Posted on 12/17/2003 5:37:44 AM PST by Einigkeit_Recht_Freiheit
For decades, the United States was the world's only significant mass market, offering businesses more than enough consumers to buy up ever greater volumes of their merchandise and services.
To gain access to these consumers, companies had to operate inside the country. They could do so profitably because they benefited from economies of scale, meaning that each item off an assembly line was less expensive to produce than the one before. The wealth generated, in profits and wages, has made the United States far and away the world's most powerful country for nearly a century. No one else had ever been able to match the American achievement. But now the world is witnessing the birth of a mass market in China, whose 1.2 billion people hold the promise of consumption on a much greater scale than in the United States.
That prospect is still a generation or two away, economists say, and assumes that political or economic disruptions do not derail it. But a consumer class is rising fast. The Chinese are buying cellphones, refrigerators, computers, cars, toys, furniture, televisions, airliners and designer clothes in greater numbers.
As this mass market asserts itself, China becomes a problem for the United States not just for the exodus of tens of thousands of American jobs but also for the potential to use economies of scale to keep those jobs, even if Chinese wages rise to American levels.
"The notion that God intended for Americans to be permanently wealthier than the rest of the world, that gets less and less likely as time goes on," said Robert Solow, a Nobel laureate in economics.
This sense of entitlement to pre-eminent wealth and world power has been a U.S. national characteristic stretching back to Theodore Roosevelt and Woodrow Wilson. Now China is undermining that singular influence. More and more, it can defy American demands and worry less about the economic effects. Last week, for example, Prime Minister Wen Jiabao, visiting the White House, again ignored President George W. Bush's pleas to increase the value of the Chinese currency. A stronger yuan would make it more expensive for American manufacturers to shift operations and jobs to China.
In Asia, China is supplanting the United States as the principal trading partner for several countries, including South Korea. This influence reduces U.S. power in the region, not only economically but also militarily.
China's power seems certain to increase as it develops its mass market, chipping away at the American role as the world's buyer of last resort, the only nation capable of bolstering other countries' economies with its vast purchases of their goods and services. For 60 years, that purchasing power has made America the unchallenged leader in trade negotiations and political influence, a leadership now gradually eroding.
A big stick in this leadership, apart from military might, has been the threat of tariffs and import quotas - of cutting off the golden American consumer from outsiders. But with the rise of China as an alternative mass market, American restrictions on European steel imports or Brazilian citrus, for example, lose potency. Why worry that much about being kept out of the United States when China provides more than enough buyers? Mass markets were critically important in inflating America's sense of itself. As the economic historian Alfred Chandler has pointed out, Microsoft and Intel grow rich today on economies of scale just as Ford Motor did nearly a century ago with the assembly line. A thousand copies of Microsoft Word or a thousand Intel computer chips roll off the line in little more time than the first 100, adding only pennies to the cost of the initial production. Invention and development are already paid for, and also most of the labor. .
That makes selling all this output critically important. If sales rise 20 percent a year in the Chinese mass market and only 5 percent in the much older, more saturated American market, then the pressure builds on Microsoft and Intel to make China the center of production, not merely the site of many factories, and to export to the United States as a secondary market. In this new arrangement, the American mass market survives and grows, but China's grows more quickly - holding Microsoft and Intel in place there even as Chinese wages rise to the U.S. level. The productivity that results from economies of scale - that is, rising output per worker - generates more than enough revenue to pay the higher wages and also fattens profits, a compelling reason to stay put rather than move on to a country with even lower wages. Pressure mounts to shift research and marketing from the United States to China. "As the Chinese become richer and their tastes move closer to those of the higher-income world, then companies that put their plants in China basically to export from there will find themselves increasingly producing for that market," said Richard Nelson, an economist at Columbia University. "That seems to be what is beginning to happen now."
China's share of the world's output of goods and services has nearly doubled since 1991, to 12.7 percent, closing in on the European Union's 15.7 percent and approaching America's 21 percent, according to the International Monetary Fund.
No other country comes close to China's explosive expansion, all of it generating purchasing power for a rapidly growing work force.
India has increased its share by 33 percent since 1991 but still accounts for a meager 4.8 percent of total global output. The American share, although clearly the largest, has not changed since 1980.
As striking as these developments are, the tipping point is a long way off, said Stephen Roach, chief economist at Morgan Stanley.
