February 18, 2009

Globalist responses to Japan and China

I was struck recently by how cruddy the reliability of manufactured products often are today compared to where they ought to be if the positive quality trends in the 1980s and into the 1990s had continued full strength. This is not to say that they've gotten worse, but that they aren't getting better at the same rate as in the late 20th Century.

Granted, when a DVD player or whatever stops working after only two or three years, it doesn't seem like a big deal. The newer one is cheaper and has more features. Still, besides the down time and time wasted researching new models and looking for sales, there are hidden "systems integration" costs. When you finally get the gizmo home, you have to screw around with connecting everything up with cables, you have to learn a new remote control, and sometimes you never quite get everything working together right. When you add up all the costs, you realize it would have been worthwhile to pay more for a more reliable product in the beginning.

The shift in imports from Japan to China plays a role in this. An important point that gets forgotten sometimes is that just because people have epicanthic folds doesn't mean everything they make is Lexus-quality. The Japanese worked incredibly hard to build great brands like Toyota, Honda, and Sony that would be tremendous assets for the Japanese nation for generations to come. The Japanese have an elaborate ritual of shame that executives go through when a Japanese firm's products are scandalously bad, involving resignations and televised apologies to the nation.

In Japan, "nationalist economics" is a serious, well-thought out philosophy that entails short run sacrifices for the long run general welfare. In the West, our elites have been trained to scoff at nationalist economics as mere mindless populism, but the best minds in Japan have developed an economic culture that's perhaps too sophisticated for American economists and their fellow travelers in the punditry to understand.

The Chinese, in contrast, have followed the Taiwanese model of manufacturing anonymously under contract to Japanese and American brand names. They churn out stuff and let other countries' companies sell it as their own. For the Chinese, it's all about meeting minimum quality and cost parameters to get the next deal, not to build a reputation with the public for high quality. How many recognizable brand names have the Chinese created so far? There's Lenovo, and then there's ...

This fuels a "race to the bottom" in pricing, which comes with a cost in quality.

This has had interesting political effects. America's gigantic trade deficits with China in this decade were much less noticeable to the general public than America's trade deficits with Japan in the 1970s because Americans back then were seeing Japanese brand names everywhere, in the stores, on the street, and in TV commercials. This generated political pressure that brought about the Reagan Administration's highly successful protectionist move of imposing import quotas on Japanese car makers, which led them to build factories in the U.S.

In contrast, unless you look for the "Made in China" labels on products or read the trade statistics, you won't really notice the hollowing out of American industrial capacity.

Unless you, personally, lose your job at the factory. But, really, who cares about factory workers? For American business executives, offshoring manufacturing to China is less of a threat to their own positions than the Japanese competition of a generation ago. The big Japanese brands had their own executives and didn't need Americans except in subordinate roles. In contrast, today if you are an American executive in marketing, finance, or general management, you still get to run a seemingly big company, but you just offshore all that sweaty manufacturing to China.

So, the Chinese have fit much less threateningly into the Davos Man globalist worldview than the Japanese did.

Still, how's globalism working out for us lately?

My published articles are archived at iSteve.com -- Steve Sailer

65 comments:

a_c said...

Uh, not that bad? We pay less for stuff. Unless you want to claim that China is somehow responsible for the financial crisis, which was prompted by excessive borrowing by US consumers, I don't see your argument here.

And I fail to see the point of your differentiation between the Japanese big brand model and the Chinese small-firm model. Is it your contention that Chinese goods will forever remain inferior? If so, remember the denigration of "Made in Japan" in the '50s, and the pretty high quality of Taiwanese goods (including probably the semiconductors in the machine you're typing the post on.)

Alan said...

Lenovo worked (at least in the West) because people knew it was relabeled IBM.

Stopped Clock said...

Lenovo only exists in the USA because IBM sold its unprofitable personal computer market to the highest bidder. The IBM logo remained on the laptops for several years because Lenovo was unsure of its ability to sell its name to American customers. They likely would never have succeeded if they had tried to come into America without IBM's help.

beowulf said...

paging Eamonn Fingleton...
http://www.unsustainable.org

Anonymous said...

a_c,

U.S. economy aside, the rise of China as an economic and military superpower is a serious threat to the region and maybe even beyond--it's now cozying up to the terror-exporting kleptocrats in Saudi Arabia and propping up genocidal Islamist regimes in Africa. At least postwar Japan is a democracy under rule of law, a far more benevolent force in the Asian sphere and elsewhere.

And the fact that the U.S. has become a debtor nation hopelessly in hock to China doesn't exactly bode well for us either.

Christopher said...

