In a signal of change in elite attitudes, Steven Pearlstein wrote a Washington Post op-ed, "Chinese follow same old script (and they get the punch line)," describing the cost-to-us of the business-as-usual game we have been playing with China. Pearlstein has seen the light: China has an industrial policy and it is working for them as a nation. We do not. We have a lassez-faire ideology that enables a few at the top of "Multinational Corp." to get really rich moving manufacturing infrastructure to China, leaving the rest of us with no way to make a living. Next week President Obama can announce that he is changing that.
"Enough!"
Pearlstein writes about China's bullying mercantilism, how it benefits China, the cost to us, and says "Enough!" He makes a startling suggestion to address the problem: do unto them as they are doing unto us. He writes,
"The right response to these challenges would be for the president this week to laud China for the success of its economic policies and announce that the administration will begin forthwith to apply each and every one of them to Chinese exports into the United States. Subsidies and directed credit for local companies, buy-American provisions for government agencies and government contractors, currency manipulation, the rules on "conditional market access" and "indigenous innovation" - surely China could hardly complain if we were to pay them the highest compliment by embracing their economic model."
Read that paragraph again.
Pearlstein goes on to describe how a national industrial policy brings advantages to China, while our everyone-in-it-for-themselves ideology hampers us,
"...China can strike deals that may provide short-term profits to one company and its shareholders but in the long run undermine the competitiveness of [our] economy. What's good for GE or Honeywell or Rockwell is, in this case, almost certainly not good for America and American workers."
The Establishment
This column is significant because Pearlstein is part of what you might call "the establishment," a DC opinion leader, not part of the labor movement or a social-justice non-profit or, worse yet, an advocate for the unemployed. But here he is joining with us on the "far left" to say that we can't keep going down this road -- that it is time to see ourselves as a country of people who are in this together, with common interests. He actually makes the far-left argument that, "What's good for GE or Honeywell or Rockwell is, in this case, almost certainly not good for America and American workers."
Will he keep his job? Or will others join him and begin to see that this is all of a piece. Our trade deficit is part and parcel of our budget deficit and our terrible unemployment problem and our bank bailouts and our deteriorating infrastructure and our deregulation and our tax-cuts-for-the-rich and our on-your-own ideology and our corporate-financed elections and our slow economic growth.
Evergreen Solar
To illustrate the difference, a national industrial policy makes Pearlstein uses the instructive example of Evergreen Solar, a solar panel manufacturer that made waves this month announcing it is closing down its US manufacturing and moving it to China. Solar panel prices are plunging because of Chinese-subsidized manufacturing, and "Evergreen can still make money in China because of the lower costs and considerable government subsidies offered by the government there." But not here.
The NY Times covered the Evergreen Solar story last week, in "Solar Panel Maker Moves Work to China." These snippets tell the story,
... But now the company is closing its main American factory, laying off the 800 workers by the end of March and shifting production to a joint venture with a Chinese company in central China. Evergreen cited the much higher government support available in China.
. . . Chinese manufacturers, Mr. El-Hillow said in the statement, have been able to push prices down sharply because they receive considerable help from the Chinese government and state-owned banks, and because manufacturing costs are generally lower in China.. . . In addition to solar energy, China just passed the United States as the world's largest builder and installer of wind turbines.
The article includes a reminder that we are, after all, talking about China,
... Evergreen's joint-venture factory in Wuhan occupies a long, warehouselike concrete building in an industrial park located in an inauspicious neighborhood. A local employee said the municipal police had used the site for mass executions into the 1980s.
Business As Usual
China cheats. We don't stop them. They manipulate currency. They restrict imports. They subsidize exports. They subsidize companies. They steal intellectual property. They coerce companies to give up proprietary technology. They do what it takes to win key strategic industries, regardless of treaties and laws. And why should they if we won't stand up to this cheating and stop them? They watch out for themselves, and we do not.
Yesterday, describing China's currency manipulation as part of an industrial policy, I wrote that China looks at the overall, longer-term picture, seeing themselves as a country of people with a common interest. We do not. They understand that attracting industries to China is good for China and its people in the long term. We do not.
We follow a corporate/conservative greed-is-good ideology that says that the interests of individual companies and a few wealthy people are the interests of the country-at-large, and if companies can make larger profits in the short term and a few people can get wealthy closing factories and moving them to China that's just fine, even if it means a loss of jobs and of the country's overall ability to make a living in the long term. This just doesn't work for us as a nation. Or, as Pearlstein put it, "What's good for GE or Honeywell or Rockwell is, in this case, almost certainly not good for America and American workers."
Obama's State of the Union Opportunity
Next week, the President delivers his State of the Union speech. This is an opportunity to announce a new direction. He can lead us in a transition back to a nation that sees itself in this together as a people watching out and taking care of each other. He can reject the conservative vision of each of us on our own, following a greed-is-good ideology that enriches a few but just doesn't work for We, the People. He can announce the formation of a bold national industrial/economic policy where we again lead the world toward greater prosperity. And he can announce that we are going to, as Pearlstein writes, "pay [China] the highest compliment by embracing their economic model" -- meaning do unto China as China is doing unto us. Enough!
This post originally appeared at Campaign for America's Future (CAF) at their Blog for OurFuture. I am a Fellow with CAF.
