http://service.spiegel.de/cache/international/0,1518,369232,00.html

Interesting article.



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Whoever wrote that article is an utter idiot. Simply put, his editors gave him a subject, told him what kind of slant it should have, it's lenght, and he filled up the specifications with BS.

Quote: But there's a little fact that gets lost in the larger to-and-fro over China: Right now, in the face of a vast trade deficit with China, chips are one of the few sectors in which the United States enjoys a surplus. Thanks to China's emergence as the world's manufacturing headquarters for high-tech devices -- computers, DVD players, cellphones, iPods and just about everything else -- U.S. companies currently sell far more chips to China than they buy from that nation. The United States is at the top of the food chain in both chip design and chip-making equipment, and China is potentially its largest growth market.

Only an idiot would write something like this. He's trying to make it seem as if China's dominance of manufacturing is providing a vast market for American chips that would otherwise not exist. WRONG!!! If you take away China America would still supply chips to those cell phones and computers, except that they might be built in the US. As it is, most of those chips the US "exports" to China end up coming back over here inside Chinese assembled electronics.

Quote: "From a U.S. national security view, the potential effects of this restructuring are so perverse and far reaching and have such opportunities for mischief that, had the United States not significantly contributed to this migration, it would have been considered a major triumph of an adversary nation's strategy to undermine U.S. military capabilities." Strong words. But while perhaps a bit overblown -- America still owns the leading edge of semiconductor technology

Aargh! The idiot takes a researhed analysis of the situation, and dismisses it with an unsubstantiated conjecture he simply takes out of his arse. Not only that, but the point he tries to dismiss with his opinion is not even the one the analysis makes. The authors in the analysis take issue with the fact that chips designed and developed by American companies in America are manufactured in Asia. This idiot says that "America still owns the leading edge of semiconductor technology ." That's fine, but that's exactly what the study says, and the problem it sees is not that America no longer "owns the leading edge of semiconductor technology," but that this American owned techology is manufactured by Asian companies in Asia.

I could go on for pages, but I am falling behind in my work and anyhow I just made this post to expose the way the "mainstream media" tries to defy reality with barely disguised nonsense.

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Economics is always also a matter of one's POV. You can't just flatly say it's right or wrong particularly about complex matters like these. It's an interesting article and I agree with many points. Keeping the manufacturing base inside a country when it clearly isn't profitable enough in this sector makes no sense in a globalised economy.

If you include politics it becomes another story.

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All the chips will be designed and built by Chinese own high-tech companies soo.

"Keeping the manufacturing base inside a country when it clearly isn't profitable enough in this sector makes no sense in a globalised economy."

So what? If you cannot win, why play the game? Why engage in free trade with a nation that not only doesn't play by the rules, but that would beat you over the head and lay you low even if it did? It is madness, free trade is turning the Western economies into third world ones. The Chinese branches of American companies are mainly occupied with designing and manufacturing high tech products for the world markets; the American branches of American companies are primarily engaged in selling those Chinese designed and manufactured products to Americans.

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"So what? If you cannot win, why play the game? Why engage in free trade with a nation that not only doesn't play by the rules, but that would beat you over the head and lay you low even if it did? It is madness, free trade is turning the Western economies into third world ones. The Chinese branches of American companies are mainly occupied with designing and manufacturing high tech products for the world markets; the American branches of American companies are primarily engaged in selling those Chinese designed and manufactured products to Americans."

Let's suppose for a moment that nation X plays by your rules. While the rest continues to engage in free trade. You may achieve a grade of independence, but your overall level of technology and ability will become obsolete pretty fast since you will be hardly able to compete with the synergy effects of the global economy.


So after 50 years nation X drives its own cars, makes its own clothes etc. while the rest of the world is enjoying a far higher standard of living.

All those criticisms of free trade are disproved by actual economic facts, all that speaks against it are political scaremongers. Intertwined economies cannot afford to wage war against each other like 50 years ago. It's time to see that.

In a war between the US and China, US consumer prices would skyrocket, while those vaunted Chinese manufacturing companies would run out of everything when the venture capitalists take their money away.

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You are so wrong! You say that economic facts support free trade while political scaremongering is the only thing going against it. And yet what facts support free trade? Why don't you give me a single figure that supports free trade? I can give you many that suggest it is anything but beneficial. Job losses in manufacturing. Incredible trade deficits. Unsustainable borrowing. The deterioration of know how in every sector. The very rise of China is proof that free trade hurts the West, for where would China be without Western markets. Trade accounts for 75% of Chinese GDP.

Free trade is destroying career opportunities in every worthwile field. I wanted to be an engineer. No longer possible. According to today's estimates more than 50% of American engineering jobs will move offshore withing 15 years. Fuc.k free trade. **** it.

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This is an interesting article, unlike that Spiegel bullcrap. Read it. It is from Fortune, which is a vociferously pro-free trade periodical designed for the investor audience. It lays out the problems America (and Europe too) faces because of free trade, though it of course doesn't even make one connection between those problems and free trade itself.







Is America the World's 97-lb. Weakling?

In the relentless, global, tech-driven, cost-cutting struggle for business . . . America isn’t ready—here’s what to do about it.

By Geoffrey Colvin

July 22, 2005

It's a crisis of confidence unlike anything America has felt in a generation. Residents of tiny Newton, Iowa, wake up to the distressing news that a Chinese firm—What’s it called? Haier? That’s Chinese?—wants to buy their biggest employer, the famed but foundering Maytag appliance company. Two days later, out of nowhere, a massive, government-owned Chinese oil company muscles into the bidding for America’s Unocal. The very next day a ship in Xinsha, China, loads the first Chinese-made cars bound for the West, where they’ll compete with the products of Detroit’s struggling old giants.

All in one week. And only two months earlier a Chinese company most Americans had never heard of took over the personal computer business formerly owned—and mismanaged into billions of dollars of losses—by the great IBM.

"Can America compete?" is the nation’s new No. 1 anxiety, the topic of emotional debate in bars and boardrooms, the title of seminars and speeches offered by the liberal Progressive Policy Institute, the conservative economist Todd Buchholz, and countless schools and Rotary Clubs. The question is almost right, but not quite. We’re wringing our hands over the wrong thing. The problem isn’t Chinese companies threatening U.S. firms. It’s U.S. workers unable to compete with those in China—or India, or South Korea. The real question is, "Can Americans compete?"

The stakes are mammoth: Respectable analysts believe it’s possible—not certain, but possible—that the U.S. standard of living, after decades of steady ascent, could stall or even begin to decline. More worrisome is the chance that if the world’s most powerful nation finds itself getting poorer rather than richer, some kind of domestic or even global political crisis could follow.

As for the big question at the center of it all—Can we compete?—the answer isn’t obvious. The don’t-worry-be-happy crowd points out that our last national fit of wailing and garment rending, when Japan was going to smite us in the 1980s, proved unfounded. We adapted and prospered, as we always had (and Japan didn’t). But today’s situation is so starkly different that it’s tough to find comfort in our experience then.

We’re not building human capital the way we used to. Our primary and secondary schools are falling behind the rest of the world’s. Our universities are still excellent, but the foreign students who come to them are increasingly taking their educations back home. As other nations multiply their science and engineering graduates—building the foundation for economic progress—ours are declining, in part because those fields are seen as nerdish and simply uncool. And our culture prizes cool.

No one is saying that Americans can’t adapt and win once more. But look at our preparedness today for the emerging global economy, and the conclusion seems unavoidable: We’re not ready.

To understand better whether Americans are destined to be the scrawny and pathetic dweebs on the world’s economic beach, it’s necessary to refine the question. Who is most threatened? How come? What will it take to make America stronger in a new economic world? What political forces could propel—or derail—progress?

Many iconic U.S. firms—Coca-Cola, Procter & Gamble, Texas Instruments—already do most of their business and employ most of their workers outside the U.S. Conversely, some of the most American brands you can think of—Hellmann’s mayonnaise, Jeeps, BV California wines—are owned by non-U.S. companies (Unilever, DaimlerChrysler, and Diageo, respectively). To complicate matters further, many products of U.S. companies are made outside the U.S.—Maytag refrigerators are no longer made in Galesburg, Ill., but in Mexico—while many non-U.S. companies make products here—your new Toyota may have come from Kentucky. Now add a few more twists: Your Dell laptop may have been assembled in Malaysia from parts made by American companies in Thailand.

The truth is that large companies transcended nationality long ago, and globalization gives them as many opportunities as problems. It increasingly lets them hire, source, and sell wherever they like, and that is basically good news no matter where the incorporation papers are filed.

For American workers, globalization is a radically dicier proposition—far more so than most of them realize. The fast-changing economy is exposing vast numbers of them to global labor competition, and it’s a contest millions of them can’t win right now.

Three main factors are changing the game. First, the world economy is based increasingly on information, bits and bytes that have to be analyzed, processed, and moved around. Examples: software, financial services, media. Second, the cost of handling those bits and bytes—that is, of computing and telecommunications—is in free fall. Wide swaths of economic activity can be performed almost anywhere, at least in theory.

