[Marxism] China and the American consumer

Louis Proyect lnp3 at panix.com
Sun Jul 4 08:21:31 MDT 2004

NY Times Magazine, July 4, 2004
The Chinese Century


The China Savings

No politician declares it. There is no Association of Big Box Store 
Customers beating the drum. But, as nearly any shopping trip in America 
will teach you, China saves American consumers enormous amounts of money.

The worry that Chinese producers are hurting American businesses and 
eliminating American jobs misrepresents the problem -- at least 
geographically. While the U.S. trade deficit with China is growing, most 
of the goods from China, between 60 and 75 percent of them, simply would 
have been imported in past years from other countries. Still, because 
the China price forces manufacturers the world over to drop their own 
prices, the jobs that have not moved have been shaken up all the same, 
in the U.S. and in other countries. In Mexico, for example, which has 
lost nearly half a million manufacturing jobs and 500 maquiladora 
manufacturers, workers earn four times what their Chinese counterparts 
do. So for Mexican factories to stay competitive, they must get by with 
fewer hands or smaller profits.

Americans who would demonize China also have a local problem: the China 
price is a boon to American consumers. Gary Hufbauer, a senior fellow at 
the Institute for International Economics, has done some rough math that 
shows how. ''From time immemorial,'' Hufbauer says, ''most American and 
Japanese businesses have been reluctant to move their manufacturing to 
new locales unless they can save at least 10 to 20 percent with the 
move.'' For the $152 billion worth of goods coming in from China last 
year, those savings have already been realized.

The multiplier effect on the rest of the world's manufacturers, however, 
dwarfs the savings that come directly from China. Hufbauer figures some 
$500 billion in goods come from countries that are China's low-wage 
competitors, and another $450 billion in goods come from China's 
American and Japanese competitors. That means savings on nearly a 
trillion dollars of goods. If the savings on that non-Chinese trillion 
dollars' worth of trade are just 3 to 5 percent, rather than the 20 
percent the Chinese can deliver, Hufbauer calculates further savings 
starting at $500 for the average American household. And people who 
spend more, get more back. Have a drawer full of $3 T-shirts, a DVD 
player in every room, a Christmas tree annually encircled with piles of 
toys? You probably have tons more stuff -- and additional savings -- 
thanks to the China price.

This inexorable downward pressure on prices now shows up even when the 
prices of raw materials rise, costs that in the past were hurriedly 
passed on to consumers. The Chinese industrial boom has, for example, 
pushed up the cost of copper, aluminum, nickel, plastics and nearly 
every other important industrial commodity. Chinese demand has caused 
the price of steel to rise 20 percent this past spring. (China is now 
the world's top steel producer, by the way, while the U.K. has dropped 
out of the top 10.) Nevertheless, the price of cars, which reflect 
nearly the entire commodity index, has been weak. In April, cotton 
climbed to its highest price at this time of year in seven seasons, but 
the price of clothing declined.

American firms can find it hard to compete. ''China hits domestic U.S. 
manufacturers twice,'' Oded Shenkar says. ''They drive down the price of 
goods, but they drive up the price of raw materials. It's a wholly 
different environment.'' And yet it's a good one for Americans too.

The efficiencies forced on the market by Chinese factories also hold 
U.S. inflation in check. Lower inflation means the Federal Reserve can 
keep interest rates low, making money more freely available for 
investment in new and stronger industries. Chinese competition forces 
American businesses -- Signicast, for example -- to use capital as 
efficiently as possible. And to run their plants full tilt. And to find 
ways to save on labor costs. The Americans who lost manufacturing jobs 
over the last three years, and the millions more who are expected to see 
their white-collar jobs migrate overseas, may have not only China to 
blame, but also the very economic benefits that China has provided for 

And that's to say nothing of what happens once the Chinese countryside, 
thinned of its oversupply of farmers, turns into efficient farms. 
Already the Chinese have their eyes on cash crops. Though it has only 
recently begun exporting apple juice, China already produces seven times 
as many apples as the U.S., enough to cause a depression in the price of 
apple juice worldwide. Whole apples for exports are individually wrapped 
by hand in a foam sock. Given the country's wealth of manual labor, it 
can assert dominance in crops that must be tended by hand.

In a stable China, where its great resource, its people, are allowed to 
work and spend money in a reasonably well functioning market economy, 
the growing place of China in a global economy cannot be legislated away 
with tariffs, quotas or tax incentives for struggling industries. 
China's strengths cannot be altered by changes in the value of its 
currency or by restricting the flow of foreign investment into the 
country. By having changed itself, China is changing the world.

That doesn't necessarily mean things will be worse for Americans as the 
century -- the Chinese century -- unfolds. Following World War II, the 
nations of Western Europe, Japan and the so-called tiger countries of 
Asia rose from the ruins, aided, not thwarted, by the strength of the 
American economy. In turn, those economic booms fed our own.

So perhaps we will be as Europe is to us today, and China will be our 

Imagine Pekin, Ill., a few decades from now. It may, like innumerable 
small Chinese cities today, be accustomed to a stream of foreign 
business managers. Perhaps the regional boss for a Wanfeng Automotive 
dealership is there to be host of a ''dig to China contest'': the team 
that gets closest in 40 minutes might win one of the company's hot new 
red-and-gold Lucky 8 hybrid sports coupes, worth $4,000. As a promotion, 
Wal-Mart's new World Store is rolling prices back to 2004 levels for the 
day -- shoppers are grabbing the steaks and fish, whose prices Chinese 
consumers have driven up fourfold since then. Wal-Mart might have 
competition, however, perhaps from a new giant outpost of Homeworld, a 
Chinese retail giant that has learned to exploit its proximity to 
Chinese suppliers and beat Wal-Mart on price. A big event scheduled for 
the evening might get knowing smiles from the town's old-timers. The 
Foreign Devils, a high-school basketball team from Manhattan, a new 
suburb of Beijing, is due in for an exhibition game. Provided its 
flight, on an all new Chinese jumbo jet, arrives on time.

full: http://www.nytimes.com/2004/07/04/magazine/04CHINA.html

Marxism list: www.marxmail.org

More information about the Marxism mailing list