Excellent point Steve. The Japenese were economic nationalists (or how about just plain nationalists, with the idea that such would have an economic policy implied), so they could be dealt with as such. Fire with fire and all that. The Chinese, if I read you right, are not so much. They're free-marketeers. They could care less; probably even about their own countrymen. They're like water; they'll just go with the flow. So, with all that implies... Uh, actually, what does that imply? Crappy stuff forever? Or until globalism schmeers everything level?

Mr. Anon said...

"a_c said...

Uh, not that bad? We pay less for stuff."

Yeah, we pay less for stuff. Like the alarm system I have in my house to keep out the guy who became a meth-head burgler after he lost his job at the sock factory. We're drowning in the cheap crap sold out of those ugly suburban open-sores known as strip malls and big box stores.

But who cares that our country is becoming a scabarous landscape, peopled by hopeless, amoral, tatooed barbarians, and amused by racing, wrestling, and rap? At least we can buy a cheap new lawn sprinkler every year (which of course we must as they only last that long).

Anonymous said...

Many manufacturing jobs have been lost of the decades BUT in our industrial output is UP in that same time period.

We are getting more efficient.

That is a big part of the story that should not be ignored.

Mr. Anon said...

I have noticed that some products by once stirling Japanese brands like Sony, are now as crappy as those of Phillips or GE. I suppose even the Japanese are getting their arms twisted by Walmart, and have out-sourced production as a result.

American Goy said...

"In Japan, "nationalist economics" is a serious, well-thought out philosophy that entails short run sacrifices for the long run general welfare. In the West, our elites have been trained to scoff at nationalist economics as mere mindless populism, but the best minds in Japan have developed an economic culture that's perhaps too sophisticated for American economists and their fellow travelers in the punditry to understand."

Are you kidding?

The American economists and their fellow travelers in the punditry understand only one philosophy - 'greed is good!', modified to a more modern 'grab as much as I can, before it all implodes around me!'.


Everything, EVERYTHING, in the US business world (from funds to shares to bank statements) is judged by its current, price.

There is absolutely no planning for the near future, two or three years ahead, much less say five years... or a decade.

The dream of every American CEO and higher business echelon (our so called elites) is to grab as much as they can, and leave just before Bear Stearns happens.

Artanis said...

The Taiwanese model works because Taiwan is a relatively small area and there is a constant oversight of vendors by the US companies they contract with. By comparison China is huge and there are enormous numbers of infinitely varying quality facilities all of which compete only on price.

We don't need cheap stuff, very certainly not cheap DVD players and TVs. We need good stuff that holds up and is repairable and has a long service life and interfaces to the rest of the world in a consistent, predictable way.

Many products sold today are simply not as good as the old ones in many ways. You can't buy a top loading washing machine (which millions still prefer) that's well made anymore, except the super efficient but moldprone Staber. You can't buy a well made audio or video cassette player new-yes, they're old tech, but there are a LOT of old tapes out there. If you want to buy a well made set of mechanic's tools, Snap-On is your only option anymore. Metal vacuum cleaners are still made (Royal) but stores do not carry them, you have to go to industrial vendors.

The incidence of hoarding and the sheer volume of consumer junk filling the landfills tells us that fewer, but better goods at a higher price, is a better model than a deluge of disposable junk.

Anonymous said...

1) If caring about quality is a characteristic of Japanese culture rather than just a business strategy, why do Japanese firms outsource to China too?

2) If Sony makes high quality products why don't you just buy DVD players from them?

Anonymous said...

Business is another form of warfare. Who will be the slave and who will be the slaver? Who will be put to exhausting labor and who will live in luxury?

WWII never ended: It was only continued by other means. Any thinking person can see that.

The East and West are in conflict and no gooey political correctness can stop what is coming.

RKU said...

Well let's see...

During the last 20 years, China has gone from absolute zero to "alright" quality in technology, and probably the best in the world in price/performance, including big-screen TVs, notebook computers, etc.

I guess we can all assume that Chinese quality has now peaked, and will henceforth never improve.

Remember that Reagan movie from the 1950s in which his "Made in Japan" gun naturally fails to work...

Anonymous said...

I don't think we can assume China and Japan have similar IQ structures. China is genetically much more heterogenous than we realize and probably has quite bit of internal IQ variation.

The coastal southerners (Fujianese, Cantonese) and urbanites have done well for themselves, but the rest of China is stagnant. Outside of China, Mongolians and Kazakhs (both genetically similar to the northern Chinese) have underperformed in a number of different countries. So I don't think we can take IQ tests of the overseas Fujianese and urbanites and then extrapolate to the rest of the country.

The level of selective pressure for high IQ was probably much higher in the mercantile coastal regions and cities. I would imagine that many of the Chinese factory workers are drawn from the lower urban classes and peasantry.

In Japan though, IQs seem to be high pretty much everywhere. So even the peasantry is pretty smart.

Lucius Vorenus said...

