Will the US go gently?
Here's the thesis: the US has had its time in the sun and is heading down to the ahem 'poverty' of the EU. China and India are ascendant. The economic miracles that held the US as the last century's GB / Portugal / Spain / Rome are coming to an end.
The theory says: the US had an amazing economic virtuous circle based on increasing value / increased spending. Everything always grows. The economy was underpinned by oil being valued in dollars and it was all backed by the US ability to pay for an awesome military machine that could afford to ensure that US interests were played out on the ground. America ran tings.
But that seems to be ending now ... remember when you first heard analysts being quoted about how the internet bubble was bursting? On the ground, analysts I talk to (guys at the big banks) are telling me to watch out for major macro-economic changes.
It started with manufacturing: all those things made in the US (like, for example, everything) started to be made in Asia. And then outsourced menial knowledge work. And now all those Indian immigrants who are smart as hell and wrote all our software in California have realised they can work for Intel at 80pc of the wages ... back in India. "Blowback" I'm hearing it called. And now, even the IP being created for future value -- R and D, with tomorrow's primal value -- is being done in joint venture with the Chinese. Because they have 30 million physics graduates who will work for less then US grads, and to access them you have to do JVs with Chinese companies. Semiconductors, software, mobile data protocols ... the whole bit.
So, according to the theory, even college degrees don't mean what they did. No jobs. And if you can buy something, basic economic activity in the US increasingly leads to greater value being created in Indian and Chinese economies then at home. Profund tendency toward revaluation of the currency (aka terminal recession). Not a profound collapse (but that's possible if the lunatic fiscal policy of the US contintues. Enron turns to California turns to ... ) but more likely a gradual drift down to the obscene wealth we enjoy in Europe relative to Africa.
I'm not saying I agree totally, although it's a compelling theory. But I do pretty much agree ... my question is ... what do you think? Will the US admin -- CAN a US admin -- allow this scenario to play out?
The theory says: the US had an amazing economic virtuous circle based on increasing value / increased spending. Everything always grows. The economy was underpinned by oil being valued in dollars and it was all backed by the US ability to pay for an awesome military machine that could afford to ensure that US interests were played out on the ground. America ran tings.
But that seems to be ending now ... remember when you first heard analysts being quoted about how the internet bubble was bursting? On the ground, analysts I talk to (guys at the big banks) are telling me to watch out for major macro-economic changes.
It started with manufacturing: all those things made in the US (like, for example, everything) started to be made in Asia. And then outsourced menial knowledge work. And now all those Indian immigrants who are smart as hell and wrote all our software in California have realised they can work for Intel at 80pc of the wages ... back in India. "Blowback" I'm hearing it called. And now, even the IP being created for future value -- R and D, with tomorrow's primal value -- is being done in joint venture with the Chinese. Because they have 30 million physics graduates who will work for less then US grads, and to access them you have to do JVs with Chinese companies. Semiconductors, software, mobile data protocols ... the whole bit.
So, according to the theory, even college degrees don't mean what they did. No jobs. And if you can buy something, basic economic activity in the US increasingly leads to greater value being created in Indian and Chinese economies then at home. Profund tendency toward revaluation of the currency (aka terminal recession). Not a profound collapse (but that's possible if the lunatic fiscal policy of the US contintues. Enron turns to California turns to ... ) but more likely a gradual drift down to the obscene wealth we enjoy in Europe relative to Africa.
I'm not saying I agree totally, although it's a compelling theory. But I do pretty much agree ... my question is ... what do you think? Will the US admin -- CAN a US admin -- allow this scenario to play out?
Comments
At the contrary of Europe wich is quite slow, US react fast in order to solve any problem she may encounter. Whenever a problem arrive, US manage to solve it quickly even if it cost much in term of money or men (read employement).
At the contrary Europeans wait more, in order to have more clarifications, sometimes it can be an advantage (minoring the excess of an over-reaction) but manytimes it' s a disavantage.
That's why we have a phrase in France that said that each thing coming in America, will come in France ten years later.
I expect that i will recieve my G5 sooner ...
Originally posted by Powerdoc
i am confident in the future of the US. For one simple reason : the US spirit.
At the contrary of Europe wich is quite slow, US react fast in order to solve any problem she may encounter. Whenever a problem arrive, US manage to solve it quickly even if it cost much in term of money or men (read employement).
At the contrary Europeans wait more, in order to have more clarifications, sometimes it can be an advantage (minoring the excess of an over-reaction) but manytimes it' s a disavantage.
That's why we have a phrase in France that said that each thing coming in America, will come in France ten years later.
I expect that i will recieve my G5 sooner ...
THIS IS NOT A US V EURO RANT.
Don't even drift it that way Doc. We're talking US v China and India.
Originally posted by Harald
THIS IS NOT A US V EURO RANT.
Don't even drift it that way Doc. We're talking US v China and India.