Turning theory into reality is the third factor: Low-cost countries—not just China and India but also Mexico, Malaysia, Brazil, and others—are turning out large numbers of well-educated young people fully qualified to work in an information-based economy. China will produce about 3.3 million college graduates this year, India 3.1 million (all of them English-speaking), the U.S. just 1.3 million. In engineering, China’s graduates will number over 600,000, India’s 350,000, America’s only about 70,000.

The result is that many Americans who thought outsourcing only threatened factory workers and call-center operators are about to learn otherwise. That is a giant development, because information-based services are the heart of the U.S. economy. With 76% of its jobs in services, America’s economy is the most service-intensive of any major country’s. Of course many of those jobs can’t be shipped abroad: Chefs, barbers, utility and NFL linemen, and many others know they can’t be replaced by even the smartest person in Bangalore.

But growing numbers of other service jobs are not safe. Everyone has heard about the insurance-claims processors, accountants, and medical transcriptionists in India and elsewhere who’ve taken away U.S. jobs by doing the same work for much less money. More alarming is that the value of outsourced jobs is steadily rising. Morgan Stanley is hiring Indian bond analysts, fearsome quants who can make or cost a company millions. Texas Instruments is conducting critical parts of its next-generation chip development—extraordinarily complex work on which the company is betting its future—in India. American computer programmers who made $100,000 a year or more are getting fired because Indians and Chinese do the same work for one-fifth the cost or less.

The big question is how far all this will go. A massive new study from the McKinsey Global Institute predicts that some industries could be changed beyond recognition. In packaged software worldwide, 49% of jobs could in theory be outsourced to low-wage countries; in infotech services, 44%. In other industries the potential job shifts are smaller but still so large they’d create major dislocations: Some 25% of worldwide banking jobs could be sent offshore, 19% of insurance jobs, 13% of pharmaceutical jobs.

Looking at occupations rather than industries, some fields will never be the same. McKinsey figures that 52% of engineering jobs are amenable to offshoring, as are 31% of accounting jobs.

Adding up all the numbers, McKinsey calculates that some 9.6 million U.S. service jobs could theoretically be sent offshore today. That is a staggering number. If all those jobs really did get outsourced, the U.S. unemployment rate would leap from 5% to 11.4%. For various reasons, not all those jobs will get sent abroad. Some companies aren’t big enough to make the effort worthwhile. Some have infotech systems so old or messed up that they can’t adapt to offshoring. Some managers just don’t like the idea.

McKinsey figures that about 4.1 million service jobs will actually get offshored from high-wage countries to low-wage countries by 2008. It doesn’t make a forecast for U.S. jobs, but others have done so. Forrester Research puts the number at 3.4 million white-collar jobs by 2015. Researchers at the University of California at Berkeley believe the number will be far larger, perhaps 14 million.

Even those numbers could be too low, because they’re based on surveys of company plans today and extrapolations of current trends—always iffy predictors. Professor Thomas H. Davenport of Babson College believes that outsourcing is about to become radically easier and more widespread for a seemingly mundane reason. Davenport sees industry groups and professional associations rapidly standardizing processes like purchasing and billing, making them easy to measure and assess. When that happens, he says, "the low costs and low risks of outsourcing will accelerate the flow of jobs offshore."

The downward pressure on U.S. wages could be more immediate and severe than you might imagine. It is tempting to suppose that the giant U.S. economy couldn’t have felt much strain yet; the total number of offshored white-collar jobs is probably fewer than a million so far. But it doesn’t take the shifting of many jobs to produce ripple effects through the whole economy.

Why? Most U.S. workers whose jobs are sent overseas will try to find new ones, perhaps in other industries or occupations. So the offshoring of any jobs will produce job seekers who will tend to push wages down even in industries in which outsourcing isn’t happening. Far more significantly, the mere threat of moving jobs offshore is enough to hold wages down—those growing armies of skilled workers around the world are increasing the labor supply in many occupations, and the immutable law of markets is that when supply goes up, prices come down. It has happened in all kinds of other markets—food, clothing, microchips, appliances. Why not in labor?

Some economists believe they see it happening already. They note that something extremely odd occurred in the U.S. economy last year: Average compensation, including pay and benefits, fell. That is a rare event; the last time it happened was 14 years ago. More important, it usually happens in or around recessions or when productivity is going nowhere. But last year wasn’t like that. Productivity rose. The economy grew. The unemployment rate was low and falling. Every indicator pointed to strong wage increases, but just the opposite happened. Now some of the nation’s most eminent economists, including professor Richard B. Freeman of Harvard and Stephen Roach of Morgan Stanley, believe the supply of overseas workers in newly globalizing labor markets is holding U.S. pay down and will do so for years.

All those university graduates in China and India threaten U.S. living standards in another way. Paradoxically, it’s not because they’ll end up working for U.S. employers, but because some of them won’t, finding jobs instead with domestic companies in their own countries. That’s a problem for America if many of those graduates are top students in science and engineering.

You might wonder why we’re constantly reading about Chinese graduates in engineering and not in law, medicine, literature, or philosophy. Why this veneration of the pocket-protector set? Engineering is fine, but there’s more to life than technology, isn’t there? Obviously there is. The question—and for America and the West it’s a huge question—is whether there can be economic dominance without technology leadership.

Many economists would say no. "There is no other fundamental mover of economic development than science and technology," Columbia University professor Jeffrey Sachs has said. He notes that until the scientific revolution began in the 17th century, virtually everyone lived on the verge of subsistence. Three centuries of technology breakthroughs are the root of today’s abundance in the developed world, and those with a technological edge—America, Japan, and Western Europe—still have the highest standard of living.

So in a world economy that threatens to pull down American wages, the key to fighting back is maintaining technological superiority—continually creating high-value new jobs that workers in the rest of the world can’t do yet. What are the chances? A worrisome sign is that the brightest students from many Asian countries are staying home to get their Ph.D.s rather than coming to America, as they did in rising numbers until the mid-1990s. Those foreign Ph.D.s have been the driving force in scores of America’s most successful and innovative tech firms, but now we’re getting fewer of them, and other countries are getting more.

Perhaps worse, those who still come to America for their Ph.D.s—arguably the best of the best—are returning home in increasing numbers. In economies like China’s or India’s, growing two or three times faster than America’s, elite students see huge opportunities. Even foreign nationals well established in the U.S. are heading home. "Many of my friends are going back," says professor Godwin Wong of Berkeley’s Haas School of Business. "They’re leaving big corporate jobs here because they can make more money in China."

For the U.S. the loss of technology leadership could be historic. Without that advantage, there would be little to prevent living standards in the world’s interconnected economies from equilibrating. The rest of the world’s living standards would rise, and—at least in the near term—America’s would decline.

Combine all those trends and the picture isn’t encouraging for America. Though the U.S. is still the world’s biggest and strongest economy by far, many Americans, from hourly workers to CEOs, feel as if they’re getting sand kicked in their faces. They know they need some serious muscle building to match the other guys on the beach. And they’re remarkably agreed on how to do it.



The No. 1 policy prescription, almost regardless of whom you ask, comes down to one word: education. In an economy where technology leadership determines the winners, education trumps everything. That’s a problem for America. Our fourth-graders are among the world’s best in math and science, but by ninth grade they’ve fallen way behind. As Bill Gates says, "This isn’t an accident or a flaw in the system; it is the system."

The good news is that we’ve overhauled the system before. A century ago, as America changed from an agricultural to an industrial economy, something called the high school movement swept the country. City and town leaders realized that an eighth-grade education, which was all that most people got, was no longer enough. They built and staffed high schools but rejected the European model, which prepared a small minority of young people for college, opting instead to prepare a majority of young people for life and work. This was a revolutionary concept, and many European authorities thought it foolish. But as research by Harvard’s Claudia Goldin and Lawrence F. Katz has shown, by 1940, America was far and away the world’s best-educated nation, a critical element of its post–World War II economic dominance.

We responded to a changing world again in 1958, after the USSR orbited Sputnik while our rockets kept blowing up on the launch pad. Congress passed the National Defense Education Act, which appropriated federal money for education in math, science, and foreign languages. It worked, along with America’s grass-roots response to the threat. We went to the moon, science and engineering became cool, even glamorous, and we gained a wide technology lead.

Now we need to revolutionize our schools again. As the world’s richest country, we certainly have the resources, but we seemingly lack the will, while many of our competitors are obsessed with education. In China it’s common for middle-school students to attend school from 7:30 a.m. to noon, then from 2 p.m. until 5, and again from 7 to 8:30 p.m. Contrast that with a nation where millions of parents are happy to let their kids spend hours hanging out at the mall or playing Grand Theft Auto on their Xbox or watching Pimp My Ride on MTV. To be sure, many upper-middle-class parents live in wealthy school districts with excellent schools, and they’re making private tutoring firms like Sylvan Learning Centers and Kumon into fast-growing businesses. But for most in the broad middle class or below, a top-notch K–12 education is a world away.

