a currency? If China's currency has its value, then, for me, that is its "True" value. And I see benefits and losses to that state of affairs.
As benefits, China is the biggest pressure against inflation in the world right now. This is very good stuff. OTOH, you are in trouble if you want to sell goods to china. However, china does not need "outside goods" more than it needs to industrialize and develop itself, given the hundreds of millions still in poverty. So they will sacrifice their purchase power for the chance of having more jobs and more work to do.
You are still thinking in zero-sum games, I think. I don't agree with that vision at all.
-
So sure, it boosts production in the near term, but it is very bad in long term, since many technologies one country has to invest in to develop its own economy are built outside of that country. If you devalue your currency, you are making these technologies more expensive, and you'll be out-competed by richer economies which can afford these technologies.
So it all balances out, I think. There is no need for protectionist measures. But there's another question lurking here. I've heard many times that china's currency is "undervalued". And I ask, how the hell anyone knows? How does one get to know the "True" value of a currency? If China's currency has its value, then, for me, that is its "True" value. And I see benefits and losses to that state of affairs.
It doesn't "all balance out". Having to pay a bit more for patent rights or whatever you are referring to is worth improving your access to foreign assets and capital. Currency manipulation has a long history and empirically it's clear that the strategy does work. It's helped the big Asian economies develop very rapidly, even if they would have done almost as well, and at less cost to production elsewhere, without it. Japan stumbled when (among other things) the government did not react to external events that strengthened the yen, but it would not have as strong an economy without manipulation.
The "true" value of a currency as far as this discussion is concerned is the value the market arrives at in the absence of government intervention. Failing that, when one country manipulates the exchange rate of its currency everyone else will have to impose controls as well to return world trade to a state where capital flows more efficiently allocate resources toward expanding production with prices that accurately and consistently reflect the cost of production.
You are still thinking in zero-sum games, I think. I don't agree with that vision at all.
I mention zero-sum games here but I don't advocate them. Rather it's best for production everywhere else if other countries take China to task about its exchange rate policy, and tariffs can bring costs more into line with economic realities in this case.
A currency exchange rate generally approaches accurate market value when the government doesn't do anything to affect it. A forklift produced in China ought to cost close to the same as one made in America (before shipping and handling). The fact that it doesn't is a sign of market inefficiency; some company will buy a forklift in China instead of America even if it can be made in the latter more quickly and with fewer production inputs. Thus a purchasing power parity calculation is often used to calculate renminbi undervaluation. Alternatively an analysis of the cost to China's currency reserves for holding down it's currency could be used.
The measures of renminbi undervaluation vary, but they run from 15 to 60%.
http://ideas.repec.org/p/cpb/memodm/166.html
-
So sure, it boosts production in the near term, but it is very bad in long term, since many technologies one country has to invest in to develop its own economy are built outside of that country. If you devalue your currency, you are making these technologies more expensive, and you'll be out-competed by richer economies which can afford these technologies.
So it all balances out, I think. There is no need for protectionist measures. But there's another question lurking here. I've heard many times that china's currency is "undervalued". And I ask, how the hell anyone knows? How does one get to know the "True" value of a currency? If China's currency has its value, then, for me, that is its "True" value. And I see benefits and losses to that state of affairs.
It doesn't "all balance out". Having to pay a bit more for patent rights or whatever you are referring to is worth improving your access to foreign assets and capital. Currency manipulation has a long history and empirically it's clear that the strategy does work. It's helped the big Asian economies develop very rapidly, even if they would have done almost as well, and at less cost to production elsewhere, without it. Japan stumbled when (among other things) the government did not react to external events that strengthened the yen, but it would not have as strong an economy without manipulation.
The "true" value of a currency as far as this discussion is concerned is the value the market arrives at in the absence of government intervention. Failing that, when one country manipulates the exchange rate of its currency everyone else will have to impose controls as well to return world trade to a state where capital flows more efficiently allocate resources toward expanding production with prices that accurately and consistently reflect the cost of production.
But prices aren't meant to reflect "the cost of production". We are living under a free market, not marxism.
