On 10 Aug 2003 19:51:47 -0700, jim rozen wrote:
I always believed the tale that manufacturing jobs are
pretty highly leveraged, that the 8% in manufacture
actually generate much more than that in serivce jobs,
like a factor of two or three.

So what if (playing 'what if') the 8% unemployement
increase really winds up being 24% increase?

The service jobs associated with manufacturing, ie distribution,
sales, after sales service, etc don't go away when the primary
manufacturing activity goes overseas. The people who were
distributing, selling, and servicing the domestic product merely
switch to distributing, selling, and servicing the imported product.

A good example is the auto industry. There are about as many
people now distributing, selling, and servicing import cars as there
are for domestic cars. Ancillary businesses, such as auto parts
stores, gas stations, etc don't really care who made the cars.

Gary

Gunner wrote:

Chuckle..I still have a Royal Enfield. 1961, rebadged as an Indian.

Oh heck, had a parts manual for one of those a few years ago, traded it
for a book...

Jon

"Gary R Coffman" wrote in message
...


The service jobs associated with manufacturing, ie distribution,
sales, after sales service, etc don't go away when the primary
manufacturing activity goes overseas. The people who were
distributing, selling, and servicing the domestic product merely
switch to distributing, selling, and servicing the imported product.

A good example is the auto industry. There are about as many
people now distributing, selling, and servicing import cars as there
are for domestic cars. Ancillary businesses, such as auto parts
stores, gas stations, etc don't really care who made the cars.

This is a point of confusion and contention. The U.S. Dept. of Commerce
published some figures a couple of years ago that said there are 3.28
service jobs created for every manufacturing job that *produces a product
for export*. In other words, the manufacturing itself creates 3.28 service
jobs.

When I questioned the people in Commerce who came up with this figure, it
was obvious they backed into the number and they really don't know what it
should be.

In any case, there are service jobs associated with manufacturing, from
building and maintaining plants to supplying power, to transporting raw
materials, and there are service jobs associated with the finished products,
which, supposedly, would be the same no matter where the product comes from.

I don't think there are any reliable figures that break the two down. At
least, no one in Commerce seems to know of any.

--
Ed Huntress
(remove "3" from email address for email reply)

"Ed Huntress" wrote in message
news

In any case, there are service jobs associated with manufacturing, from
building and maintaining plants to supplying power, to transporting raw
materials, and there are service jobs associated with the finished
products,
which, supposedly, would be the same no matter where the product comes
from.

I don't think there are any reliable figures that break the two down. At
least, no one in Commerce seems to know of any.

Oh, I should have completed that idea: No matter what the breakdown is, it's
clear that you create more service jobs by manufacturing a product and
selling it in the same country, than you do by importing the same product.
If you both manufacture and sell, you add both types of service jobs to the
equation.

--
Ed Huntress
(remove "3" from email address for email reply)

On Mon, 11 Aug 2003 05:28:11 GMT, "Ed Huntress" wrote:
I'm saying that the US economy was primarily an agricultural
economy at the turn of the century, and agriculture remained
the largest segment up until WWII. During and immediately
after WWII, manufacturing employment jumped dramatically,
but it has been declining ever since. Now the service sector
dominates.

There are a couple of things to clear up here, Gary. Firstly, manufacturing
employment has hardly budged since 1950. What's gone down is the
*percentage* of employment that's represented by manufacturing.

Yes, but even the raw numbers are declining. From the previously cited
source, manufacturing employment has declined from 19,076,000 in
1990 to 17,698,000 in 2001.

Gary

"Gary R Coffman" wrote in message
...


When you start throwing around billions, it sounds like big money (and it
is
to an individual). But to put this in a national perspective, the US GDP
is
9.2 trillion dollars, so 30 billion is just 0.32%. The GDP has been
growing
at a rate of about 2% a year, even in these down economic times. So a
downtick of 0.32% won't even be a net decline on the national level.

Our trade deficit with China ran $103B last year. Here, we're talking about
TWO companies raising that deficit by 30% all by themselves.

Many economists say we've already passed the point at which our trade
deficit has begun to suppress wages, and, thus, to have a multiplying effect
across the economy. Even the old hidebound, free-trade dogmatists at
_Business Week_ have finally acknowledged it.

Talk to the planners and purchasing people at other large American
manufacturing companies and you'll see that most of them plan to expand
their parts purchases from China to an astounding degree. I've talked to
several who, on the average, plan to increase purchases from China by around
30% next year alone. Multiply that one out for a few years, and consider how
much manufacturing capacity in the US is about to go idle.

There are around 7M cars and light trucks sold by those two companies in
a
year. The China sourcing will therefore be around $4,000/car, at
manufacturers' cost. I'll leave it to you to guess what percentage that
is,
of the parts in each car. And then you can take a look at the US
automotive
supply chain and see what percentage of the US jobbing industry will be
wiped out by this foreign outsourcing.

You mean the percentage that hasn't already gone to Mexico or Canada?

Look up the numbers, and also those for our relative trade positions with
Mexico and Canada. The big difference is that we maintain much more
reasonable import/export ratios with those two countries. The dollar amounts
of deficits are still large (although the two together are less than that of
China by itself), but the ratios suggest that a dollar of goods imported
from Canada or Mexico stimulates a much greater volume of exports to those
countries.

That's probably sustainable. Our current account ratio with China probably
is not.

--
Ed Huntress
(remove "3" from email address for email reply)

In article , Ed Huntress
says...

Oh, I should have completed that idea: No matter what the breakdown is, it's
clear that you create more service jobs by manufacturing a product and
selling it in the same country, than you do by importing the same product.
If you both manufacture and sell, you add both types of service jobs to the
equation.

So there is some multiplicative factor involved. Say it's between
one and four. Someplace in there. So the 8% bump in unemployement
really is going to be bigger than that. By at least a factor of
two.

Jim

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"jim rozen" wrote in message
...
In article , Ed Huntress
says...

Oh, I should have completed that idea: No matter what the breakdown is,
it's
clear that you create more service jobs by manufacturing a product and
selling it in the same country, than you do by importing the same
product.
If you both manufacture and sell, you add both types of service jobs to
the
equation.

So there is some multiplicative factor involved. Say it's between
one and four. Someplace in there. So the 8% bump in unemployement
really is going to be bigger than that. By at least a factor of
two.

I wish it were that simple, but it's not. For example, manufacturing people
often say that manufacturing creates service jobs, and that's certainly
true. When you build a plant, you need plant maintenance, and accounting
services, communications and transportation, and so on.

But we seldom hear the other side, which also is true. That is, service jobs
create a demand for manufactured goods. If you start a landscaping service,
you need mowers and backhoes and shovels.

My own view is that services and manufacturing are symbiotic, in one of the
few legitimate applications of that word. They grow together. Separating the
two, in terms of which stimulates the economy more, probably is an
impossible task.

What you're saying about a decline in one type of job decreasing demand for
another type, however, is clearly true. When services decline, manufacturing
is likely to decline, and vice-versa. And a net decline in manufacturing,
even if the goods not produced are fully replaced by imports, is going to
cause a net decline in demand for services in the importing country.

The big question is whether the economy is growing enough and evolving
enough to replace those lost jobs with new types of jobs and new types of
economic activity in general. It's hard to get a handle on this because we
have little unequivocal experience with it under our present economic
realities. The '90s bubble distorts it, and the recession of the last few
years distorts it the other way. There appears to be no way to normalize for
these ups and downs, so you can see the underlying dynamic. In fact, the ups
and downs *are* an important part of the overall dynamic.

Economics, anyone? g

--
Ed Huntress
(remove "3" from email address for email reply)

In article , Ed Huntress
says...

'Sorry if I sound a little sharp about this, bg, but I've been talking to
Congressmen, people from the Depts. of Commerce and Labor, and economists of
several philosophical stripes, and I've been bs'd up to my ears by people
who don't really understand the magnitude of what's happening here. Most of
them have only the vaguest idea of how manufacturing actually works. The
people who *do* know are deeply alarmed. Nothing like this has ever happened
to our economy before. Never. And those people who think this is something
like what we faced with Japan in the '70s and '80s are people who can't
count. Or who don't know what to count.

Uh oh. Just out of curiosity, who *are* the people who understand
how manufacturing works, and are any of them in a position of
power in the present adminstration?