Evidence is mounting that the way to begin reform is for legislators to establish high standards for public schools and make the schools more accountable to parents. But even if that notion becomes a movement, it’s not clear that better education will guarantee U.S. economic dominance. If we could somehow get our high school math and science scores up to South Korean standards, which would be a gargantuan achievement, then by that measure we’d be as good as they are—but they’d still be cheaper.

A prescription urged just as widely is immigration reform. A critical element of America’s economic dominance has been its attraction for the world’s brightest, most ambitious people, but today’s immigration laws favor family reunification far above talent, intelligence, or credentials. If Albert Einstein wanted to move in today but had no U.S. relatives, he’d have to get in line behind thousands of poorly educated manual laborers who did. In a global economic competition, that policy seems crazy. John Doerr, the legendary Silicon Valley venture capitalist, recommends that every foreign student who gets a Ph.D. at a U.S. university should also get a green card (granting permanent residency) stapled to his or her diploma. But U.S. policy is moving in the opposite direction. The number of available H1-B visas, which allow highly qualified foreign workers to remain in the U.S. for up to six years, has been cut from 195,000 to just 65,000 a year, based on security concerns following 9/11.

U.S. spending on R&D will also have to increase if the country wants to remain technologically dominant. The Task Force on the Future of American Innovation, a group of academic societies, high-tech companies, and industry associations, concludes in a recent report that "the United States still leads the world in research and discovery, but our advantage is rapidly eroding, and our global competitors may soon overtake us." Aggregate R&D spending by six fast-growing economies (China, Ireland, Israel, Singapore, South Korea, Taiwan) is on track to exceed U.S. spending in a few years. Industrial R&D continues to increase, but 71% of that spending is on development, not the kind of basic research that created the transistor and the laser. Federal funding of research in the physical sciences has been declining as a percentage of GDP for 30 years. The Council on Competitiveness, consisting of CEOs, university presidents, and labor leaders, wants federal research spending increased substantially, to 1% of GDP—about $110 billion a year.

Incredible as it seems, America’s infotech infrastructure is no longer world-class. We rank only 12th globally in the number of broadband connections per 100 inhabitants. Look closer and the situation is even worse. South Korea is not only more wired (No. 1 globally) but its connections are far faster than ours and are available not just through wires but also through virtually every cellphone. And speaking of our cellphone infrastructure—please don’t. Anyone who travels globally knows it’s awful by world standards.

Fixing all these problems would be a project of overwhelming proportions, yet it still might not make American workers competitive in today’s global labor market. The reason, again, is cost. American workers are enormously more expensive than their peers almost anywhere but in Western Europe. So they must confront what may be the most important question of their working lives: How can they be worth what they cost?

As increasing numbers of them find that they can’t be, at least in the short run, the result could be political upheaval. A return to protectionism is looming. When the end of global textile quotas earlier this year caused the rapid loss of 17,000 U.S. jobs—a tiny number in a nation of 141 million workers—the administration found a loophole in the trade treaty and quickly reimposed restrictions. Senator Charles Schumer (D-New York) introduced a bill to impose a 27.5% tariff on Chinese imports, and five Republican Senators signed on as co-sponsors. The Central America Free Trade Agreement, the impact of which would be minuscule in the U.S., is struggling to pass Congress. (No one in Washington seems to think NAFTA would stand a chance of approval today.)

If it all sounds terribly gloomy, it’s important to remember that gloominess has a very poor record in predicting the U.S. economy. Many traits that have helped us meet previous challenges are still with us: flexible labor markets, the world’s most highly developed capital markets, and a culture that moves on from failure and embraces new ideas. Companies aren’t standing still. Trilogy, a business software company in Austin, realized almost three years ago that hiring programmers in the U.S. no longer made sense because it could get them in India for one-fifth the cost. So it offered to help its U.S. coders learn higher-level work, becoming business experts who could help Trilogy customers make more money—for example, by showing Goodyear how to price tires more intelligently. As a general principle, learning higher-level work is what American workers have to do.

And exactly what work would that be? No one is sure, though history says not to panic. Economic crises rarely reveal their solutions, but the solutions usually come along. When U.S. business went through the trauma of restructuring in the 1980s, millions of middle managers got cashiered and wondered what they’d do next. Undreamed-of new industries developed (cellphones, biotech, Internet services), and by the mid-’90s the unemployment rate was the lowest in decades.

That’s history. It offers hope but no assurances. History says the rise of China, India, and other developing economies could someday lead to a new equilibrium that’s better for everyone. With resources deployed globally to their best use, prices could come down and living standards could eventually increase everywhere. After all, America’s rise didn’t impoverish Europe. On the contrary, the success of each continent helped the other get richer.

What happens next in the U.S. depends on how workers respond. Trilogy CEO Joe Liemandt recalls what happened when he told programmers he wouldn’t need them as programmers anymore: "We told them they could react in one of three ways. They could get really pissed, they could be in denial, or they could work with us to retool their skills. And we had people in each group."

It’s time for a massive, urgent American response to the global challenge. As Cisco chief John Chambers says flatly, "We are not competitive." Where to start? Venture capitalist John Doerr, one of America’s most passionate competitiveness campaigners, calls education "the largest and most screwed-up part of the American economy." He’d start there. GE chief Jeff Immelt has attacked America’s newly restrictive student visa rules. Others focus first on R&D spending or the broadband infrastructure. But the greatest challenge will be changing a culture that neither values education nor sacrifices the present for the future as much as it used to—or as much as our competitors do. And you’d better believe that American business has a role to play—after years of dot-com-bust- and scandal-driven reticence, more corporate leaders need to summon the courage to lead.

While optimism has always been the best guide to predicting the U.S. economy, today’s situation is unprecedented. Global product markets have been with us forever and continue to expand. Global capital markets are still developing—watch out, Unocal and Maytag. But global labor markets on a broad scale are a new phenomenon that could, for better or worse, transform the country. How we respond—in our businesses, our government, and our culture—will shape America in the deepest way






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"You are so wrong! You say that economic facts support free trade while political scaremongering is the only thing going against it."

As I said before in this thread it also IS a matter of POV. Let's see:

"And yet what facts support free trade? Why don't you give me a single figure that supports free trade?"

Easy, look where those closed economies stand now. Would you like to live in North Korea or some African ****hole ruled by the anarchist dictator of the week?

" I can give you many that suggest it is anything but beneficial. Job losses in manufacturing."

On the other hand by focussing on their comparative advantage, the West created and creates masses of services-based jobs. But I guess these are worthless, since after all WE LOSE EVERYTHING TO CHINA OMG!
Also high-tech jobs are created in the West, biotech, nanotech etc.

" Incredible trade deficits."

The US is a bad example of this and you know it, since the US has been spending over income for a very long time now. Other countries look better, and when China gets wealthy the deficits are bound to rebalance.

" Unsustainable borrowing. The deterioration of know how in every sector."

What? Do you realise that the intellectual properity belongs to the West and that the vaunted China is usually some generations behind in technology. Up the R&D spending and focus on the advantages (like the article mentioned).

"The very rise of China is proof that free trade hurts the West, for where would China be without Western markets. Trade accounts for 75% of Chinese GDP. "

You realise that without Chinese consuption we would have been in a long recession? It's give and take. The West only got to where it was due to free trade. Even in 1820 over 50% of the world's GDP was produced in China and India. Industrialisation and free trade changed that.

"Free trade is destroying career opportunities in every worthwile field. I wanted to be an engineer. No longer possible."

Move to China or where your job opportunities are better. Hell, I study economics, I will probably end up in London, Hong Kong, NY or Shanghai. I'm prepared for that.

"According to today's estimates more than 50% of American engineering jobs will move offshore withing 15 years. Fuc.k free trade. **** it."

And countless new jobs will be created.

Look, you offer no alternative at all other than to end free trade which as history has showed has very negative consequences. If you develop a working alternative to free trade, I (and the rest of the world) will listen.

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Reaver, you REALLY KNOW your STUFF!!!

Yes, the last five years, it was China that kept the world from falling into a recession because China was the world's largest consumer of steel, cement, shipping, soybeans and a thousand and one other products that keep economies running the world over.

The Western world basically created its wealth out of direct transfer of wealth (colonialism - which we won't address here) and massive imbalances created in the 1800s. An example of this was Britain stifling of the textile manufacture in India. Cotton and other cloth fiber was grown in India, sent to England and then sold back to Indians.

Opium of course was England's answer to breaking a surplus that China was enjoying with the trade in porcelain, tea and silk.