I agree that gov intervention is usually not "efficient". But it is useful, and mostly to poor countries to get the benefits of a devalued currency. However, when such countries develop themselves to reach a wealthy state of affairs, they can't maintain this devaluation. I really don't see this as a problem. If you are saying that this is bad because poor nations get more competitive with it, I can't see it as a "problem", but rather as a good "solution".
You are still thinking in zero-sum games, I think. I don't agree with that vision at all.
I mention zero-sum games here but I don't advocate them. Rather it's best for production everywhere else if other countries take China to task about its exchange rate policy, and tariffs can bring costs more into line with economic realities in this case.
A currency exchange rate generally approaches accurate market value when the government doesn't do anything to affect it. A forklift produced in China ought to cost close to the same as one made in America (before shipping and handling). The fact that it doesn't is a sign of market inefficiency; some company will buy a forklift in China instead of America even if it can be made in the latter more quickly and with fewer production inputs. Thus a purchasing power parity calculation is often used to calculate renminbi undervaluation. Alternatively an analysis of the cost to China's currency reserves for holding down it's currency could be used.
I really don't understand how you can say that production in China ought to cost the same as in the states, as if there was some physical law that forced this statement to be true. Labor costs in China are reaaaaaally cheap compared to the states. Shipping costs are nil. I can't see how your solution to tariff them is beneficial to anyone but to the governmental budget. So they devalue their own economy, rendering chinese as "slaves" to the rest of the world. How do you see this as an unfair advantage is beyond me. This is akin to a group of professionals undercutting everyone else's prices by living far worse than them.
The measures of renminbi undervaluation vary, but they run from 15 to 60%.
http://ideas.repec.org/p/cpb/memodm/166.html
Thanks a lot for the source, I'll learn a few things with it!
-
But prices aren't meant to reflect "the cost of production". We are living under a free market, not marxism.
I agree that gov intervention is usually not "efficient". But it is useful, and mostly to poor countries to get the benefits of a devalued currency. However, when such countries develop themselves to reach a wealthy state of affairs, they can't maintain this devaluation. I really don't see this as a problem. If you are saying that this is bad because poor nations get more competitive with it, I can't see it as a "problem", but rather as a good "solution".
Whoah whoah whoah, who mentioned Marxism? That pseudoscience has nothing to do with this.
Firms will produce additional units of product until marginal cost equals marginal revenue. Firms that insist on producing at a point where their marginal cost exceeds marginal revenue will go out of business; firms that produce at a point where marginal revenue exceeds marginal cost will (if they're not a monopoly and are in a competitive market) fail as well because competition ensures total revenue at this point will not cover total cost (average plus fixed costs; think of these as cost per unit plus the overhead cost of running the firm). The contrasting forces of economies of scale and diminishing returns will tend to equalize prices everywhere in the absence of barriers to trade. If your industry is inefficient and has strongly diminishing returns to scale it's most economically efficient for you to produce less. If your industry is highly efficient and has less sharply decreasing returns to scale then you should produce more. This ensures the highest level of output. Any sort of state distortion such as currency manipulation "deceives" the invisible hand into allocating too many factors of production toward countries that distort.
Here's a pic. D=MR means demand = marginal revenue, ensuring that the economy as well as the firm produces as much of a product as buyers are willing and able to pay for.
(https://mrski-apecon-2008.wikispaces.com/file/view/mc_and_mr/54428442/mc_and_mr)
As for the other points: being wealthy doesn't make it any harder to maintain currency manipulation; the developed Asian countries that practiced manipulation in the past still do so. Currency manipulation slows world growth, and in the long, long run that makes everyone poorer.
I really don't understand how you can say that production in China ought to cost the same as in the states, as if there was some physical law that forced this statement to be true. Labor costs in China are reaaaaaally cheap compared to the states. Shipping costs are nil. I can't see how your solution to tariff them is beneficial to anyone but to the governmental budget. So they devalue their own economy, rendering chinese as "slaves" to the rest of the world. How do you see this as an unfair advantage is beyond me. This is akin to a group of professionals undercutting everyone else's prices by living far worse than them.