The theories underlying free trade are based on something called
"comparative advantage." When the theory was developed, different countries
had different advantages in resources, capital availability, geographic
advantages and so on. We traded things they couldn't make efficiently for
things we couldn't make efficiently, and everyone benefited. Now we're down
to nothing more than a wage differential. We're not getting anything from
the Chinese that we can't make ourselves. All we're getting is the same
things we make, but a lot cheaper, because they pay their people 1/20th what
we pay ours.

Double uh oh. This sounds like the case where you connect a large
tank and a small tank up with a pipe. The small tank was nearly full
and the large tank was nearly empty at the start. Once the valve
in the pipe is opened, the small tank is nearly empty, and the large
tank went up maybe a teeny bit. According to the 'rozen hydraulic
theory' of economics all one has to do is multiply the US citizen's
present wage by 1/20, and add in the small iota based on whatever
small raise the workers in china will get, and that's how it's
gonna be in about 10 years or so. (if you use that hydraulic theory
you have to give me credit!)

That's not the way it's supposed to work. That's a travesty of the basic
free-trade theory. Until we get off our free-trade ideology and start paying
attention to what's really happening here, we're likely to sacrifice a lot
of our technological capability, and the sources of technological innovation
and development, for nothing more than a short-lived fire sale.

Fire sale? Sounds like the titanic going down. Pardon me, I have
to go fiddle the deck chairs....

Jim

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==================================================

"jim rozen" wrote in message
...

Most of
them have only the vaguest idea of how manufacturing actually works. The
people who *do* know are deeply alarmed. Nothing like this has ever
happened
to our economy before. Never. And those people who think this is
something
like what we faced with Japan in the '70s and '80s are people who can't
count. Or who don't know what to count.

Uh oh. Just out of curiosity, who *are* the people who understand
how manufacturing works, and are any of them in a position of
power in the present adminstration?

Yes, there are some people in the administration who have a handle on it.
Strengthening our manufacturing is not part of their agenda. Without some
more inside information than I have, I don't want to point fingers. Maybe it
will come, or maybe not.

All we're getting is the same
things we make, but a lot cheaper, because they pay their people 1/20th
what
we pay ours.

Double uh oh. This sounds like the case where you connect a large
tank and a small tank up with a pipe. The small tank was nearly full
and the large tank was nearly empty at the start. Once the valve
in the pipe is opened, the small tank is nearly empty, and the large
tank went up maybe a teeny bit. According to the 'rozen hydraulic
theory' of economics all one has to do is multiply the US citizen's
present wage by 1/20, and add in the small iota based on whatever
small raise the workers in china will get, and that's how it's
gonna be in about 10 years or so. (if you use that hydraulic theory
you have to give me credit!)

That's a damned good theory. If I thought they'd get it, I'd try it on some
Congressmen. g

Actually, it only applies if everything is a zero-sum game, and if neither
China nor we could produce any economic growth despite our trade imbalance.
But that's not the case at all. China is growing rapidly, and the growth,
although it's now highly dependent on trade as an essential element, isn't
necessarily measured by the trade itself. They have real growth going on as
well, and so do we.

Until we get off our free-trade ideology and start paying
attention to what's really happening here, we're likely to sacrifice a
lot
of our technological capability, and the sources of technological
innovation
and development, for nothing more than a short-lived fire sale.

Fire sale? Sounds like the titanic going down. Pardon me, I have
to go fiddle the deck chairs....

As I said, don't carry these ideas to some conclusion in which all the
marbles wind up in one corner of the playing board. There are counterforces,
and self-limiting phenomena, and so on.

On one level, some economists say all we're talking about is an
uncomfortable acceleration of a natural trend that's going to happen anyway.
But, on the level I'm writing from, it's more than that. It's a distortion
of the usual forces of competition that's undermining trade itself, as well
as causing an accelerated and unnecessary destruction of some important
parts of our manufacturing base.

The problem at the macro level is highly debatable. At the micro level, it's
clearly destructive, and not just to the dead wood that needed to be cleared
anyway. It's cutting into healthy tissue.

--
Ed Huntress
(remove "3" from email address for email reply)

Ed, I have been going to China every single year at least once, since
1989. I spend at least 15% of the year there, Have two offices,plenty
of staff, and have learned the culture to a point of comfort.

I have seen China grow immensely during this time. As a matter of
fact, I have never seen anything or read anything like it in
history.It has been amazing. 2-3 years ago, China built a second
international airport on the far side of Shanghai, called Pudong. It
is at least 30 miles from the center of the city. Withing a few years,
you will see all skyscrapers all the way to that airport. It has
already begun. Mixed in those skyscapers will be factories and
residences. Those factories will become the most modern facilities in
all of Asia, with the very best of infrastructure to support them. I
know China well. Real well. Thats my job. To monitor their economy and
keep my offices rolling between the graft, corruption and business.

My wife worked for years for a prominent economist, so Economics is a
staple in my house.

Since the beginning of time, companies have always been reinventing
themselves. It is a law of nature. Look at Corning? From dishes and
glass to fiberoptics. Now it will be something else. They are smart
and aggressive. Because of it, they dont feel the downturns for very
long, because they are always preparing.

Other than the current basis for free trade, what would you propose
that would advance economies of the world? If you are negative about
having companies fight to innovate and reinvent themselves, I can only
imagine how positive you would be for a different method of economics.
What method works? Protectionism? Ask South America and Asia how that
has worked. China alone will import record number of goods this year.
While they have surpluses with us, they dont with everyone. They are
buying foreign goods at an amazing growth rate. They have learned that
Protectionism gets one nowhere, except inflation, wasted resources,
and more debt. Its all a matter of economic history.


"Ed Huntress" wrote in message .net...
"bg" wrote in message
om...

What are you saying Ed? I am giving you examples. I cant also give you
the formulas and do the complete research myself. (No one has paid me
yet).

Well, that's what I do for a living. I've done little else but research this
subject and write articles about it since the beginning of this year. I'm
getting a little burned out trying to do that and to discuss it in NG's at
the same time, so I'll keep this short and then bow out.

Here are a couple of numbers for you to chew on. GM now sources roughly $2B
worth of its parts from China. Ford sources $1B. In 2007, GM plans to source
$20B from China. Ford plans to source $10 in 2010. In just seven years, the
Chinese input to US-built cars will multiply by ten times.

There are around 7M cars and light trucks sold by those two companies in a
year. The China sourcing will therefore be around $4,000/car, at
manufacturers' cost. I'll leave it to you to guess what percentage that is,
of the parts in each car. And then you can take a look at the US automotive
supply chain and see what percentage of the US jobbing industry will be
wiped out by this foreign outsourcing.

Those parts manufacturers have four years to figure out what to do with $20B
worth of unused capacity, and seven years to figure out what to do with $30B
worth of overcapacity. One wonders what kind of innovation might solve the
problem. Perhaps we can turn our manufacturing plants into theme parks. Or
maybe we can make hamburgers on converted robotic CNC machining centers.

'Sorry if I sound a little sharp about this, bg, but I've been talking to
Congressmen, people from the Depts. of Commerce and Labor, and economists of
several philosophical stripes, and I've been bs'd up to my ears by people
who don't really understand the magnitude of what's happening here. Most of
them have only the vaguest idea of how manufacturing actually works. The
people who *do* know are deeply alarmed. Nothing like this has ever happened
to our economy before. Never. And those people who think this is something
like what we faced with Japan in the '70s and '80s are people who can't
count. Or who don't know what to count.

No, we cannot compete in mfg the same items as a country with $.80/hr
wages. But we can have a mfg base that produces items that represent
the latest in innovation and design. Business must learn to transform
itself and adapt. If it does not adapt, it will perish, and maybe
rightly so.

It's unlikely that you've really considered the consequences of what you're
saying here. You have no numbers, bg. You need numbers to understand.

The theories underlying free trade are based on something called
"comparative advantage." When the theory was developed, different countries
had different advantages in resources, capital availability, geographic
advantages and so on. We traded things they couldn't make efficiently for
things we couldn't make efficiently, and everyone benefited. Now we're down
to nothing more than a wage differential. We're not getting anything from
the Chinese that we can't make ourselves. All we're getting is the same
things we make, but a lot cheaper, because they pay their people 1/20th what
we pay ours.

That's not the way it's supposed to work. That's a travesty of the basic
free-trade theory. Until we get off our free-trade ideology and start paying
attention to what's really happening here, we're likely to sacrifice a lot
of our technological capability, and the sources of technological innovation
and development, for nothing more than a short-lived fire sale.