Japan and China will soon cease to exist [to a certain extent, both nations are already effectively extinct]:

List of countries and territories by fertility rate
en.wikipedia.org

2000 CIA, Japan: 1.41 TFR
2008 CIA, Japan: 1.22 TFR

2000-2005, UN, Japan: 1.29 TFR
2005-2010, UN, Japan: 1.27 TFR

2000 CIA, Macau: 1.30 TFR
2008 CIA, Macau: 0.90 TFR

2000-2005, UN, Macau: 0.84 TFR
2005-2010, UN, Macau: 0.91 TFR

2000 CIA, Hong Kong: 1.27 TFR
2008 CIA, Hong Kong: 1.00 TFR

2000-2005, UN, Hong Kong: 0.94 TFR
2005-2010, UN, Hong Kong: 0.97 TFR

[BTW, Taiwan and South Korea are in the same boat.]

Hong Kong is a particularly tragic case: HK has both the world's highest average IQ [at 107] and [with the possible exception of Macau] the world's lowest total fertility rate [as above, at something less than 1.0].

PS: And I am very worried that the few babies being made in the Chinese mainland right now are primarily being born way out in the Muslim hinterlands.

Chief Seattle said...

a_c, you missed the point. If we're paying less for stuff that doesn't last as long, we're not getting a better deal (see how long some cheapo chinese shoes last - it's not just DVD players). And if you're the American guy in the factory that lost the job, even the shitty $15/hr job, and you've got nothing to replace it with but a $8/hr job at WalMart, then you were just royally screwed by globalization. To the WalMart worker, it doesn't matter that you can buy shoes for $20 instead of $40 since you still have to buy healthcare for $500-$1000/mo. Or try to afford college tuition even at a community college when those rates are going up 10% per year.

The globalist economists miss the point. I swear that one of them could make a huge amount of progress researching the flaws in globalization from the American standpoint. The rah-rah free trade side of economics is sort of crowded, no? And the rah-rah free traders have to stretch harder and harder each year to explain why, really, your standard of living is getting better, even though your stable employment has gone away and everything you really *need* to live is getting more expensive.

Steve, interesting comparison of Japanese and Chinese models - I've thought a bit about that myself, and it does seem to be deeply cultural. The Chinese had a lot of their history destroyed by Mao and the cultural revolution, and their collective time horizons seem awfully short - polluting rivers or air, paving over farmland, mixing poison into their food supply, just so a few people can make big bucks fast.

AsianDude said...

Chinese products suck in general because the country is poor on average. South Korea and Taiwan would make a better comparison of the export vs OEM model. Both started modernizing about the same time after WWII, both have similar per capita GDP today and both countries make pretty good products.

AsianDude said...

Haier is the only truly native Chinese global brand that I have seen selling products in the US.

Anonymous said...

This is a really unfair post against China, and not what I was expecting from Steve. Did you know that Japanese and South Korean products suffered the exact same stereotypes as Chinese ones before their brands caught up to the West? Keep an eye on Haier, they are an up and coming Chinese white goods manufacturer that make good stuff.

And what's up with the Taiwan bashing? ASUS and Gigabyte make the best motherboards in the world. Any computer geek will tell you this. Not to mention that the two top video card companies, NVidia and ATI, were both founded by Chinese immigrants in the United States and Canada, respectively.

zylonet said...

Excellent post. Fantastic summation and insight.

AsianDude said...

According to Wikipedia, Han Chinese constitute about 92 percent of the population of the People's Republic of China (mainland China). I would like to see IQ scores by province and ethnicity, but I doubt that is available. My own suspicion is that IQ in China of the same ethnic groups are distributed like most other countries including the US, smarter in the major cities and coastal regions, but by a relatively small amount.

Anonymous said...

China is responsible for the financial crisis, you dimwit (a_c). They flooded our country with debt money, rather than allowing a balance of trade, as international trade is supposed to work. Why do you think our manufacturing industry wilted, while our financial industry bloomed? We buy Chinese goods, they hoard the dollars, then buy American debt. This is not rocket science!

Anonymous said...

anon: do you have any evidence for the different iq structures in japan vs. china, or are you just speculating?

Anonymous said...

An important difference is that loyalty is based on the ethnic group in Japan, the family in China, and the self in America. Even if IQ's are similar there may be differences in behavior because of this.

Ben Franklin said...

Just for the record, the argument has been made that the trade imbalance lead in part to the cheap credit that fueled the real estate bubble. This argument has been made by very high profile people, that I otherwise don’t trust but that in this case are speaking a partial truth, leaving out the point that much of the credit was given to those who couldn’t repay it or even service the loans for any period of time.

