The standard of living keeps going up in China. Why is it that they haven't needed to outsource to countries with cheaper labor to stay price competitive themselves?
Or will that happen, just further down the line?
Or will that happen, just further down the line?
Tim Cook:
> There's a confusion about China. The popular conception is that companies come to China because of low labor cost. I'm not sure what part of China they go to, but the truth is China stopped being the low-labor-cost country many years ago. And that is not the reason to come to China from a supply point of view. The reason is because of the skill, and the quantity of skill in one location and the type of skill it is.
> The products we do require really advanced tooling, and the precision that you have to have, the tooling and working with the materials that we do are state of the art. And the tooling skill is very deep here. In the U.S., you could have a meeting of tooling engineers and I'm not sure we could fill the room. In China, you could fill multiple football fields.
> The vocational expertise is very very deep here, and I give the education system a lot of credit for continuing to push on that even when others were de-emphasizing vocational. Now I think many countries in the world have woke up and said this is a key thing and we've got to correct that. China called that right from the beginning.
Source: https://www.inc.com/glenn-leibowitz/apple-ceo-tim-cook-this-...
First - cheap labour is still a huge part of the value. Point blank. I quote from China and you can see literally the 'labour' input on the spreadsheet, and on that basis alone, it's still very competitive vis-a-vis the West.
Second - the reason 'all those skills' exist there, and not here, is because of the wages and conditions. They do all those things at far less than 1/2 price than they do here. That's a big deal. And for the most part, they are effectively commodities.
If Apple et. al. wanted to pay 'American wages' for most of that activity, then major clusters of those skills would develop here.
Very importantly, there is the 'trade asymmetry' in that China has trade barriers, the US largely does not.
It would be 'good' if both economies kind of opened up, but it's like a 'prisoner's dilemma strategy game' in that, it's even better if you get your opponent to 'open up' while you 'remain closed'.
The US has lost dramatically by allowing China on the same WTO terms, and all the other shenanigans. The US should really simply implement 'tit for tat' trade policies such as requiring Chinese companies give up their IP in the US while the US hands to a strategic competitor, not allow them to have >50% ownership of anything, put up indirect barriers, the US Treasure could direct major US banks to subsidise Cisco's customers for export, yada, yada. It seems dramatic, but that's what China is doing.
Finally, though we think of a lot of this as 'high tech' ... a lot of it is not. We don't worry too much about China making tons of 'plastic stuff' because we believe it's 'low value' - but as certain kinds of screens, disk drives etc. become truly commoditised, well, in some ways, it's a lot like assembling plastic toys, and the surpluses go to the buyers, not the makers.
Edit: I'm working on a project where our factory price in quantity is $60 here, will be in $20 in China and overall, it all boils down to labour input costs and overhead through the value chain (i.e. N. American manufacturer pays more for Internet, largely due to labour, those costs get passed on). In the end, it's not the price of the materials, it's the layers of services by humans on top.
They would, but you're still talking about a 10-20 year gap. First for masses of people to get the adequate education, apprenticeships, get good at their jobs, and then for these people to mentor the second cohort 8-12 years later to get the kind of volume China and Germany have.
Germany, Japan, Taiwan, and South Korea are all developed countries that don’t have “cheap labor” anymore. They found and are holding their niches. Even in terms of “cheap labor”, China’s losing out to places like Bangladesh. A lot of these excuses for why America can’t compete in manufacturing sound like sour grapes to me.
Vocational and apprenticeships are still a thing there.
Exactly. But it’s the “American dream” to send their kids to college, even if that’s the completely inappropriate thing to do for that child’s future prospects.
Sure. That’s ok. It’ll take time to see a return on investment. I don’t see this “but X” as a counterpoint or really an issue at all.
Further, you could make investments now that exceed current capacities and capabilities today with an eye to the future.
Actually the US does a lot of good manufacturing in some fields, like arms. But in other fields, well-intentioned protectionist policies like have backfired. For instance, rather than subsidizing US shipyards, the Jones Act protects them from foreign competition which has led them to significant decline over the past century.
US policy to rebuild or improve US industry has a very mixed history in terms of results. It probably doesn’t help that a lot of these efforts are focused on bailing out the same old manufacturers over and over again to save jobs in battleground states.
