On Monday, December 29, 2014 12:20:51 PM UTC-5, Ed Huntress wrote:






I think you guys are 'way too pessimistic about the American economy,
and 'way too optimistic about the Chinese.

And I think you are just as wrong in you assesment.

This is a long story, but the Chinese have been too slow to adopt
international standards of quality -- sewing a straight line on a
Louis Vuitton handbag is not a measure of manufacturing quality. And
now they're facing much higher transportation costs and a steep rise
in wages, with the Lewis Turning Point looming ahead. Like the
Japanese before them, they're losing their edge on cost, but without
the Japanese reputation for quality.

The Japanese had no reputation for quality at the end of WWII.


I talked with a Chinese representative of their tool-and-die industry
in Atlanta last month. I asked them if they could make decent D2 steel
yet. "Just barely," he said. Which puts them at a competitive parity
with the West...in about 1950.

The long-term goal for China is to be globally competitive at
competitive, not cut-rate, prices. They're hoping to accomplish
market-share inroads before their costs rise too much. So far, they're
not doing very well at that, in automobiles, industrial equipment, and
so on. There are factories in China turning out good products but
they're almost always run by Western companies, who are putting up
with horrible productivity in order to gain the labor-cost savings.
That will go away. Now their goal is to ride it out as the Chinese
domestic consumer market expands. Their economy *must* become more
consumption-based, or they're going to lose much of their export
market as their costs increase.



Our economy is doing well. It's employment that's at risk, largely
because of steady improvents in our productivity -- read "automation."
This will become a bigger social problem and we will have to address
it. But the solution will be much happier than you guys are imagining.
There is nothing in the economic dynamics that suggest we're going to
become a third-world country.

We are not going to become a third world country, but we are going to be in the same league as China, Japan, and Korea. Which is a step down from where we were at the end of WWII.

Dan

--
Ed Huntress