CHINA

Some years back, the North American Free Trade Agreement (NAFTA) was being debated. Texas billionaire and one-time presidential candidate Ross Perot said that if NAFTA went into effect there would be a “giant sucking sound” of US jobs going to Mexico. Obviously we have lost some jobs to Mexico, but it wasn’t a giant loss. There are a couple of reasons. One, Mexico has only one third the population of the US (and a good part of that is already on our side of the border). Two, to put it kindly, they do not have a governmental structure that is particularly good at nurturing industries.

China is a different story. There are 1.2 billion Chinese. This is four times our population. China also has a government that you might call “focused” or “aggressive.” Totalitarian and belligerent also come to mind. The leadership of China has stated that it is their goal to be the “manufacturer of the world”.

The problem is that the US has been the manufacturer of the world. Sure, a lot of things were made in Japan and made well, but the US was still the big dog of manufacturing. No more.

If you want to know how much stuff is being made in China, just go to WalMart. If you didn’t know, Sam Walton is dead and apparently so is his “Buy American First” philosophy. You first started seeing “Made in China” on clothing. Making clothing is what you call a “labor intensive” industry. That means that most of the cost of manufacturing is not in expensive equipment, but in manpower. You could buy a truckload of sewing machines, find an empty building outside Wu Ha and be in business. If things went bad with the government, all you were out was some sewing machines. As American companies became more comfortable that the Chinese authorities weren’t going to run over their middle managers with tanks they began to open shops in China that required a larger outlay of cash for machinery. The whole thing escalated to what we have today. All our manufacturing jobs are going to China.

It is no wonder that so many things are being made in China. A couple of years ago I found an item on the internet from the official China news agency. It was about their pay scale compared to ours and Mexico’s. They listed our average manufacturing wage as about $12.50 an hour and Mexico’s as $2.60. They showed theirs as $.62. It doesn’t take a PhD in economics to tell you that we have a problem. Actually, it would take a PhD in economics to show that we don’t, which reminds me, the next time someone tells you that we have lost more jobs to increased efficiency than to China, ask them how they got their numbers. Economics is a murky science.

The other advantage that manufacturers in China and other developing nations have is that they don’t have our government regulating them. They don’t have OSHA, the EPA, the Labor Department and so on. Don’t get me wrong, I am for safe workplaces, clean air and 40 hour work weeks. The problem is that China does not have these things. Therefore, their other (non-wage) costs are also lower. Free trade is not fair trade. We do not have anything approaching a level playing field.

INDIA

When this massive loss of jobs, or “outsourcing” as it is called, was first noted lots of Americans were upset. Most Americans would like to see their children someday have a job that would make their own car payments. The experts said “Don’t worry; we are becoming a service economy.” Some cynical types pointed out that service jobs tend to cluster at either end of the pay scale. On one end you have “The plans are on my desk” and “My secretary will show you where to sign.” On the other end is “Would you like fries with that?” There are not many jobs in the middle. “Sure there are,” said the experts. “There are help desk jobs, claims processing, all kinds of things.” That was before those jobs started going to Bangalore, India. The next time you are ready to take a ball bat to your computer, call the help desk instead. You will probably get someone who sounds just like Apu, the convenience store operator on the Simpsons. About ten minutes of that and you will forget about bashing the computer, and instead turn the ball bat on yourself.

Then the experts said we would support our economy on biotech. Oh, sure. All the smart people in the world live in the USA. That biotech story didn’t last long. The latest one I heard was that we were going to be the bankers of the world. The experts cite the example of the Dutch in the 1700’s. They were the bankers of the world. They also wore wooden shoes and got their power from windmills. I think we have a better chance of going to a lawn-care based economy.

We have a serious problem, and it needs to be addressed now.