The trade deficit also contributes to the stagnation of wages in the US. If the US is to continue to buy the world’s goods, US workers and consumers must have increasing wages in order to afford said purchases. But now it looks like the global elite are moving to a new model, one that will leave the American consumer in the same boat as the American worker, i.e., up a creek without a paddle.

headache said...

"There's Lenovo, and then there's ..."

my next laptop which isn’t IBM/Lenovo. The drop in quality was instantaneous and the company I work for, which has thousands of laptops, immediately switched to HP. Beats me why IBM dumped the ThinkPad, which was a great laptop and must have been making money.

Anonymous said...

China does a good job manufacturing some of the cheapo crap - why pay for Japanese quality/craftsmanship when it is something of not much importance, something mass produced and easily replaced?

Some DVD players made in China you can buy at Wal-Mart now cost less than the price of some DVDs...meaning, $25 or even less. Sure, it might only last you 2-3 years depending on how much you use it - but who cares? It only cost 23 dollars plus tax, and when it breaks just get a new one. A DVD player is a DVD player.

Meanwhile, we have a 1988 Honda Accord in our family that is still running like a champ despite not ever having much work done on it. Japanese craftsmanship!

jody said...

americans will become familiar with chinese brands in the next 10 years, when chinese made cars appear on US soil. they will probably reduce GM's domestic market share to 10%. if GM survives that long, anyway.

US industrial production may have increased somewhat, but it needed to increase a large amount simply to stand still. in relative terms, US industrial production is down.

GM is a perfect example. GM may be producing more vehicles now than ever, but their market share drops every year. build 8 million vehicles in 1980 and take 50% of the market. build 12 million vehicles in 2010 and take 20% of the market.

US industry is NOT doing well, relatively speaking. the coming demographic tsunami, in which retiring boomers are replaced by mexican high school dropouts that contribute basically nothing to industry, will ensure this.

as for the demographics of east asia, china is in no danger at all of disappearing. people can only even HAVE 1 child there by law. remove the law, and the population in china EXPLODES. it could reach 2 billion by 2100. china can make it's population boom any time it wants.

just more terrible news for the united states, a nation that will be populated primarily by low IQ whites, mestizos, and africans in 2050. mestizos will be the majority in california and texas.

Chief Seattle said...

Lucius, a TFR of 1.2 isn't exactly the end of a civilization. It just means that the population will roughly half over the course of a generation. For crowded countries this may allow a much higher standard of living down the road. 60 million Japanese is still plenty for that mountainous island the size of CA. And higher productivity can more than make up for lower population for things like supporting more retirees per worker. The goal should be lowering the TFR uniformly everywhere - not trying to raise it in crowded Asian countries where space is at a premium.

Pseudothyrum said...

Re - Anon: "Many manufacturing jobs have been lost over the decades BUT in our industrial output is UP in that same time period."

Yes, exactly right - we are absolutely swimming in goods of all kinds, oversupply is everywhere; America and every other industrialized country is manufacturing more goods more efficiently than ever, only with MANY fewer workers: http://www.calculatedriskblog.com/2009/02/overcapacity-everywhere.html

People simply do not realize the terrible toll which mechanization/mass production has taken on human labor - the perennial problem of modern industrialized economies is one of oversupply, overproduction, and overefficiency more than anything else...we are suffering from our own material success, basically. Yet still the moronic 'myth of scarcity' persists - the people perpetuating it are greedy pigs who are no better than the diamond merchants with their persistent claims that diamonds are 'valuable' because they are 'rare'...yeah, uh huh - http://www.theatlantic.com/doc/198202/diamond

By the way - most of these 'factory' workers in China or Japan are not actually manufacturing anything, they are simply ASSEMBLING products which machines manufactured. Thus they are mere assembly-line workers rather than actual factory workers - the machines do the actual manufacturing.

People have been losing their jobs to machines ever since the Industrial Revolution began - funny bumper sticker reads: A Machine Took My Job.

Face the facts: the service sector is it when it comes to jobs, folks. Machines can do the labor of hundreds if not thousands of workers in 10% of the time or less - just look how much dirt a bulldozer can move in an hour compared to what it used to take dozens of workers a full week to do.

Yes, the machines have taken our jobs. Do what you can to get out of debt and then find healthy ways to occupy your time and deal with the boredom of un(der)employment...you'll be fine, we'll all be fine...unless you are a fan of D.H. Lawrence as I am - http://www.kalliope.org/digt.pl?longdid=lawrence2001061629a

Chief Seattle said...

One long term cultural difference between China and Japan is that Japan practiced primogeniture - leaving all land to the eldest son, whereas the Chinese divided land. So in Japan, the second, etc. sons needed to learn a trade or join the army, similar to the pattern in Europe. This gave a big push to craftsmen in Japan, and may be part of the reason that they were able to modernize so quickly (in the 1860s) when exposed to Western culture. And I may be ignorant, but I haven't seen anything from China that's the equivalent of medieval Japanese swords - the Museum of Fine Arts in Boston has a collection dating back to the 1500s, and they are both phenomenally beautiful with the oyster-like layers of metal, and, I'm told, amazingly sharp and durable.