Ed Huntress

"jim rozen" wrote in message
...
In article , Ed Huntress
says...

On one level, some economists say all we're talking about is an
uncomfortable acceleration of a natural trend that's going to happen
anyway.
But, on the level I'm writing from, it's more than that. It's a
distortion
of the usual forces of competition that's undermining trade itself, as
well
as causing an accelerated and unnecessary destruction of some important
parts of our manufacturing base.

Honestly this thing sounds like nothing more than a Wal-Mart
executive, or the equivalent at GM or Ford, looking at the
idea of getting stuff a *lot* cheaper from China, and saying
'hey, this is a no-brainer. Fire all those american workers
and just buy the stuff we need from overseas.'

In what is probably the best-researched analysis of the subject, John
MacArthur's _The Selling of Free Trade_, the author reaches exactly the same
conclusion.

MacArthur was analyzing the politics behind NAFTA, but the same general
principles apply to China, with one exception: There really is a big
potential market in China. Maybe. Someday.

But most US and European manufacturers that are investing there talk about a
potential market that they expect will develop in 5 to 10 years. When was
the last time you heard about a publicly traded company making a sizable
investment that will return nothing to the bottom line for 5 to 10 years?
g It's evident that most of the Western companies that have establsihed
themselves there are after the low manufacturing costs and not, except in a
few cases, the market. The Shanghai-GM operation was ostensibly set up to
serve the Asian market, as GM claimed to anyone who would listen a few years
ago. Now they're exporting to North America, and their chief exec in China
has made no bones about the fact that they're out to compete in the US
market. To paraphrase James Carville, "It's the wages, stupid."


I have no problem at all with them buying stuff from overseas.
The trouble happens in the 'fire all those expensive american
workers' section. If they fire all the workers then nobody's
gonna be there to buy stuff at Wal-Mart. Sounds like the
end result is a depression.

More likely, a continued hollowing out of middle-class wages in the US.

--
Ed Huntress
(remove "3" from email address for email reply)

In article , Ed Huntress
says...

... Sounds like the
end result is a depression.

More likely, a continued hollowing out of middle-class wages in the US.

It's not clear to me that those are necessarily two
different things, depending on degree.

Jim

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In article , bg says...

Other than the current basis for free trade, what would you propose
that would advance economies of the world? If you are negative about
having companies fight to innovate and reinvent themselves, I can only
imagine how positive you would be for a different method of economics.
What method works? Protectionism?

I don't ever recall Ed advocating protectionism. Quite
the opposite.

Ask South America and Asia how that
has worked. China alone will import record number of goods this year.

I'm gonna go out on a little bit of a limb here, and make
a guess that most of whatever they did import, they did
not import from the US.

Jim

==================================================
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==================================================

"bg" wrote in message
om...

Other than the current basis for free trade, what would you propose
that would advance economies of the world?

I'm not in that business, bg. I'm in the business of analyzing what's
happening. One thing I've learned from a few decades of doing it is that,
once you've decided what the range of possible solutions is, as you've done
with your free-trade/protectionism dichotomy, you've limited your ability to
see the problem without bias and with clear eyes. You naturally begin to see
events in terms of which solution they imply.

You seem loathe to look at the actual numbers, even though you acknowledge
that "I have never seen anything or read anything like it in history." Yet,
you're looking at this new situation and trying to apply old answers to it:
the black/white, free-trade/protectionism answers.

That's exactly what I've run into with Congress. They're so afraid that the
facts will lead them to a protectionist answer, or to an admission that
they're willing to just let our manufacturing go to hell, that they're
falling all over themselves to avoid either. Pressed from both sides,
they've squirted out in the direction of least resistance. Quite a few of
them have now become "fair traders," who focus on 5% solutions to 95%
problems. A fair-trader often is a former free-trader who doesn't quite get
it yet. "Fair trade" is a comfortable answer because they know that it's an
endless debate that will keep them from ever having to face squarely the
consequences of trying to compete with a country that makes decent products
while paying 80 cent/hour wages.

I'm not "negative about having companies fight to innovate and reinvent
themselves." What I'm negative about is the idea that the people who propose
that as a solution have really researched and thought carefully about the
problem. Once again, you're quite right that this is a situation unlike
anything we've experienced in history. Some of the key dynamics are
radically new. We've never confronted such a radical explosion in imports of
goods made with the technology we created or developed, and which has been
the strength of our own economy. We're being beaten over the head with our
own arms.

The idea that old solutions will answer this problem, especially unfettered
"free trade" and the tariffs and quotas we collectively call
"protectionism," is a failure of imagination.

Meanwhile, if I had the answers, I'd be rich, and not a magazine writer. g
I appreciate your thoughts and your experience, bg, and I take them into
account, as I do all evidence that I encounter in this quest. But I don't
believe that you've seen the problem clearly, either. You're doing business
with China, which is a perfectly legitimate thing to do, but it undoubtedly
colors your judgments. Nearly everyone from whom I gather information has a
dog in this fight. Sorting out the facts is never easy, but it's my job.

Because this is such a new phenomenon in several crucial ways, I'm skeptical
about the lessons one would learn from the examples of South America and
Asia that you suggest. I'm also skeptical that the Chinese leaders know
quite what they're doing. Serious economists, real-world types who consult
on hedge funds and the like, and who play bet-your-life with billions of
dollars, are concerned that China is digging itself a financial hole by
piling up too much foreign currency while letting its banks cruise along in
what amounts to an utterly bankrupt state. Nobody knows what's going to
happen to China's economy, but I'm not really concerned about it myself.
What I'm concerned about is how much damage our policies and China's
enormous low-cost production will do to our manufacturing, and, perhaps, to
our economy, as long as the party goes on.

I don't believe you've presented any information that helps quantify the
problem. And, without some quantities attached to the ideas, we're really
just wasting our time in a melange of ideologies, tired old answers, and
speculations. The possibility that motivates me is that we may be whistling
past the graveyard.

Ed Huntress

In article , Ed Huntress
says...

... We're being beaten over the head with our
own arms.

This for me is the really infuriating part. The better
we do, the harder we get hit. And to the uninitiated,
(at least discussing the job flight) it looks like
our own CEOs that are handing them the sticks!

Jim

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==================================================

On 11 Aug 2003 12:45:33 -0700, jim rozen wrote:
I have no problem at all with them buying stuff from overseas.
The trouble happens in the 'fire all those expensive american
workers' section. If they fire all the workers then nobody's
gonna be there to buy stuff at Wal-Mart. Sounds like the
end result is a depression.

Seems to me that Walmart is *hiring* American workers to staff
all the stores they're opening to sell all those inexpensive goods.
Walmart is one of the fastest growing companies in the US.

Gary

On Tue, 12 Aug 2003 04:24:28 GMT, "Ed Huntress" wrote:
Well, you can take the position of the conservative think-tank, the Cato
Institute, and point out that a careful analysis of the quintile divisions
of family income in the US indicates that the middle class is doing just
about as well as it's done since the early '70s.

Then, like the Cato Institute, you could ignore the fact that it now
frequently requires two incomes for a family to remain in the middle
quintiles, where it once required one.

A doubling of job seekers in the marketplace can do that. When
women entered the workplace, they diluted the value of labor
by providing a glut of supply. With households bringing in more
currency, they naturally chased more goods, driving up prices.
The end result of all that supply push and demand pull is that
everyone wound up in about the same place with respect to
standard of living as the inflated currency buys about the same
amount of goods as before.

Gary

"Ed Huntress" wrote in message .net...
"bg" wrote in message
om...

Other than the current basis for free trade, what would you propose
that would advance economies of the world?

I'm not in that business, bg. I'm in the business of analyzing what's
happening. One thing I've learned from a few decades of doing it is that,
once you've decided what the range of possible solutions is, as you've done
with your free-trade/protectionism dichotomy, you've limited your ability to
see the problem without bias and with clear eyes. You naturally begin to see
events in terms of which solution they imply.

You seem loathe to look at the actual numbers, even though you acknowledge
that "I have never seen anything or read anything like it in history." Yet,
you're looking at this new situation and trying to apply old answers to it:
the black/white, free-trade/protectionism answers.

When you see that economy grow first hand, then way I have in such a
short time, I can only think of the historic 1920's USA production
oriented economy, which eventually led to a a big bang. However,
today, institutions are more transparent then yesteryear. I dont know
any other way to find answers. It seems to me, either you are a free
trader, or a fair trader. I dont believe the fair trade matra works in
most open economic cases (Major league baseball and sports excluded).

