Stop whining about China. Stop looking for scapegoats. Maybe the problem isn't with them, but us.
It's time to get some perspective. I just received a flier from Target Corp (NYSE: TGT) advertising a Euro futon / contemporary sofa for $99, a Haier under-counter stainless steal refrigerator for $99 and a microwave for $30. These prices are so low I had to check three times to make sure I was reading them correctly. No gimmicks were found.
Consider this, it would be a waste of our resources to have Warren Buffett or Steve Jobs mowing lawns. That is not the highest and best use of capital should we choose to pay the millions it would cost to hire them. Conversely, it would be an extreme waste of their talent if they worked for your average gardeners' wages. Our highest and best use of resources is to pay foreigners to do the work.
Historically we've paid foreigners (immigrants, both legal and illegal) low wages on our soil. Now we are paying them low wages to do the work on their own soil. What's the difference? We do not have the manpower to do the work anyway.
If we designed and manufactured the same merchandise in the United States it would cost 300% to 400% more. That would be fine if workers here received that much more in compensation, but that is not the case. Most people would simply have to do without, unless of course your average annual salary was increased from $45,000 to $180,000, yeah that will happen -- not!
We have an imbalance of trade because we are being out-produced -- and we spend beyond our means. This is true on a macro-scale by the federal government and on a micro scale when someone spends thousands of dollars (going into debt) on a wide screen TV when they can buy a traditional TV for 90% less.
On a separate note, the Chinese are experiencing quality control problems that have been highlighted by lead paint on children's toys and toxins in pet food. Some of our companies have been flocking to China because of lower safety and environmental standards. These standards have to be raised, and this is happening. No one should get a free pass on this and if you follow the stories you will find that no one is more embarrassed and harmed by these events than the Chinese. In terms of penalties for such violations, the Chinese exceed us in this regard also, and some have paid with their lives. This includes corrupt government officials as well. I have not heard anything about Presidential pardons for convicted felons in China. As far as I know there is no penitentiary 'light' for their convicted company directors -- it's hard time. They take these matters very seriously.
Now, some might complain about currency manipulation, government subsidies, and other attempts to manage their economy, and to the degree that there is not a level playing field there are issues to discuss. However, we have been pleading with the Federal Reserve Board to respond to the liquidity crises now affecting the market by adjusting interest rates (and the value of our currency), and we have farm subsidies, energy subsidies, tariffs and taxes that can be called many different things depending on your point of view but they all fall under the category of government manipulation.
China is having growing pains. They are having problems dealing with new social, political and economic realities and mistakes are being made -- just like everywhere else. In the long run the advantages of working with them outweigh whatever unfortunate incidents occur from time to time. China has gotten most of the headlines lately, but the same is true for India, and Russia, and anywhere else you care to be overly concerned about. So let's continue to be vigilant, improve our communications, extend the dialog and move on.
To verify my track record, including bad calls, read Chasing Value and Serious Money. Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm.











Reader Comments (Page 1 of 1)
8-23-2007 @ 1:54PM
MaryLou Michelin said...
I don't feel that illegals getting $10-$12 an hour to mow the lawn is a low wage. They all have new trucks and very loud stereo equipment. Please remember this is a tax free wage. I worked many years for less.
Sheldon Liber you need to hit the streets and see what really is going on in this world. Who elsee is killing our animals and trying to kill out children with lead paint? you sounnd like an idiot liberal and I sure am glad I never put my $$ with your firm.
MaryLou
8-23-2007 @ 1:57PM
stockshocks said...
Blah Blah.....I'm not buying anything else from China. Who needs the toxins. I'll do without.
8-23-2007 @ 2:07PM
JamesPKaresi said...
Sheldon:
Two things-
1 - Where did you get the figures to support your statement, "We do not have the manpower to do the work anyway." What exactly are you basing that on? The U.S. seasonally adjusted unemployment fairy tales or a magic 8-ball?