Firstly, currency manipulation only lowers your wages in relative terms by increasing costs everywhere else. Sure, there is some wage competition that lowers wages in the US, but currency manipulation drives it back up. A cheaper renminbi means a relatively more expensive dollar and Euro.
To address what you said about costs- that is true, but things are more complicated. There's a difference between marginal and average costs. Marginal cost is the cost to produce one additional unit of output. Marginal costs ought to balance out; more resources should be allocated to more efficient economies with higher output per cost until they produce at the same marginal cost as everywhere else due to diminishing returns on investment. Again, this is why prices will equilibriate globally in the absence of trade barriers. Average costs however are not going to be the same everywhere because they are simply the total cost of production divided by the number of units produced. Efficient economies will have lower average cost in a reasonably undistorted market.
Let me give you a concrete example. Let's say you make money picking cherries. There's a tree with $5 worth of cherries on each branch. You go for the low-hanging fruit first, of course, since that's the easiest to get at. Your marginal revenue for picking all the cherries on the lowest branch is $5 and your marginal cost is zero since you can easily reach them with your hand. Eventually you pick all the cherries in easy reach and need to spend $4 per cherry on electricity for your cherry-picker to reach up to the next branch. Your marginal revenue is still $5 but marginal cost has gone up to $4. It's still profitable for you to pick cherries so you keep doing it. You soon pick all the ones on this branch and now need even more power to reach the next branch. You still get $5 in marginal revenue but have to pay $5 in marginal cost for the extra electricity. MC=MR and you are now indifferent to producing one additional unit of production; you will keep picking cherries and running your cherrypicker up to this point but no further because the fourth branch would require $6 of electricity to reach and you would cost the economy more than you were producing to reach it.
Now what if someone over the border (lets call him Bob) can pay half as much as you to pick cherries from an indentical tree with the same equipment just because their government prints money to keep their currency 50% undervalued? The power company will relocate because investors would rather give Bob $3 to pick cherries from the fourth branch than give you $4 to consume less power to reach the same number of cherries. Bob will keep producing past the fourth branch and hog all the electricity you could have used more efficiently.
That's uneconomic, and not how things are supposed to work.
Thanks a lot for the source, I'll learn a few things with it!
No problem. Google "effect of currency manipulation" or something and you'll get plenty more information. Here's a congressional report on Japan's practices, with options to get them to cut it out.
http://www.fas.org/sgp/crs/row/RL33178.pdf
Currency manipulation is really a small part of the problem though, since prices adjust most of the way regardless. Retaliating against manipulators is better than letting the problem fester for decades. But global trade imbalances have more to do with extremely low savings rates in the United States than anything else.
-
Firms will produce additional units of product until marginal cost equals marginal revenue.
Yeah, I get this too, except that it isn't absolutely true. Economies are dynamic and new technologies, new markets, new demands and etc. are always changing the graphic. The price of stuff is always dependent between the pressures between demand and offer, and if the market stays stable for a long time, then yeah you are right. But for many things, this is simply not true.
As for the other points: being wealthy doesn't make it any harder to maintain currency manipulation; the developed Asian countries that practiced manipulation in the past still do so. Currency manipulation slows world growth, and in the long, long run that makes everyone poorer.
I don't quite get this point, it's a little above my head...
Now what if someone over the border (lets call him Bob) can pay half as much as you to pick cherries from an indentical tree with the same equipment just because their government prints money to keep their currency 50% undervalued? The power company will relocate because investors would rather give Bob $3 to pick cherries from the fourth branch than give you $4 to consume less power to reach the same number of cherries. Bob will keep producing past the fourth branch and hog all the electricity you could have used more efficiently.
Yeah, I get it. If Bob can produce more cherries while still profiting, is because he and everyone else living on that side of the border is poorer.
A very poor nation will find, for instance, "personal" agriculture profitable. In a rich one, you'd be out of job with it. I guess the example is exactly the same as yours.
But people don't take that kind of poverty with a smile. If people are poorer than in other nations, they will ask why to their politicians. The reason why this is not happening in China is because they are growing up like mad. When they stop growing like that, they will have to stop the devaluation of their currency, to appease the population.
That's uneconomic, and not how things are supposed to work.