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in articles appearing in the NYTimes and various publications in the Boston metro area. This is
not the case.
Yes, Evergreen is shuttering the Devens, MA facility. It is not moving any of that capacity of jobs
to China.
In September 2010, the Company began producing wafers in China and using a JV relationship to have those wafers converted into cells and then panels. This facility will continue to operate
as equipped.
As announced on January 11, 2011, Evergreen is focusing on supplying wafers to high volume
panel manufacturers. The String Ribbon processes developed by the Company provide it with
a cost advantage, that according to Company estimates, are in excess of 40% compared
to the "cast & cut" technology currently in use. As panel cost trend below $1.00/watt and ASPs
move toward $1.45/watt later this year, the economic consideration of incorporating string ribbon
wafers becomes compelling.
Sadly, the media and many who are supposed to cover "business" have missed this point so fundamental to the actions announced.
For anyone caring to get a more balanced view, they can reach me at
mmccarthy@evergreensolar.com. I am Evergreen's Director of Investor Relations &
Government Affairs. I will, as I have been, responding to every inbound call and email recieved.
Daniel Griswold, Financial Post
Undervalued yuan? Not any more
"It has been a mantra of Mr. Schumer and other critics of U.S.-China trade that the yuan is undervalued by 15% to 40%. They were saying that before the 2005 appreciation and they're saying that now, as though nothing has changed.
Yet a lot has changed. In nominal terms, the yuan appreciated by more than 20% between 2005 and 2008. That's when China relaxed its hard peg with the dollar and allowed its currency to gradually appreciate. After holding the peg steady again during the recent financial turmoil, China has again allowed it to rise another 3% since last June...
...When you combine the effect of rising prices in China with the higher nominal value of the yuan, you get a double boost to the real exchange rate. The real value of the yuan has appreciated by 50% since the beginning of 2005. In early 2005, 100 Chinese yuan could be exchanged for about US$12; today it can be exchanged for US$18 (in real, inflation-adjusted dollars)."
The Chinese has been slowly appreciated the Chinese Yuan for the last 5 years.
http://www.financialpost.com/Undervalued+yuan+more/4135804/story.html
It's slow, but that's because they're worried about another Asian Currency crisis in the late 90s.
You are aware that happened and nearly bankrupted South Korea right? So China's a bit worried about that so they're doing it slowly because turning the Chinese Yuan into monopoly money isn't really in the interest of the Chinese people. Not to mention when you have a system in place like the Fed that can suddenly print 600 billion dollars in Quantitative Easing 2. I guess the Chinese don't want foreign capital to suddenly raise the value of the Yuan and suddenly dumping it like what happened to the Southeast Asian countries.
And before you start a trade war by imposing tariffs, let me tell you now in advance that it'll hurt American businesses and it'll basically stop international trade for America.
The question you should be asking is; why is American consumers only saving and investing 2% of their income when Chinese consumers are saving and investing 35% of their income?
I'm sorry it's like school right? Studying / Hard work = Cheating
Economic State Of The Union: The Future Will Likely Be Worse
"The United States continues to live far beyond its means while losing its once uniquely dynamic productive expertise and its financial independence. The standard business news narrative is that the United States is now 18 months into recovering from the worst downturn in 70 years. Private sector jobs grew in each of the past 12 months. Industrial production, real wages, after-tax incomes and personal spending are all rising with monthly savings up from post-1933 lows three years ago. Prices are stable. Global corporate profits and Wall Street bonuses are again at record levels, helping reflate equity markets to 28-month highs.
But in the first U.S. economic lost decade since the 1930s, there are still 3.2 million fewer private sector jobs than there were 10-years ago, including one-third fewer manufacturing jobs. There is less private investment and less real per-capita net worth. Income inequality is at the highest level since the 1930s, and the median real annual income of men with a college degree is less than it was for men with four years of college in 1966. No surprise, consumer spending this decade is the weakest on records back to WWII..."
Obama's Top Economist Discloses Why The Administration Refused To Support U.S. Manufacturing
"For the past two years, executives of domestic manufacturing companies -- along with their workers -- were in a daze, wondering why the Obama administration pushed no policies to counter the hemorrhage and the continued offshoring of American production.
Now it is clear.
Obama's outgoing chief economist Lawrence Summers does not think it necessary for the United States to mass-produce products that would be consumed by hundreds of millions of Americans. Summers justifies this position by stating that even the number of manufacturing jobs in China is declining, when in fact, they are not.
"We are moving towards a knowledge and service economy," said the departing director of Obama's National Economic Council in a brusque farewell address at the Economic Policy Institute in Washington, D.C. "You don't succeed by producing exactly the same thing that other people are producing in the same way just at a lower cost," he added. "There is no going back to the past. Technology is accelerating productivity in mass production to the point where even China has seen manufacturing employment decline by more than ten million jobs over the most recent decade for which data is available..."
Jobs of "a knowledge and service economy" will be done in a cheaper labor market than the U.S.
Take the iPhone for example, iPhone is made in China. But it is designed by Apple and sold by Apple. Chinese factories earn 2% of the total price, which means with a 179 $ worth of iPhone, China only makes a money of 3.6 $.