Anonymous said...

Studies on the Chinese population show that northern Chinese tend to genetically cluster with the Mongols and the closely related Kazakhs. They are more distant from southern Chinese groups, such as the Fujianese and Cantonese.

Within the former Soviet republics, both the Mongols and Kazakhs were economically and socially stagnant groups that needed substanial assistance from the state. In fact in much of Central Asia, Kazakhs are at the bottom of the economic ladder. I'm not sure why this is, but the experiences of the Fujianese and north Asian diasporas seem quite divergent.

You should also note that within China, certain groups (Hui Muslims, Fujianese, Zhejiangese, ethnic Koreans) are considered economically much more prosperous than the rest of the population. Urbanites are much more propserous than rural dweller. The rural-urban disparity is large enough that the government has mandated affirmative action in its universities.

So I feel it's a bit simplistic to use the southeastern diaspora and urban elites as the model for the entire China.

Tom Piatak said...

We Americans need to rediscover the virtues of economic nationalism, before our economic dispossession is complete. America became the world's greatest industrial power behind high tariff walls and with a population that strongly preferred American products to foreign brands for patriotic reasons. Under free trade and with a populace that, in many cases, actually prefers foreign brands to American ones, we have lost 4.8 million manufacturing jobs since 1998, and are continuing to run unsustainable trade deficits that threaten the stability of the entire economy.

Anonymous said...

"PS: And I am very worried that the few babies being made in the Chinese mainland right now are primarily being born way out in the Muslim hinterlands."

Don't worry, we won't run out of Han Chinese anytime soon. As for those muslims in Xinjiang, the ChiComs have a solution to that too...

Anonymous said...

The second rate cities of the Chinese far north are quite orderly and growing fast so the large divergence claim doesn't make too much sense.

Anonymous said...

It's not as if the Chinese government doesn't know that they have a low value-added manufacturing based economy, and that there are limits to how much the economy can grow with that kind of model. That's why they're taking strong measures to change it, since thar's profit to be had:

http://features.csmonitor.com/economyrebuild/2009/02/09/china-aims-for-its-own-silicon-valley/

Will it work? Who knows. But I see no reason why they can't follow in the footsteps of Japan, South Korea and Taiwan.

Here's a striking quote from a government official, in response to the rash of low end factory closures in Guangdong due to the financial crisis:

"There's no need to panic even if 10 factories go bankrupt every day," Luo Zhiqiang of Dongguan's labor bureau was quoted as saying.

According to Luo, this is a strategy of "emptying the cage for new birds".


So it's obvious that they're very serious about attempting the economic transition.

Evil Sandmich said...

Beats me why IBM dumped the ThinkPad, which was a great laptop and must have been making money.

Same reason why a lot of U.S. manufacturing went outsourced: it took too much effort on the part of IBM's MBAs to figure out how to make it work. It's so much easier to sell off that hard work stuff and then just count the numbers in Excel.

...when chinese made cars appear on US soil.

You mean Chinese branded cars. I've not seen percent workups, but I know that even in American cars that there's more than a few Chinese components. I've seen that both Nissan and Kia have a $10,000 car; they didn't get that cheap by being made in Japan or Korea.

Uh, not that bad? We pay less for stuff.

What's worse, for China, is that they're basically coming to us now and offering to lend us a dollar and we only have to pay them back eighty cents (if that) after inflation eats up the pittance of an interest rate that they're charging. I think it's still bad for us in terms of lost manufacturing output and skills; but it's real hard to turn down free money.

kerdasi amaq said...

About time that people begin to realise that free-marketer globalizing economists are little better than snake-oil salesmen!

Dutch Boy said...

The American economic philosophy is wage arbitrage (seeking the cheapest venue to manufacture goods to be imported to the USA). It is a sure-fire way to deplete one's country of capital and high-paying jobs while maximizing profits!

Svigor said...

and they are both phenomenally beautiful with the oyster-like layers of metal, and, I'm told, amazingly sharp and durable.

They're roughly equivalent to the best European examples. Way overhyped vis-a-vis performance. They're pretty though.

Lucius Vorenus said...

Chief Seattle: Lucius, a TFR of 1.2 isn't exactly the end of a civilization. It just means that the population will roughly half over the course of a generation. For crowded countries this may allow a much higher standard of living down the road.

Chief - allow me to introduce you to this concept called Exponential Decay.

It's fast.

Real fast.

Like speed of light heading directly into the vacuum of oblivion fast.

Anonymous said...