Perhaps, but here are two thoughts. First, the "suppositions" on how things should work are not an absolute, they are merely personal preferences. Second, perhaps while being less efficient from an economical point of view overall, it helps people get out of poverty faster than they otherwise would be. And if you take that into account, if you understand that, for instance, population education is very important for the future economy, and that if people are trapped into poverty they won't be able to educate their sons, then it follows that lowering poverty as fast as possible should be a priority over the overall "efficiency" of the market, with better results long term.
Currency manipulation is really a small part of the problem though, since prices adjust most of the way regardless. Retaliating against manipulators is better than letting the problem fester for decades. But global trade imbalances have more to do with extremely low savings rates in the United States than anything else.
Ok
-
Firms will produce additional units of product until marginal cost equals marginal revenue.
Yeah, I get this too, except that it isn't absolutely true. Economies are dynamic and new technologies, new markets, new demands and etc. are always changing the graphic. The price of stuff is always dependent between the pressures between demand and offer, and if the market stays stable for a long time, then yeah you are right. But for many things, this is simply not true.
Sure. But innacurate pricing due to exchange rate controls don't help.
As for the other points: being wealthy doesn't make it any harder to maintain currency manipulation; the developed Asian countries that practiced manipulation in the past still do so. Currency manipulation slows world growth, and in the long, long run that makes everyone poorer.
I don't quite get this point, it's a little above my head...
Simple. Faster growth in the overall economy will speed growth everywhere eventually. Its not going to happen in an individual lifespan or even in the lifespan of a country, but small differences in growth add up. Slowing world growth now for your benefit costs you expotentially more as time goes on.
But people don't take that kind of poverty with a smile. If people are poorer than in other nations, they will ask why to their politicians. The reason why this is not happening in China is because they are growing up like mad. When they stop growing like that, they will have to stop the devaluation of their currency, to appease the population.
Perhaps, but here are two thoughts. First, the "suppositions" on how things should work are not an absolute, they are merely personal preferences. Second, perhaps while being less efficient from an economical point of view overall, it helps people get out of poverty faster than they otherwise would be. And if you take that into account, if you understand that, for instance, population education is very important for the future economy, and that if people are trapped into poverty they won't be able to educate their sons, then it follows that lowering poverty as fast as possible should be a priority over the overall "efficiency" of the market, with better results long term.
There's a good argument there for foreign aid to developing countries there. China could use more infrastructure and education spending. Overall, though, the main effect of exchange rate controls is to depress domestic consumption (including spending on things like education) in order to boost exports rather than significantly affect education outcomes. Additionally, China already has quite good public education education enrollment (95%) and its exchange rate policy is a major drag on developing countries looking to export.
http://www.cfr.org/china/chinas-exchange-rate-policy-heat/p21455
China might stop currency manipulation on its own at some point decades from now for whatever reason, but development is unlikely to matter in this decision looking at the history of other countries which practiced the same policy.
None of this is really personal preference when taking everyone's interests into account. All of the benefits of manipulation are relatively short term and the costs long term. A stronger world economy means faster technological advance and faster poverty reduction in countries other than China if you insist on thinking in the medium term. And when you slow global economic growth it will come around to you, if not now then many generations later.
-
Overall, though, the main effect of exchange rate controls is to depress domestic consumption (including spending on things like education) in order to boost exports rather than significantly affect education outcomes. Additionally, China already has quite good public education education enrollment (95%) and its exchange rate policy is a major drag on developing countries looking to export.
Ok, you convinced me there, except for the little issue of depressing consumption will include education, which I don't think follows very well. Education is an internal activity, not an import...
China might stop currency manipulation on its own at some point decades from now for whatever reason, but development is unlikely to matter in this decision looking at the history of other countries which practiced the same policy.
You made a point about Japan. Is there any possible relationship between japan's currency manipulation and the apparently unlinked "lost decade"?
None of this is really personal preference when taking everyone's interests into account. All of the benefits of manipulation are relatively short term and the costs long term. A stronger world economy means faster technological advance and faster poverty reduction in countries other than China if you insist on thinking in the medium term. And when you slow global economic growth it will come around to you, if not now then many generations later.
