A factory in China is just as efficient as a factory in Spain. But if China has most of the factories, and supporting industries, and supporting education, etc. it suddenly becomes more efficient. But then if China decides it doesn't like you, you're screwed. So it's the concentration of skill you mention, but also concentration of all kinds of relevant infrastructure.
As for cheaper workers - it's a temporary "efficiency" in financial terms, in forms of price arbitrage. Over time it evaporates. Even as the 2019 was coming to an end, China was already too expensive for many industries - being the world's factory enabled them to enrich their citizens, and suddenly there was a middle class that demanded humane working conditions and employee protection and what not. So suddenly poorer countries became of interest for future manufacturing...
> A factory in China is just as efficient as a factory in Spain. But if China has most of the factories, and supporting industries, and supporting education, etc. it suddenly becomes more efficient.
But I'd argue that shouldn't be considered "globalization": there's nothing "global" about concentrating things in one country. It's just outsourcing.
It is efficiency, really, because it's making better use of an underutilized resource. Over time, of course, the price of labor evens out because the resource is no longer underutilized.
> more a question of fairness
If it's fairness you want, telling companies to hire locally isn't going to cut it. That's the opposite of fairness, really—you would be subsidizing local workers whose wages are already higher at the expense of foreign labor that has more need for the income.
> Another potential advantage could be, factories are closer to natural resources, but it seems to me that that's not as much a question of efficiency, as it is of lax (enforcement of) environmental standards.
Locating factories near their required materials is a net gain even when ideal environmental standards are maintained. It's almost always cheaper (economically and environmentally) to ship end products where they need to go than it would be to ship raw materials around to distributed factories. Concentrating manufacturing in one area also makes it easier to confine the environmental impact.
The price would have evened out if labor could cross borders as freely as the goods that it produces - then it would flow to areas where it's in high demand. But with borders and immigration controls and different laws (esp. environment and labor) in different jurisdictions, it's not really a free market. Instead, it looks a great deal like a contraption that's deliberately designed to allow transnational corporations to extract massive economic rents from otherwise pointless brokerage (outsourcing).
That would certainly speed up the process. However, labor prices are still gradually rising in China and other common outsourcing areas despite these restrictions. As are environmental standards. I'm not saying it's an ideal free market—there are governments involved, after all. But free or not, the trade is still advantageous for both sides.
Not really, if that was the case for ex, everyone doing similar jobs would be getting paid the same in US or EU. I am not saying things dont get evened out to an extent, but people are harder to move than the goods they produce.
> It is efficiency, really, because it's making better use of an underutilized resource. Over time, of course, the price of labor evens out because the resource is no longer underutilized.
It's not efficiency at all, it's stagnation. Since the 80s instead of trying to innovate and automate production lines too many companies have been hopping from country-to-country looking for the cheapest labor pool. We lost 40 years of manufacturing innovations because they were economically unnecessary due to offshoring.
But they are run by people, those people are the ones crafting the legal and regulatory environment that encourages this behavior, and we can certainly blame them.
It sounds to me like you're saying that it is unfair to strangers that you would help out your family first before helping them.
Most countries do subsidize local workers and industry. Should it be another way?
The United States actually does heavily subsidize foreigners for the benefit of the rich and powerful, at the expense of its citizens. Most work visa programs are an example of this.
This is the problem with the globalist mindset. Chinese workers are ultimately working for China. Chinese companies are always inclined to help Chinese people and the Chinese government. So telling domestic firms to be neutral in national loyalty is essentially telling them to be loyal to China.
A government not pressuring firms to hire and buy locally is deeply unfair to the point where I would argue it is a dereliction of their duty to the people.
Well, yes, it is unfair to the strangers that you're favoring the people you personally care about when others are worse off. Being unfair doesn't necessarily make it wrong. You're free to help whoever you want—with your own resources. However, organizations distributing resources they took by force, or enforcing their own rules on others, ought to be held to higher standards.
> Chinese workers are ultimately working for China.
Chinese workers are ultimately working for themselves and their own families, just like all workers everywhere. Not for the Chinese government. If you have a problem with the Chinese government forcibly and unjustly profiting from the labor of Chinese workers, great! So do I. The same goes for every other government, both foreign and domestic.
And I think that a government has an obligation to prioritize its own citizens before foreigners. And it appears that people here disagree with me.
Most governments do this. The Chinese government certainly does this for its own citizens. I wish that US government was as protectionist as the Chinese government is.
As it is now, American citizens pay taxes to subsidize our exploitation. The only people who benefit from the current immigration system are billionaires. The government is more concerned with the pursuit of capital for the elites than they are with the welfare of the people.
