The Wealth of Nations and the Prius

What happens when the world runs out of cheap energy? At the moment goods are shipped around the world because I guess the cost of moving manufactured goods is cheap, and so it is possible for goods to be manufactured where the labor is cheaper.

 

Taking your case to the end, eventually only the chinese would be able to afford the automobiles being made. Henry Ford wanted to pay his workers enough so they could afford the product. Over the last 35 years the opposite has been happening in the United States. Now we are feeling the cumulative effects of trillions of $ being siphoned out of the US economy and from the citizens of the US. Real purchasing power of the average US citizen has not kept up to inflation because a larger and larger portion of their disposable income is going overseas and not going to fund the raises, health insurance, pensions, to keep up with price increases.

 

in many cases the cost to ship goods is underwritten and subsidized by governments.

 

If you have study world history, every country has its rise and fall. China is no exception. US as a country is only 232 years old compare to China's 3000 years. It has only endured a few cycles.

Even if China becomes the only nation that can produce affordable cars, it will not last long as the standard of living rises due to the wealth from the monopolies, the labor cost will increases as the workers demand it. The manufactures will look for countries with lower labor cost to set up factories. Does it sound familiar?

The US auto industry will not disappear but transformed. The government will intervene like the bail out proposals because the impact is too great on the country's economy. If any of the big 3 goes bankrupt, someone will buy its assets and restart as a new company, pennies on the dollar and opportunities to get rid of the labor contracts. I heard on TV, someone proposes to stop the bail out and let them go bankrupt. I am not sure what his agenda is.

If the affordable cars are from Chinese manufacturers and reliable as the Japanese, who cares.

 

You should, only building things do you create wealth. Most other professions, sell the wealth, extract the raw materials, insure the wealth, regualte the wealth or tax the wealth.

 

Smoke and mirrors, one ponzi scheme after another. I disagree, we can compete with anybody if given the level playing field.

 

level playing field is $10 per month salary in China...

last I heard UAW did not want to reduce their benefits $10 per hour to save their companies .

p.s. as I have shown before, GM is #1 Chinese manufacturer... Chinese have very few successful brands selling their products, what usually happens is western company opens up JV with chinese company and produces something for cheap, yet sells it for expensive back home... all the profits go to western companies and their home countries.

 

Free trade - Wikipedia, the free encyclopedia


p.s. I buy Sketchers shoes, Levis jeans, I drink Coke.... I buy Toyota but many other people buy GM/Opel and Ford around here... Yet, I dont think a single product from my country is sold in yours. Even if it is, profits go back to bigger countries as factories here are owned by corporations from western europe and usa.

When did you buy something with Chinese brand on it? Heck, before Lenovo - did anyone know of any Chinese brand in general? Sure, Wallmart might import from China, but all of those products are made by cheap chinese labor, for low price, in factories owned by US/Japanese/German company so they can sell it for big profit in the USA. Who gets profits? I doubt their chinese employees tho... rather their govts tax the profits and shareholders get their cut too... You think many chinese own stock in Wallmart?

So tell me - who is going to be better off if we stop trading? And same goes for most countries outside of G8...

p.s. average wage for chinese is between $100-$200 per month if they work... people on farms make $30 per month... Average in expensive cities like Beijing is only $3k per year. And guess what,Beijing is 10th most expensive city to live in Asia.

 

First of all a manufacturer is never going ot have 95% of the global market share unless there is one totalitarian govt and that govt maker has 100%. It is time to level the playing field. What do we have to lose?

 

Smoot-hawley was enacted when the US had huge trade surpluses with its key trading partners, not deficits. The scenario is almost the polar opposite today. I am not in favor of punitive tariffs unless reciprical trade agreements do not work.

 

The rise in transportation costs has already started to reverse the trend to outsource. In the past 2 months I've seen two stories in the local paper of factories reopening in Alabama. One was a factory that made socks, the other a factory that made pillows. These are traditional industries for the area and industries that have been picked up and moved to china due to labor costs. Why did they come back? The increase cost of transportation more than offset the savings from low-cost labor. The owners of the factories were quoted as saying it now cost less to manufacture these low-priced, commodity items in Alabama then China.

My last company learned about outsourcing the hard way. In 2006 they made the decision to outsource the manufacturing of a utility vehicle to India based on reduced labor costs. They didn't plan for the price of a 40' container tripling in 2 years. This increase in shipping costs plus a never ending string of quality problems killed the product.

 

There are two ways to level the playing field:

1. Pay the Chinese worker $40/hr like you , so your LCD TV will cost $5000 instead of $1500.

2. You are paid $1/hr like the Chinese and then the $1500 LCD TV is out of your reach.

Which one will you choose?

 

My son came come from school back in Nov 2008 (he is in 8th grade), and said "Dad, I don't want to be paying for their poor decisions. Every company eventually fails. Besides, if they had a GREAT product, they wouldn't be in this situation."

I think it's pretty clear.

 

If China were the only country producing cars, it is inevitable that the Chinese cars would be produced here, as the labor would be cheaper than China. China would be unable to compete with other countries because of outrageous salaries,health benefits, unimployment benefits, union rules, private golf clubs, coporate jets.....etc.

 

I can agree with most of that. Volkswagen had the same concept in its beginning - build a car the workers could afford, and had a payment plan they could join. But the unions have taken this too far, and now they're building cars that other people can't afford (or don't want to, given the competition). They've also lost their agility to adapt to new market forces, for whatever reason. Capitalism says they should die and be reborn (ch.11) or replaced (Tesla Motors, Green Vehicles, Myers Motors, ZENN, Aptera, etc).

And the trillions that are being siphoned out of this country that I'm worried about is not the imported cars - that is minor compared to imported petroleum, our #1 product on the trade imbalance. I'd rather send my money to Japan than to OPEC.

Manufacturing will come back here (or at least to Mexico, Guatamela, etc.) with higher transportation costs. That's a given. Most overseas manufacturers of high end items, like cars, already have factories here. Still, I make a conscious effort to buy American if I can find the choice.