And then you have the 'raw labour' - you still need factories with workers making very little, treated like crap.
The bottom 10% of Americans will not do that. For what it's worth.
Now - there is the possibility for 'full automation'. Sony Playstation in made in Japan by this amazingly automated assembly line.
America could feasibly do this if they wanted for some things, but it will take innovation.
The revolution will be: a 'pair of hands'.
When robotics and AI becomes sophisticated enough that you can buy a 'pair of robot hands' for $100K and very easily train them to do 'anything' ... then this will enable automation in rich countries and it could really damage the entire developing world economies.
> The bottom 10% of Americans will not do that. For what it's worth.
OR you need to find other ways to bolster margins without skimping on labor costs at the bottom end. Intelligent cuts to C-Suite pay and golden parachutes could easy pay for thousands of workers at a living wage at the bottom of any company.
The top 10% of Americans will not do that. For what it's worth.
Nothing will make up for the low wages in China.
America could push up minimum wage some, but it won't change the dynamics of export/import.
> Nothing will make up for the low wages in China.
China's wages aren't even that low anymore. Maybe you are thinking of Bangladesh or somewhere that China is now themselves outsourcing "cheap labor" to?
> America could push up minimum wage some, but it won't change the dynamics of export/import.
Correct, it's not a labor cost issue at the end of the day. As I said, companies are more than capable of finding margins that work and still pay labor what it owes them. There's too many externalities companies are willing to, and legally allowed to, ignore that keep them from feeling any pressure or need to actually do so. The point I tried to make is that is not "low wages exist in China" keeping jobs outside of the US. That's a solvable problem with honest dealing with the labor market. Companies just have no interest to solve it.
(The labor market isn't a fair market, for what that is worth, and has almost no liquidity. Corporate structures impact the labor market a lot more than the labor market affects corporate structures, whether or not you agree that the modern American "gentry" are playing too selfish a game with the American labor market and getting away with it.)
No, this is an ideological statement, not a factual statement.
The 'earnings' (not wealth) of Billionaires would not move the needle that much.
But even the wealth: if Jeff Bezos gave $100B up his wealth, it would be a one-time check to every American for $300. That's it. And just once.
Take up all the billionaires and it wouldn't amount to much for Americans, and it would be shortlived.
"China's wages aren't even that low anymore."
Yes, they absolutely are. To the point wherein there is absolutely no way for America to compete with them on a wage-basis.
"Correct, it's not a labor cost issue at the end of the day."
Yes, it is a labour cost, you're misinterpreting my point. Nothing America can do will make the US competitive with China for things involving labour.
" As I said, companies are more than capable of finding margins that work and still pay labor what it owes them."
This is just fantasy business math. There is no 'finding margins'. There is 'increasing prices' or 'lowering costs'. So either they pay suppliers less, or increase prices in order to pay greater salaries.
And 'owes them' - is again, just made up. How much does Starbucks' 'owe' it's Baristas? What you say they owe? What the market will bear? Minimum wage?
"The labor market isn't a fair market, for what that is worth, and has almost no liquidity"
The term 'liquid' is generally not used for labour markets, you might mean to say 'fungibility'?
The US could afford to pay better minimum wages and probably better for the lower 1/3 - but again, it won't change what's happening vis-a-vis China.
Yet we aren't talking about "every American", we are talking about increasing the labor force, so your math isn't that relevant. Instead, let's say that Amazon required Bezos to put that $100B back into wages for low level employees for ten years: $10B/year works out to as many as 320,512 people employed at a $15/hour full time job minimum wage for those 10 years.
You are correct that I suggested wealth rather than earnings because of course most of the wealthy play shell games with their incomes that launder as much as possible of their income into other things that aren't "earnings" on paper (because one is taxed much higher than most of the "capital gains" taxed sorts of passive incomes). I mentioned golden parachutes, I was not trying to hide that wealth is a bigger component of the debate than just "earnings".
That said, even Bezos' over-the-table non-stock "earnings" are still nearly 3x a $15 minimum wage earner.
All of the above is mathematically true, so easier to consider "facts" just as much as yours. No ideological statements there. I could bring out some actual ideological statements if you wish what those really look like.
