What is to protect us from real bad stuff, like...

Great Debates
21

I’m not going to say that the decline of the US manufacturing sector is a good thing, but let’s get real: Walmart owes its success to Chinese made goods. If Walmart sold only higher-priced US made goods, Walmart would not be found in every hamlet from Bar Harbor to San Diego, and we’d have tens of thousands fewer jobs for low wage earners.

Oh, shit. I guess that’s a reason we should stop buying Chinese goods.

Well, let’s try this on for size: consumer spending on crap that people don’t really need – like 26 different “seasons” of clothes coming out each year, iPods, and whatever other things you can think of – are a very important part of our economy. Though it would be much preferable if US manufacturers could compete with Chinese made goods, it ain’t gonna happen, and we’ll just have to settle knowing that the more iPods there are out there, the more iTunes are sold, and the more money will be made by Taylor Hicks and the Black Eyed Peas. Cheap Chinese imports made American consumers happy and fuel our service sector.

But you’re missing the point that I’m making: a big trade deficit has undesirable effects, but the bottom line is that China does not have us in a stranglehold because they sell us lots of cheap clothes and electronics. China needs a wealthy market for all that stuff just as much as we need those consumer goods. When it comes to the consumer economy, the US has at much at stake as China does, no more, no less.

The same can be said of trade in financial instruments. China’s got to do something with the dollars it earns, so they buy bonds. So what? What are you afraid of, that China’s going to dump them all on the market for pennies on the dollar? That would be bad, but do you seriously believe that China, still a developing country, would essentially light a match and burn up $300 billion?

I’m not saying that everything is hunky-dory with US trade competitiveness, but this idea that China is either going to end up owning the US or that we will be brought to our knees by some fiendish Commie plot is nothing more than a repeat of the hysteria of 20 years ago with respect to the Japanese.

If anything, we ought to be taking solace in the fact that China’s economy, while superficially formidable, is brittle. Its currency is worthless on the international stage, labor problems are brewing, political stability over the next 20 to 50 years is not guaranteed, the state-owned enterprise issues continue, its stock market is a joke, and a huge number of Chinese are and will continue to be engaged in something slightly more than a subsistence economy. The US economy, on the other hand, is less diversified than a decade ago, but continues to be incredibly powerful, our workforce (esp. when immigrants are included) is unchallenged when considered in terms of size and expertise, and if we can get a few tough issues under control (such as deficits, energy, and the baby boomer issues) we can continue to be the preeminent economic power for at least another couple of generations, and there ain’t nothing China can do to stop that.

22

I am far from a rocket scientist, but I do get it. Trade is indeed a two way street. Fair and equal trade keeps both countries healthy. Japan and the United States have always had a good trade relationship. The Japanese brought manufacturing into this country and the US auto industry frequently out sources to cheaper foreign labor markets. The competitive automobile industry and our trade relationship with Japan has nothing to do with the unprecedented trade imbalance between the US and China.
No, I am not a flag waving buy American zealot, nor am I afraid of *them thar furriners. *
I did read that Japan wants to pull manufacturing out of the United States because of the weak dollar.

Sure, Chinese goods are cheap and stock the shelves of Wal-Mart, but it doesn’t benefit American workers or consumers. It only benefits corporate America’s bottom line. Wal-Mart generates low paying menial jobs and clobbers competition. Oh, I forgot. It is capitalism and the American way.

This is not the same global market it was twenty years ago. It is a global market dominated by conglomerates. The artificially low cost imports from China keeps corporate America happy but stifles economic growth and does nothing to benefit the vast majority of Americans. When everything is owned by a few and all manufacturing is outsourced there isn’t any real competition. Well, the service sector is thriving. The greeter at Wal-Mart has job security.

I agree that China needs our market as much as matell needs the cheap Chinese labor. China is even willing to finance our debt so we can continue to buy their cheap goods, with the exception of the occasional recalls.