Noty, grow up nad learn from Reaver. LOL

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Let's see:
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"It's a crisis of confidence unlike anything America has felt in a generation. Residents of tiny Newton, Iowa, wake up to the distressing news that a Chinese firm—What’s it called? Haier? That’s Chinese?—wants to buy their biggest employer, the famed but foundering Maytag appliance company. Two days later, out of nowhere, a massive, government-owned Chinese oil company muscles into the bidding for America’s Unocal. The very next day a ship in Xinsha, China, loads the first Chinese-made cars bound for the West, where they’ll compete with the products of Detroit’s struggling old giants.

All in one week. And only two months earlier a Chinese company most Americans had never heard of took over the personal computer business formerly owned—and mismanaged into billions of dollars of losses—by the great IBM. "

Key-word mismanagement. And precisely the chip and high tech sector is totally dominated by US firms. Chinese companies make stuff that's 2 generations behind while TI, IBM etc. make and develop the new cutting-edge things where money is to be made. Other than that the rest of this paragraph is scaremongering extraordinaire.

""Can America compete?" is the nation’s new No. 1 anxiety, the topic of emotional debate in bars and boardrooms, the title of seminars and speeches offered by the liberal Progressive Policy Institute, the conservative economist Todd Buchholz, and countless schools and Rotary Clubs. The question is almost right, but not quite. We’re wringing our hands over the wrong thing. The problem isn’t Chinese companies threatening U.S. firms. It’s U.S. workers unable to compete with those in China—or India, or South Korea. The real question is, "Can Americans compete?" "

Precisely.

"The stakes are mammoth: Respectable analysts believe it’s possible—not certain, but possible—that the U.S. standard of living, after decades of steady ascent, could stall or even begin to decline. More worrisome is the chance that if the world’s most powerful nation finds itself getting poorer rather than richer, some kind of domestic or even global political crisis could follow. "

Uhh, just what exactly is supposed to happen? The US wealth bubble is long overdue to bust. You cannot consume indefinitely on deficit.

"As for the big question at the center of it all—Can we compete?—the answer isn’t obvious. The don’t-worry-be-happy crowd points out that our last national fit of wailing and garment rending, when Japan was going to smite us in the 1980s, proved unfounded. We adapted and prospered, as we always had (and Japan didn’t)."

Exactly. And due to what? By focusing on it's advantages the US companies profited from the .com boom while the Japanese were caught on the wrong leg.

" But today’s situation is so starkly different that it’s tough to find comfort in our experience then.

We’re not building human capital the way we used to. Our primary and secondary schools are falling behind the rest of the world’s."

That's because you don't up your R&D spendings enough, while China increases it every single year. They are basically letting themselves been taken over in their field of advantage. Stupid, very stupid, but no argument against free trade.


"Our universities are still excellent, but the foreign students who come to them are increasingly taking their educations back home. As other nations multiply their science and engineering graduates—building the foundation for economic progress—ours are declining, in part because those fields are seen as nerdish and simply uncool. And our culture prizes cool. "

Interestingly enough this effect has become greater post 9/11 when many foreign students were simply coerced to leave. As I said, stupid.

"No one is saying that Americans can’t adapt and win once more. But look at our preparedness today for the emerging global economy, and the conclusion seems unavoidable: We’re not ready.

To understand better whether Americans are destined to be the scrawny and pathetic dweebs on the world’s economic beach, it’s necessary to refine the question. Who is most threatened? How come? What will it take to make America stronger in a new economic world? What political forces could propel—or derail—progress?

Many iconic U.S. firms—Coca-Cola, Procter & Gamble, Texas Instruments—already do most of their business and employ most of their workers outside the U.S."

Should that be really surprising in times of globalisation? I think no.

" Conversely, some of the most American brands you can think of—Hellmann’s mayonnaise, Jeeps, BV California wines—are owned by non-U.S. companies (Unilever, DaimlerChrysler, and Diageo, respectively)."

And Germany has no single German-owned aircraft manufacturer, even though we have been pioneers in that field for 50 years. Things change.

" To complicate matters further, many products of U.S. companies are made outside the U.S.—Maytag refrigerators are no longer made in Galesburg, Ill., but in Mexico—while many non-U.S. companies make products here—your new Toyota may have come from Kentucky. Now add a few more twists: Your Dell laptop may have been assembled in Malaysia from parts made by American companies in Thailand.

The truth is that large companies transcended nationality long ago, and globalization gives them as many opportunities as problems. It increasingly lets them hire, source, and sell wherever they like, and that is basically good news no matter where the incorporation papers are filed. "

Shareholder value exactly. The company is an instrument to earn money, not more, not less. Everything else is an illusion by socialists IMO.

"For American workers, globalization is a radically dicier proposition—far more so than most of them realize. The fast-changing economy is exposing vast numbers of them to global labor competition, and it’s a contest millions of them can’t win right now. "

Certainly not in areas that require less skill. The answer that globalisation offers is simple, become proficient in the field that your country dominates. The concept really is that simple.

Three main factors are changing the game. First, the world economy is based increasingly on information, bits and bytes that have to be analyzed, processed, and moved around. Examples: software, financial services, media. Second, the cost of handling those bits and bytes—that is, of computing and telecommunications—is in free fall. Wide swaths of economic activity can be performed almost anywhere, at least in theory.

Turning theory into reality is the third factor: Low-cost countries—not just China and India but also Mexico, Malaysia, Brazil, and others—are turning out large numbers of well-educated young people fully qualified to work in an information-based economy. China will produce about 3.3 million college graduates this year, India 3.1 million (all of them English-speaking), the U.S. just 1.3 million. In engineering, China’s graduates will number over 600,000, India’s 350,000, America’s only about 70,000.

The result is that many Americans who thought outsourcing only threatened factory workers and call-center operators are about to learn otherwise."

OK, first of all, the illusion that you can compare Berkeley to some random Chinese uni is wrong. The money spent there goes to R&D and being at the core of development means your skills will be superiour to the others. That China and India are catching up is no surprise at all. Financed by US investors for the main part. The consumer will feel the sinking costs.

Those critics should forget believing that there is any way you can keep China or India artificially down. There is none. It's adapt or die as harsh as this may sound. Free market capitalism is superiour to all other economic strategies that have been tried up to now. There is no viable alternative.

" That is a giant development, because information-based services are the heart of the U.S. economy. With 76% of its jobs in services, America’s economy is the most service-intensive of any major country’s. Of course many of those jobs can’t be shipped abroad: Chefs, barbers, utility and NFL linemen, and many others know they can’t be replaced by even the smartest person in Bangalore. "

Ahh, he sees the light.

"But growing numbers of other service jobs are not safe. Everyone has heard about the insurance-claims processors, accountants, and medical transcriptionists in India and elsewhere who’ve taken away U.S. jobs by doing the same work for much less money. More alarming is that the value of outsourced jobs is steadily rising. Morgan Stanley is hiring Indian bond analysts, fearsome quants who can make or cost a company millions. Texas Instruments is conducting critical parts of its next-generation chip development—extraordinarily complex work on which the company is betting its future—in India. American computer programmers who made $100,000 a year or more are getting fired because Indians and Chinese do the same work for one-fifth the cost or less. "

Yes and yes, but still no mention of a viable alternative to free trade...

"The big question is how far all this will go. A massive new study from the McKinsey Global Institute predicts that some industries could be changed beyond recognition. In packaged software worldwide, 49% of jobs could in theory be outsourced to low-wage countries; in infotech services, 44%. In other industries the potential job shifts are smaller but still so large they’d create major dislocations: Some 25% of worldwide banking jobs could be sent offshore, 19% of insurance jobs, 13% of pharmaceutical jobs.

Looking at occupations rather than industries, some fields will never be the same. McKinsey figures that 52% of engineering jobs are amenable to offshoring, as are 31% of accounting jobs. "

Econopic predictions are rarely worth the paper on which they are published, but anyway while this may or may not be the case, your alternative still does not compare.

"Adding up all the numbers, McKinsey calculates that some 9.6 million U.S. service jobs could theoretically be sent offshore today. That is a staggering number. If all those jobs really did get outsourced, the U.S. unemployment rate would leap from 5% to 11.4%. For various reasons, not all those jobs will get sent abroad. Some companies aren’t big enough to make the effort worthwhile. Some have infotech systems so old or messed up that they can’t adapt to offshoring. Some managers just don’t like the idea.

McKinsey figures that about 4.1 million service jobs will actually get offshored from high-wage countries to low-wage countries by 2008. It doesn’t make a forecast for U.S. jobs, but others have done so. Forrester Research puts the number at 3.4 million white-collar jobs by 2015. Researchers at the University of California at Berkeley believe the number will be far larger, perhaps 14 million.

Even those numbers could be too low, because they’re based on surveys of company plans today and extrapolations of current trends—always iffy predictors."

Oh wonder the article even admits it. It's educated guesswork at best.

" Professor Thomas H. Davenport of Babson College believes that outsourcing is about to become radically easier and more widespread for a seemingly mundane reason. Davenport sees industry groups and professional associations rapidly standardizing processes like purchasing and billing, making them easy to measure and assess. When that happens, he says, "the low costs and low risks of outsourcing will accelerate the flow of jobs offshore."