Did not drift in that way, just spoke of the US spirit, and make a comparison with the european spirit, merely because i am european and i know it more than the indian or chinese spirit.
I believe in the humans, US is not US because of his structure, army, gov, it's US because of his citizens, like any others countries are also the results of her citizens.
Just wanted to say that US love competition, and are quite good at this game.
India and China will gain power in the next coming years, but it will take time before they can match US. The declin of the US empire is not for tomorrow. For the moment US is the only superpower, and the number one in diplomatia, army, economy.
India has problems with her cast system, a system who is more feudal than modern. Gandhi knew it, and tempted to abolish it. But it's still alive even if not officialy.
China has contradictions : a communist collegial dictatorship governement and a capitalistic economy. The capitalistic system promote the individuality, while the communist tend to promote the contrary. At a point or another of her history, this will lead to major problems.
Another country I see with great potential in the world is South Korea, only if it can overcome it's problems with N. Korea and then the problems that may stem from reunification. I recently listened to a report where in China many youth look to S. Korea for a cultural model, whereas in the 50s and 60s it was N. Korea.
People are in charge of everything. You can speak about virtual notions like patriotism, national spirit and freedom, however they easily turn into chauvinism, treachery and paranoia when personal interests take over.
Long ago, when kings and pharaohs ruled the world, a death of one of them was enough for empires to rise and fall. These days large corporations, stock markets and tax policies are more of a threat to the world's future than a hundred of wicked dictators because they have a better budget and stronger armies.
Originally posted by costique
Every empire shall fall sooner or later. The world constantly changes as well as people living in it. The rules, laws and habits which were winning yesterday may become a mistake tomorrow. On the other hand, people's inertia is much greater than any of us can imagine. You just cannot react properly to every change for ever.
People are in charge of everything. You can speak about virtual notions like patriotism, national spirit and freedom, however they easily turn into chauvinism, treachery and paranoia when personal interests take over.
Long ago, when kings and pharaohs ruled the world, a death of one of them was enough for empires to rise and fall. These days large corporations, stock markets and tax policies are more of a threat to the world's future than a hundred of wicked dictators because they have a better budget and stronger armies.
I would say, though that still in many parts of the world the death of a leader could shift the forunes of that country in either direction. N Korea for instance . . . they would probably open up with the death of their insane leader . . . and if he were to die and they opened what would happen to the region? would it free up resources for a small economic boon or would it make teh region no longer an area of interest in the world's eyes?
India and China will be economic forces however they will be dependant on maintaining a large economic desparity: they will need to maintain a low wages workforce that also will need to be increasingly skilled: two things that are at odds with each other.
however, the population and the class structure in both these countries gives them a lot of room to grow before they need to outsource labor.
Which, of course, in a purely economic view, is the reason the US will slowly become less dominant: our actual production is not done in the US, yet the money comes here . . . this can't mainatin itself for any length of time without an actual industrial base . . . its like an economy built on air . . . hemmm?
I probably have no idea what I am talking about . . .
Like many South American and Mexican immigrants in this country, Indians are willing to work on the cheap (and in some cases without having to leave India). The difference is, they're well educated technically speaking (math, science, tech). So eventually things will pay off for them as a nation, but it's going to be a few decades at a minimum before they are a true world power in any sense.
China is clearly next in line for Super Power status IMO. There's not even a close second. I agree The US is on the decline, as evidenced by the fact that many spineless corporations are more than willing to farm out thousands of customer service, tech and other jobs to people living in India and SE Asia, all in order to make their books balance in the short term. IOW, the board members and managers in American companies still are fixated on shareholder value and NOT on the economic viability of their company in the long term, or of the economy in general.
There's a fine line between ambition and greed; one day our corporate "leaders" (HAR!) will figure that out.
American companies are horribly short-sighted right now, despite all the lessons we should've learned over the last couple years. However, at worst we'll be sharing our Super Power status with China in the coming decades, not relinquising it entirely. Short of nuclear holocaust or some other horrible catastrophe, I don't see the US ever completely losing its footing. Unlike Rome and other empires, we are a much more heterogenous population. Ultimately it is ideas that keep a nation or empire afloat, and the more heterogenous the population the more good ideas will come to the fore during hard times.
I see the only way the US can keep its world-hegemony is by staying ahead in future technologies, like nano-tech. By keeping up its lead in science and research the US could very well keep ahead for the next century. But not if you waste it on silly star-wars defense projects.
Originally posted by Moogs
The US is on the decline, as evidenced by the fact that many spineless corporations are more than willing to farm out thousands of customer service, tech and other jobs to people living in India and SE Asia, all in order to make their books balance in the short term. IOW, the board members and managers in American companies still are fixated on shareholder value and NOT on the economic viability of their company in the long term, or of the economy in general.
