Tuesday, January 02, 2007

The Price Tag Of New Age Mercantilism (And The Outsourcing Of American Jobs To Succeed At It)

For last few months, I have been listening to my free subscription to Sirius satellite radio, courtesy of Chrysler-Jeep-Dodge. One of the more poignant talk show hosts on the talk show circuit is an up and coming Andrew Wilkow.

This past week I heard him say some things that certainly bear communicating, in this forum.

I'll start it off with some news about China's military budget. According to an article in the Washington Post, China spent about 35.4 billion in their 2006 military budget, up 10% from the year before.

China's announced military budget has risen about 10 percent a year recently, reaching $35.4 billion in 2006, and Pentagon specialists estimate that also counting equipment expenditures would more than double it.


Granted, it's but a fraction of what America spends. But, that's not all. Let's back up a second here and look at what's happening, via Mr. Wilkow's argument, shall we?

To start this off, let's look at some history.

In the Civil War, it was the industrialized north that defeated the agrarian south. While the south had to import weapons and equipment, the north manufactured them because they were heavily industrialized. They had the workers, they had the plants. But that wasn't the half of it, the Union forces put up a naval blockade and prevented the Confederates from importing. With no means of production or importing them, the Confederacy lost.

In WWI, the U.S. and her allies outproduced the Germans and its allies and won. In WWII, add ingenuity to the outproducing of the Axis powers and one can easily understand why the allies were victorious, then, too. Having the ability to produce is one of the most important factors in any nation's quest to sustain and/or win a war. None of these conflicts are an exception.

If a nation does not have the plants to convert from making everyday goods to armaments and other kinds of equipment, its chances at military success are diminished. That much we've established. But what about the workers?

Factory workers are used to working hard with their hands. So it stands to reason, they can be more easily converted to soldiers than say a greeter at Wal-Mart, or a server at Red Lobster. So all in all, having a strong manufacturing base is a major plus, all the way around.


Do you see what I am getting at, here?

Although, I am a capitalist and I strongly feel that a company has the right to do what it feels best in order to be profitable, it can come with a huge cost. By sending these plants, along with these jobs, to China, and by replacing them with warehouse workers and date entry clerks, we sacrifice a lot. We sacrifice that ability to outproduce.

What if we send the entire manufacturing base overseas to countries that are openly hostile (or at the very least have a vested interest in seeing the U.S. weakened), and those countries do not want us to be successful in a necessary military endeavor, or want to directly challenge the U.S. in some way? Do you think they will allow us to convert those plants to produce armaments and other equipment? I rather doubt it.

Now, we see China increasing its military spending by leaps and bounds and we also see a good portion of manufacturing jobs slipping to them. Does it make sense to keep doing this? With this new age of mercantilism and the natural by-products of that system, it's easy to see the answer.

10 comments:

A.C. McCloud said...

It's a scary thought and you may be correct, but let me offer some devil's advocate material.

The military wargames everything. They even wargamed a possible British attack on America after World War I. They certainly had plans for Iraq and even Afghanistan, and they've got one for sudden climate shifts. My guess is that they really aren't concerned with a land invasion of the US, or the need for a WWII-like invasion of another country that would require massive armaments. Just a guess. The oceans are still a big deterrent.

Maybe they think future defensive wars will be fought with missile shields and other high tech stuff.

I'm no economist, but it seems if China declared war on us we'd cut off trade which would cause their main revenue to dry up fast. Maybe the New World Order is really to integrate the economies of the world to the point where everyone so depends on everyone else that nobody can attack on a large scale.

Still, it's unsettling to have no quick ability to produce.

Greg said...

AC brings up some good discussion material. It does seem any war with China would be of a nuclear nature, ie, complete destruction of one or both combattants. In fact, it's hard to imagine a conventional war b/w 2 nuclear powers that doesn't end with a mushroom cloud. That's why I'm now in favor of developing a missile shield system.

Another point on manufacturing jobs is whether there is anything we can do to stop this. The Chinese enjoy a large pool of what amounts to slave labor. They can put 'em to work young and for long hours, and can restrict their ability to complain about it. Oh, and they can make 10 cents/day and still live to work another day. The advantages to the Chinese here are presently insurmountable.

Over time, though, the Chinese will start to see their wages increase, and they will turn into spoiled brats just like us. They'll want their IPods and japanese cars and vacation time, etc. Hopefully that happens before we end up in a war over Taiwan or something....