"The Chinese are producers now, and they will become mass-market consumers, but only after a long lag," Roach said. "And the reason is lack of income. The Chinese are still firing eight or nine million workers a year as part of their reforming of state-owned enterprises, and those workers don't have a safety net" - much less a wage.
Even so, it is no longer possible for the United States to regain the special access to income and profits that its mass market made possible, Solow argues.
America, like everyone else, must get used to being a loser as well as a gainer in the global economy.
In the end, the 21st century is unlikely to be the American Century.
Concurrently, despite Rumsfeld hubris about America mainting unchallenged power, technology is expensive and the richer the nation the more powerful.
As an optimist, however, I am hopeful we can teach the Chinese a bit about respecting human rights and individualism and all live peacefully on this little globe. In a prosperous, democratic world disagreements over bras should be all we have to fight over.
However, another question that comes to mind is whether there are enough resources on the planet to provide that many people with that many consumer goods. There is a limit to what we can take out and then dump back. Certainly they won't all be eating ocean caught fish.
I remember back in the early 1980's the media - TV, radio, print, the whole shebang - going on and on and on about about Japan Inc. and how it was going to take over the world, how the US's days of being the world's economic superpower were over, and blah, blah, blah....
And now this! Seems like every 20 years or so they drag out and dust off this "Era of the Pacific Rim" crisis du jour
The current leadership has no intention of letting that happen. They are using Sun Tsu techniques to woo huge amounts of money into the country with the promise of an allusionary 1 billion person market in order to displace the failed Maoist/Marxist economics and maintain their hold on the country...and to be in a position to expand that hold out to the first or second Island chains in the Pacific.
Our problem is simple...we are funding it.
We should treat the PRC like the totalitarians they are and only practise the types of economic policies we are currently involved in after the Red Chinese demonstrate substanative change. Right now we have the cart before the horse...and the totalitarians are lapping it up. Unless we get it turned around, the price will be paid in blood I am afraid to turn it around later.
In that case, unless we successfully alter course, the future is more apt to look something like this scenario IMHO.
PS: Einigkeit und Recht und Freiheit fuer alle!
Despite your poor grammarThen you continued with this...
The conquerer may be assimilated, not Americans have been doing a damn good job of assimilating all comers for about 200 hundred years as well.Funny, those kinds of nitpickings almost always end up being two-edged sword, don't they? LOL!
Ideas can be the ultimate determining factor...if they are backed up with strong, moral resolution and with the means to defend them. Otherwise, someone will take the ideas and make them their own.
Better to foster an environment where the others emmulate those ideas and internalize them. Right now, the Chinese are not doing that at all...they are moving more towards the former and we'd best give them the proper incentives to alter their behavior or it will lead to war.
As I said, we are funding the move in the wrong direction right now IMHO.
Unfortunately, like with our other core industries, we are moving our agriculture production offshore as quickly as possible too.
We are turning ourselves into a true service economy along the lines that Al Gore amd Bill Clinton recommended almost a decade ago. Despite all of the hoopla about service economies controlling information and therefore being in control, once you boil off all means of production and make yourself dependent on others for your actual products and food...the root word in the term service economy tells the tale.
A service economy ultimatley is an economy of servants.
Island Japan doesn't have 1 billion people and vast natural resources.
Thos emasses are their ticket to conitnued power and overcoming their failed maoist/maxist economics so they can expand their political, economic and (ultimately) military hegonomy. They will walk a delicate tight rope in letting the serfs/peasants see just enough progress to keep them in line while they maintain their totalitarian power over them...and then taking the profits to exert influence outward from China.
Their own writing make it clear that such expansion and hegonomy are their aim. They can only accomplish it by ultimately displacing us in the region...and they have everty intent of ultimately doing that while we fund the whole thing.
They are playing Sun Tsu to the letter.
So, they will maintain an environment for as long as they can where we fall all over ourselves to build nice new manufacturing facilities to take advantage of their cheap labor force...one they will maintain by design in order to keep it from going elsewhere...and for those who do, you watch and see who has large interest in those other facilities in other places.
The key cog in such plans, IMHO, is their ability to continue to woo, blackmail, bribe and cojole us to keep the revenue coming in until they reach a critical mass where they do not need it anymore. What we need to do is to face them with economic and political philospohies like Reagan used to face down and ultimatley bankrupt the Soviets. We can still do that...but it would be costly at this point...but much less constly IMHO than the future alternative.
Just my opinion.
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