The downward pressure on U.S. wages could be more immediate and severe than you might imagine. It is tempting to suppose that the giant U.S. economy couldn’t have felt much strain yet; the total number of offshored white-collar jobs is probably fewer than a million so far. But it doesn’t take the shifting of many jobs to produce ripple effects through the whole economy.

Why? Most U.S. workers whose jobs are sent overseas will try to find new ones, perhaps in other industries or occupations. So the offshoring of any jobs will produce job seekers who will tend to push wages down even in industries in which outsourcing isn’t happening. Far more significantly, the mere threat of moving jobs offshore is enough to hold wages down—those growing armies of skilled workers around the world are increasing the labor supply in many occupations, and the immutable law of markets is that when supply goes up, prices come down. It has happened in all kinds of other markets—food, clothing, microchips, appliances. Why not in labor? "


LOL, you realise he is argumenting with Marx, do you? "Reserve army of the unemployed" LOL
Basically the only thing he states - which btw. I never denied - is that the rise of previously undeveloped countries will make the fight in the markets harder. Of course this also means that the Western countries will face more opposition.

"Some economists believe they see it happening already. They note that something extremely odd occurred in the U.S. economy last year: Average compensation, including pay and benefits, fell. That is a rare event; the last time it happened was 14 years ago. More important, it usually happens in or around recessions or when productivity is going nowhere. But last year wasn’t like that. Productivity rose. The economy grew. The unemployment rate was low and falling. Every indicator pointed to strong wage increases, but just the opposite happened. Now some of the nation’s most eminent economists, including professor Richard B. Freeman of Harvard and Stephen Roach of Morgan Stanley, believe the supply of overseas workers in newly globalizing labor markets is holding U.S. pay down and will do so for years. "

Yes, and this has been known for a long time.


"All those university graduates in China and India threaten U.S. living standards in another way. Paradoxically, it’s not because they’ll end up working for U.S. employers, but because some of them won’t, finding jobs instead with domestic companies in their own countries. That’s a problem for America if many of those graduates are top students in science and engineering.

You might wonder why we’re constantly reading about Chinese graduates in engineering and not in law, medicine, literature, or philosophy. Why this veneration of the pocket-protector set? Engineering is fine, but there’s more to life than technology, isn’t there? Obviously there is. The question—and for America and the West it’s a huge question—is whether there can be economic dominance without technology leadership."

Oh man, I can't stand it anymore, the WEST HAS TECHNOLOGICAL LEADERSHIP and that will remain that way for the forseeable future if it continues to spend in comparison more than the developing countries.
"
Many economists would say no. "There is no other fundamental mover of economic development than science and technology," Columbia University professor Jeffrey Sachs has said. He notes that until the scientific revolution began in the 17th century, virtually everyone lived on the verge of subsistence. Three centuries of technology breakthroughs are the root of today’s abundance in the developed world, and those with a technological edge—America, Japan, and Western Europe—still have the highest standard of living."

Precisely.

"So in a world economy that threatens to pull down American wages, the key to fighting back is maintaining technological superiority—continually creating high-value new jobs that workers in the rest of the world can’t do yet. What are the chances? A worrisome sign is that the brightest students from many Asian countries are staying home to get their Ph.D.s rather than coming to America, as they did in rising numbers until the mid-1990s. Those foreign Ph.D.s have been the driving force in scores of America’s most successful and innovative tech firms, but now we’re getting fewer of them, and other countries are getting more. "

So get more Americans to study.

"Perhaps worse, those who still come to America for their Ph.D.s—arguably the best of the best—are returning home in increasing numbers. In economies like China’s or India’s, growing two or three times faster than America’s, elite students see huge opportunities. Even foreign nationals well established in the U.S. are heading home. "Many of my friends are going back," says professor Godwin Wong of Berkeley’s Haas School of Business. "They’re leaving big corporate jobs here because they can make more money in China." "

Of course you can, it's venture country. Billions of Dollars in capital flow there, because the US is saturated with capital.

"For the U.S. the loss of technology leadership could be historic. Without that advantage, there would be little to prevent living standards in the world’s interconnected economies from equilibrating. The rest of the world’s living standards would rise, and—at least in the near term—America’s would decline. "

As I mentioned countless times the clue to maintain that leadership is R&D spending.

"Combine all those trends and the picture isn’t encouraging for America. Though the U.S. is still the world’s biggest and strongest economy by far, many Americans, from hourly workers to CEOs, feel as if they’re getting sand kicked in their faces. They know they need some serious muscle building to match the other guys on the beach. And they’re remarkably agreed on how to do it.



The No. 1 policy prescription, almost regardless of whom you ask, comes down to one word: education. In an economy where technology leadership determines the winners, education trumps everything. That’s a problem for America. Our fourth-graders are among the world’s best in math and science, but by ninth grade they’ve fallen way behind. As Bill Gates says, "This isn’t an accident or a flaw in the system; it is the system.""

Good, they realised it.

"The good news is that we’ve overhauled the system before. A century ago, as America changed from an agricultural to an industrial economy, something called the high school movement swept the country. City and town leaders realized that an eighth-grade education, which was all that most people got, was no longer enough. They built and staffed high schools but rejected the European model, which prepared a small minority of young people for college, opting instead to prepare a majority of young people for life and work. This was a revolutionary concept, and many European authorities thought it foolish. But as research by Harvard’s Claudia Goldin and Lawrence F. Katz has shown, by 1940, America was far and away the world’s best-educated nation, a critical element of its post–World War II economic dominance.

We responded to a changing world again in 1958, after the USSR orbited Sputnik while our rockets kept blowing up on the launch pad. Congress passed the National Defense Education Act, which appropriated federal money for education in math, science, and foreign languages. It worked, along with America’s grass-roots response to the threat. We went to the moon, science and engineering became cool, even glamorous, and we gained a wide technology lead.

Now we need to revolutionize our schools again. As the world’s richest country, we certainly have the resources, but we seemingly lack the will, while many of our competitors are obsessed with education."

So it's now a problem of will not free trade anymore. I agree.


"In China it’s common for middle-school students to attend school from 7:30 a.m. to noon, then from 2 p.m. until 5, and again from 7 to 8:30 p.m. Contrast that with a nation where millions of parents are happy to let their kids spend hours hanging out at the mall or playing Grand Theft Auto on their Xbox or watching Pimp My Ride on MTV. To be sure, many upper-middle-class parents live in wealthy school districts with excellent schools, and they’re making private tutoring firms like Sylvan Learning Centers and Kumon into fast-growing businesses. But for most in the broad middle class or below, a top-notch K–12 education is a world away.

Evidence is mounting that the way to begin reform is for legislators to establish high standards for public schools and make the schools more accountable to parents. But even if that notion becomes a movement, it’s not clear that better education will guarantee U.S. economic dominance. If we could somehow get our high school math and science scores up to South Korean standards, which would be a gargantuan achievement, then by that measure we’d be as good as they are—but they’d still be cheaper. "

But South Korea doesn't have the capital that the US does to facilitate the non-human aspects of R&D.

"A prescription urged just as widely is immigration reform. A critical element of America’s economic dominance has been its attraction for the world’s brightest, most ambitious people, but today’s immigration laws favor family reunification far above talent, intelligence, or credentials. If Albert Einstein wanted to move in today but had no U.S. relatives, he’d have to get in line behind thousands of poorly educated manual laborers who did. In a global economic competition, that policy seems crazy. John Doerr, the legendary Silicon Valley venture capitalist, recommends that every foreign student who gets a Ph.D. at a U.S. university should also get a green card (granting permanent residency) stapled to his or her diploma. But U.S. policy is moving in the opposite direction. The number of available H1-B visas, which allow highly qualified foreign workers to remain in the U.S. for up to six years, has been cut from 195,000 to just 65,000 a year, based on security concerns following 9/11. "

As I mentioned earlier, stupid, very stupid of the US.

"U.S. spending on R&D will also have to increase if the country wants to remain technologically dominant. The Task Force on the Future of American Innovation, a group of academic societies, high-tech companies, and industry associations, concludes in a recent report that "the United States still leads the world in research and discovery, but our advantage is rapidly eroding, and our global competitors may soon overtake us." Aggregate R&D spending by six fast-growing economies (China, Ireland, Israel, Singapore, South Korea, Taiwan) is on track to exceed U.S. spending in a few years. Industrial R&D continues to increase, but 71% of that spending is on development, not the kind of basic research that created the transistor and the laser. Federal funding of research in the physical sciences has been declining as a percentage of GDP for 30 years."

That's the fundamental point. And they are recognising it. I don't see how this article proves me wrong in any way.


" The Council on Competitiveness, consisting of CEOs, university presidents, and labor leaders, wants federal research spending increased substantially, to 1% of GDP—about $110 billion a year.