I see. So it's a kind of a tragedy of the commons phenomena. But if they do this by overprinting money, wouldn't that cause big time inflation instead? I better read on your sources before venturing on these things I badly understand though... thanks for your time
-
Ok, you convinced me there, except for the little issue of depressing consumption will include education, which I don't think follows very well. Education is an internal activity, not an import...
Education is domestic consumption. However, devaluing the exchange rate will raise the price of domestic consumption (or lower the value of the currency you use to pay for it; same effect). The end result is the resources you need (college educated professionals - eg teachers, construction equipment, managers, whatever you have to pay for to fund education) become harder to get as they are reallocated to producing exports. But it really makes little difference either way in regards to exchange rates.
You made a point about Japan. Is there any possible relationship between japan's currency manipulation and the apparently unlinked "lost decade"?
It was likely part of it. The Plaza Accord of 1985 was an agreement between the US, West Germany, the UK and Japan to allow the yen to appreciate. This encouraged investment to flow into Japan (rember the balance of payments identity and the capital account moving opposite exports?), fueling the asset price bubble. It also forced a disruptive patrial transition from an export based economy to one based more on domestic consumption. Other factors contributing to the Japanese asset price bubble leading to the Lost Decade might include low interest rates and banking derequlation. They all happened at the same time to it's hard to finger just one.
So it's possible, but floating the Yen (freeing/"demanipulating" as it were the exchange rate) wasn't a clear culprit and it's good that it happened eventually. Not that the Japanese completely stopped debasing their currency afterwards.
I see. So it's a kind of a tragedy of the commons phenomena. But if they do this by overprinting money, wouldn't that cause big time inflation instead? I better read on your sources before venturing on these things I badly understand though... thanks for your time
No problem. I learned a lot myself. Have to get to class, will answer you later.
-
I see. So it's a kind of a tragedy of the commons phenomena. But if they do this by overprinting money, wouldn't that cause big time inflation instead? I better read on your sources before venturing on these things I badly understand though... thanks for your time
Yes to your first comment.
To the second: Nope. There are many other ways to maintain a currency peg. China relies mainly on a crude but effective method: maintain a government monopoly on currency trading and arrest anyone who trades outside the official trading band. There's a black market, but the authorities have been very successful in keeping it under control.
Additionally, they bring in large amounts of foreign currency thanks to ownership of Western external debt. Pulling in all the interest payments on this debt without spending them puts deflationary pressure on foreign currencies, increasing their value and weakening the renminbi (RMB).
What you said relates to the Mundell Fleming model and its description of the "unholy trinity". A nation cannot maintain a fixed exchange rate, free capital flows (the Chinese government heavily intervenes in capital flows), and an independent monetary policy (inflation control) at the same time. Something will have to give. In the Chinese case it's free flow of capital.
-
Thought I'd elaborate more on your question about the Japanese asset price bubble of the early 90s.
You made a point about Japan. Is there any possible relationship between japan's currency manipulation and the apparently unlinked "lost decade"?
A lot of people think ending manipulation was the main factor, through both direct and indirect lines of causality. The Plaza Accord (mentioned in the last post) was meant to pull Germany, France, and other countries out of a mid-80s recession by depreciating the dollar and appreciating the yen; America and Japan were both having strong growth at this time and were willing to sacrifice a bit of it to help out Western Europe. Rebalancing trade in this way did accomplish this. At the same time it lead to appreciation of the yen, more Japanese investment seeking domestic assets, and a disruption of Japanese export production.