That's exactly what I've run into with Congress. They're so afraid that the
facts will lead them to a protectionist answer, or to an admission that
they're willing to just let our manufacturing go to hell, that they're
falling all over themselves to avoid either. Pressed from both sides,
they've squirted out in the direction of least resistance. Quite a few of
them have now become "fair traders," who focus on 5% solutions to 95%
problems. A fair-trader often is a former free-trader who doesn't quite get
it yet. "Fair trade" is a comfortable answer because they know that it's an
endless debate that will keep them from ever having to face squarely the
consequences of trying to compete with a country that makes decent products
while paying 80 cent/hour wages.

The slightest move to fair trade can have grave consequences. Just
look at the recent duty placed on steel imports in this country. Steel
prices have risen anywhere from 35-50%. To protect what? A few
outdated inefficient steel MFR's? The whole economy suffers because of
it. Corporate profits have suffered in the face of trying not to raise
prices,and many companies have been buried, especially in the
metalworking trades.

I'm not "negative about having companies fight to innovate and reinvent
themselves." What I'm negative about is the idea that the people who propose
that as a solution have really researched and thought carefully about the
problem. Once again, you're quite right that this is a situation unlike
anything we've experienced in history. Some of the key dynamics are
radically new. We've never confronted such a radical explosion in imports of
goods made with the technology we created or developed, and which has been
the strength of our own economy. We're being beaten over the head with our
own arms.

It is not a matter of research to find the solution. The solution is
evident. Change the paradigm or die. It is the law of nature. The
nature of the beast. The strong survive and the weak die off. Adapt
and thee will survive. What they will adapt to, is what really needs
to be researched.

The idea that old solutions will answer this problem, especially unfettered
"free trade" and the tariffs and quotas we collectively call
"protectionism," is a failure of imagination.

Meanwhile, if I had the answers, I'd be rich, and not a magazine writer. g
I appreciate your thoughts and your experience, bg, and I take them into
account, as I do all evidence that I encounter in this quest. But I don't
believe that you've seen the problem clearly, either. You're doing business
with China, which is a perfectly legitimate thing to do, but it undoubtedly
colors your judgments. Nearly everyone from whom I gather information has a
dog in this fight. Sorting out the facts is never easy, but it's my job.

Because this is such a new phenomenon in several crucial ways, I'm skeptical
about the lessons one would learn from the examples of South America and
Asia that you suggest. I'm also skeptical that the Chinese leaders know
quite what they're doing. Serious economists, real-world types who consult
on hedge funds and the like, and who play bet-your-life with billions of
dollars, are concerned that China is digging itself a financial hole by
piling up too much foreign currency while letting its banks cruise along in
what amounts to an utterly bankrupt state. Nobody knows what's going to
happen to China's economy, but I'm not really concerned about it myself.
What I'm concerned about is how much damage our policies and China's
enormous low-cost production will do to our manufacturing, and, perhaps, to
our economy, as long as the party goes on.

I believe China knows exactly what they are doing. They have been
doing it well for the past 10 years. They are learning lessons from
all economies, taking the best ideas and making it happen within a
moments notice in the case of infrastructure. They prevented imports,
except for those items they needed to build infrastructure for many
years, (learned from Japan), and have now reached the point of opening
the door nearly all the way. The banking situation is not pretty, but
it is improving, albeit slowly. It is the largest reason they dont
float their currency at the moment, along with the problem of
corruption at every level.


I don't believe you've presented any information that helps quantify the
problem. And, without some quantities attached to the ideas, we're really
just wasting our time in a melange of ideologies, tired old answers, and
speculations. The possibility that motivates me is that we may be whistling
past the graveyard.

The only problem I see is for USA companies to adapt. I think this is
unquantifiable.


By the way, In regards to your numbers on the automotive guys buying
from China, I am really surprised they are so late. VW, audi, Peugeot,
Toyota, Honda and Nissan have all been benefitting greatly. I dont
believe all have been exporting full vehicles, but many have. It is
certainly in the cards for the balance of them. Keep in mind though
that Chinas market is growing so big, they may never have enough
capacity in the near term to really get exports going to a large
degree. The profit in the domestic China market is also great compared
to here, a virtual dumping ground.

Ed Huntress

bg wrote:


The only problem I see is for USA companies to adapt. I think this is
unquantifiable.


Can American companies not find people to employ at 80 cents an hour?
How do the Chinese manage it? I presume that low living costs (thanks to
the existance of cheap food from rice paddies) helps.

I'm in the UK, so I'm not 100% in touch with the socioeconomic situation
over there, but here we're having problems with minimum wage laws; we
have people (eg, students) who want to work at low wages for
organisations like the student union bar - they get a job within easy
travel of their place of study, with hours that fit around their study,
and without needing to put in too much commitment (which can be a
problem around exam time).

Here, also, space to live in is expensive, but that can't be the case in
the US, surely :-)

So does the US have a minimum wage? If so, who does it benefit? I
presume that minimum wage laws exist to prevent companies exploiting
workers, but they can only do that in a situation where it's hard to
move to another company that won't exploit you. I suppose there might
have been cartels of low-paying companies within an industry, and the
only way out being retraining. Perhaps the government ought to have put
more funding into libraries and further education to make it easy to
move out of exploitational industries, while still leaving the door open
for low cost labour for people who are either less educatable than
others, or who are working part time while furthering their education?

ABS

"Gary R Coffman" wrote in message
...
On Tue, 12 Aug 2003 04:24:28 GMT, "Ed Huntress"
wrote:
Well, you can take the position of the conservative think-tank, the Cato
Institute, and point out that a careful analysis of the quintile
divisions
of family income in the US indicates that the middle class is doing just
about as well as it's done since the early '70s.

Then, like the Cato Institute, you could ignore the fact that it now
frequently requires two incomes for a family to remain in the middle
quintiles, where it once required one.

A doubling of job seekers in the marketplace can do that.

I suppose it could, but did it? There was a lot of discussion about it in
the late '70s, but the idea was pretty well dismissed because there was no
correspondance between unemployment and the numbers of women enterring the
workforce. The correspondance that was a lot clearer was the decline of
unions.

I always remember one anecdote, from my college roommate, who had been a
teacher but who quit and took a job at Dodge, driving cars off the end of
the assembly line to the parking lot for $22/hr. That was almost twice what
he had been making as a teacher.

Ed Huntress

"Gunner" wrote in message
...

Well, you can take the position of the conservative think-tank, the Cato
Institute, and point out that a careful analysis of the quintile
divisions
of family income in the US indicates that the middle class is doing just
about as well as it's done since the early '70s.

Then, like the Cato Institute, you could ignore the fact that it now
frequently requires two incomes for a family to remain in the middle
quintiles, where it once required one.

Even in the early 70s, it took two incomes. That started about 1968-9
with the Great Society....

Gunner

Is this an "opinion," or do you have the numbers to support your idea? You
can find them at the Dept. of Labor website. See you next week. g

Ed Huntress

"bg" wrote in message
om...


When you see that economy grow first hand, then way I have in such a
short time, I can only think of the historic 1920's USA production
oriented economy, which eventually led to a a big bang. However,
today, institutions are more transparent then yesteryear. I dont know
any other way to find answers. It seems to me, either you are a free
trader, or a fair trader.

Only two possibilities? Perhaps that's because of the way the issue has been
framed by the ideologues, who have overwhelmed the debate for so long. And
those ideologues tend to be people who have a financial interest in the
outcome.


The slightest move to fair trade can have grave consequences. Just
look at the recent duty placed on steel imports in this country. Steel
prices have risen anywhere from 35-50%. To protect what? A few
outdated inefficient steel MFR's? The whole economy suffers because of
it. Corporate profits have suffered in the face of trying not to raise
prices,and many companies have been buried, especially in the
metalworking trades.

The steel industry is far from transparent. The fact is that U.S. primary
steel producers are too small to compete on world markets. Until now,
they've been unable to consolidate because they're all carrying enormous
legacy liabilities in the form of unfunded pension obligations and
retirement healthcare plans. No one with the capital to do it will touch
them.

The idea behind the tariffs was to give them some profitibility, which would
interest investors in buying them up and consolidating them. It hasn't
worked so far, and it may never work. But it's a good example of how such
things are seldom what they seem.