Incredible as it seems, America’s infotech infrastructure is no longer world-class. We rank only 12th globally in the number of broadband connections per 100 inhabitants. Look closer and the situation is even worse. South Korea is not only more wired (No. 1 globally) but its connections are far faster than ours and are available not just through wires but also through virtually every cellphone. And speaking of our cellphone infrastructure—please don’t. Anyone who travels globally knows it’s awful by world standards. "

Now it becomes too US-centered to apply to the entire West.

"Fixing all these problems would be a project of overwhelming proportions, yet it still might not make American workers competitive in today’s global labor market. The reason, again, is cost. American workers are enormously more expensive than their peers almost anywhere but in Western Europe. So they must confront what may be the most important question of their working lives: How can they be worth what they cost? "

A mix of the before mentioned measures coupled with mor flexibility from the worker and the will to work longer if the productivity advantage isn't sufficient to guarantee the current standard of living. Alternatively you can keep the wages high, but you will suffer more unemployment.

"As increasing numbers of them find that they can’t be, at least in the short run, the result could be political upheaval. A return to protectionism is looming. When the end of global textile quotas earlier this year caused the rapid loss of 17,000 U.S. jobs—a tiny number in a nation of 141 million workers—the administration found a loophole in the trade treaty and quickly reimposed restrictions. Senator Charles Schumer (D-New York) introduced a bill to impose a 27.5% tariff on Chinese imports, and five Republican Senators signed on as co-sponsors. The Central America Free Trade Agreement, the impact of which would be minuscule in the U.S., is struggling to pass Congress. (No one in Washington seems to think NAFTA would stand a chance of approval today.) "

Protectionism, what that means is higher prices for the consumer, artificially held up, while you become even less productive compared to the rest of the world. You see where this is heading?

"If it all sounds terribly gloomy, it’s important to remember that gloominess has a very poor record in predicting the U.S. economy. Many traits that have helped us meet previous challenges are still with us: flexible labor markets, the world’s most highly developed capital markets, and a culture that moves on from failure and embraces new ideas. Companies aren’t standing still. Trilogy, a business software company in Austin, realized almost three years ago that hiring programmers in the U.S. no longer made sense because it could get them in India for one-fifth the cost. So it offered to help its U.S. coders learn higher-level work, becoming business experts who could help Trilogy customers make more money—for example, by showing Goodyear how to price tires more intelligently. As a general principle, learning higher-level work is what American workers have to do. "

He agrees with me! I agree with him! Where can I apply to become an economic analyst for forbes?

"And exactly what work would that be? No one is sure, though history says not to panic. Economic crises rarely reveal their solutions, but the solutions usually come along. When U.S. business went through the trauma of restructuring in the 1980s, millions of middle managers got cashiered and wondered what they’d do next. Undreamed-of new industries developed (cellphones, biotech, Internet services), and by the mid-’90s the unemployment rate was the lowest in decades.

That’s history. It offers hope but no assurances. History says the rise of China, India, and other developing economies could someday lead to a new equilibrium that’s better for everyone."

That sums up my opinion pretty well.


" With resources deployed globally to their best use, prices could come down and living standards could eventually increase everywhere. After all, America’s rise didn’t impoverish Europe. On the contrary, the success of each continent helped the other get richer.

What happens next in the U.S. depends on how workers respond. Trilogy CEO Joe Liemandt recalls what happened when he told programmers he wouldn’t need them as programmers anymore: "We told them they could react in one of three ways. They could get really pissed, they could be in denial, or they could work with us to retool their skills. And we had people in each group."

It’s time for a massive, urgent American response to the global challenge. As Cisco chief John Chambers says flatly, "We are not competitive." Where to start? Venture capitalist John Doerr, one of America’s most passionate competitiveness campaigners, calls education "the largest and most screwed-up part of the American economy." He’d start there. GE chief Jeff Immelt has attacked America’s newly restrictive student visa rules. Others focus first on R&D spending or the broadband infrastructure. But the greatest challenge will be changing a culture that neither values education nor sacrifices the present for the future as much as it used to—or as much as our competitors do. And you’d better believe that American business has a role to play—after years of dot-com-bust- and scandal-driven reticence, more corporate leaders need to summon the courage to lead.

While optimism has always been the best guide to predicting the U.S. economy, today’s situation is unprecedented. Global product markets have been with us forever and continue to expand. Global capital markets are still developing—watch out, Unocal and Maytag. But global labor markets on a broad scale are a new phenomenon that could, for better or worse, transform the country. How we respond—in our businesses, our government, and our culture—will shape America in the deepest way"


Nice article, it touches on the main points. Adaption is the key in a global economy. It is clear that closing the borders and protectionism can't be the answer.

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Reaver180 you can teach that PaxAmerica he is a bit dummby in Economics

Lol Panda you gonna do all the reading?

**********************************************

Btw. In the new issue of Der Spiegel, which I already mentioned (with the nice dragon-eagle cover lol), there are a lot of interesting facts about the US-China competition. I hardly ever buy the magazine, but this issue is nice.

Did you know that:

Even in 1820 China earned 1/3 of the world's GDP?

That during the last 10 years the US lost 56,7% of its textile jobs?

Electronics -25,7%
Paper industry -22,1%
Computers -19,2%
Printing -18,9%
Tools and machinery -17,7%
Plastics and rubber -11,8%
Automobiles -11,3%
Chemical industry -10,6%
Furniture industry -8,1%
Tobacco and beverages -3,5%

On the other hand the services jobs have risen +22%

Chinese managers are the world's most sought-after experts concerning corporate turnarounds due to their experience in fixing China's inflexible state-run companies?

That the politburo can destabilise the Dollar and shock the US economy with around 700 billions of foreign reserves?

That there is a 75% chance of a substantial Dollar-crash in the next 5 years according to Alan Greenspan?

etc. etc.

Lol Panda you gonna do all the reading?

Yes, I am because Reaver is worth reading. His opinions are worth listening to. I know because I was the finest economic mind in the forum until Reaver spoke and then I knew here is something who matches my economic intellect. LOL

Even in 1820 China earned 1/3 of the world's GDP?

According to Paul Kennedy (Rise and Fall of Great Powers) and maybe others, China had always been one of the great constants in the world's economic system. This goes all the way back to the silk trade 2000 years ago which tied Rome commercially to China and then we saw other great trade products like porcelain and tea.

In all that time, China produced between 1/4 to 1/3 of the world's wealth. There were short period of time like during the Tang Dynasty where China might have produced up to one half of the world's wealth.

What we see today is not a new phenomenom where a new country took over the lead. This is an old country which had the lead for most of human history and is just returning to its customary spot.

-------------------------------------------------

That the politburo can destabilise the Dollar and shock the US economy with around 700 billions of foreign reserves?

That there is a 75% chance of a substantial Dollar-crash in the next 5 years according to Alan Greenspan?

A major crash is still more scare scenario than reality because the Chinese also need their $300 billion in US bonds to be worth something. So they would not suddenly divest from US dollars and bonds. But what would happen is China will diversify towards other standards such as the Euro and even gold to lessen its risks.

Now, the problem comes not from China but from the market. If the market sees China - one of the largest buyers of US treasuries - moving away from a dollar based financial policy, it could start a stampede of people leaving the dollar for other things. But I think any stampede will be blunted by central banks in Japan and Europe.

So I see a slow decline in the US dollar but no crash. A small decline would make US exports more competitive which is a good thing but it would also mean higher oil and raw material prices that could dampen consumption which bad.

The most dangerous side effect of a lower dollar is the higher interest rates which comes from a sliding currency. A higher interest rate could kill off the most powerful growth engine in the US economy and that is the housing market.

-------------------------------------------------

"Yes, I am because Reaver is worth reading. His opinions are worth listening to. I know because I was the finest economic mind in the forum until Reaver spoke and then I knew here is something who matches my economic intellect. LOL"

LOL, thanks buddy, but seriously PaxAmericana's skills at data collecting and interpretation are really far out of my abilities.
Even though I often don't agree with him, but as I said economics has a big subjective component and the POV really matters.

"According to Paul Kennedy (Rise and Fall of Great Powers)"

Another book I want to read, along with Guns of August and so many others. Too little time, argh. Btw. a booktip for you, if you really want to understand the neocon obsession with a hostile China:
"Three Billion New Capitalists" by Prestowitz.

" and maybe others, China had always been one of the great constants in the world's economic system. This goes all the way back to the silk trade 2000 years ago which tied Rome commercially to China and then we saw other great trade products like porcelain and tea."

And something worth of consideration is that China's concept of peaceful growth is firmly rooted in history. An interesting interview with the founder and ex-President of modern Singapore Lee hints that most of Asia except Japan view China in a neutral or positive light. No signs of big fears.

"In all that time, China produced between 1/4 to 1/3 of the world's wealth. There were short period of time like during the Tang Dynasty where China might have produced up to one half of the world's wealth.

What we see today is not a new phenomenom where a new country took over the lead. This is an old country which had the lead for most of human history and is just returning to its customary spot."