2 - At which point in Chinese production have the standards been raised? The pet food/toothpaste/toy
poisonings didn't really yield anything except public scrutiny for the moment, and only so so scrutiny from the FDA which more or less punted on the issue. American consumers aren't any safer from the poisons being sprinkled in our food and our pet's food than we were 6 months ago.
And while the Chinese have since executed a high profile manager and have seen the suicide of the other high profile manager in the food poisonings debacle, I wouldn't exactly call that reform.
It is the low level grunts who are adding the antibiotics to the seafood, sprinkling the pet food with melamine and adding dimethyl glycol to the toothpaste. Execution and suicide aren't really anything tangible/substantial except headline news.
Reform begins at home and as long as the FDA is staffed by political lackeys beholden to the WH, consumers will never be safe from American companies who claim not to know about the poisons their Chinese manufacturers are feeding us.
8-23-2007 @ 2:13PM
Jeff said...
wow idiot liberal huh? idiot, maybe.... liberal, well MaryLou must have tracking down rich Mexicans for the Minuteman Project, as compared to reading your article.
8-23-2007 @ 2:27PM
John said...
If you put Warren Buffet mowing lawns it would be the first time in his parisite life he would actually of worked. No American made goods would not swell prices that much. It should shrink investors profits instead.Example ford loses money yet still pays a dividend and goes up and down. it should be losing. Investors should lose the money they invest in Ford. if i put money into a hot dog stand that wasnt making money. i would lose that money. Investing has nothing to do with owning a buisness. it is nomore than a con to allow people to cash in on American companies without regaurds to the rules of buisness. Parisites like Warren Buffet GET A JOB!
8-23-2007 @ 8:38PM
Hold China Accountable said...
China is basically conducting a trade war with us, but we haven't the political will to fight back. And nonsense like this blog entry don't help. The truth is
1) China's currrency is still not trading freely on world currency exchanges. The Chinese set the exhange rate to perpetuate their trade advantage.
2) China is still ignoring intellectual property rights -- music, video, software, luxury goods, are being copied and sold -- and not just inside China. My employer has had software stolen, hardware reverse-engineered and sold under our brand name throughout the world.
3) Greed in China is rampant and regulators and (civil) law enforcement is nearly non-existent (particularly for the politically 'connected'). So you basically can't trust anything that is being manufactured in China, unless (perhaps) it is being regularly inspected outside China. The Target $30 microwave is a perfect example -- I will gladly pay more for a microwave that I trust is properly shielded, wired, etc.
Finally, not everyone has the skills on Buffett and Jobs. To have a vibrant middle-class, we need good-paying manufacturing jobs.
8-24-2007 @ 5:51PM
Blue collar said...
nice comments from someone sitting in an air conditioned office, working from a lap top. Come on down from the tower and check who's loosing their job to cheap china imports and then has to buy them because they can't afford the quality American made.There will always be a place in the world where people will work for a bowl of rice and there will always be those willing to import cheap and tack on 'Quick big money' to make their buck. When this country forgets how to produce products ( I fear that will be soon) and we are dependent upon others, we are all in for a cultural shock. Do you really think we can all sit in offices behind our computers and just move products on E bay to put bacon on the table? Who will make the bacon? O chineese bacon too!
8-24-2007 @ 7:09PM
Lily Chweh said...
interesting blog
8-25-2007 @ 2:19PM
Z.Shalgo said...
Sheldon comments are in place and so very true!
I am surprised again and again by the negative atitude many have on other people (in this case Chinese) taking no responsibility on themselves!
Do you blame an Indian software engineer for working on lower wages? Can you blame a Chinese for working his ass off to survive in this world?
American companies who purchased defective goods are solely responsible for the quality of the products!!
There are many kinds of manufacturers in China, low quality and high quality as well...its all in the price and the QA managment.
As for the rest of the whining mob...go get an education and start fighting for a better life where there are chances to develop in your economy. It seems to me (and i live and work in China for the last 12 years) that American society still has far better oportunities for diligent people. A typical Chinese will study from morning to night and do the best he can to better his life. The problem of government subsidies or currency rates is not the hart of the problem...The intelectual and financial hunger of many millions in China , India, Vietnam or Brazil for that matter will not disapeer simply because Americans find it uncofortable!