It is not a matter of research to find the solution. The solution is
evident. Change the paradigm or die. It is the law of nature. The
nature of the beast. The strong survive and the weak die off. Adapt
and thee will survive. What they will adapt to, is what really needs
to be researched.

"The solution is evident"? So, what's the solution?

What does it mean when the "strong" get there only by paying their workers
80 cents/hour? What other "strength" do the Chinese have? Have they
innovated any manufacturing technologies? Do they have geographic
advantages? Resource advantages? More efficient production? Is their
competitive edge explained by better schemes of industrial organization and
efficient automation, like the Japanese have innovated? No. They have low
wages, and a command-and-control economic structure that focuses on exports.
Period.

And their low wages are attracting astronomical amounts of FDI (foreign
direct invertment). The new "paradigm" seems to be, as Alan Tonelson puts
it, a race to the bottom.

The goals of economic development, the old "paradigm," run towards
improvements in labor productivity, economic opportunity, and innovations in
products and manufacturing. So the equation has been stood on its head. The
real question now, for a country that wants its economy to grow, is what
goals they should establish. Keep cutting wages? There's a winner for you...


I believe China knows exactly what they are doing.

It isn't a matter of belief. It's a matter of facts. And one key fact is
that the Chinese are addicted to their state-run enterprises, which are
their employment buffer that keeps a lid on unrest, even while they run
their banking system into the tank. Their banks are insolvent. If they
opened up their state banking system to competition, as they've promised the
WTO they will do, there would be a run on those banks tomorrow, and they
would collapse within a week. All of their money is loaned out in
non-performing loans, which can never be paid back. They knew they would
never be paid back when they loaned the money -- to state-run enterprises,
exclusively. There's no way to call those loans in. The money is all gone.

For both practical and ideological reasons, China's government is unable to
do anything about it. They can't get off of the merry-go-'round they've
created. They're sweating it. So is the world banking community.


By the way, In regards to your numbers on the automotive guys buying
from China, I am really surprised they are so late. VW, audi, Peugeot,
Toyota, Honda and Nissan have all been benefitting greatly. I dont
believe all have been exporting full vehicles, but many have.

Not. VW has by far the largest market share in China, at 40%. From "The
Business Times," August 4, 2003: "China, the land of $50 VCRs and $3
haircuts, remains too uncompetitive a place to make cars for export. And it
could take up to five years before the country exports cars, according to a
top VW executive yesterday."

From Automotive News Europe, July 16, 2003: "Volkswagen, which has
complained frequently about the high cost of auto parts in China, will
follow the example of Ford Motor Co. and General Motors and begin sourcing
parts here for its global operations."

Opinion is a kind of low-level ailment, bg. The cure for it is facts.
Unfortunately, they require some effort to research.

But they can really help clear your head.

--
Ed Huntress
(remove "3" from email address for email reply)

"Ed Huntress" wrote in message .net...
"bg" wrote in message
om...


When you see that economy grow first hand, then way I have in such a
short time, I can only think of the historic 1920's USA production
oriented economy, which eventually led to a a big bang. However,
today, institutions are more transparent then yesteryear. I dont know
any other way to find answers. It seems to me, either you are a free
trader, or a fair trader.

Only two possibilities? Perhaps that's because of the way the issue has been
framed by the ideologues, who have overwhelmed the debate for so long. And
those ideologues tend to be people who have a financial interest in the
outcome.

Actually three I know of in the same format. Fair trade is actually
middle ground between free trade and outright protectionism.


The slightest move to fair trade can have grave consequences. Just
look at the recent duty placed on steel imports in this country. Steel
prices have risen anywhere from 35-50%. To protect what? A few
outdated inefficient steel MFR's? The whole economy suffers because of
it. Corporate profits have suffered in the face of trying not to raise
prices,and many companies have been buried, especially in the
metalworking trades.

The steel industry is far from transparent. The fact is that U.S. primary
steel producers are too small to compete on world markets. Until now,
they've been unable to consolidate because they're all carrying enormous
legacy liabilities in the form of unfunded pension obligations and
retirement healthcare plans. No one with the capital to do it will touch
them.

The idea behind the tariffs was to give them some profitibility, which would
interest investors in buying them up and consolidating them. It hasn't
worked so far, and it may never work. But it's a good example of how such
things are seldom what they seem.

Lousy decision. Look at the consequences to this action. As if these
metalworkers here were not already fighting an uphill battle. Bush was
thinking of the political ramifications, not the economical. He doesnt
know better.


It is not a matter of research to find the solution. The solution is
evident. Change the paradigm or die. It is the law of nature. The
nature of the beast. The strong survive and the weak die off. Adapt
and thee will survive. What they will adapt to, is what really needs
to be researched.

"The solution is evident"? So, what's the solution?

Change or die. Its cold, but has always been true. The milkman, diaper
man, Knife sharpening truck, etc. If they didnt change the paradigm,
they starved.

What does it mean when the "strong" get there only by paying their workers
80 cents/hour?

Nothing, If you produce a different item in that same industry or
another.

What other "strength" do the Chinese have? Have they
innovated any manufacturing technologies?

Maybe. I dont see the relevance here.

Do they have geographic
advantages?

Over most countries, yes.

Resource advantages?
Over most countries, yes.

More efficient production? Is their
competitive edge explained by better schemes of industrial organization and
efficient automation, like the Japanese have innovated? No. They have low
wages, and a command-and-control economic structure that focuses on exports.
Period.

This is true for the most part.

And their low wages are attracting astronomical amounts of FDI (foreign
direct invertment). The new "paradigm" seems to be, as Alan Tonelson puts
it, a race to the bottom.

This is true.

The goals of economic development, the old "paradigm," run towards
improvements in labor productivity, economic opportunity, and innovations in
products and manufacturing. So the equation has been stood on its head.

Why hasnt it been stood on its head? You listed economic opportunity.
Moving production for certain items is good economic opportunity.
Innovation is lacking. That si the basis for my argument. It is
lacking.

The
real question now, for a country that wants its economy to grow, is what
goals they should establish. Keep cutting wages? There's a winner for you...


Goals?
Provide sound govt economic planning - we dont
Provide ample economic infrastructure - we dont
Provide money and resources for research and dev. - we need more.


I believe China knows exactly what they are doing.

It isn't a matter of belief. It's a matter of facts. And one key fact is
that the Chinese are addicted to their state-run enterprises, which are
their employment buffer that keeps a lid on unrest, even while they run
their banking system into the tank. Their banks are insolvent. If they
opened up their state banking system to competition, as they've promised the
WTO they will do, there would be a run on those banks tomorrow, and they
would collapse within a week. All of their money is loaned out in
non-performing loans, which can never be paid back. They knew they would
never be paid back when they loaned the money -- to state-run enterprises,
exclusively. There's no way to call those loans in. The money is all gone.

For both practical and ideological reasons, China's government is unable to
do anything about it. They can't get off of the merry-go-'round they've
created. They're sweating it. So is the world banking community.

Chinas banks have been in garage sale mode for the past three years
selling off bad assets in a fire sale, even to foreigners. The loans
are being written off and they are working on getting the program on
track.

But you are mistaken to think there is no competition. Froeign bnaks
now work in local currency, give loans and sell financial instruments.
I suggest you get your facts straight.


By the way, In regards to your numbers on the automotive guys buying
from China, I am really surprised they are so late. VW, audi, Peugeot,
Toyota, Honda and Nissan have all been benefitting greatly. I dont
believe all have been exporting full vehicles, but many have.

Not. VW has by far the largest market share in China, at 40%. From "The
Business Times," August 4, 2003: "China, the land of $50 VCRs and $3
haircuts, remains too uncompetitive a place to make cars for export. And it
could take up to five years before the country exports cars, according to a
top VW executive yesterday."

From Automotive News Europe, July 16, 2003: "Volkswagen, which has
complained frequently about the high cost of auto parts in China, will
follow the example of Ford Motor Co. and General Motors and begin sourcing
parts here for its global operations."

Opinion is a kind of low-level ailment, bg. The cure for it is facts.
Unfortunately, they require some effort to research.

"A shipment of 252 Xiali economy cars manufactured in north China's
port city of Tianjin is on its way to the United States market.
Tianjin is the leading manufacturing center for economy cars in China.

The cars, produced by Tianjin Auto Group in cooperation with Toyota,
are the first batch of Chinese-made economy cars to be exported. They
are part of a deal signed in April between the manufacturer and
American Automobile Network Holdings Inc., which will be the sole
agent for Xiali economy cars on the international market.