The Spiegel comments on this too. A 1.3 billion country with a 5000-year old history returning to its rightful place.

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"A major crash is still more scare scenario than reality because the Chinese also need their $300 billion in US bonds to be worth something. So they would not suddenly divest from US dollars and bonds. But what would happen is China will diversify towards other standards such as the Euro and even gold to lessen its risks. "

What China also needs to do - and there the US does have a point - is revalue it's currecny. Depending on whom you ask up to 40% undervalued.

"Now, the problem comes not from China but from the market. If the market sees China - one of the largest buyers of US treasuries - moving away from a dollar based financial policy, it could start a stampede of people leaving the dollar for other things. But I think any stampede will be blunted by central banks in Japan and Europe."

It's not only China, the OPEC countries and Russia are major factors too. A major pillar of the Dollar system is that it is the world's oil currency. If this changes fundamentally or swiftly a crash is very, very likely.

"So I see a slow decline in the US dollar but no crash. A small decline would make US exports more competitive which is a good thing but it would also mean higher oil and raw material prices that could dampen consumption which bad. "

Well, the oil market is a huge bubble right now.

"The most dangerous side effect of a lower dollar is the higher interest rates which comes from a sliding currency. A higher interest rate could kill off the most powerful growth engine in the US economy and that is the housing market."

Higher interest rates are generally bad for investments, I agree. We will have to wait and see.
The interesting fact about all of this is that the US government is practically in no position to influence those things. This rare lack of options for the US will prove interesting to say the least.

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*Now This will really make NOTY mad here lol. Airbus to transfer most advance aircraft technology to China lol.



BEIJING, Aug. 12 (Xinhuanet) -- To commemorate the 20th anniversary of entry into China's market, Airbus is now considering the plan to establish a manufacture plant in China, which will be unprecedented for the two sides.
Airbus said its industrial cooperation with China and its technology transfer has entered a new phase this year. Over half of the world's 3,700 Airbus aircraft in operation have parts made in China.

It is predicted by 2007, China will grasp the most advanced technology of producing the wings of single-isle aircraft. The newly-established Airbus technological center in Beijing will takefive percent work shares of Airbus A350 aircraft, including aircraft design.

The cooperation between China and Airbus kept expanding in the past few years. There are now six Chinese manufacturers involved in parts production for Airbus planes.

In the past seven months, Airbus received orders for 59 aircraft from five Chinese airline companies, accounting for 20 percent of its total orders. China Southern Airlines already ordered five A380 aircraft, the largest one in the world with 555 seats. Enditem


Related link: http://news.xinhuanet.com/english/2005-08/12/content_3345516.htm




"When China awakes, the world will tremble." -- Napoleon

*bump double post

There is no right or wrong in economics, only what makes money, and what looses money.

"ÎÒ´óÇå×ÓÃñÁ¬»î×Ŷ¼²»Å£¬»¹»áÅÂËÀÂð£¿" - ÀîºèÕÏ
"Let them hate us, so long as they fear us" - Emperor Caligua
"The strong did what they could, the weak suffered what they must"
"German soldiers don't die, they go to hell and regroup"
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"Easy, look where those closed economies stand now. Would you like to live in North Korea or some African ****hole ruled by the anarchist dictator of the week?"


Haha, those ****holes are ****holes not because they refuse to engage in free trade, but because as you yourself have said, they are ruled by incompetent egomaniacs. With that kind of leadership neither free trade not pretectionism would make any difference.


"On the other hand by focussing on their comparative advantage, the West created and creates masses of services-based jobs."


LOLOLOLOL! Aye, we Westerners are really skillful in serving up those burgers and selling groceries. Really Reaver, I expected more from you. First, could you explain to me how exactly you need a "comperative advantage" in order to gain jobs in sectors that are not exposed to foreign competition? I mean, even if barbers in China were ten times more skillful and 20 times cheaper than barbers in America, they would still not drive the latter out of business, because no one is going to fly to China to get a haircut. (not so in healthcare)
In the final analysis, service jobs being created in the West have nothing to do with with trade, because they are non-tradeable, which is precisely why they are created here and not in China.

"Also high-tech jobs are created in the West, biotech, nanotech etc."

Lol, wait ten years. There are many many Chinese, but still you cannot expect them to do everything all at once. Even as it is, a large portion of start ups, especially in the US and Britain, move much of their operations to "low cost" locations even before they have a product to sell. They always keep their marketing activities onshore, though. After all, home is where they sell things, Asia where they make things.

"The US is a bad example of this and you know it, since the US has been spending over income for a very long time now. Other countries look better"

No I don't know it. As far as I know, every "industrialized country" save Japan runs a trade deficit with China. Even mighty Germany does, and the largest deficit in Europe it is too. The reason Germany's overall surplus is so large (surely this is what you have in mind when you speak of other countries doing better) is that it more than balances its deficit with China with its surpluses with other advanced countries.

"What? Do you realise that the intellectual properity belongs to the West and that the vaunted China is usually some generations behind in technology. Up the R&D spending and focus on the advantages (like the article mentioned)."

Intellectual property? Sorry dude, but I'd rather have a factory for making cellphones in my country and the intellectual property for it in another than the other way around. As for China being two generations behind technology, first that's not true in most cases, you are just assuming it is with no facts to substantiate your claims, and second even if it were so, you again engage in that propaganda of free trade, the "look, we're doing better than them" bullshi.t Well guess what, we were doint better than them in electronics 10 years ago, look where we are now, not even on the map. China's rise has been nothing short of astounding, as has been the decline of our manufacturing, but all the proponents of free trade ever do is to point out sectors in which we are still leading as proof that free trade is not harmful, right before those sectors fall to China as well. At least we are running low on those sectors, so soon the free traders will be unable to use this tactic anymore, lol.



"You realise that without Chinese consuption we would have been in a long recession? It's give and take. The West only got to where it was due to free trade. Even in 1820 over 50% of the world's GDP was produced in China and India. Industrialisation and free trade changed that."

Oh yeah? How so? I thought you said that our "economic strenghts" are due to the service sector, which is unaffected by China? Anywhow, the very notion of "Chinese consumption" saving the world from reccession is bull**** propaganda. Do you know what Chinese consumption really is? It is China importing components from its Asian neighbours, assembling them into finished products, and shipping those products "West." Most of the imports China "consumes" it ends up regurgitating to America and Europe.



"Move to China or where your job opportunities are better. Hell, I study economics, I will probably end up in London, Hong Kong, NY or Shanghai. I'm prepared for that."

What if I don't want to move to China? Shouldn't the country I live in, seeing how "advanced" it is, be able to offer me a decent job? And if it cannot, and if that inability stems from free trade, then how can you call free trade beneficial? How indeed?


"And countless new jobs will be created."

They are being created, countless indeed, here are they:



30,000 food servers and bar tenders;
• 28,000 health care and social assistance:
• 12,000 real estate;
• 6,000 credit intermediation;
• 8,000 transit and ground passenger transportation;
• 50,000 retail trade; and
• 8,000 wholesale trade.

Impressive! America managed to create 50,000 retail jobs in one month alone! I see there really isn't anything to worry about, seems like our cashiers can compete with anyone in the World!















.

"Now This will really make NOTY mad here lol"

Oh? Why should it? Airbus actually sells its planes to China, so it is only fair that China supplies some of the components and even develops some of the technology. Of course, even it there wasn't even a single Chinese made nail (or rivet, I think) on an Airbus plane, China would have no right to complain, given that it runs a $100 bil +
surplus with Europe in other areas.

.

LOL, thanks buddy, but seriously PaxAmericana's skills at data collecting and interpretation are really far out of my abilities.
Even though I often don't agree with him, but as I said economics has a big subjective component and the POV really matters.

LOL. I PaxAmericana is not bad but his views are overshadowed by his politics. He interprets things according to politics not business. LOL.


"According to Paul Kennedy (Rise and Fall of Great Powers)"

Another book I want to read, along with Guns of August and so many others.

Guns of August is a fantastic book. It is basically the defining work on the beginnings of WWII. A fantastic read.

booktip for you, if you really want to understand the neocon obsession with a hostile China:
"Three Billion New Capitalists" by Prestowitz.

Yes, the old Reagan trade official. I'm looking forward to reading it soon.

What China also needs to do - and there the US does have a point - is revalue it's currecny. Depending on whom you ask up to 40% undervalued.

At some point China will need to revalue simply because energy and raw material will be too expensive to pay for with an undervalued currency. But China's peg was there for stability not trade. Don't forget that China kept its peg stable in 1997-98 when the rest of Asia's currency collapsed. This made ASEAN and South Korean goods far cheaper than Chinese. China kept the peg in spite of losing competiveness.

BTW, both the Western embargo in 1989 and the collapse of the Asian currencies did nothing to stop Chinese growth. The internal market is far larger than people realize.