Honestly what is going on is Consumer Choice "driving" the trends we see. Consumer choice? you ask...
Yes. In the not so far off past people in the US would pay a good $400 for a vacuum cleaner. This can still be a reality today (the $400 price) but in volume the sub $89 price is a new reality. Why? Imported products made with cheap labor from asia.
Maytag Corp.(NYSE:MYG), which makes Hoover vacuums, said in mid-July that second-quarter profit tumbled 63 percent from a year earlier, as its Hoover unit scrambled to introduce cheaper models for bargain-hungry customers.
Its chief executive Ralph Hake said the low-end product has gotten so good that it is hard to get people to pay the extra $50, $70, or $100 that they typically would have spent "when the low-end stuff looked like junk."
"When you have a $79 product that looks decent out there, how do you get people to spend $159 or $169 to buy a vacuum cleaner?" he said in conference call.
Some manufacturers manage to drive costs down by sourcing from Asia, while Maytag, which still makes most of its vacuum cleaners in the United States, plans to alter some features and performance packages to attract more customers.
Quote.com story
As you can see the consumer is in the drivers seat here. Why pay high prices when cheaper goods are in the market place. Cheap Korean import cars are another example of consumers buying Hyundai and Kia cars etc.
What is going on in America is that in the 50's people bought more domestic brands of goods as there was no competition really to choose from. People drove Fords, Buics, Chevrolets. They watched Zenith Televisions, listened to RCA radios, wore clothing made in the US. That was in the 50's
Now we live in a competitive global world where we exchange with a vast number of countries (Now americans have access to Hyundai cars, Sanyo televisions, and cheap imported clothing) and the only way for the former "big" american companies to compete is to compete with both quality and value. When competitors from overseas produce for less that is the path of least pain for a company to compete for "consumers choices" Remember the consumer is in the drivers seat.
America is not the only "rich" country to outsource to cheaper venues. Germany and Japan do the same thing. Volkswagen cars and Krupps coffee makers are made in Mexico very often that end up being sold in the US market. Sony, Pioneer, etc even outsource many sub-components of electronic devices to cheaper asian countries.
I am not saying this is good or bad but simply that this is the trend we see and again it is not unique only to the United States.
Fellowship
Originally posted by FellowshipChurch iBook
What is going on in America is that in the 50's people bought more domestic brands of goods as there was no competition really to choose from. People drove Fords, Buics, Chevrolets. They watched Zenith Televisions, listened to RCA radios, wore clothing made in the US. That was in the 50's
Now we live in a competitive global world where we exchange with a vast number of countries (Now americans have access to Hyundai cars, Sanyo televisions, and cheap imported clothing) and the only way for the former "big" american companies to compete is to compete with both quality and value.
He. What you say here is exactly what happened in the USSR (before and after the fall of the so-called Iron Curtain), but the other way round. During its communist madness the consumer actually didn't get paid money, rather the right to have certain goods. There was almost no import, while there was the cheapest labour (remember, Soviet money was not actually money at all), the cheapest products and, as a consequence, very profitable export. The country was in fact so rich that you can't imagine; the people, of course, were as extremely poor. While the system managed to dispense with import, it worked just fine. Even when big wigs came to use the country's resources for their own interests.
When the Iron Curtain fell, quality products appeared on the market and almost eliminated our own cheap crap. When the most able workers realized that they are as able abroad, they rushed out of the USSR for higher wages. Mostly for this reason we became unable to improve our industry's value/price ratio and, obviously, got unable to compete on our own national market. Economy crashed. Then it crashed again. And again. The situation has ultimately gone out of control due to the rise of crime and national property re-re-re-division beyond all hope.
Remember the consumer is in the drivers seat.
Yes, and if politicians could control the consumer as if we were one person, it would be a bastard's paradise.
Originally posted by costique
He. What you say here is exactly what happened in the USSR (before and after the fall of the so-called Iron Curtain), but the other way round. During its communist madness the consumer actually didn't get paid money, rather the right to have certain goods. There was almost no import, while there was the cheapest labour (remember, Soviet money was not actually money at all), the cheapest products and, as a consequence, very profitable export. The country was in fact so rich that you can't imagine; the people, of course, were as extremely poor. While the system managed to dispense with import, it worked just fine. Even when big wigs came to use the country's resources for their own interests.
When the Iron Curtain fell, quality products appeared on the market and almost eliminated our own cheap crap. When the most able workers realized that they are as able abroad, they rushed out of the USSR for higher wages. Mostly for this reason we became unable to improve our industry's value/price ratio and, obviously, got unable to compete on our own national market. Economy crashed. Then it crashed again. And again. The situation has ultimately gone out of control due to the rise of crime and national property re-re-re-division beyond all hope.Yes, and if politicians could control the consumer as if we were one person, it would be a bastard's paradise.
Very interesting. You make excellent points in your post.
Fellows