All this was enough of an adverse shock to the economy already. But the government overreaction made it even worse. Expansionary fiscal and monetary policy (high deficits with mere 2% interest rates) were enacted on what turned to be the mistaken belief that strong stimulus was needed to hold up the economy. This may have just blew the bubble up even bigger. Thus central bank policy is often blamed, but it may have only acted in response to the appreciation shocks. When the Bank of Japan realized its mistake and began to hike rates it had little impact, and its failure to lower rates back down quickly after the following recession, even in the face of deflation, had terrible consequences for real interest rates. See how complicated this **** is to make cause effect narratives about? (http://www.federalreserve.gov/newsevents/speech/mishkin20080515a.htm)
Financial deregulation had also been going on in the country since 1985. It's clear from the historical record that removing prudential regulation over the financial sector will usually lead to a financial crisis as the game changes; newly-freed banks begin lending recklessly until going out of business, clearing the way for new firms more adapted to the novel regulatory environment. To cite a few examples, it's thought that the Swedish recession of 1990 was largely due to financial deregulation. Italy suffered a major financial crisis a few years after deregulating it's banks. Perhaps most infamously, the S&L crisis under Reagan put the second dip on the 80s recession; in that case, though, nothing at all was accomplished and new regulations over savings and loans institutions were soon put in place. So high financial leverage and speculative investment was the result that could have been expected from deregulation over the following years, although not to the degree that it happened in Japan.
This bubble occurred across asset classes- banks and other investors made heavily leveraged forays into rapidly appreciating real estate and stock markets. After it burst from late 1989 to around February 1991, no one had the asset wealth to liquidate and pay back what they had thus borrowed, credit tightened dramatically and the economy fell into a slump for years with a great number of bankruptcies and deficient demand given the poor credit conditions. At least timely fiscal stimulus prevented this from becoming the Asian equivalent of the Great Depression. It will be a long time before the aftereffects of this crash completely go away but the Japan more or less recovered by 2003.
Large debt loads still hold back major firms, many of whom run profit margins of less than one percent and essentially stay operating by rolling over debt. The keiretsu system, or the five major business groupings that dominate the economy, made Japan particularly vulnerable to this kind of crisis. In this model, encouraged in part by the Japanese government post-WWII and even before, each industrial group relies on a single bank. The grouped firms coordinate R&D and other services, and extract monopoly profit from domestic operations in order to compete internationally. When one of these banks makes poor investments, however, the rest of the keirestu is badly disrupted. This organizational structure is slowly getting competed away by successful firms outside the system.
So to swallow all that up, yes, the Plaza Accord as originally designed likely was a big part of what happened. A "reverse Plaza Accord" was even drawn up in 1995 to correct some of the imbalances resulting from the original agreement to allow the yen to sink a little. Nonetheless, it's hard to really place blame or say anything that happened was avoidable. If Japan wanted to continue to maintain it's currency at extremely undervalued levels it would have found it increasingly difficult to do so, as became apparent by 2004 when the Bank of Japan finally abandoned active exchange rate intervention in the face of mounting upward pressure on the yen. In this particular case, forcing change on the currency manipulator was probably unwise since they were entirely willing to clean up their act on their own in a gradual but timely manner.
China is a different and less vulnerable beast. For one thing they have a marvelously strong - you could say nearly unstoppable- rate of growth in industry and productivity with a capacity utilization of just 60%. The government practically owns the severely constrained financial sector (which issues 98% of its loans to state-owned enterprises anyway) which generally doesn't dally in asset speculation. The measures I suggest (a 20% tariff on Chinese goods to match their currency devaluation) aren't particularly dramatic either given that their yuan is already strengthening. A little more domestic demand and a little less exports would almost help them. And the tariffs would bring in about $100 billion a year in federal revenue. What might be disastrous is if they continue to hold down the yuan for too long. It's slowly appreciating against the dollar, but could use a nudge.
And then we get into the geopolitical issue of how the Chinese would perceive such a measure and react to it.Like most policies which stand to make big waves it should be implemented gradually.
-
If you insist on sauce...
http://www.plantengineering.com/search/search-single-display/rising-labor-costs-in-china-may-cause-manufacturers-to-return-to-us/648179741a.html
Most factory workers in the more developed areas of China makes no more than $500 per month, usually less. At the previous federal minumum wage of $5.15 per hour on a 40 hour workweek the minumum for a US factory worker in would be $824, except that the US has much higher living standards so it is almost impossible to live off of that. Read Deer Hunting with Jesus to see the kind of life those people lead. In anycase while it is true that some of that manufacturing has come back, a lot of it either stayed put, moved to inland China where there are still even lower wages or moved to Vietnam which also has lower wages.
http://www.chinalawblog.com/2011/02/china_manufacturing_were_bringing_it_home.html
One thing that is also worth keeping in mind is that now a days retained manufacturing does not often lead to much employment. Unlike 50 years ago we can easily automate most traditional factory jobs, which ensures better efficiency and overall lower operating costs. There was one country that tried really hard to retain full employment in manufacturing, and that the Soviet Union went completely bankrupt because of it is a telling lesson.