I think the idea that the global community still treats China like a developing country is a mistake. China is a significant economic force and should be treated like one. I know the US economy is still significantly ahead of China, but the US has roughly three percent growth while China has double digit growth. The gap is closing quickly.

What am I afraid of? I am afraid that the United States will no longer have the global economic edge. I am afraid that the world is losing faith in the dollar. I am afraid that the US will be in so much debt that China will become the global lenders. Money is power and debt controls. Are my fears irrational?

23

Cite?

24

No offense, but No, unconventional, you don’t get it.

Of course it does, that was the whole point of my post. Do you regularly buy stuff that you have no use for? If American consumers didn’t benefit, they wouldn’t be buying it, the other thing about free trade being the “free and willing” part. Chinese manufacturers are not charities, any more than Honda is. When American consumers give them money, they are getting something in return. I deliberately used Honda because buying a Hondas is generally accepted in polite society. It isn’t any different for any other product.

For every dollar you save on a Chinese product, that’s an extra dollar in the AMERICAN economy that can be invested in AMERICA. You and the country are one dollar richer. Now you may choose to use it on crack or prostitutes, which are generally not considered economically productive uses (investment vs. consumption), but that’s not the 'furriner’s fault.

25

…absolutely no offense taken.

The problem is that there is no productive investment. Americans are in debt. The economy is floating on debt. The tax payers subsidize conglomerates and in return everything is outsourced. Even the service sector is outsourced. There is massive corruption in corporate culture which results in creative tax loopholes, fraud, aggressive lobbying, and the amassment of obscene wealth that is beyond the average American.

We aren’t really saving money on cheap Chinese imports; we are losing money when the unprecedented trade deficit is considered. The enormous trade deficit equates to lost production and stagnant economic growth. The result is low salaries and a general free fall of our standard of living. The housing market crashed. Small business can’t afford to provide employees with basic benefits like health care. The dollar is weak. It is obvious the US economy is in trouble.

Unregulated, corporate capitalism is good for corporations and countries like China and India but not the US economy.

I don’t think this is the global economy that we all had in mind. I will only buy a Japanese car. I try to stay away from the cheap lead filled products.
But, this isn’t about buying American made products or imports. It is about a corporate culture without any regulations dominating the direction of the US economy. Global corporations are rich and powerful at the expense of Americans.

26

Unconventional, the problem is not that China is a cheap producer of goods. The problem as you pointed out is that Americans and bad savers and living beyond their means. When you calculcate all the debt your average american has (mortgage, credit card, school, etc) versus their savings (home equity, savings, investments), it’s pretty piss poor.

Then if a poor country like China, pools a high savings rate, and then buys up part of America, I’m not real sympathetic.

Do keep in mind that a couple of hundred million people in China live in pretty dire poverty, a couple hundred million more have a pretty low standard of living, I would be surprised if you wanted to trade your american house and lifestyle for the typical Chinese middle class. You sure as hell would not want to live the life of the average Chinese worker that is feeding the export machine that puts cheap goods on WalMart shelves.

China is a dualistic economy. Some parts are pretty well off and should not be considered developing, other parts wish they were off the bottom rung and could be considered developing.

27

China Guy,

I certainly don’t blame China or the Chinese people for US economic failures. I blame free market fundamentalism and the US government for embracing it. The nature of unregulated capitalism is exploitive. Chinese factory workers earning slave wages in deplorable conditions and the skewed concentration of astronomical wealth into the hands of a few are the result of unregulated capitalism. I am only pointing out the fact that the US/China trade deficit is a direct result of corporate capitalism and hurts our economy. Trying to fix the problem with borrowed money has only caused enormous debt and foreclosures.

China is stuffing its piggy bank, smart. The US consumer is out of money and in debt, not smart. I am not sure where Wal-Mart plans to find buyers for all those goodies on their shelves. The machine is out of fuel. Maybe the Walton billionaires will donate to the homeless shelter this year.

28

Here’s something key: China is unbridled capitalism. At least the export machine is. The old command control economy and State Owned Enterprise system is less than 20% of the real economy these days and shrinking.