The Chinese government has pretty good data on IQ by region. This is partially motivated by iodine deficiency problems in rural areas.

There is variation, but not that large and not what you might think. The provinces (e.g., Zhejiang) that have traditionally produced top scholars in the imperial examinations (in place for 1300 years!) also have high averages according to the data. Don't take the absolute score values too seriously as Flynn-related normalization hasn't been done carefully. But the relative values are meaningful.

Note SE regions like HK, Canton, Fujian are NOT known for producing top scholars.

2005 National Health Survey (google scholar

Zhejiang rural boy 116.23
Zhejiang average boy 115.82
Zhejiang men and women an average of 115.05
Beijing rural 114.9
Hangzhou City 114.7
Zhejiang rural girls 114.41
Zhejiang girls an average of 114.32
Wenzhou (5 counties average) 114.195
Beijing average 114.07
Zhejiang city girl 113.73
Zhejiang city boy, 113.46
Beijing city an average of 112.6
The national average 103.5

Hubei 111 urban children (prefecture-level cities and provincial towns)
Jilin average 107.04
Jiangsu average 109
Hubei county-level city and county 106.4
Hubei average boy 105.44
Hubei average 105.3
Sichuan 105.3
Hubei girls 105.1
Guangdong 103.4 or 101.1

Lucius Vorenus said...

jody: people can only even HAVE 1 child there by law. remove the law, and the population in china EXPLODES. it could reach 2 billion by 2100. china can make it's population boom any time it wants.

You know, ironically enough, I was just reading this old poem chez Derbyshire:

...With the Hopes that our World is built on they were utterly out of touch,

They denied that the Moon was Stilton; they denied she was even Dutch;

They denied that Wishes were Horses; they denied that a Pig had Wings;

So we worshipped the Gods of the Market Who promised these beautiful things...


If you don't get my drift here - extinction [as opposed to revival & resurgence] is the standard outcome for just about every culture known to archaeology.

For instance, this is all that remains of the nation-state which produced the greatest mathematician who ever walked the face of the earth.

Lucius Vorenus said...

Anonymous: You should also note that within China, certain groups (Hui Muslims, Fujianese, Zhejiangese, ethnic Koreans) are considered economically much more prosperous than the rest of the population. Urbanites are much more propserous than rural dweller. The rural-urban disparity is large enough that the government has mandated affirmative action in its universities.

So I feel it's a bit simplistic to use the southeastern diaspora and urban elites as the model for the entire China.


Yes, and these are PRECISELY the parts of China where fertility rates are at or below 1.0 children per woman per fertile lifetime.

China has the very same fertility problem that we have, only the fertility rates of the productive part of their population are vastly lower than even the productive part of our population, and the breeders in China are disproportionately MUSLIM [as opposed to AME or Papist].

kurt9 said...

Guys,

China is moving up the technology/quality ladder just like Japan did during the 50's-80's. Ask any older boomer and they will tell you that the Japanese produced cheap toys that broke easily when they were kids. By the 70's, they made good quality merchandise. It is certainly true that Chinese quality is not at Japanese standards. However, they are moving in that direction. Do consider that in 1980 China was as desperately poor as sub-Saharan Africa is today. The Koreans made junk 25 years ago and today their product quality is as good as the Japanese. The idea that the Chinese cannot move up the ladder like Japan and Korea is plain stupid (and I am justified in saying it this way).

Also, I resent the disparaging comments about Taiwan product quality and Taiwan economic development in general. The leading edge 300mm semiconductor foundries are all in Taiwan. Some of them use the same advanced process technology as Intel.

Having lived in Taiwan, I will tell that it is far easier (less bureaucracy and government regulation) to start any kind of technology company in Taiwan as it is in Japan (I have experience with both as I have lived and worked in technology in both countries).

I will tell you as someone who have lived and work in Japan, Taiwan, and Malaysia for 10 years and having been involved in technology start-ups in this region, that any western pundtis who have not done the same cannot make intelligent statements about the region. Having lived as in expat for 10 years, I consider myself to be infinitely more qualified to comment about the region than anyone who has not.

The ignorance of Americans who have not lived internationally is astounding.

Anonymous said...

----Svigor said...
and they are both phenomenally beautiful with the oyster-like layers of metal, and, I'm told, amazingly sharp and durable.

They're roughly equivalent to the best European examples. Way overhyped vis-a-vis performance. They're pretty though.----


If you're looking for some good steel, try Mora and Marttiini knives. Fantastic products, great prices. Can't beat their firearms either. However, the ChiComs make some great weapons as well, idiot proof too!

AsianDude said...

I think Japan, South Korea, Hong Kong, Singapore, Taiwan and China will eventually converge in development and per capita GDP similar to Western Europe. Let's simplify and say it is a 100 year process to fully develop. Japan is all the way there, Taiwan and Korea started 60 years ago and China started 30 years ago.

albertosaurus said...