Revaluing the Yuan might slow down the growth in Chinese exports but it won't stop it. The scale of economy is simply too great. Remember, foreign build factories in China because of BOTH the internal market and the export market. A higher Yuan makes energy and raw material cheaper which in turn makes consumer items inside China cheaper. Greater growth in the internal economy means greater scale of economy which translate into greater competiveness for Chinese companies on the world market.

Well, you probably know much of this already, Reaver. That was just to teach kids like Noty. LOL

Well, the oil market is a huge bubble right now.

LOL. I wouldn't so sure about that. If we are sure it is a bubble, we would be shorting oil futures right now. (Actually lots of people lost money on this as the price of a barrel of oil just grew and grew. LOL)

I think there is a slight bubble but it is minor one - with prices probably collapsing around $68 after it reaching $80. The demand from China and later India is simply too great for oil to ever become cheap again. But then again we're all guessing. LOL

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"Haha, those ****holes are ****holes not because they refuse to engage in free trade, but because as you yourself have said, they are ruled by incompetent egomaniacs. With that kind of leadership neither free trade not pretectionism would make any difference. "

There are enough examples of corrupt and incompetent regimes that engaged in free trade and through this measure at least succeeded in preventing the starving of their people. (Even though much of those were shady deals, but still).

"LOLOLOLOL! Aye, we Westerners are really skillful in serving up those burgers and selling groceries. Really Reaver, I expected more from you. First, could you explain to me how exactly you need a "comperative advantage" in order to gain jobs in sectors that are not exposed to foreign competition?"

You obviously know which part of the service industry I'm talking about. Big business administration jobs and the like, not the grocer from around the corner. Or yes, let's go and look at the retail sector, many supplier jobs are indeed dependent on the globalisation.

" I mean, even if barbers in China were ten times more skillful and 20 times cheaper than barbers in America, they would still not drive the latter out of business, because no one is going to fly to China to get a haircut. (not so in healthcare)
In the final analysis, service jobs being created in the West have nothing to do with with trade, because they are non-tradeable, which is precisely why they are created here and not in China. "

Not tradeable? Have you been hiding the last few years? That is one of the main points. Admin jobs are being restructured, customer centers centralised etc. to places where the advantages are biggest. Sorry, but this really should be evident.

"Lol, wait ten years. There are many many Chinese, but still you cannot expect them to do everything all at once. Even as it is, a large portion of start ups, especially in the US and Britain, move much of their operations to "low cost" locations even before they have a product to sell. They always keep their marketing activities onshore, though. After all, home is where they sell things, Asia where they make things. "

I never said they didn't do those things there, I said that we do them better and far more efficient.

"No I don't know it. As far as I know, every "industrialized country" save Japan runs a trade deficit with China. Even mighty Germany does, and the largest deficit in Europe it is too. The reason Germany's overall surplus is so large (surely this is what you have in mind when you speak of other countries doing better) is that it more than balances its deficit with China with its surpluses with other advanced countries. "

Quit looking at the deficit as the only measure, cheaper prices are good for the consumer who therefore spends more on other things. It really is a complex cycle.

Can you read German?

From the German foreign ministry:

"Seit 2002 ist China nach den USA der zweitwichtigste deutsche Exportmarkt außerhalb Europas geworden, noch vor Japan; bei Einbeziehung des deutschen Handels mit der Sonderverwaltungszone Hongkong spielt der gesamtchinesische Wirtschaftsraum bereits seit 2000 diese Rolle. Deutschland ist mit Abstand Chinas größter europäischer Handelspartner und steht in der Rangfolge der weltweiten Handelspartner Chinas auf Platz sechs. Der deutsch-chinesische Handel "boomt". Seit 1998 wächst der deutsche Export nach China (ohne Hongkong) mit zweistelligen Prozentzahlen, 2001 wuchs er um 28,9%, 2002 um 19,5%, 2003 um 24,9% und 2004 um 16%.

Gleichzeitig importieren deutsche Unternehmen wesentlich mehr Waren aus China als sie dorthin liefern; die Zuwachsraten beim Import lagen eine Reihe von Jahren deutlich unter den entsprechenden Werten für den Export, das deutsche Handelsbilanzdefizit nahm daher ab. Dieser Trend hat sich im Jahr 2004 wieder umgekehrt. 2002 importierte Deutschland Waren für 21,3 Mrd. Euro (+7,0%), 2003 für 25,0 Mrd. Euro (+17,3%) und 2004 für gut 30 Mrd. Euro (+ 34%). Das deutsche Handelsbilanzdefizit gegenüber China bewegte sich seit Jahren zwischen 5 und 9 Mrd. EUR jährlich – könnte im Jahr 2004 nach vorläufigen Berechnungen aber auf 10 Mrd. Euro gestiegen sein."

So the deficit has grown bigger slowly during the last few years, but on the other hand our exports are always increasing in double digit figures. It's give and take as I said.

"Intellectual property? Sorry dude, but I'd rather have a factory for making cellphones in my country and the intellectual property for it in another than the other way around."

Fine then.

" As for China being two generations behind technology, first that's not true in most cases, you are just assuming it is with no facts to substantiate your claims,"

Re-read the article it is even mentioned there with regards to the software industry.

" and second even if it were so, you again engage in that propaganda of free trade, the "look, we're doing better than them" bullshi.t Well guess what, we were doint better than them in electronics 10 years ago, look where we are now, not even on the map."

Of course we are "on the map". What's yopur point, that China is advancing faster than we are and that they will overtake us? Of course they will, they are a giant country with 1.3 billion people. But what you don't want to see is that we all will profit from China's rise.

" China's rise has been nothing short of astounding, as has been the decline of our manufacturing, but all the proponents of free trade ever do is to point out sectors in which we are still leading as proof that free trade is not harmful, right before those sectors fall to China as well. At least we are running low on those sectors, so soon the free traders will be unable to use this tactic anymore, lol. "

Instead of putting LOL's everywhere please explain your winning strategy and alternative to free trade to which I challenged you from the beginning of this thread and I still hear nothing...

>"Oh yeah? How so? I thought you said that our "economic strenghts" are due to the service sector, which is unaffected by China?"

No, I didn't say that. I said we have the comparative advantage there. Manufacturing still is important that's why we should focus on strenghtening our position where we have advantages. Like high-tech tools, machinery, cars and planes for example.

" Anywhow, the very notion of "Chinese consumption" saving the world from reccession is bull**** propaganda. Do you know what Chinese consumption really is? It is China importing components from its Asian neighbours, assembling them into finished products, and shipping those products "West." Most of the imports China "consumes" it ends up regurgitating to America and Europe. "

Again, where have you been the last few years? In the big cities in China there is now quite a large middle-class that consumes akin to its Western counterparts.

"What if I don't want to move to China? Shouldn't the country I live in, seeing how "advanced" it is, be able to offer me a decent job? And if it cannot, and if that inability stems from free trade, then how can you call free trade beneficial? How indeed?"

How many times do I have to repeat it for you?

"They are being created, countless indeed, here are they:



30,000 food servers and bar tenders;
• 28,000 health care and social assistance:
• 12,000 real estate;
• 6,000 credit intermediation;
• 8,000 transit and ground passenger transportation;
• 50,000 retail trade; and
• 8,000 wholesale trade.

Impressive! America managed to create 50,000 retail jobs in one month alone! I see there really isn't anything to worry about, seems like our cashiers can compete with anyone in the World!"

No need to be ironic about it, it's true. Now please talk about this great alternative of yours, I'm waiting eagerly...















.

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Btw. another interesting fact is that Germany already exports more to China than the US does:

using a figue for 1 Euro = 1.2 USD for 2004 we get

US 34,7 billion, Germany 36 billion.

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Damn, I was so clever even at 18 yrs old. That's right Reaver, I still remember this thread. What say you about your financial services now?

F.uck an eye for an eye. You take my eye, and I will kill you, and all those you care about. That is our policy.

Wow, really interesting what one can read out of a stinking corpse thread

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A German Soldier doesnt die, he goes to hell and regroups !

DING DING DING! AND THE WINNER IS......NOTAN!

lol sorry could not resist. Globalization has just flopped big time.

Globalization has just flopped big time.
______________________________________________

Maybe for the United States, for Germany it works great.

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A German Soldier doesnt die, he goes to hell and regroups !

Germany has kept a strong manufacturing/service mix... That is the point Notan was making. Where the US decided to go into some sickening globalisation effort and moved almost all its manufacturing offshore, Germany has not... count your nation amongst the lucky, most Western nations have failed to see this... or refused too.

Siege of Tobruk - One German POW said: "I cannot understand you Australians. In Poland, France, and Belgium, once the tanks got through the soldiers took it for granted that they were beaten. But you are like demons. The tanks break through and your infantry still keep fighting." Rommel wrote of seeing "a batch of some fifty or sixty Australian prisoners ... marched off close behind us—immensely big and powerful men, who without question represented an elite formation of the British Empire, a fact that was also evident in battle."

What say you now Reaver.

F.uck an eye for an eye. You take my eye, and I will kill you, and all those you care about. That is our policy.