[Marxism] China and the American consumer

[Louis Proyect <lnp3@xxxxxxxxx>]

NY Times Magazine, July 4, 2004
The Chinese Century
By TED C. FISHMAN

(clip)

The China Savings

No politician declares it. There is no Association of Big Box Store
Customers beating the drum. But, as nearly any shopping trip in America
will teach you, China saves American consumers enormous amounts of money.

The worry that Chinese producers are hurting American businesses and
eliminating American jobs misrepresents the problem -- at least
geographically. While the U.S. trade deficit with China is growing, most
of the goods from China, between 60 and 75 percent of them, simply would
have been imported in past years from other countries. Still, because
the China price forces manufacturers the world over to drop their own
prices, the jobs that have not moved have been shaken up all the same,
in the U.S. and in other countries. In Mexico, for example, which has
lost nearly half a million manufacturing jobs and 500 maquiladora
manufacturers, workers earn four times what their Chinese counterparts
do. So for Mexican factories to stay competitive, they must get by with
fewer hands or smaller profits.

Americans who would demonize China also have a local problem: the China
price is a boon to American consumers. Gary Hufbauer, a senior fellow at
the Institute for International Economics, has done some rough math that
shows how. ''From time immemorial,'' Hufbauer says, ''most American and
Japanese businesses have been reluctant to move their manufacturing to
new locales unless they can save at least 10 to 20 percent with the
move.'' For the $152 billion worth of goods coming in from China last
year, those savings have already been realized.

The multiplier effect on the rest of the world's manufacturers, however,
dwarfs the savings that come directly from China. Hufbauer figures some
$500 billion in goods come from countries that are China's low-wage
competitors, and another $450 billion in goods come from China's
American and Japanese competitors. That means savings on nearly a
trillion dollars of goods. If the savings on that non-Chinese trillion
dollars' worth of trade are just 3 to 5 percent, rather than the 20
percent the Chinese can deliver, Hufbauer calculates further savings
starting at $500 for the average American household. And people who
spend more, get more back. Have a drawer full of $3 T-shirts, a DVD
player in every room, a Christmas tree annually encircled with piles of
toys? You probably have tons more stuff -- and additional savings --
thanks to the China price.

This inexorable downward pressure on prices now shows up even when the
prices of raw materials rise, costs that in the past were hurriedly
passed on to consumers. The Chinese industrial boom has, for example,
pushed up the cost of copper, aluminum, nickel, plastics and nearly
every other important industrial commodity. Chinese demand has caused
the price of steel to rise 20 percent this past spring. (China is now
the world's top steel producer, by the way, while the U.K. has dropped
out of the top 10.) Nevertheless, the price of cars, which reflect
nearly the entire commodity index, has been weak. In April, cotton
climbed to its highest price at this time of year in seven seasons, but
the price of clothing declined.

American firms can find it hard to compete. ''China hits domestic U.S.
manufacturers twice,'' Oded Shenkar says. ''They drive down the price of
goods, but they drive up the price of raw materials. It's a wholly
different environment.'' And yet it's a good one for Americans too.

The efficiencies forced on the market by Chinese factories also hold
U.S. inflation in check. Lower inflation means the Federal Reserve can
keep interest rates low, making money more freely available for
investment in new and stronger industries. Chinese competition forces
American businesses -- Signicast, for example -- to use capital as
efficiently as possible. And to run their plants full tilt. And to find
ways to save on labor costs. The Americans who lost manufacturing jobs
over the last three years, and the millions more who are expected to see
their white-collar jobs migrate overseas, may have not only China to
blame, but also the very economic benefits that China has provided for
them.

And that's to say nothing of what happens once the Chinese countryside,
thinned of its oversupply of farmers, turns into efficient farms.
Already the Chinese have their eyes on cash crops. Though it has only
recently begun exporting apple juice, China already produces seven times
as many apples as the U.S., enough to cause a depression in the price of
apple juice worldwide. Whole apples for exports are individually wrapped
by hand in a foam sock. Given the country's wealth of manual labor, it
can assert dominance in crops that must be tended by hand.


In a stable China, where its great resource, its people, are allowed to
work and spend money in a reasonably well functioning market economy,
the growing place of China in a global economy cannot be legislated away
with tariffs, quotas or tax incentives for struggling industries.
China's strengths cannot be altered by changes in the value of its
currency or by restricting the flow of foreign investment into the
country. By having changed itself, China is changing the world.

That doesn't necessarily mean things will be worse for Americans as the
century -- the Chinese century -- unfolds. Following World War II, the
nations of Western Europe, Japan and the so-called tiger countries of
Asia rose from the ruins, aided, not thwarted, by the strength of the
American economy. In turn, those economic booms fed our own.

So perhaps we will be as Europe is to us today, and China will be our
America.

Imagine Pekin, Ill., a few decades from now. It may, like innumerable
small Chinese cities today, be accustomed to a stream of foreign
business managers. Perhaps the regional boss for a Wanfeng Automotive
dealership is there to be host of a ''dig to China contest'': the team
that gets closest in 40 minutes might win one of the company's hot new
red-and-gold Lucky 8 hybrid sports coupes, worth $4,000. As a promotion,
Wal-Mart's new World Store is rolling prices back to 2004 levels for the
day -- shoppers are grabbing the steaks and fish, whose prices Chinese
consumers have driven up fourfold since then. Wal-Mart might have
competition, however, perhaps from a new giant outpost of Homeworld, a
Chinese retail giant that has learned to exploit its proximity to
Chinese suppliers and beat Wal-Mart on price. A big event scheduled for
the evening might get knowing smiles from the town's old-timers. The
Foreign Devils, a high-school basketball team from Manhattan, a new
suburb of Beijing, is due in for an exhibition game. Provided its
flight, on an all new Chinese jumbo jet, arrives on time.

full: http://www.nytimes.com/2004/07/04/magazine/04CHINA.html

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