I have been thinking a lot about the feeling I have that “US manufacturing jobs” has become a political myth, and that real decay is setting in.
I have been ordering CNC machined parts from a machine shop in China. The only US organization I priced from is Plethora which probably isn’t the cheapest but their prices were much, much higher than China.
Of course Chinas prices have been lower for a long time, but in the past my simplified understanding is that there was a large volume of cheap labor that suffered a poor standard of living. But China has grown leaps and bounds in the past three decades. I suspect that now for many machine shops in China the standard of living for their workers is probably on par with that of workers in the US. It could even be better, I wouldn’t be surprised.
So now it’s cheaper in China just because they took manufacturing seriously. In the US we let MBA’s sell off all our manufacturing capability to foreign nations. Which seemed to work great for increasing profits. But the lack of higher level planning has left us with a vulnerability. Selling your business to China works great in peace time. But China has power over us now.
I am hopeful that the article is correct, and our horrendous military spending is coming to a close. But I worry about what will happen in the US to make us finally understand the need to change our ways.
I think the best outcome would be for the US to end its posturing against China and learn to benefit from collaboration.
It seems he has relevant experience in the subject matter and is relating that experience to an audience eager to interrogate him. How could that be interpreted negatively?
This seems to imply that one party or the other is manipulating the currency markets aye? the claim is effectively that $1 when converted to local currency in china buys 2x what $1 buys in the US.
There are a lot of things that go into pricing of a purchase. Especially large scale purchase of cutting edge military technology with long time horizons by state actors.
Yes thats the point of PPP. I found it counter intuitive for ages, but might have got it now.
Think of it as if 2 bucks buys you 1 loaf of bread in Chicago, but take those two dollars to Beijing, turn it into yuan at the prevailing exchange rate, and that buys you 2 loaves of bread in Beijing, then very roughly speaking China can take 50 million dollars worth of yuan, and buy two jet fighters for the price USA pays for one.
It varies of course, when you look at shipbuilding capacity, in that China probably has a huge cost advantage in that they, you know, build ships a lot. Vice versa Jet fighters.
As ever it depends greatly on the basket of goods - which is naturally bent towards consumer and FMCG.
The Economist runs a Big Mac index - a trivial but effective means of doing the same - how much does a Big mac cost in different cities. (https://www.economist.com/big-mac-index)
The part that bothers me is that this discrepancy butts heads with the idea of comparative advantage. Somehow every economy which is heavy on imports has a higher overall cost level than peer economies that are not import dependent (see Hawaii). While in theory some of these import dependent economies are powered by comparative advantage (e.g. pork, and coffee growing in Hawaii) - the dominant term appears to be the imports for the average basket of products.
Is China's cost level lower because a local supply chain inherently more efficient and advantageous than an external supply chain? When does an external supply chain actually make sense? If there are some markets which are winner takes all, then is the economic theory more about "do you make it or do I?" rather than a smooth supply/demand/cost curve with comparative advantage.
http://cluborlov.blogspot.com/2019/07/war-profiteers-and-dem...
https://www.amazon.com/Losing-Military-Supremacy-American-St...
I am not Russian by the way, the links could give you this impression.