If Germany switched to making everything in-house rather than importing the products from China, they would have to pay 2-3 times more for everything from pantyhose to teddybears to headphones.
The reasons are threefold:
- labor costs in China are cheaper because they can get people to work for 12 hours straight
- power costs in China are cheaper because they do not have any pollution regulations
- machine costs in China are cheaper because they run their factories 24/7 and get more time out of new machines.
This leads me to believe that if China decides to increase its standard of living by reducing pollution, increasing housing space, and reducing work hours, their products will not be cheaper than what can be made locally in Germany.
The Chinese government has been subsidizing the transfer of manufacturing to their country by giving companies access to an irrefusable combination of workers, power, and low taxes. The leaders may be thinking long-term, but the people are surely suffering in the short term.
Perhaps this temporary transfer of manufacturing to China is the right thing to do to make the world a more peaceful place. As long as every country has the facilities and technology to make or buy what they need, there should be no reason for any of them to fight. The trouble I see is that Russia and the Middle East are the source of raw materials that feed the factories and they sit in between two maunufacturing power houses – the EU and China. In a quadrupolar world, this is a recipe for perfect balance if the Americas can offer raw material pricing to compete with Russia and the Middle East.
Nevertheless, from a competitive, less holistic standpoint, what Germany has done is stupid. Outsourcing production to China while keeping engineering master plans in Germany seems like a good idea until you realize that engineering master plans are cheap once everyone has seen them and once the production know-how has been outsourced, Germany’s infrastructure may suffer from lack of investment.
Germany may retain knowledge of how to make a perfect ‘bee-sting cake’ but forget how to make a perfect teddy bear or pair of headphones in an efficient manner. And if Russia decides to strong-arm the EU in order to extract higher prices for their raw materials, productive capacity in the EU may suffer further damage and enable China to boost their prices. They’d be shooting themselves in the foot with such a strategy. Thus, the EU, China, and the Americas need one another in order to keep pricing competitive and maintain productive infrastructure.
Some things, like pantyhose or drugs, can be made in a perfectly hands-off fashion and by not manufacturing them in-house, Germany doesn’t have to worry about the pollution that comes from such facilities, but should global supply chains ever get disrupted, German women would have to forego aspirin, disposable pantyhose, and cheap children’s clothes. I’ve never liked disposable clothes much anyway. Wool, leather, sturdy linen, and chainmail are the future, I tell ya. But seriously, polyester fibres are poisoning us and t-shirt cotton falls apart too quickly.
If I compare this global economic situation to the transition academic physics has made over the past hundred years from small, individual science projects to big science collaborations, I see some lessons to be learned. Big science projects were able to produce novel results at the beginning of this transition, but as the years ticked by, they began to do more and more nonsensical things on a large scale and if the global economy follows a similar pattern as it transitions from small, individually owned businesses to big, collectively owned business collaborations, we will see great gains from big companies in their formative years, but as the years tick by, they will do more and more inefficient, nonsensical things on a large scale – for example, putting all of the world’s aspirin production into a single factory in India.
If I try to make a contribution to the economy as an individual scientist or a small business owner, I am at a major disadvantage compared to someone who is part of a collaboration because a collaboration can control the refereeing, patenting, or copyrighting process if it should so choose. They can also network with their peers in a more efficient manner to craft their product so that it is widely accepted.
But acceptance isn’t necessarily a goal of an economy. A slave will accept her fate and consume half-truths and poorly-crafted or poisonous products, but this isn’t optimal in the long run.
In a knowledge economy, truth and predictive power are primary goals, but without an incentive for economy or clarity of expression, you may end up with truth buried within so much garbage that it is impossible for anyone to think anymore. In terms of the global economy, when globalized companies become large and unwieldy, we tend to get buried in literal garbage. When I see mountains of useless, plastic crap or mountains of useless academic papers, I see the same basic cause.
When you are isolated, you will be able to avoid such garbage piles and maintain your ability to think about the big picture, but everything will be more expensive for you. Nevertheless,
To be a jack of all trades and a master of none is far better than being the master of one.
When we specialize, we infantilize ourselves and make ourselves dependent on everyone else. Infants are non-threatening and helpless and when they protest globalization, they are protesting their own helplessness. If they really wanted to, they could go out on their own, but they are angry that they don’t know how to do that anymore.
If the scientific community can serve as a laboratory to test a solution to a similar problem in the broader community, I think I could forgive it for all of its recent faults and missteps.
Kirsten Hacker 