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Manufacturing has economies of scale, in a global market there will inevitably be winners who win by being bigger than all other participants. Why wouldn't the

by lumost 5y ago

Manufacturing has economies of scale, in a global market there will inevitably be winners who win by being bigger than all other participants. Why wouldn't the global economy settle on a single manufacturing power eventually?

gumby 5y ago
This has been true in the past but need not be true in future. The US took the manufacturing crown from Britain, France, and Germany (the “made in” label was invented by the British back in the 1880s to try to fend off Germany’s rising manufacturing), Britain having supplanted India and, to Anlässen degree China, through force of arms. Manufacturing was only partially centralized. The US had lots of land, water transport, raw material, and young labor. This worked for the new steel processes and other mass production. The Europeans were busy with other things. China had a young workforce, lots of raw material and partially took over some of the legacy industries (e.g, steel), but really picked up new stuff. The USA was busy with other things. Now China faces a demographic cliff (the workforce is aging) plus major unemployment (of the uneducated) and isnstarting to get busy with other things. What’s different now is automation, telecom, and automated management. Economies of scale may not apply so much with next gen products from phones to clothes to lawnmowers. If you can get a factory in a box it may be better to sprinkle those around to reduce supply, demand, and transport shocks. These may be more locally configurable. It seems kind of absurd but I remember when packet switching was wasteful and absurd.
- cgio 5y ago
  You bring a relevant dimension, often overlooked, to the discussion, I.e. the evolution of the manufacturing model and of mechanics of scale economies. Also, to add to that, what we witness with Covid is the disruption of logistics that makes that transition even more relevant. And the social pressure from societies that, whether right or wrong, now associate isolation with better local opportunities and bearable impacts from limited trade. China is understanding the loss it faces in global market trends. That’s why it focuses introspectively on fairness of distribution of wealth. Because fairness will enable a decentralised supply and innovation model targeted on internal consumption of increasingly sophisticated consumers. A tough balance in the context of socialist principles but China has demonstrated impressive ability to weather conceptual stresses on ideological boundaries on the supply end, now they will focus on demand. I am actually optimistic that, for a while at least, benefits will be felt across all economies. It’s the mechanics of the next crisis that will draw the fields of the next conflict.
ajuc 5y ago
Because that country gets rich, salaries rise, and another country outcompetes it as a cheap source of labor. This happened to GB, Germany, USA, Japan, South Korea, and will happen to China.
- DeathArrow 5y ago
  It will take a long time until some other countries will overtake China. And China isn't going to sit doing nothing. They buy and invest all over the world. They invest in foreign resources, infrastructure and manufacturing.
  - imtringued 5y ago
    They are only one doubling of gdp per capita away from surpassing Poland. Give it 20 years.
    - lumost 5y ago
      I think you'll find that china has succeeded due to more factors than cheap labor. If it was only cheap labor we'd expect other low cost countries with large populations to have performed similarly. China had at least the following combination of factors in its favor. - Geopolitical alignment with the current superpower resulting in favorable trade deals across the globe with no need to expend military and diplomatic power to maintain trade. - A government which actively supported infrastructure investment with a corruption level low enough to actually build infrastructure with the investment. - A trade policy which encouraged foreign direct investment but required companies to train locals and ultimately leave IP/management decisions locally. - A strong investment in STEM education, including importing of talent from abroad. - A stable governing structure. - A young, low-cost, urbanizing labor force. There are likely many more factors in China's economic performance. But it would be foolish to believe that China succeeded because of cheap labor, or that manufacturers are going to move shop out of China as soon as labor costs rise. At this point I'd be skeptical that most US manufacturers who outsourced to China could relocate their manufacturing without the technical expertise of the same Chinese manufacturers they outsourced too.
  - 5y ago

by lumost 5y ago

gumby 5y ago

This has been true in the past but need not be true in future. The US took the manufacturing crown from Britain, France, and Germany (the “made in” label was invented by the British back in the 1880s to try to fend off Germany’s rising manufacturing), Britain having supplanted India and, to Anlässen degree China, through force of arms. Manufacturing was only partially centralized. The US had lots of land, water transport, raw material, and young labor. This worked for the new steel processes and other mass production. The Europeans were busy with other things. China had a young workforce, lots of raw material and partially took over some of the legacy industries (e.g, steel), but really picked up new stuff. The USA was busy with other things. Now China faces a demographic cliff (the workforce is aging) plus major unemployment (of the uneducated) and isnstarting to get busy with other things. What’s different now is automation, telecom, and automated management. Economies of scale may not apply so much with next gen products from phones to clothes to lawnmowers. If you can get a factory in a box it may be better to sprinkle those around to reduce supply, demand, and transport shocks. These may be more locally configurable. It seems kind of absurd but I remember when packet switching was wasteful and absurd.

cgio 5y ago
You bring a relevant dimension, often overlooked, to the discussion, I.e. the evolution of the manufacturing model and of mechanics of scale economies. Also, to add to that, what we witness with Covid is the disruption of logistics that makes that transition even more relevant. And the social pressure from societies that, whether right or wrong, now associate isolation with better local opportunities and bearable impacts from limited trade. China is understanding the loss it faces in global market trends. That’s why it focuses introspectively on fairness of distribution of wealth. Because fairness will enable a decentralised supply and innovation model targeted on internal consumption of increasingly sophisticated consumers. A tough balance in the context of socialist principles but China has demonstrated impressive ability to weather conceptual stresses on ideological boundaries on the supply end, now they will focus on demand. I am actually optimistic that, for a while at least, benefits will be felt across all economies. It’s the mechanics of the next crisis that will draw the fields of the next conflict.

ajuc 5y ago

Because that country gets rich, salaries rise, and another country outcompetes it as a cheap source of labor. This happened to GB, Germany, USA, Japan, South Korea, and will happen to China.

DeathArrow 5y ago
It will take a long time until some other countries will overtake China. And China isn't going to sit doing nothing. They buy and invest all over the world. They invest in foreign resources, infrastructure and manufacturing.
- imtringued 5y ago
  They are only one doubling of gdp per capita away from surpassing Poland. Give it 20 years.
  - lumost 5y ago
    I think you'll find that china has succeeded due to more factors than cheap labor. If it was only cheap labor we'd expect other low cost countries with large populations to have performed similarly. China had at least the following combination of factors in its favor. - Geopolitical alignment with the current superpower resulting in favorable trade deals across the globe with no need to expend military and diplomatic power to maintain trade. - A government which actively supported infrastructure investment with a corruption level low enough to actually build infrastructure with the investment. - A trade policy which encouraged foreign direct investment but required companies to train locals and ultimately leave IP/management decisions locally. - A strong investment in STEM education, including importing of talent from abroad. - A stable governing structure. - A young, low-cost, urbanizing labor force. There are likely many more factors in China's economic performance. But it would be foolish to believe that China succeeded because of cheap labor, or that manufacturers are going to move shop out of China as soon as labor costs rise. At this point I'd be skeptical that most US manufacturers who outsourced to China could relocate their manufacturing without the technical expertise of the same Chinese manufacturers they outsourced too.
- 5y ago