> This is just fantasy business math. There is no 'finding margins'. There is 'increasing prices' or 'lowering costs'. So either they pay suppliers less, or increase prices in order to pay greater salaries.
I agree, it is fantasy business math, but it is fantasy business math that is the current language of the MBA and Wall Street folks managing this mess. I did not invent it, and I would use more direct language if it were weren't readily apparent this is the preferred language of those currently propping up the established system.
> And 'owes them' - is again, just made up.
By that logic, all of capitalism is made up. All of human history is made up.
Even setting aside the deeper ethical questions about what an honest society owes to its labor class, I did explicitly define it in that context as capable of meeting the requirements to move those jobs back to the US, which in this case would specifically mean "US minimum wage" as the law of the land people keep claiming makes US noncompetitive with China, and you are just needlessly splitting hairs here.
(To be fair, I'm happy to continue splitting hairs, as I did use "owe" to evoke both the indebtedness meaning as well as the philosophical one as well. But it was well defined in context.)
The issue with China now is 25% Trump Tax, which is huge. For less sophisticated goods, Malaysia, Vietnam, etc. are becoming options.
I wouldn't be surprised if Apple being a major contributor in propping up China for so long before taking action (like their recent diversifications to India and Brazil for manufacturing) is going to be a stain on his legacy long term.
What does that mean? Are you talking about opinions he has expressed, or are you just saying he's responsible for the opinions of other people you associate him with?
It still remains to be seen how successful they would be, but at least they recognize this situation as a problem in nearest future.
I wish the US had seen this with equal clarity 30 years ago.
Step 2 is to steadily increase prices once they have a manufacturing monopoly, and impose tariffs on imports.
More like it transferred that wealth to the managerial class, while the US worker is flipping burgers for minimum wage now.
We're too busy arguing over irrelevant stuff, unfortunately.
Some people did. Even many politicians did. But they were shouted down as being racist and protectionist, and "globalism" was the future. Anyone who didn't get on board was called old and stupid.
IMO if a foreign adversary spends 20+ years and tens of thousands of dollars (at a minimum) training a highly skilled worker we would be insane not to take that skilled worker for free, if they want to move and work here.
Limiting immigration of highly skilled workers is a massive national security failure. It's a huge mistake. If a Chinese or Russian top tier engineer / AI researcher / wants to immigrate to the US we should roll out the red carpet because they're a strategic asset.
In Canada the only party to consistently oppose NAFTA and the FTA was the NDP, the left wing party.
In my experience, the right was very opposed to NAFTA (while the left was pushing it), in favor of free trade but not at the expense of jobs and manufacturing ability in the USA, and thought all these deals with China were going to enrich a possibly future adversary. By experience, I simply mean social interaction with middle class conservatives/Republicans, not experience in politics or "the party". And, I didn't really start paying attention to what was going on until the early 90s. (edited for a paragraph break)
: liberal is not considered "Left" outside of the United States
I see this repeated as a talking point by multiple individuals. I don’t really get what the point of the comment is or what I’m supposed to learn from it or do about it. It feels pretty close to a Scotsman but to what end?
And because Americans are being lied to by their own politicans, and part of that lie is that they have a left wing opposition. They don't, really, apart from the Sanders wing of the Democrats. That Fox News or whatever in the US can with a straight face call Biden "left wing" isn't just a political vocabulary corruption, or a relative shift of frames of reference -- it is an ideological lie, and the purpose of it is to advance an agenda.
And because it would help if Americans looked outside of their own borders at the rest of the world, and gained frame of reference from that.
I'll just quibble with this and say that if we're talking about US politics then we are talking about the same thing when we speak of the "left" in the US, because that's what it is regardless of the state of the rest of the world.
I also am not sure there is much value in arguing about how much more "left" some countries are. The fundamentals aren't really different until you talk about communists (and if that's what you're talking about, I abhor communism and don't want that in my country). If you're talking about universal healthcare for example, you're not really talking about something radically different between "more left countries" like the colloquial Sweden, it's just a matter of degree of difference.