According to the deal, the American company will be responsible for
selling at least 25,000 Xiali cars during the next five years"

GM Shanghai is also exporting cars to the Phillipines (I have a
relative who recently left GM Asia to work for one of their major
parts suppliers - at least 5 factories in China now).

I suggest that you take some medicine for that ailment Ed.You need
some more research to come up with facts.

BG

jim rozen wrote in message ...
In article , bg says...

Other than the current basis for free trade, what would you propose
that would advance economies of the world? If you are negative about
having companies fight to innovate and reinvent themselves, I can only
imagine how positive you would be for a different method of economics.
What method works? Protectionism?

I don't ever recall Ed advocating protectionism. Quite
the opposite.

True, but here he is stating that he believes free trade does not
work. Well, what is the alternative? 2 others are commonly practiced,
outright protectionism, or "fair trade", which is a go between the two
others. Fair trade basically stands for protect what you need to
protect, when you want to, on a limited basis.

If he is looking for another method, he can wait a century or so, when
someone may come up with a different economic structure.

Within 5 years Most of the developing countries will have decreased
any import duties to reasonable levels, as a result of WTO membership.
There will always be fights and squabbles, but thats humanity's
factor. At that time, where does the argument free or fair or
protectionism stand? Another method? The argument loses its relevance
in a matter of time. The process is already in place. China's duty for
metalworking equipment and tools I believe is currently 17% max,
scaled down for different divisions.

Ask South America and Asia how that
has worked. China alone will import record number of goods this year.

I'm gonna go out on a little bit of a limb here, and make
a guess that most of whatever they did import, they did
not import from the US.

Stong limb, Jim. They do not purchase that much from the USA on scale.
However, my point is that they are amassing large amounts of foreign
currency, but their trade surplus is a pittance compared to Japans
(diue to large imports from Asian countries who have the surplus over
China for their own trade balances). South America has been outright
protectionist for years and look at the shape they are in. We have to
bail them out every 5 years and still they dont learn.

Jim

==================================================
please reply to:
JRR(zero) at yktvmv (dot) vnet (dot) ibm (dot) com
==================================================

On Tue, 12 Aug 2003 12:42:20 GMT, "Ed Huntress" wrote:
"Gary R Coffman" wrote in message
.. .
A doubling of job seekers in the marketplace can do that.

I suppose it could, but did it? There was a lot of discussion about it in
the late '70s, but the idea was pretty well dismissed because there was no
correspondance between unemployment and the numbers of women enterring the
workforce. The correspondance that was a lot clearer was the decline of
unions.

Well now, I don't think housewives showed up in the unemployment stats
until after they got an outside job, then *lost it*. So the initial influx of women
into the workforce wouldn't have been reflected in unemployment statistics.
They'd have shown up in employment statistics, though, and they did.

That influx of labor meant that pressure to increase wages was relieved at
the same time there was a greater amount of money per household chasing
available goods. So prices rose while individual incomes didn't rise at a
corresponding rate. The end result, a man alone could no longer earn
enough to keep up with the Joneses (as both Mr and Mrs Jones were
now working).

Once the two wage earner household became the norm, and prices settled
to what two wage earners could afford (remember that prices reflect what
the market will bear, not necessarily what the product cost to produce), the
single wage earner household was screwed. Unless the single wage earner
was far above average, his household would be relatively poor compared
to the two wage earner household.

Gary

On Tue, 12 Aug 2003 12:45:26 GMT, "Ed Huntress" wrote:
"Gary R Coffman" wrote in message
.. .
On 11 Aug 2003 12:45:33 -0700, jim rozen wrote:
I have no problem at all with them buying stuff from overseas.
The trouble happens in the 'fire all those expensive american
workers' section. If they fire all the workers then nobody's
gonna be there to buy stuff at Wal-Mart. Sounds like the
end result is a depression.

Seems to me that Walmart is *hiring* American workers to staff
all the stores they're opening to sell all those inexpensive goods.
Walmart is one of the fastest growing companies in the US.

Gary


Yes. Have you noticed what they pay? Do you know what the average pay is at
Wal-Mart, versus the average pay in manufacturing?

Hint: It's roughly half. And the number of service jobs that supported
*manufacturing*, itself, are now gone. All that's left there is the
low-paying service jobs that support *products*.

Yes, but there are a *lot* more of those jobs than there were manufacturing
jobs. Sure, some of those high pay low skill assembly line jobs are gone, there
aren't as many auto workers with cabins at the lake and a big boat, but more
people are earning enough to shop at Walmart (many getting an employee
discount too).

Gary.

On Wed, 13 Aug 2003 11:04:43 +0100, the renowned Alaric B Snell
wrote:

Perhaps this is a sign that the cheap labour market in China will not
last long, then!

It could be a couple of generations more. China is evolving into a
country with relatively rich cities with a relatively small population
(but about the same as the US) and a much larger number of people
(about a billion) who live in the countryside, endure back-breaking
labor and have little money. The country folks try to get into the
cities (and special economic zones) for better pay and easier, cleaner
factory and other work.

There's another factor- once a country or region gets really good at
something, the production tends to remain long after other places
become competitive because of all the infrastructure, suppliers,
traders, designers and other bits of the process. Little Taiwan, for
example, is far more expensive than China but retains a lot of control
of electronics and other manufacturing. New Yawk retains much control
of the schmattas trade despite most of the stuff being made elsewhere.
And LA is where you want to be in the movie business, even if the
movie is shot in Toronto.

Yeah, but if I can hire a sharp young university graduate for less
than $1/hour...

Assuming there's enough of them left over after being offered more money
to do more interesting things! How qualified is the average 80 cent per
hour Chinese worker?

Very hard working. More supply than demand. The factory workers may
require some training but that's no problem if they are smart. There
is a cultural issue that the people there are used to more
imperfections in their own lives and they have to be taught how picky
we are about things- if a new product is scuffed or the paint is a
little off, we won't accept it.

Are they being hired as senior management or
consultants, or are we just talking apprentice shopworkers here? :-)

I think good English or German or Japanese-speaking Chinese managerial
types there can make a good buck.

Best regards,
Spehro Pefhany
--
"it's the network..." "The Journey is the reward"
Info for manufacturers: http://www.trexon.com
Embedded software/hardware/analog Info for designers: http://www.speff.com

"bg" wrote in message
om...
"Ed Huntress" wrote in message
.net...


It is not a matter of research to find the solution. The solution is
evident. Change the paradigm or die. It is the law of nature. The
nature of the beast. The strong survive and the weak die off. Adapt
and thee will survive. What they will adapt to, is what really needs
to be researched.

"The solution is evident"? So, what's the solution?

Change or die. Its cold, but has always been true. The milkman, diaper
man, Knife sharpening truck, etc. If they didnt change the paradigm,
they starved.

Ah, the old free-trade mantra raises its little head. So, you're comparing a
skilled moldmaker, who works with 3D CAD and 5-axis high-speed machining
centers, with a guy who sharpens knives on the back of a truck?

You sound like Grant Aldonis, Assistant Sec. of Commerce. He thinks our
productivity is too low to compete. He apparently didn't read his own
department's figures, which show that we have the highest productivity in
the world.

As you sit there telling other people what they must do, bg, what is it you
suggest? Should they all start becoming middlemen for China?


Do they have geographic
advantages?

Over most countries, yes.

You don't understand the question. Geographic advantage relates to an
advantageous climate or low-cost trans-shipping. In terms of trade with the
US, China has neither.


Resource advantages?
Over most countries, yes.

We aren't talking about "most countries." We're talking about the US. Again,
no advantage overall.


Innovation is lacking. That si the basis for my argument. It is
lacking.

And your argument is utter nonsense. The US is the most innovative economy
in the world. So, your cure for an assault by low-wage mercantilism is to do
something that you can't think of yourself, and that this country already
does better than anyone else. That sounds like a self-serving excuse to me,
bg, when it's coming from someone who's engaged in foreign trade himself.
Your prescription seems to be, "go away, I have mine."

The
real question now, for a country that wants its economy to grow, is what
goals they should establish. Keep cutting wages? There's a winner for
you...


Goals?
Provide sound govt economic planning - we dont
Provide ample economic infrastructure - we dont
Provide money and resources for research and dev. - we need more.

