Tue 25 Sep 2007
China Adjusts To Capitalism; America Adjusts to Socialism
Posted by RichSlick under Misc
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The UAW strike got me thinking about what a really strange world we live in these days. On the one hand, Americans have been trying to get the world to embrace capitalism and it’s some what surprising that the real change in China these days is largely due in part because of pressure put on the Chinese government by American consumers. There is a great article here about the China capitalist model.
Inversely, American companies like the big three auto manufactures simply can’t seem to survive without subsidized (i.e. socialized) health care as described in this article here.
High health care costs are at the heart of Detroit’s problems. General Motors, Ford and Chrysler are pushing hard for an overhaul, having long argued that the nearly $100 billion that union contracts require them to pay out for active workers, retirees and their families’ health care add some $1,500 to the cost of building each car. This puts them at a disadvantage with their rivals from Asia, where the government is mostly responsible for workers’ health care.
I’m not certain where the equilibrium will end up in these “adjustments” but they create interesting ideas where a quasi-socio-capitalistic global society might be the remains of the day.
As a side note, my wife and I decided to get out of the city over the weekend and we stopped at a small rustic town in the middle of nowhere. We stopped at an antique shop to pick up some local crafts. As my wife looked around she pointed out a few things she liked. She picked one of the items up, it looked like an old 18th century candle holder, flipped it over and read out loud, “Made in China.” We looked at each other and giggled. It turns out the only local craft actually made in the small rustic town were scented candles and almost everything else was made in China: quilts, arts, towelettes, etc.
September 25th, 2007 at 3:51 pm
I entirely understand GM (and all the car companies) wanting to get someone else to handle health care. Their core competency is cars (no, really, stay with me here) and not health care. But because of the healthcare structure in the US, they need to spend a LOT of resources and energy on something that doesn’t increase revenues. They want to outsource their non-core problem and get back to their raison d’etre. I not saying I agree (still pondering that one), but I can understand their motivation.
September 25th, 2007 at 4:22 pm
My long term thesis is most of the countries involved in global trade and vibrant economies will revert to a worldwide mean. This means great things for those countries currently below the mean (Most of Asia ex-Japan), Eastern Europe, South America - and not so great things for US and Western Europe. While much of Western Europe’s people issues will be buffered by their social programs in the dog eat dog world in the US it won’t be so. The top will still do great, but those in the bottom 2/3 who now have to compete with the rest of the world - I don’t see them doing very well in the long run when capital can move so quickly from 1 country to another. Remember just 10 years ago Mexico was going to be the boom place, but it got too expensive to pay people $2.20 an hour so it all got moved to China - now already wage inflation begins there and people are talking about moving to someplace ‘cheap’ like Vietnam.
So in the big picture if the bottom 2/3 of America has to move closer to the income levels of the ‘median’ in the world plus say 20-25% what would that mean for them? Not such good things. I can see this world in 20-30 years… most of our economy is now services as it is - whom will be paying for these services as buying power decreases and wages normalize across countries?