4 ms·

How do you explain the fact that car manufacturers can and do build plants in Mexico and use cheap labour there, but still can’t compete with Chinese manufactur

How do you explain the fact that car manufacturers can and do build plants in Mexico and use cheap labour there, but still can’t compete with Chinese manufacturers? Labour cost isn’t the problem, the problem is that US innovation has stagnated and now his to rely on protectionism to compete.

wakawaka28 2y ago
I feel like I just enumerated several ways that China is overwhelmingly cheaper than practically any other advanced economy. But I will try to spell it out even more. Labor is almost certainly not as cheap in Mexico as it is in China. China still enjoys benefits of "developing nation" status despite being very advanced when it comes to manufacturing. There are many variables when it comes to productivity such as the amount of investment, the size of the workforce, and government subsidies. If you believe in specialization, then having a much larger population to work (as also consume the product) is a big advantage. The Chinese government is heavily involved with its domestic businesses, from literally owning them to spying on their behalf, to putting up roadblocks for any competition. Mexico might be as advanced as China if we had outsourced everything to them instead of China, but I'm sure that did not make sense when we started doing it and it probably still does not. There's nothing magic about China. It's just got lots of people and cheap labor, and a bunch of policies that are unfair to the rest of the world. They have a head start of about 30+ years on Mexico and other competition. The US and euro nations have let everything basically rot for 30+ years instead as everything got shipped to China. It's not that we can't do anything that they can do in principle, but it takes time and investment and the result is hard-pressed to make enough money due to the fact China can do it cheaper. In most cases Western manufacturing was better than Chinese for the longest time, but we basically taught them all our trade secrets without them sharing back any knowledge. We don't have a large pool of workers with manufacturing experience as they do, because of the outsourcing. We have some subsidies, but they pale in comparison to what China does and come with random obligations like quotas per ethnicity or sexual orientation. TSMC complained about this stuff recently. They got billions of dollars in subsidies but still struggle to hire the right people locally in the US. It takes decades for some of these industries to build up, even going back to the university training pipeline. The idea of pushing a "service economy" is a costly mistake that nearly all Western countries fell into. At some point, China and other manufacturing-based nations will refuse to take worthless Western currencies in exchange for their goods. That is, unless we have something real to offer in exchange.

wakawaka28 2y ago

I feel like I just enumerated several ways that China is overwhelmingly cheaper than practically any other advanced economy. But I will try to spell it out even more. Labor is almost certainly not as cheap in Mexico as it is in China. China still enjoys benefits of "developing nation" status despite being very advanced when it comes to manufacturing. There are many variables when it comes to productivity such as the amount of investment, the size of the workforce, and government subsidies. If you believe in specialization, then having a much larger population to work (as also consume the product) is a big advantage. The Chinese government is heavily involved with its domestic businesses, from literally owning them to spying on their behalf, to putting up roadblocks for any competition. Mexico might be as advanced as China if we had outsourced everything to them instead of China, but I'm sure that did not make sense when we started doing it and it probably still does not. There's nothing magic about China. It's just got lots of people and cheap labor, and a bunch of policies that are unfair to the rest of the world. They have a head start of about 30+ years on Mexico and other competition. The US and euro nations have let everything basically rot for 30+ years instead as everything got shipped to China. It's not that we can't do anything that they can do in principle, but it takes time and investment and the result is hard-pressed to make enough money due to the fact China can do it cheaper. In most cases Western manufacturing was better than Chinese for the longest time, but we basically taught them all our trade secrets without them sharing back any knowledge. We don't have a large pool of workers with manufacturing experience as they do, because of the outsourcing. We have some subsidies, but they pale in comparison to what China does and come with random obligations like quotas per ethnicity or sexual orientation. TSMC complained about this stuff recently. They got billions of dollars in subsidies but still struggle to hire the right people locally in the US. It takes decades for some of these industries to build up, even going back to the university training pipeline. The idea of pushing a "service economy" is a costly mistake that nearly all Western countries fell into. At some point, China and other manufacturing-based nations will refuse to take worthless Western currencies in exchange for their goods. That is, unless we have something real to offer in exchange.