LASunsett said...

Greg and AC,

Both of you raise interesting points.

But let's just say it's not China that we need to go to war with.

Say it's ten years from now and sanctions against Iran haven't worked, the Iranian people have not overthrown the current system and replaced it with more western friendly policies, and they direct a successful terrorist attack against the U.S. In the meantime, more of our plants have gone to China and China is fully dependent to Iran for oil.

I realize that's somewhat of a stretch, but what then? Nationalize the Japanese plants?

Anonim said...

IMO, AC has a point. "Globalization" will probably have changed everything before we put our finger on it. If it hasn't done so already, that is. Maybe we'll have the doctrine of mutually assured total economic collapse replacing (or augmenting) that of mutually assured nuclear destruction of the cold war era. Again IMO, China has already become a major global capitalist player to be dealt with. Without much fanfare, they shed the rigid ideological hold-ups around which a "containment" strategy could have been instituted. I think it is already impossible for the US (or the West in general) to pull off anything that China is determined to block. For other potential engagements where they are ambivalent about their interests, they might abstain, cooperate, make their production capacity available, et cetera, as business logic would dictate.

There was a PBS documentary I came across a couple of weeks ago (probably a re-run; not full of new discoveries, that is). It was about Wal-Mart & China, and how the economic balance has shifted towards the Chinese credit column. Large volumes of raw materials being shipped to China from US ports, and even larger volumes of finished products of all kinds (including heavy machinery) flowing in in the opposite direction... I don't know, maybe, the anarchists staging protests in front of WTO meetings during Clinton's term had a point back then (or it wasn't too late to keep this picture from arising back then).

LASunsett said...

Anonim,

//I think it is already impossible for the US (or the West in general) to pull off anything that China is determined to block. For other potential engagements where they are ambivalent about their interests, they might abstain, cooperate, make their production capacity available, et cetera, as business logic would dictate.//

You may be right.

While I love the Chinese people dearly (I know many that are here, from China, both first and second generation), I do not trust their government.

The problem with human beings too often is, their innate ability to turn the quest for equality and friendly competition, into a drive for empowerment and supremacy.

One need look past Washington, to see that.

A.C. McCloud said...

Say it's ten years from now and sanctions against Iran haven't worked, the Iranian people have not overthrown the current system and replaced it with more western friendly policies, and they direct a successful terrorist attack against the U.S. In the meantime, more of our plants have gone to China and China is fully dependent to Iran for oil.

Very interesting discussion LA. As to your scenario, it would be a pickle, especially if Iran went after us with a nuke then Israel, requiring an Iraq-like response (march on their capital). In that scenario I believe you're correct--the Chinese would be on their side.

If we believe the recent study that said Iran's oil exporting ability was going to plummet by 2015. Not sure I do, but let's say it's true. Knowing that it's likely the Ayatollahs would attack sooner than later, which might negate the effect.

I think our steel production has largely gone to the Japanese, who would be allied with us in a war. I'd be concerned about our ammunition factories. They are still here, right?

LASunsett said...

AC,

//I think our steel production has largely gone to the Japanese, who would be allied with us in a war.//

The Chinese could easily offset this with a naval blockade. We have held the Japanese military to low numbers since WWII, we would then need to fight a naval battle to free the Japanese to export whatever they would make for us, taking valuable resources from where they would be most needed.

Maybe it's time to turn the Japanese loose and allow them to arm themselves, again. But wait, who would argue against that? China.

Mustang said...

China need not lift a single finger in anger toward the United States. They can simply destroy us economically, and they’ve seen how to do it – which is the “downside” of a free and open society. Every day, we give our potential enemies all the information they need to destroy us. While China is making tons of money from Americans, they are also developing and marketing destructive weapons to the highest bidder. If the events on 9/11 disrupted our economy for two years, what do you think would be the result of destructive weapons in the hands of terrorist countries, provided by China? Make no mistake that China is an expert in the use of surrogates to accomplish China’s long-range goals. But what they hell, I like Chinese food.

A.C. McCloud said...

China need not lift a single finger in anger toward the United States. They can simply destroy us economically,

It seems a Chinese import ban would really hit them hard, however, if they were determined to attack they could probably withstand the pain. But I think Russia is more in their cross-hairs than we are--after all, they've got the needed land mass.

LASunsett said...

Mustang,

//But what they hell, I like Chinese food.//

Gotta love that PF Chang's, no?