DVD players are a poor choice of an example for quality decline.

A two or three year old DVD player is essentially worthless. Check Craigslist. I just did, there are 102 DVD players for sale today in the SF Bay Area for ten dollars or less. Used top models of a few years ago are available for twenty dollars.

Newer DVD players are progressive scan - meaning they deinterlace the 480i data stream to accomodate your progressive scan plasma or LCD flat screen. Newer DVD players have optical (digital) outputs for audio or HDMI. Older players may only have composite or S-video outputs.

All TV broadcasters are going digital in the next few months. Should your DVD player continue to send out an analog signal?

You can buy a brand new DVD player at any Radio Shack for $50 but few do. They are waiting for Blu-ray players to get cheaper. Only two years ago Blu-ray players cost from $500 to $1,500. Today Sony Blu-ray players start in the low two hundreds. Blu-ray players also play DVDs. Quite soon it will be hard to find "DVD only" players.

Many "experts" think Blu-ray itseld will fail. A victim of VOD (Video On Demand). No one expects BD to replicate the DVD comercial success.

If technical obsolence comes in just two or three years, does it really make sense to invest equipment that lasts for decades?

Watt Tyler said...

READ:Kicking away the ladder by Ha-Ja-Chang

When US labor markets were much less globalized-1945-50 -the real wage was growing and there was a significant narrowing of the economic gap between the top and bottom. Indisputable fact that all econmist are aware of. This is also corresponds to a time peiod when White Americans were a significant majority. Legal immigration levels were quite low also. Labor scarcities are very good indeed.

Rohan Swee said...

It's not as if the Chinese government doesn't know that they have a low value-added manufacturing based economy, and that there are limits to how much the economy can grow with that kind of model. That's why they're taking strong measures to change it [...]

Will it work? Who knows. But I see no reason why they can't follow in the footsteps of Japan, South Korea and Taiwan.


On the one hand, yes, China is moving up the value-added chain. (The U.S. already runs a deficit with China in advanced technology products.)

On the other hand, the economic landscape in which Japan, South Korea, and Taiwan became wealthy nations, via the "export platform" strategy, has changed. The consumer nations on which these nations bootstrapped their economies, particularly the huge U.S. market, are tapped out - more than tapped out, as we all now realize that this consumption capacity was a debt-driven illusion. So it doesn't seem plausible to me that a huge nation like China can continue moving on up using these once-successful strategies, in a changed world. Can internal demand (or demand in other, emerging nations) be raised high enough, fast enough, to substitute? I dunno, but as it stands now, there doesn't seem to be enough demand in the world to continue to absorb the necessary amount of Chinese production.

Anonymous said...

China certainly has the IQ and work habits to make quality products, but there may cultural, economic, and historical factors holding them back.

But Japanese-type culture is not always needed to make quality products, as shown by the example of Korea which has improved significantly over a short period of time. See this link: http://consumerist.com/5127337/the-10-most-reliable-car-brands-vs-your-preconceived-notions . In the top 10 most reliable car brands, 8 are Japanese and 2 are Korean (#8 and 10). The American brands range from a little to a lot worse and the Europeans are far down the list, even Mercedes and BMW. What I want to know is why can't the Americans and Europeans make good cars.

Anonymous said...

BTW, here's the full rankings from CR:

1. Scion
2. Acura
3. Honda
4. Toyota
5. Lexus
6. Infiniti
7. Subaru
8. Hyundai
9. Mitsubishi
10. Kia
lincoln
mazda
mini
nissan
mercury
volvo
ford
buick
porsche
bmw
suzuki
audi
saab
chevrolet
vw
gmc
mercedes
jeep
pontiac
dodge
cadillac
chrysler
saturn
land rover

Chief Seattle said...

"Chief - allow me to introduce you to this concept called Exponential Decay."

Lucius, allow me to introduce you to the concept of "extrapolating current trends forever doesn't always produce great results."

Once Japan is less crowded, the cost of a house isn't so high, men don't have to commute two hours each way on a train to work - do you think that birth rates might inch back up?

If not, there's plenty of time to deal with the problem. Even if the population falls in half for two generations, that means that there will still be 30 million Japanese in 60 years. That's far from extinction.

nzconservative said...

Note the service economy worshiping Brits at the bottom of the pile there with the overpriced Range Rover - all style and no substance.

Anonymous said...

"Japan is all the way there"

Well it once was. In fact they were quite ahead.

Ranking Country Per capita GDP (1991) 1997
1. Kuwait ?
2. Switzerland 33,610
3. Japan: 26,930
4. Sweden 25,110
5. Norway 24,220
6. Finland 23,980
7. Denmark 23,700
8. Germany 23,650
9. US 22,240
10. Canada 20,440

But now Japan is quite behind the U.S. And I don't see that aging population catching up.

