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China - the new Japan

In the mid-1980s media pundits of the Lou Dobbs variety promoted Japan Inc. as the world powerhouse. Japanese companies had steamrolled the auto and electronics industries, and had bought half of California with the loot. The U.S. economy was doomed.

These days, it is a rising China that has the gloom and doomers at work. As with most chicken littles, history is likely to prove them wrong.

Here are two little pieces of the puzzle which suggest that Yankee ingenuity is alive and well. First, Craig Newmark notes this perceptive New York Times story on Dell, the only significant PC company to manufacture in the U.S. But Dell is not the modern version of Zenith. (Some of you may recall that Zenith lapsed into a technological laggard, and sought to survive Japanese competition with the use of trade restrictions and antitrust suits. ) Here is Craig's synopsis of the Times' piece.

Among the amazing bits of information here:

--Five years ago it took two Dell employees 14 minutes to manufacture a computer. Now it takes one employee 5 minutes.

--Even at the peak of the Christmas rush, a new order received on the factory floor at 9 a.m. is typically complete and on a truck by 1 p.m. the same day.

--Last year, General Motors's president for North America visited Dell's plant to learn about its process.

Here's a second item on the same theme, from Andy Mukherjee at Bloomberg:

Concerns that an unstoppable Asian juggernaut is going to crush whatever is left of the U.S. textile and garment industries may be vastly overstated.

...While it's true that the Americas are at a disadvantage -- the hourly labor costs in the U.S. and Mexican apparel industries are $9 and $2.5 respectively, compared with 88 cents and 38 cents in coastal China and India -- wages are only one part of the equation.

Doomsayers are wrong, argues a study by the Harvard Center for Textile and Apparel Research, because they ignore a crucial fact: proximity.

Wal-Mart Stores Inc. and other U.S. chains prefer North and Central American and Caribbean suppliers who are closer to home for products like jeans and T-shirts that must be quickly replaced on store shelves as stocks run out.

"The Wal-Mart model that dominates the U.S. retail scene," says David Weil, a Boston University economics professor and a co- author of the report, "requires suppliers to replenish their products on a weekly basis." ...

Proximity is an important consideration in $61 billion of clothing imported into the U.S. under quotas, Weil says.

Why else would three-fifths of T-shirts sold in the U.S. be manufactured in Honduras, Mexico, El Salvador and the Dominican Republic, mainly using U.S.-made textiles, when Bangladesh and Thailand offer them for less? Ditto for denim trousers: The biggest U.S. jeans suppliers are Mexico, Costa Rica, Guatemala and Colombia, not any Asian country.

More on the Harvard study, including the paper (which I've not yet read) can be found at their website. Nice to see this sort of material break through the nonsense that is all too common in the MSM.

Remember this the next time you read a "chicken little" piece: a country with sound institutions, abundant capital and labor, and a bit of technological savvy will do just fine for itself. And trade will generally make things better, trade with China included.