Ooh, more government planning and spending. They're going to take your
Junior Libertarian Free-Trade Decoder Ring away from you if you keep talking
like that, bg. g




I believe China knows exactly what they are doing.

It isn't a matter of belief. It's a matter of facts. And one key fact is
that the Chinese are addicted to their state-run enterprises, which are
their employment buffer that keeps a lid on unrest, even while they run
their banking system into the tank. Their banks are insolvent. If they
opened up their state banking system to competition, as they've promised
the
WTO they will do, there would be a run on those banks tomorrow, and they
would collapse within a week. All of their money is loaned out in
non-performing loans, which can never be paid back. They knew they would
never be paid back when they loaned the money -- to state-run
enterprises,
exclusively. There's no way to call those loans in. The money is all
gone.

For both practical and ideological reasons, China's government is unable
to
do anything about it. They can't get off of the merry-go-'round they've
created. They're sweating it. So is the world banking community.

Chinas banks have been in garage sale mode for the past three years
selling off bad assets in a fire sale, even to foreigners. The loans
are being written off and they are working on getting the program on
track.

But you are mistaken to think there is no competition. Froeign bnaks
now work in local currency, give loans and sell financial instruments.
I suggest you get your facts straight.

You neglect to mention that this is only in a few select cities, and most of
the foreign banks' RMB services are only allowed to Chinese businesses, not
to the foreigners doing business in China. The phased "liberalization" of
foreign banks in China won't be complete until 2007.

Meanwhile, our Fed. Reserve estimates that the non-performing loan (NPL)
percentage among major Chinese banks is around 60%. In a competitive
marketplace, banks are usually insolvent when their NPL goes above 20%.
Their capital-adequacy ratios (CARs) are still far below the international
norm of 8%, while they're demanding far higher ratios, well ABOVE the
international norm, from foreign banks that want to do business in China. At
the same time, they have limited the inter-bank loans from Chinese banks to
foreign banks, which is one of their few sources of RMB, assuring that their
growth will be limited, and that Chinese banks won't have to compete with
them except at that margins, for quite a long time to come. They're barely
sticking to the letter of their WTO agreements, but it's obvious they're
doing everything they can to hold back the tide.

But China's banks are not in a competitive marketplace. If they were, as I
said, they'd have a run and go belly-up before week's end.



By the way, In regards to your numbers on the automotive guys buying
from China, I am really surprised they are so late. VW, audi, Peugeot,
Toyota, Honda and Nissan have all been benefitting greatly. I dont
believe all have been exporting full vehicles, but many have.

Not. VW has by far the largest market share in China, at 40%. From "The
Business Times," August 4, 2003: "China, the land of $50 VCRs and $3
haircuts, remains too uncompetitive a place to make cars for export. And
it
could take up to five years before the country exports cars, according
to a
top VW executive yesterday."

From Automotive News Europe, July 16, 2003: "Volkswagen, which has
complained frequently about the high cost of auto parts in China, will
follow the example of Ford Motor Co. and General Motors and begin
sourcing
parts here for its global operations."

Opinion is a kind of low-level ailment, bg. The cure for it is facts.
Unfortunately, they require some effort to research.

"A shipment of 252 Xiali economy cars manufactured in north China's
port city of Tianjin is on its way to the United States market.
Tianjin is the leading manufacturing center for economy cars in China.

The cars, produced by Tianjin Auto Group in cooperation with Toyota,
are the first batch of Chinese-made economy cars to be exported. They
are part of a deal signed in April between the manufacturer and
, which will be the sole
agent for Xiali economy cars on the international market.

According to the deal, the American company will be responsible for
selling at least 25,000 Xiali cars during the next five years"

Ah, bg, that ship set sail in June of 2002. Maybe your subscription to the
People's Daily is running a little behind. g

American Automobile Network Holdings Inc. was the remnant of the collapsed
Daewoo dealer network in the U.S. All hat, no cattle. No cars, either.

The cars were slated to land in Port Everglades, Fla., but the US government
wouldn't allow them to pass through customs because they don't meet US
emissions standards. The ship was re-routed to Mexico, and then apparently
it was decided they'd land in Port Everglades after all, for trans-shipment
to Africa.

They haven't been heard from since. They may have tried to cross the Bermuda
Triangle...

There could be a connection, though, with an incident in which the golf
carts at the Boca Raton Country Club were replaced in the dead of night by a
fleet of funny little hardtops with radios and turn signals, and with
tear-off pads of Chinese takeout menus stuffed into the glove boxes. Under
the vehicles' insignia, which no one recognizes, are the words "Happy,
Happy, Joy, Joy."

Golfers are generally pleased with the new vehicles, although they complain
about the lack of air conditioning and a noxious odor coming from their
trunks. "It smells like somebody has been living in there for weeks," says
Boca Raton police chief Billy-Bob Turkle. "But it can't be, because those
trunks are so small you could barely stuff a Chinaman in there."

The mysterious replacement of the golf carts, which turned up in a
hand-laundry parking lot near Clearwater, is under investigation. Police
report that the carts were missing their batteries and tires.


GM Shanghai is also exporting cars to the Phillipines (I have a
relative who recently left GM Asia to work for one of their major
parts suppliers - at least 5 factories in China now).

Yeah, a grand total of 900 luxury Buicks. But I was responding to this
statement of yours: "VW, audi, Peugeot, Toyota, Honda and Nissan have all
been benefitting greatly. I dont believe all have been exporting full
vehicles, but many have." One assumes that the Shanghai VW executive quoted
in that article knows where the cars that his company makes are going.

The total passenger car exports from China this year, which are all trial
balloons, run to less than 2,000 vehicles, including SUVs, to other parts of
Asia, Turkey, Iran, and Africa. The joke is that they're all being bought by
Chinese foreign diplomats. That isn't trade. That's cultural exchange. g


I suggest that you take some medicine for that ailment Ed.You need
some more research to come up with facts.

Yeah, more research. Maybe you can send me your year-old "People's Daily's"
so I can find out what happened last year. G

Any word on the Xiali ghost ship?

--
Ed Huntress
(remove "3" from email address for email reply)

"Gary R Coffman" wrote in message
...
On Tue, 12 Aug 2003 12:45:26 GMT, "Ed Huntress"
wrote:
"Gary R Coffman" wrote in message
.. .
On 11 Aug 2003 12:45:33 -0700, jim rozen
wrote:
I have no problem at all with them buying stuff from overseas.
The trouble happens in the 'fire all those expensive american
workers' section. If they fire all the workers then nobody's
gonna be there to buy stuff at Wal-Mart. Sounds like the
end result is a depression.

Seems to me that Walmart is *hiring* American workers to staff
all the stores they're opening to sell all those inexpensive goods.
Walmart is one of the fastest growing companies in the US.

Gary


Yes. Have you noticed what they pay? Do you know what the average pay is
at
Wal-Mart, versus the average pay in manufacturing?

Hint: It's roughly half. And the number of service jobs that supported
*manufacturing*, itself, are now gone. All that's left there is the
low-paying service jobs that support *products*.

Yes, but there are a *lot* more of those jobs than there were
manufacturing
jobs. Sure, some of those high pay low skill assembly line jobs are gone,
there
aren't as many auto workers with cabins at the lake and a big boat, but
more
people are earning enough to shop at Walmart (many getting an employee
discount too).

Gary.


At the end of 1998, the US employment stats looked like this (in thousands):

Manufacturing: 18,587
Retail trade: 22,650

As of the 2nd quarter of 2003, they looked like this:

Manufacturing: 14,741
Retail trade: 14,979

Next question?

Ed Huntress

"bg" wrote in message
om...
jim rozen wrote in message
...

I don't ever recall Ed advocating protectionism. Quite
the opposite.

True, but here he is stating that he believes free trade does not
work. Well, what is the alternative? 2 others are commonly practiced,
outright protectionism, or "fair trade", which is a go between the two
others. Fair trade basically stands for protect what you need to
protect, when you want to, on a limited basis.

If he is looking for another method, he can wait a century or so, when
someone may come up with a different economic structure.

The irony here, bg, is that you advocate "innovation," and "change or die,"
for the people in US manufacturing who are having the slats cut out from
under them by low wages. But, when I suggest that we need an innovative idea
in trade relations, you limit us to the solutions from the past, and suggest
that it will take a century or two to come up with something new.

What's wrong with this picture?


