And We Didn't Even Blink: From Garden Buckets to Yachts In One Generation

HUBGRAM


Cause for Alarm.
Or just another “Ho-Hum?”

If some of you were out of out pigtails and knickers by the mid-fifties, you might remember what Japanese post-war products looked like. Mostly, they were embarrassingly poor examples of what could be turned out cheaply in plastic. In fact, in those days, plastics was considered the medium of the Japanese; it was cheap, ugly and usually poorly manufactured.

Most of us today, tend to equate China with the same kind of shoddy manufacturing.
They kind of fill in the gaps for things we can’t make cheaply enough for mass markets.
So, we don’t get particularly excited when we hear the latest list of Chinese goods flooding our stores unless of course you’re a curmudgeon like me who worries about the off-shoring of jobs and the economic loss to our country that isn’t being made up or taken very seriously..

Yesterday, I was parading through a growing list of Chinese imports that included things like garden tools, hardware items, small fixtures, cooking implements when I came across one that sent me reeling. There buried in a list of innocuous every day items appeared ‘yachts.’ Yachts? This must be a typo. Maybe they meant ‘pots’ or ‘cots’ or maybe even ‘dots.’ This needed a little detective work. So I got on the computer and found an article on the subject of yachts that appeared in last week’s New York Times. Yes, it seems it was no mistake.
China is really making yachts! Not the entire yacht, mind you, which is kind of an amalgam of parts from Seattle to the Netherlands but who knows? Maybe in five years time, they will be doing the whole shooting match.

The story goes that China’s custom boatyards has prospects for twenty five more of these million dollar plus yachts over 100 feet long; and plans to roll out a yacht design that is well over 200 feet.

Now, this is a far cry from my garden bucket and spade which are made in their totality in some distant province in China where laborers toil away for pennies we are told and there is no such thing as days off or benefits.

I don’t really mind that so much; although I suspect I should. But I do mind the fact that the Chinese are upgrading. In fact, the article went on to say that BMW is making some components in China and that Cadillac and Mercedes will be building cars there shortly.

To this ole boy, that’s kind of worrisome. Why? Because I remember what happened to Japan. They learned the ropes darned quickly and jumped way ahead of us in modern manufacturing practices. For more than a decade, we struggled to catch up.

Will this happen in China?

Well, here’s the skinny. The Chinese turn out ten times as many scientists and engineers as we do. They have built remarkable cities in under ten years where there were only rice paddies before. And we are informed, that they can afford to keep the cost of labor down virtually forever since there is a standing supply of labor from the agricultural provinces.

Why is this something to worry about?

Well, because we are not being told the whole, unvarnished truth about our balance of payments. Our government covers up the fact that we are importing a great deal more from China than we are led to believe. The numbers prove the point. Even the figures that are revealed are staggering; that is, we are in the red thirty five billion dollars a month. According to my informed sources, the truth is probably closer to fifty billion dollars a month.

Now, fifty billion dollars may not sound like much money to you but when I was an advisor in Korea in the early sixties, the Economics minister confided in me that their annual budget for imports amounted to about only 50 million dollars. China’s monthly deficit with the US was 5,000 times their annual budget!...Now, of course, at the time, their budget was very low. Maybe we should use a different yardstick. Say, for example if a school in current terms costs one million dollars to build, you could build sixty thousand new schools in one year with the China deficit alone. That should help put things into perspective.

Who holds all of that debt?

Guess. The Chinese do. The trouble is we are in an economy where the interests rates are rising and that everyone goes to the same well for credit.

Where does that leave us? With a rising debt service that will eventually crush any attempts to balance our budget.

So, unless the entire scenario changes, it would seem that our financial future under the following circumstances needs to be attended to and rather quickly.

Cause for alarm? That may depend on your perspective. But when China starts to build yachts, I think it’s time for everyone to sit up and take notice.

Les Aaron- The Hubgram