The reason this matters is because as long as Americans accept this false polarity they are missing choice. Not just because they're a two party system, but because their two parties are defined along an ideological axis that misses entire policy choices. And Americans have been mistakenly educated to believe that "socialism" = "government involvement", and that it is an extreme 'left' pole of the political spectrum, and as such they are increasingly ending up with dysfunctional state systems that do not serve the populace.
That and being able to speak to the rest of the world about politics is why clarity of terms here is, I think, important
I think universal healthcare is a suitable minimum definition of left wing despite that, since a minimum definition is “without this element, a thing cannot be left wing” not “with this element, a thing must be left wing”.
> Universal healthcare is off the table by both parties in the coming federal election.
No, it's not, whether you are referring to the Presidential or Congressional elections, both of which are federal elections in and, unlike in most parliamentary systems, are separate-though-concurrent elections where the candidate platforms even from the same party have no necessary alignment.
> Biden is against it,
No, he's not.
> so is he left wing?
No, he's a center-right neoliberal, just like the rest of the dominant faction of the Democratic Party, and up through at least the early 90s the dominant faction of the Republican Party, too.
A sizable minority of the Democratic Party, though, is (mostly center-)left, though, and they are a not-insignificant factor in Democratic policy stances currently (US major political parties are effectively multifaction coalitions, and just like any coalition the policy preferences of the dominant faction aren't always those of the coalition.)
> (No, sorry, the "public option" tack onto Obamacare doesn't count)
While I don't particularly like it, being part of the more-left-than-Biden part of the Democratic Party, the public option proposed by Biden as recently fleshed out by the Biden-Sanders joint policy group is, in fact, a proposal for universal coverage, not to dissimilar from some other OECD countries, all of which have universal healthcare but far from all of which have public single-payer like Canada's Medicare or public provision like the UK NHS.
> The impetus for a North American free trade zone began with U.S. president Ronald Reagan, who made the idea part of his 1980 presidential campaign. After the signing of the Canada–United States Free Trade Agreement in 1988, the administrations of U.S. president George H. W. Bush, Mexican president Carlos Salinas de Gortari, and Canadian prime minister Brian Mulroney agreed to negotiate what became NAFTA. Each submitted the agreement for ratification in their respective capitals in December 1992, but NAFTA faced significant opposition in both the United States and Canada. All three countries ratified NAFTA in 1993 after the addition of two side agreements, the North American Agreement on Labor Cooperation (NAALC) and the North American Agreement on Environmental Cooperation (NAAEC).
Politically speaking, NAFTA passed in the Clinton administration because he was able to get enough Democrats on board. To this day, free trade doesn't seem to be strongly supported on the left, in part because it's not strongly supported by unions; it's mostly strongly supported by economists, think tanks, and publications that might be characterized more as centrist (the Council on Foreign Relations), center-right (The Economist) or libertarian. I'm not entirely sure why American conservatives in particular moved so strongly against it in the last two decades.
There are a couple of factions that makes up modern American conservationism. I think it was mainly big business/ideological libertarians that were strongly for free trade, but I think they were far from the majority, numbers-wise
The 80s and 90s were the era of the FTA and NAFTA, and the rise of the fortunes of the IMF and the WTO. And apart from Clinton in the late 90s this was an era of (for the time) pretty strongly right wing American politics.
I remember it the same way, and I was a journalist at the time and wrote many stories about GOP politicians afraid sounding warning bells about American jobs going to Mexico. Which they did. And then they went from Mexico to China.
I also remember that conservative companies like Walmart were so against NAFTA that they actively promoted Made In America goods in store and in advertising. My how times have changed.
iPhones are twice as expensive in China and they always have been.
But one important factor why China is ruling this industry right now is not only because the cheap labor, but also the massive supply chain. If you're prototyping some electronic hardware, you're in Huaqiangbei, Shenzhen, you can probably go there and find all the parts you want in one hour.
It's extremely slow and expensive for other places to do the same in the world compared to there. And it still holds true for other parts in China (where many of them with even same quality of labor but cheaper).
This is absolutely the case, and you don't even necessarily need to look to "other [geographic] areas" to find them.
https://www.reuters.com/article/us-foxconn-india-apple-exclu...
I watched the same thing happen to Japan way back.