There is no massive coordinated government conspiracy. It’s the free market fucking America. American’s choose to live far beyond their means, and leaner, meaner countries with high savings rates are starting to eat the appetizers of our lunch.

29

:dubious:

I’m still not sure what you mean, although I’m having a good laugh over the mental picture. Could you explain further?

30

For decades America has been enforcing ‘Free Trade’, which just meant that countries had to accept cheap American goods flooding into their countries, often to the detriment of their own industries.

Now, the system America has set up has turned around and is biting it in the arse.

The turning around began with cheap Japanese camera’s and cars and it is still going on.

Hey you set the rules, and now by your own rules, you loose.

31

Actually, many of thsoe countries were happy to export stuff without tariffs into the U. S., but built protectionist barriers toanyone trying to do the same to them. The American export sector bloomed right after WW2 (when everyone needed more stuff to recover) then withered as more and more countries built up their economies but refused to open up. And of course, many (not all) of them relied on expensive Amerian military power for protection from Communists.

Japan and South Korea are notorious for their barriers. In Japan, for example, Toyota pretty much owns the government departments responsible for car safety, which IMHO is one reason the U. S. car companies were so slow about changing their strategies over. They got blindsided because they could never compete in the markets where smaller cars were desirable, and the concept withered on the vine. When smaller cars became more popular, they literally didn’t know how to make them. Plus, Toyota had been stealing American production secrets by getting a look at any car the Americans brought over. Gotta check it for safety standards, donchaknow.

And then you have nations like China which uses its currency to ensure we can almost never export anything back. And the fact that American manufacturing got hit hard because in the 70’s huge numbers of foreign firms started competing fresh out of nowhere after building the absolute latest plants and techniques, which our firms couldn’t employ without much more expensiv retooling.

Don’t get me wrong; there are some industries in America whose own protectionism or incompetence cost them the game, like the lumber industry, where a number of older companies are decades behind the times and get eaten by Canadian firms even with high protectionist barriers.

32

On the plus side, is it possible that this greatly lessens the probability of open military conflict? If you’re even remotely sane, do you want to go to war with your most important trading partner, with the folks who owe you tons and tons of money, with the people who supply you with critically needed imports? Give those sort of economic ties, would you really want to wreck the other guy’s economy either covertly or through open warfare? Just trying to be an optimist here.

33

I’m rather pessimistic. Regarding Barbara Tuchman’s The Guns of August

34

Lose, lose, lose, lose! I loose the dogs on your loose grasp of spelling.

35

To: Argent Towers
Re: “Economically, I think, in our country, our collective scrotums are being slowly cut at the top of its cage.”

I meant, economically, China could cut our balls and bag off.

36

Much as I hate to help revive zombie threads, recent events have made this one very relevant.
We are now reducing our purchases of cheap junk from China (or even expensive junk) and Chinese factories are closing down by the thousands. China might reduce the purchase of our debt, but not out of spite, but because they seem to need the money to bail out their own companies. it appears that factory workers are moving back to the country just like immigrants here are moving back to Mexico. Free trade is all about two countries becoming co-dependent.

Any participants want to reconsider their postings in the light of the retail crash?

37

I would like to know if some poster’s answers have changed- or would be different- due to the recent chances in worldwide macroeconomics…ie, the present depression.

38

You think this, right now, is a depression? Really?

39

I don’t think so. I expect the USA won’t have any more the global economic edge in my lifetime (I’m 43, for the record). I think there’s a lot of wishful thinking going on when people keep on stating that the USA will stay on top for three generations at least.

American dominance used to be uncontested technologically, economically and militarily. All is left is the military part. On the two other fronts, American dominance has be steadily declining and IMO will continue to do so. Especially since many seem to be blind to this issue, hence not much is done and the USA is overextending, overspending . Which means that IMHO the US will have to be forced to adapt by going through successive shocks, like the current one.

40

Or on other goods also produced in China.