Thankfully, this administration has actually been enforcing the rules with H1-B visas. So lots of people I know have gotten great jobs in the last few years as visas are no longer rubber stamped. H1-B is nothing but a scam to help tech billionaires.
But yeah, putting outsiders above those you have a responsibility to care for is wrong. Volunteering at a soup kitchen does not excuse neglecting your own children. It brings me no comfort that the American middle class was eviscerated to help China. And yet that is trotted out whenever an American expresses frustration at how they have been harmed by globalization. It would be like if someone said: Sure, your bike was stolen, but at least the bike thief is happy, so it is ok.
- work visas aren't subsidized. not even close. it costs a lot to sponsor and the workers pay taxes without benefits. not to mention the brain drain.
- you've grouped people as working for countries. people work for their own benefit and compete globally. as long as countries ensure their trading partners have humane working conditions, it's up to each person to remain globally competitive. your wage is a loose function of value generated for the employer.
There are probably advantages for many large corporations. e.g. Nike, Apple. Design in the US, manufacture in China (or equivalent), reap profits in the US
What perhaps we should be thinking about is the second order effects of unfettered globalization. In the good times we only see the advantages. Ultimately, it looks like it is better to have some redundancy (in certain areas/sectors at least) to be able to deal with situations like these
Are US engineers imagining the same ideas about being irreplaceable that an earlier generation of American machinists, tool-and-die experts, and manufacturing workers also did?
Not at all. Being close to your inputs means you don’t have to ship them as far to make use of them. And the shorter the distance you have to ship them, the less you will pay for shipping. Lower overhead equals higher efficiency.
It’s like, why were car factories in the U.S. clustered around the Great Lakes? Because car factories need steel, and the steel mills were in Pennsylvania. And why were the steel mills in Pennsylvania? Because steel mills need coal, and the coal mines were in Appalachia. You could theoretically build these factories anywhere, but the company that built close to their inputs would have an economic edge over the company that didn’t.
Companies focused on cost cutting, outsourcing and the like, but in doing so sacrificing agility and deep knowledge, and sometime even cost.
That's exactly the argument that Tim Cook used a few years ago. He said that an iPhone not manufactured in China would cost 30k USD...before quickly moving manufacturing out of China. These arguments sound nice, but are lies. When offshoring first started the cheap labor pool was the only thing that mattered, and it still is.
This is why a factory in Spain or the USA is not as efficient as one in China (or vice-versa). Institutional knowledge has to be built up over time. You can't just start a factory in a place with no skilled labor for it. It's going to be way too expensive.
Just look at the US and compare to the EU. The EU has very few influential (or large) tech companies. The US has many of them. There's clearly some kind of concentration going on there and some of it probably is due to skill and thus efficiency. It's not that individual European developers are necessarily worse, but rather that as a collective (for some reason) they don't produce the same results as Americans do. I imagine that the same applies to factories.
(Apologies to Sir Winston Churchill)
I'm not sure how you're defining efficiency, but in the Netflix special American Factory, it would seem like the chinese workers were not only cheaper but also more productive.
that didn't happen overnight, that happened by politicians playing people against each other and invoking the all too common negative traits of envy, jealousy, and even anger. The mantras of you did not win life's lottery, its not fair, you deserve, they stole, has really done a number at not just manufacturing levels but in all aspects of life.
A single, sensationalized data point.
Never thought of it this way, but you're right, at least in spirit. Efficiency is probably not the right word but I couldn't agree more. This drive towards ruthless efficiency actually hurts us in being more productive. We all need to rethink the endgame that capitalism, low cost - high efficiency systems inevitably leads us towards.
Unions and strikes are a political topic, and we should probably figure out how to handle it better, probably some middle ground between fairness and efficiency (I’m not really well versed in the topic), but regardless companies bypassing the discussion completely by just having a factory in China is wrong and anti-competitive.
Obviously, cheaper workers work for less, but that's not exactly efficiency, (1) more a question of fairness, (2) can be done domestically (low-cost immigrant workers) and (3) there's plenty of cheap workers worldwide, not just in China.
Another potential advantage could be, factories are closer to natural resources, but it seems to me that that's not as much a question of efficiency, as it is of lax (enforcement of) environmental standards. Which I personally don't see as a net gain, even if it results in cheaper production.
The only real advantage I can see is concentration of skill - e.g. people say that you basically have to develop electronics in Shenzhen, there's simply not enough talent in the US and EU - but I wonder if the efficiency gains are offset by innovation losses. Again, IMO it would be better to have a local high-skilled population of engineers & entrepreneurs.