Anonymous said...

"WWII never ended: It was only continued by other means. Any thinking person can see that."

Agreed. And we in US only THINK we won. Truth is, we woefully misidentified the enemy.

Anonymous said...

Lucius,

With "exponential decay," you are making the same mistaken assumption that lots of novice stock traders make; that is, extrapolating a trend to infinity.

Just because THIS generation is not reproducing itself does not mean the next won't. With more resources and land available due to a decline in population of the previous generation and a higher standard of living created by robotics, a sensible policy of nationalism can quickly persuade young women to have kids. Especially if society is specially arranged to make working and childrearing compatible: home based businesses, telecommuting; taking babe to work; tax breaks for the male breadwinner.

Anonymous said...

Guys, this whole problem is going to be self-correcting.

Globalism is based on cheap oil for nearly cost-free transportation, so that the cheap labor can be exploited.

As Peak Oil's bite really begins to be felt in the next few years, the shipping will become cost-prohibitive and local manufacturing will resume.

What must happen, though, is the border be controlled. As Mexico's Canterell Field continues its precipitous decline, we'll soon see Mexicans attempting to get into US at a rate that will make the current torrent look like a slow drip.

Anonymous said...

Sink globally, react locally.

Anonymous said...

The Chinese are probably second to none in the world with regards to the qality of craftsmanship and care and excellence in manufacture of products - better than the Germans even.
Yes, you might scoff - as you sneer at the cheap dime store toys, but consider this, the world renowned quality of Chinese textiles, ceramics, sculpture and other objets d'art that have been produced for millenia.
The very same qualities that made the Chinese excel in this handicrafts (probably a genetic predisposition for craftsmanship, together with a cultural elevation of the craftsman), are exactly the same transferrable skills that are neccessary for the design and production of the most intricate and complicated machines.
It is for this ancient reason that I have full faith in the Chinese - despite any guff an economics professor might poop out.

Anonymous said...

"There's no need to panic even if 10 factories go bankrupt every day," Luo Zhiqiang of Dongguan's labor bureau was quoted as saying.

According to Luo, this is a strategy of "emptying the cage for new birds".


It's interesting how China and the U.S. are taking opposite approaches to the financial crisis. The U.S. is spending trillions of dollars to bail out failing companies, whereas China seems to be practicing a form of economic Darwinism. Who will prevail?

I do think that China's plan to stimulate the economy through infrastructure projects will work out a lot better for them than the U.S., since they could actually, sorely use it. They're planning to build things like power grids, roads, and railroad lines. The U.S. will probably have a lot of frivolous light bulb changing/Big Dig type projects.

Although, ANY time the Chinese leadership goes up against the American leadership, I'll bet on the Chinese. I'll put my money on technocrats over politicians any day.

Anonymous said...

in the end, the drive for near-term profits has caused firms to gradually cut costs all down the supply chain while simultaneously raising prices. more careless spending during the credit/housing boom and a lag between a reduction in value to consumers and changed consumer buying decisions reflecting that change has masked a deterioration in intermediate and long term profit prospects of companies. I personally used to shop at Bed Bath and Beyond but now avoid it because the brand is a virtual guarantee that, whatever price or quality point I may decide to buy at, the price/value equation has been so carefully engineered to the benefit of the company that I will not get good value. Designer clothes are another example; an Armani knit polo now has worse construction and worse material than in the past but, pre-bust anyway, was also selling at much higher prices on an inflation adjusted basis than 10 years ago. When you look at the underlying material costs, some of these decisions at the company level seem perverse; leather or wools adding noticeable higher quality might add $5 of cost on a $200 item--just too much to ask. I buy made in france or portugal a lot, where the lack of "management sophistication" seems to coexist with a values oriented commitment to maintain quality levels.

The upshot is that (1) a lot of retailer and consumer brand firms are weaker even than the recessionary conditions might suggest, because their long term profit prognosis due to damaged brands is worse. this doesn't necessarily mean stocks are a bad buy now, just that this factor should be accounted for in any analysis. (2) productivity growth, the key to the economic future, has probably been overstated and inflation understated in the recent past; while prices have increased the level of "heuristic adjustment" to prices for quality improvements have probably been too high, as companies have run ahead of the economists and consumers in cleverly subtracting value. increased sophistication of somewhat cartelized retail firms at railroading consumers into limited options has facilitated this.

Sorry if i'm late to post here said...

Sorry for my late comment... I think Steve forgot Samsung and Korean electronics/gadgets in general in his blog post.

Anonymous said...

If anyone here truly feels fiat currency is worthless then feel free to give me all your money.