WHAT COST $10.00 JEANS?
In the wake of Delphi Corporation's bankruptcy, it is time for the United States government to get its head out of the sand and begin to address the issue of a declining American manufacturing base. In a brutally frank news conference on October 13, Robert "Steve" Miller, Chairman and CEO of Delphi, spelled the problem out in frank terms, the truth of which was as refreshing as it was disturbing.
Those of us with political science backgrounds tend to be free traders. The number 1 rule in political science is free trade promotes peace and prevents wars. That was the lesson of World Wars I and II. And those of us with rudimentary backgrounds in economics believe in Adam Smith's invisible hand in matters of free enterprise. One can make the argument that free trade and free enterprise are proper approaches when dealing with Japan, Europe, possibly India, and other areas of the world.
China is a different ball game. There is no way the United States can compete with China in any capacity and be successful as things currently exist. For free enterprise and free trade to work, it has to be.....free. China is NOT free.
Notwithstanding the glitz and urban boom surrounding Chinese development over the past several years, China is a Communist country. Whether overtly or subtly, the Chinese government controls the growth and fiscal structure of the country in ways that go way beyond the comprehension of most Americans and its politicians. Consider the following:
1) Chinese currency is pegged to the dollar whereas most other currencies of economically viable nations float. That means that no matter what the United States does vis-a-vis its own economy, the cost of a product or service in China will automatically be 1/3 less than the same good or service produced in the United States. While some progress has been made this past year in moving the Chinese to float its currency, the movement has been miniscule at best. John Snow and Alan Greenspan are currently in China trying to rectify the problem. Like that's going to happen.
2) The average wage of a Chinese factory worker is between $.64 and $1.20 per hour. On its face, there is no way we can compete with that type of wage structure. In addition, in the Communist workers' paradise, the Chinese government controls every aspect of life. It prevents free movement of its citizens within its country. It prevents free discussion and dissent of its government in every way. It prevents labor from organizing. There are no free elections. In other words, for all intents and purposes, the Chinese have created a permanent slave labor class with a limitless number of workers. Bill Gates and Microsoft have even agreed to help censor the internet on behalf of the Chinese government in order to secure its stake in China. There is a deal with the devil.
Those of us with political science backgrounds tend to be free traders. The number 1 rule in political science is free trade promotes peace and prevents wars. That was the lesson of World Wars I and II. And those of us with rudimentary backgrounds in economics believe in Adam Smith's invisible hand in matters of free enterprise. One can make the argument that free trade and free enterprise are proper approaches when dealing with Japan, Europe, possibly India, and other areas of the world.
China is a different ball game. There is no way the United States can compete with China in any capacity and be successful as things currently exist. For free enterprise and free trade to work, it has to be.....free. China is NOT free.
Notwithstanding the glitz and urban boom surrounding Chinese development over the past several years, China is a Communist country. Whether overtly or subtly, the Chinese government controls the growth and fiscal structure of the country in ways that go way beyond the comprehension of most Americans and its politicians. Consider the following:
1) Chinese currency is pegged to the dollar whereas most other currencies of economically viable nations float. That means that no matter what the United States does vis-a-vis its own economy, the cost of a product or service in China will automatically be 1/3 less than the same good or service produced in the United States. While some progress has been made this past year in moving the Chinese to float its currency, the movement has been miniscule at best. John Snow and Alan Greenspan are currently in China trying to rectify the problem. Like that's going to happen.
2) The average wage of a Chinese factory worker is between $.64 and $1.20 per hour. On its face, there is no way we can compete with that type of wage structure. In addition, in the Communist workers' paradise, the Chinese government controls every aspect of life. It prevents free movement of its citizens within its country. It prevents free discussion and dissent of its government in every way. It prevents labor from organizing. There are no free elections. In other words, for all intents and purposes, the Chinese have created a permanent slave labor class with a limitless number of workers. Bill Gates and Microsoft have even agreed to help censor the internet on behalf of the Chinese government in order to secure its stake in China. There is a deal with the devil.
3) The Chinese government controls and limits foreign ownership in Chinese corporations, and is a silent partner in most of them. It then uses its "corporations" to attempt to purchase American companies. In those instances when they succeed, the Chinese government is then a part owner of the American asset. IBM sold its computer manufacturing business to them. This past year, China almost got Unocal as well as Maytag.
4) Wal-Mart currently imports 22 billion dollars per year from China, and almost 80% of its branded items are made in China. That is up from 12 billion dollars in 1992. At least 82% of American households bought something from Wal-Mart this past year. How much do you think those $10.00 jeans cost us in terms of jobs and our own economic security?
Our government has rationalized the problems with China partly out of greed and partly out of fear. The amount of American debt and currency held by the Chinese is staggering. If the apple cart is upset, it could lead to severe world wide recession or even depression. But at lunch the other day, watching the Delphi news on television, my friend asked me if I thought the United States could survive if we didn't make anything here anymore? Isn't the wealth of a nation based on how many refrigerators it makes as opposed to how hamburgers it flips?
It isn't that our current policy with China is bad. There is no policy. No matter how you look at it, or rationalize it, or free trade it away, this is bad for our country. It is dangerous for our country. And I am deeply concerned.
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