--
Ed Huntress
(remove "3" from email address for email reply)

"Gary R Coffman" wrote in message
...
On Tue, 12 Aug 2003 12:42:20 GMT, "Ed Huntress"
wrote:
"Gary R Coffman" wrote in message
.. .
A doubling of job seekers in the marketplace can do that.

I suppose it could, but did it? There was a lot of discussion about it in
the late '70s, but the idea was pretty well dismissed because there was
no
correspondance between unemployment and the numbers of women enterring
the
workforce. The correspondance that was a lot clearer was the decline of
unions.

Well now, I don't think housewives showed up in the unemployment stats
until after they got an outside job, then *lost it*. So the initial influx
of women
into the workforce wouldn't have been reflected in unemployment
statistics.
They'd have shown up in employment statistics, though, and they did.

That influx of labor meant that pressure to increase wages was relieved at
the same time there was a greater amount of money per household chasing
available goods. So prices rose while individual incomes didn't rise at a
corresponding rate. The end result, a man alone could no longer earn
enough to keep up with the Joneses (as both Mr and Mrs Jones were
now working).

Once the two wage earner household became the norm, and prices settled
to what two wage earners could afford (remember that prices reflect what
the market will bear, not necessarily what the product cost to produce),
the
single wage earner household was screwed. Unless the single wage earner
was far above average, his household would be relatively poor compared
to the two wage earner household.

Gary


You're doing back-porch economics here, but it's easy to test. If what
you're saying was true, it would show up as a decline in GDP per capita. But
there was no such decline.

Ed Huntress

"Spehro Pefhany" wrote in message
...
On Wed, 13 Aug 2003 14:45:04 GMT, the renowned "Ed Huntress"
wrote:


At the end of 1998, the US employment stats looked like this (in
thousands):

Manufacturing: 18,587
Retail trade: 22,650

As of the 2nd quarter of 2003, they looked like this:

Manufacturing: 14,741
Retail trade: 14,979

Big-box stores don't have a lot of employees in relation to their
turnover. That (and online ordering) has got to be reducing overall
retail employment regardless of the overall economy. Still, that's a
stunning drop (1/3) in less than 5 years, compared to the still hefty
20% drop in manufacturing employment. Where have all these people
gone?

Best regards,
Spehro Pefhany
--
"it's the network..." "The Journey is the reward"
Info for manufacturers:
http://www.trexon.com
Embedded software/hardware/analog Info for designers:
http://www.speff.com

A lot of minimum-wage retail work is discretionary. They may have just
decided not to bother.

But getting a real analysis of things like this takes quite a bit of time.
I'll defer to someone who's interested in chasing it down.

Ed Huntress

"Spehro Pefhany" wrote in message
...
On Wed, 13 Aug 2003 15:45:54 GMT, the renowned "Ed Huntress"
wrote:


A lot of minimum-wage retail work is discretionary. They may have just
decided not to bother.

With the big number being at the end of the year and the other in
summer, you may have the Xmas temporary workers being counted in one
and not the other. And there's all those part-time workers (the better
not to have to pay benefits). How are they being counted?

But getting a real analysis of things like this takes quite a bit of
time.
I'll defer to someone who's interested in chasing it down.

Sure, fair enough. It was more a rhetorical question or invitation to
speculation than a demand for more work. ;-)

I think those aggregate Labor Dept. figures include part-time workers, but
I'm not sure, because I don't spend much time with the aggregates. You can
peel them off by looking at the hours/worker figures, which are available
from some Labor Dept. tables.

I'm thinking of paying for Stat-USA or one of the other services to make
this job easier, but I spent some time with Stat-USA at a county library and
I didn't find it much easier than the system I've set up for the free
sources of data.

--
Ed Huntress
(remove "3" from email address for email reply)

In article , Gary R Coffman says...

... but more
people are earning enough to shop at Walmart (many getting an employee
discount too).

Mmmm. So let me get this straight, in about ten years,
we're all gonna be simultaneously employed by wal-mart,
and do all our shopping there as well?

Somehow, someplace, there's something wrong with
this picture.

Jim

==================================================
please reply to:
JRR(zero) at yktvmv (dot) vnet (dot) ibm (dot) com
==================================================

On Wed, 13 Aug 2003 15:42:15 GMT, "Ed Huntress" wrote:
"Gary R Coffman" wrote in message
.. .
On Tue, 12 Aug 2003 12:42:20 GMT, "Ed Huntress"
wrote:
"Gary R Coffman" wrote in message
.. .
A doubling of job seekers in the marketplace can do that.

I suppose it could, but did it? There was a lot of discussion about it in
the late '70s, but the idea was pretty well dismissed because there was
no
correspondance between unemployment and the numbers of women enterring
the
workforce. The correspondance that was a lot clearer was the decline of
unions.

Well now, I don't think housewives showed up in the unemployment stats
until after they got an outside job, then *lost it*. So the initial influx
of women
into the workforce wouldn't have been reflected in unemployment
statistics.
They'd have shown up in employment statistics, though, and they did.

That influx of labor meant that pressure to increase wages was relieved at
the same time there was a greater amount of money per household chasing
available goods. So prices rose while individual incomes didn't rise at a
corresponding rate. The end result, a man alone could no longer earn
enough to keep up with the Joneses (as both Mr and Mrs Jones were
now working).

Once the two wage earner household became the norm, and prices settled
to what two wage earners could afford (remember that prices reflect what
the market will bear, not necessarily what the product cost to produce),
the
single wage earner household was screwed. Unless the single wage earner
was far above average, his household would be relatively poor compared
to the two wage earner household.

Gary


You're doing back-porch economics here, but it's easy to test. If what
you're saying was true, it would show up as a decline in GDP per capita. But
there was no such decline.

Sure there was, but you have to calculate it in *constant dollars* to see it.
That's the only way you can compare actual purchasing power differences
between years.

Gary

On 13 Aug 2003 10:06:36 -0700, jim rozen wrote:
In article , Gary R Coffman says...

... but more
people are earning enough to shop at Walmart (many getting an employee
discount too).

Mmmm. So let me get this straight, in about ten years,
we're all gonna be simultaneously employed by wal-mart,
and do all our shopping there as well?

Somehow, someplace, there's something wrong with
this picture.

Yeah, it is your assumption that Walmart is the only
service sector employer. Remember that the number
of lawyers is also expanding exponentially.

Gary

"Gary R Coffman" wrote in message
news

You're doing back-porch economics here, but it's easy to test. If what
you're saying was true, it would show up as a decline in GDP per capita.
But
there was no such decline.

Sure there was, but you have to calculate it in *constant dollars* to see
it.
That's the only way you can compare actual purchasing power differences
between years.

Gary


This is a joke, right?

Ed Huntress

Ed,

Whats all the huff and puff for?

Look, it would be great to come up with a new economic theory that
will fix all the economic disparities in the world today. But its not
something that will happen tomorrow. People need solutions near-term.
So if that is a given, we need to work within the systems we have
available as best we can.



"Ed Huntress" wrote in message .net...
"bg" wrote in message
om...
jim rozen wrote in message
...

I don't ever recall Ed advocating protectionism. Quite
the opposite.

True, but here he is stating that he believes free trade does not
work. Well, what is the alternative? 2 others are commonly practiced,
outright protectionism, or "fair trade", which is a go between the two
others. Fair trade basically stands for protect what you need to
protect, when you want to, on a limited basis.

If he is looking for another method, he can wait a century or so, when
someone may come up with a different economic structure.

The irony here, bg, is that you advocate "innovation," and "change or die,"
for the people in US manufacturing who are having the slats cut out from
under them by low wages. But, when I suggest that we need an innovative idea
in trade relations, you limit us to the solutions from the past, and suggest
that it will take a century or two to come up with something new.

What's wrong with this picture?

Spehro Pefhany wrote:
... the renowned Alaric B Snell ... wrote:
....
Assuming there's enough of them left over after being offered more money
to do more interesting things! How qualified is the average 80 cent per
hour Chinese worker?

Very hard working. More supply than demand. The factory workers may
require some training but that's no problem if they are smart. There
is a cultural issue that the people there are used to more
imperfections in their own lives and they have to be taught how picky
we are about things- if a new product is scuffed or the paint is a
little off, we won't accept it.
....

I was thinking about quality control today, while looking at
some bits of Chinese steel and paint, purportedly a drill-press
vise, with about a quarter-inch of play in the movable parts,
and it occurred to me, "Wow! Their reject rate must be
practically zero!"
-jiw