-
One thing Japan nor the USSR ever did was finance the US. Whether China will be more of the same or something different remains to be seen.
http://www.npr.org/2011/06/10/136930746/explore-chinas-global-reach
-
One thing Japan nor the USSR ever did was finance the US. Whether China will be more of the same or something different remains to be seen.
http://www.npr.org/2011/06/10/136930746/explore-chinas-global-reach
Actually Japan did and continues to finance the US.
-
If you insist on sauce...
http://www.plantengineering.com/search/search-single-display/rising-labor-costs-in-china-may-cause-manufacturers-to-return-to-us/648179741a.html
Most factory workers in the more developed areas of China makes no more than $500 per month, usually less. At the previous federal minumum wage of $5.15 per hour on a 40 hour workweek the minumum for a US factory worker in would be $824, except that the US has much higher living standards so it is almost impossible to live off of that. Read Deer Hunting with Jesus to see the kind of life those people lead. In anycase while it is true that some of that manufacturing has come back, a lot of it either stayed put, moved to inland China where there are still even lower wages or moved to Vietnam which also has lower wages.
http://www.chinalawblog.com/2011/02/china_manufacturing_were_bringing_it_home.html
Vietnam is not nearly big enough to make a difference in any of this. China is America's number one trade partner. The rest of the major ones are either developed countries or oil exporters.
Wages are only one factor in the equation, and a country's trade balance has a lot to do with things totally unrelated to costs or productivity. Germany, Netherlands, Sweden... numerous relatively high wage countries are net exporters to the US thanks to their higher savings rates. America's trade deficit and consequent outsourcing of manufacturing has more to do with low savings rates in the US encouraging import consumption and limiting funds for domestic capital investment than wage differences.
(http://pragcap.com/wp-content/uploads/2010/11/sectoral_balances1.png)
There is a rough identity between the savings rate, capital account, and government deficit. For the purposes of this discussion its worth noting how the capital account and savings move inversely to each other (as well as the government deficit against the private savings rate). A higher capital account funds more imports (as I talked about in a previous post), widening the trade deficit.
What this means for the future is that China's high trade surplus is only going to be sustained as long as their incredibly high savings rate. More pension payments, an increased dependency ratio, slower growth and government policies designed to boost domestic demand over the next decade are going to work against keeping the savings rate so high. And when it falls it's going to make room for other countries to increase their exports.
None of this is going to eliminate the US trade deficit. It will (http://www.google.com/url?sa=t&source=web&cd=49&ved=0CFMQFjAIOCg&url=http%3A%2F%2Fdigitalcommons.bard.edu%2Fcgi%2Fviewcontent.cgi%3Farticle%3D1252%26context%3Dsenproj_s2011&rct=j&q=us%20current%20account%20projection&ei=bkf2TfiOEsr3gAf7_NjqCw&usg=AFQjCNH1vZ4YvYe8Sx8eFLR1CSsS_Sjh6g&sig2=0wOwVijcOcy89e1u_VwdFQ&cad=rja), however, lead to a gradual shrinking of China's trade surplus and eventually a reversal of it, possibly as soon as mid-decade.
One thing that is also worth keeping in mind is that now a days retained manufacturing does not often lead to much employment. Unlike 50 years ago we can easily automate most traditional factory jobs, which ensures better efficiency and overall lower operating costs. There was one country that tried really hard to retain full employment in manufacturing, and that the Soviet Union went completely bankrupt because of it is a telling lesson.
What happened with the Soviet Union had little to do with their choice of pushing manufacturing. Their main problem was failing to employ some kind of market mechanism, leading to a lack of competition and low or negative productivity growth. Had they built a service economy on fast food restaurants and retail stores it wouldn't have worked out any better for them as long as they stuck with their command economy.