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Chinese Whispers May 5, 2010

Posted by markswill in Navel Gazing, Politics, Schmolitics.
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My last blog before the election is written as clouds of volcanic ash again threaten British airspace, an oil slick the size of Belgium (or at least Yorkshire) threatens the Gulf of Mexico and a Tory election victory threatens to return Blighty to the dark days of the Thatcher government (© G. Brown). Of these, the danger that concerns me most is the one augured by the ruptured undersea oil pipe off the coast of Louisiana, although that other slick, the one that characterises the leader of the Conservative party, comes a close second. And there are parallels between the two that might be usefully drawn.

I understand that Louisiana’s major industry, namely fishing, will be irreparably damaged, even ended for good, if the umpteen thousand barrels of oil thus far chucked up reaches the shoreline, as will many species of wildlife, many of them rare and threatened. And if the Tories get a majority, we can pretty much expect that what remaining manufacturing industries we have left in this country will be allowed to wither on the vine with little or nothing put in place to mop up the massive unemployment that will follow. And that rare but noble species, the arts administrator, will also largely disappear if predicted cuts to cultural budgets materialise, as they surely will. (Subsidies for opera will of course remain intact, because Tory grandees do like a nice bit of Cosi Fan Tutte). These two changes will, in my view, be responsible for the biggest and most destructive changes to our social and ultimately our economic landscape since the war (la Thatcher’s Falklands War, that is).

I’ve already written about the decline of UK’s manufacturing base (They Don’t Make ‘Em Anymore – Oct 6th 2009) and its consequence for our balance of payments, and since then the continuing decline of the pound, and indeed the Euro mean that this (im)balance – already the largest of any developed nation – will inexorably increase during the term of the next government. For those concerned about our slow descent into Third World Nation status, and I just know that means you, recent news from China support some of my October doom-mongering inasmuch as wages settlements in what is now clearly the manufacturing base of choice for all Western nations have risen by an average of 20% in the last year and will continue to do so. This in turn means that China is increasingly having to turn to making luxury goods, e.g. cars, to maintain profitability, luxury goods that more and more if its own citizens can now afford.

This is having a profound effect on the Yuan, the Chinese currency which its government freed from the yoke of dollar parity some years ago and is now rising fast. This not only means that Western countries who’ve abandoned their manufacturing base are having to pay more and more for the goods they once bought cheaply for the Far East, but also that China’s foreign investment programme continue to march ahead, outstripping that of most Western nations, particularly in countries which have dodgy governments and human rights records (e.g. Burma, Chile, Nigeria) but which have plentiful reserves of minerals such as lithium, copper and of course oil which it needs to fuel its increasingly consumer-oriented economy.

And call me gloomy or alarmist, which I know you will, but as seasoned yank financial commentators predict the ultimate collapse of the Euro following the Greek bailout, and the IMF being stretched beyond its original remit as more and more Western economies approach it cap-in-hand, can the day not be far off when China becomes the bank of last resort for broken economies? This isn’t crude xenophobia – indeed I can see some benefits to having China as the word’s most pre-eminent economy – but how Britain will adapt to becoming a low-wage satellite of an oriental cultural powerhouse is anybody’s guess. All I can be happily sure of is that it won’t be in my lifetime (unless that bottle of snake oil I just bought off the interweb actually works).

Which brings me back to the last day of electioneering and Gordon Brown on the Today programme mouthing off about Labour’s commitment to manufacturing and their creation (their creation?!?!) of a squillion apprenticeships to that end. It’s all horseshit of course and not that I expect any of you who read this are wavering voters, but should it possibly be the case, I’d advise you to put your ‘X’ elsewhere, preferably Monster Raving Loony.

 And on that note we must await Friday’s result with the encouraging dictum, god help us all.

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Comments»

1. George Snow - May 5, 2010

Mark- you’re a good fellow. We all like you very much. While we all have the utmost respect for the former Lord Sutch and his dynamic political force, the Raving Monster Looney Party, any suggestion that we should vote anything other than Tory threatens another session of Labour Party rule. That is unthinkable. If the English vote for these lying, greedy, over-ambitious, middle-class, corrupt, thieving, self-serving socialist hypocrites then I’m leaving the country.

markswill - May 5, 2010

George, as ever I bow to your foresight and being always one jump ahead of the game.

2. Pete - May 5, 2010

Blimey, Mark – can’t even find a decent British razor blade to slit my wrists since they started making those little safety cassette jobs that glide over the skin but pound for pound cost more than gold….

I wonder though about the rebalancing that will occur as China’s home economy burgeons. If wage rises there make them less competitive there is perhaps some hope for manufacturing in this country. After all, manufacturers chase lower costs but wages are only part of that. As it gets more expensive to manufacture in China the sacrifices that are made in terms of verbal communication, long and expensive transportation links and risk of counterfeiting make less sense. Intelligent and committed investment will be a major factor as you intimate but, ever the optimist, I can envisage a somewhat rebalanced future in the (hopefully not too) far distance.

And then I see Cameron oiling up the rump of the public and the razor blades seem to beckon again. You are an expert in finding obscure components for old machinery. Where should I look…?

markswill - May 5, 2010

Electric razors are the answer, obviously. (Made in, er, China).

Pete - May 5, 2010

How do you slash your wrists with an electric razor? The Chinese are pretty good at making things these days – traditional sharp edges and tinplate are for novelty collectors only.

3. Chris Rowley - May 5, 2010

Funny how both UK and US economic elites were/are happy to
let their manufacturing sector transfer out to other venues, or even
to be sold off to outside firms. The contrast with the German model
is very sharp. China has chosen the German way, too.
Must be rooted in the social disdain that US/UK “ownership” has for
unionized workers. They’d rather not have manufacturing, than have to come up with a social method of rubbing along with an organized work force capable of holding its own. The Germans have managed this trick, we’ll see if the Chinese can.

Ian Powis - May 6, 2010

I don’t think I’m quite as gloomy regarding the future as you are Mark. 13 years of Labour incompetence surely must have dented your enthusiasm for socialism (or perhaps you don’t consider Labour a proper model). I’ve never had the luxury of knowing my vote counted, having either lived in solid labour or solid conservative constituencies all my life so living in Buckingham this time around at least it’s been a bit more interesting. 11 names on the ballot paper this morning! Bercow for speaker, the ‘unofficial’ conservative, and Farage from UKIP with a supporting cast. Whoever wins has to take the axe to centralised government spending. The country simply can’t afford it and no doubt we will see Greek style demonstrations when it becomes clear exactly what is necessary.

4. WTK - May 6, 2010

I dare say I should have responded to this post earlier but I fortunately waited long enough to watch little Greece expose the EU’s feeble currency model and a union held together with bailing wire and chewing gum. Unfortunately the fiasco managed to “contage” and upset everyone’s apple cart. Raise taxes and bail out Portugal, Spain, Italy, and let the whole CEE join in. Mr. Empty Suit is trying that old saw in the US that “taxes are just a great way to bump start an economy.” Are politicians simply thieves or are they just plain nuts? And we wonder why manufacturing couldn’t survive taxes and unions? All trade-level jobs go through multiple steps seeking the lowest taxes and tariffs and the cheapest labor. Like water down a slide. And as machines gain intelligence and functionality the skill of the laborer goes down, not up, albeit supervisory positions increase in skills, and on a 12-1 ratio. It’s plain and simple exploitation of the least developed. Worked for developed nations for centuries. I won’t get on a rant about macroeconomic issues as my blood is beginning to simmer. Well, Happy Elections—Oh, and may the best man win. I fondly remember Mr. Brown as a wet dishrag…


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