8-28-2007 @ 3:50AM
Angry said...
China acting as a partner ? What a ridiculous comment ! I'm sure Sheldon is doing well in the new economy while the rest of the middle class isn't.
Everything with China is unilateral. Entirely so. They dictate what we can sell there and impose tremendous tariffs, while bristling at even the mention of them in a reciprocal manner.
They demand a 100% technology transfer initially and on-going whenever we manufacture there. And that transfer is by default to the Chinese government (as it is still is a communist country). We never call it communist china anymore. Faith based free traders would like to forget that activity.
And what's happening with their trillion dollar trade surplus with all of their dollars happily supplied by us ? They are buying oil from Iran and the Sudan, selling arms back to them (which are being used against our troops in Iraq and Afghanistan), stealing
technology with a massive spy network in the United States (both industrial and military espionage), and conducting one of the largest military buildups in world history.
We complained about their trade policies and were promptly threatened with their economic version of the "nuclear option": dumping our currency thus devaluing it greatly and hamstringing our economy.
What lovely partners ! I'm sure "Sheldon" is cashing in handsomely on the currently situation. His apologist position in regard to China reminds me of a midwestern dealer in scrap metals in the 1920s and 1930s: "Japan is our friend ! Stop complaining about them !". The person I'm thinking of sold them stratgic metals right up until the bombs dropped on Pearl Harbor. Why ? Because they were great partners ! And we were whining.
8-29-2007 @ 1:57AM
nuclearmind2100 said...
I usually sit on the sidelines when I read various blogs online, but it is difficult for me to remain passive when a communist, anti-democratic behemoth continues to dictate to America how far we must jump and how high. Recently Chinese authorities hinted at selling off their dollar reserve if we continued to press them to adhere to our mutually consented fair trade practices, and to allow their currency to reflect its true value, rather than keep it artificially low to protect their cheap-labored exports. This action would theoretically destabilize our economy and potentially caused the kind of horrors not seen since the great depression of 1929. I simply will not buy anything if I can ascertain that the item has anything in it, whatsoever, of Chinese origin. I am not a racist or a nationalist. I boycotted Ford Motors too, back in the eighties when they where taking poor concepts and shoddy manufacturing benchmarks to new lows. We the people must demand transparent labeling of all products in regard to their total organic, as well as inorganic content. We are at the mercy of China because we have allowed that to occur. The Iraq War alone, as much as I can conservatively estimate, will contribute a two trillion dollar wallop to our national debt. If that debt is ever paid back, which is traditionally an appropriate option for America’s financiers; our grandchildren will have to eat rice cakes and pigeons for most their lives just to make a dent in the interest alone. Thanks to war profiteers, such as Halliburton, Saudi Arabia, Western Europe, paranoid hawks littered throughout our own congress, and others, but with special thanks to China, Iraqis and Americans can look forward to dying on strategically negligible land on a daily basis for the next two years. American politicians must develop a 'Marshall' styled plan as we did after WW II directed at safe-guarding our health and economy from morally corrupt foreigners who would rather steal our intellectual property than ever consider originating a novel idea or concept themselves. If China ever starts behaving with respect and true compassionate concern for all people of the world and the planet we occupy, then I will gladly embrace their potentially revolutionary contributions to an ever more enlightened humanity. Whether America will adopt the same compassion and respect is the great uncertainty. Will we use reasoned diplomacy and empathetic foreign policy templates to help heal our planet and its people, all people, or will we allow murderous force and thug tactics to be our legacy?
Scott Utley
Los Angeles
9-06-2007 @ 10:40AM
racism is our heritage? said...
So we Americans are worth way too much to work for slave wages, but the Chinese are not worth anything, therefore EXPLOIT!
Gotta love little Lord Fauntleroy, there.
All workers must stand up for eachother and entrepreneurs must stand up for their workers!!!
Test question: Who said, " I am not so much interested in the size of Einsteins' brain as I am in the numberless geniuses who died in the fields picking cotton". Whoever answers correctly, move to the head of the class and get this blogger off whatever drugs he's on...