By on September 8, 2013

yihong

And every nation but one signed on. A hundred and fifty-five nations agreed to a kind of form of blackmail, which is that you want to sell cars to the U.S., you want to sell, you know, orange juice to the U.S., you’re going to have to go along with deregulating your banking system, accepting our derivatives junk, our junk bonds and our junk derivatives, and opening up your sectors to Goldman Sachs and JPMorgan, so that Morgan, Citibank, and others are allowed to operate internationally. The effects, of course, have been disastrous.

It’s a stunning allegation, but it’s one that increasingly appears to be backed by solid evidence: the United States “exported” bad banking practice in exchange for importing everything from bananas to Bentleys. But there’s more.


Speaking to Truthout’s Jaisal Noor, muckraker/author/progressive Greg Palast made an interesting claim: that the United States allowed China to send us junk parts in exchange for junk bonds, inadvertently crippling the Detroit economy in the process.

By the way, even when we look at the destruction of Detroit, China signed the agreement, agreed, okay, we’ll open up our banking sector to derivatives and your toxic junk, but we want your auto parts industry in return. So we basically handed over the auto-parts industry to China. That was their deal. Two million manufacturing jobs shifted to China from the U.S., and auto-parts was a big part of it, which led to the–. One of the reasons why the city of Detroit went bankrupt despite the auto bailout is that auto parts did leave for China. So, you see, there’s direct repercussions of this type of secret connivance between our officials and banks. It’s a very dangerous business. And for Summers to have been in the middle of organizing this and coordinating this and not revealing this–they’re allowed to have these meetings, but they can’t do it in secret–it raises questions about whether this guy should be the central banker of the United States.

This is the sort of allegation which offers a very simple answer to a very complicated question, and perhaps for that reason it should taken with anything from a grain to a lick of salt. This isn’t a centrally planned economy and the government can’t just “shift” two million jobs. Still, it’s worth discussing, particularly as the not-quite-totally-open Chinese auto market continues to require a couple pounds of flesh with each imported American product.

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96 Comments on “Was The American Auto Parts Industry “Given” To China?...”


  • avatar
    Xeranar

    You mean our right-wing free market led government pushed more free market agendas on the rest of the world? Crazy! I’m sure the excited free marketers will try and cry socialism some how. It’s nothing new, the republican-led agenda in the 1990s and 2000s sped up these issues with their globalized corporate agenda. Now we’re stuck trying to unravel the crap they did.

    • 0 avatar
      CJinSD

      Do you know who the Summers referred to in the article is and who his cronies in the US government and academia are? Take off your prism.

      • 0 avatar
        Lorenzo

        Larry Summers WAS Secretary of Treasury under Clinton, but only from 1999 to the end of 2000, after the free trade agreements of the ’90s. After a stint as president of Harvard, he served as director of the National Economic Council under Obama during the 2009 meltdown. After looking over the Obama team, he confided to a colleague, “we’re the only adults here”, and left the administration after less than two years. He MAY become our next Federal Reserve Chairman.

        It was free trade with China, allowing their auto parts makers to undersell American makers, and not a diabolical agreement to ship jobs to China, and American auto makers pressuring them on price, that damaged the American auto parts industry. That’s the effect of free trade, the cheapest (materials, labor) source for anything drives out higher cost competition. The public is supposed to benefit from lower prices, but a balance must be struck to protect jobs.

        • 0 avatar

          I agree. We need US jobs. Not cheaply made Chinese parts that leave US Citizens out of work.

          • 0 avatar
            threeer

            Sherma, it’s a three-legged stool, and for America, all three legs are wobbly (at best). 1) Rampant consumerism and demand for “cheaper is better” product, 2) Corporate profit “ueber alles” and 3) Government policy that eintices companies to stay in America. We’re failing on all three fronts, and most Americans simply don’t care, nor do they see the correlation between their lost job and the overwhelmingly foreign-contented goods they flock to Walmart (or Buick..go look at the Chinese content of the Encore) to buy. America produced nearly 40% of the world’s goods in the 80s. Today, hanging onto 20%. Our last trade SURPLUS (overall)? Ronnie was in office. In the end, I believe that the biggest mover of change will be if (and only if) consumers truly begin demanding American-made products. That will drive manufacturers to provide what the consumer is demanding and may just turn Congress back to looking at what needs to be done to get America moving again. I’m an optimist, but even these days it’s hard not to see the loss of our independence to countries like China…without a shot being fired.

          • 0 avatar
            danio3834

            Then buy only US made parts. You have the power.

          • 0 avatar
            mklrivpwner

            @threeer – You don’t need to artificially demand American products. But the consumer needs to be educated about a balance between low price and high quality. Price needs to not be the only factor in a purchase decision. And that needs to extend from the cars we drive to the parts we put in them to the TVs on our wals, the phones in our pockets, and even the toys (especially the toys) we grab on the way home to surprise our children with.

            I am ALWAYS willing to pay a premium for a high-quality product. I am ALWAYS willing to pay a premium to ensure a safe manufacturing process (for the workers and environment). I am NOT going to pay a premium based solely on a “Made in America” sticker when a higher-quality, safer, more advanced, better, imported product is available for cheaper right next to it on the shelf.

            And THAT is a free market.

    • 0 avatar

      After summer comes winter. Snow you know and cold after sunny, warm and nice weather. And that’s what happen when republicans take power and free market rules. Except in California it is always summer and sunny and you know why.

    • 0 avatar
      TomHend

      May I say it again? If you think there is a difference between the right wing and the left wing in this country you are what they call at Zero hedge a “sheeple”

    • 0 avatar
      cartunez

      I laughed that you think the free market had anything to do with this – Then I cried when you actually believed the bulk of the one party system in this country actually understands the term free market.

  • avatar
    IndianaDriver

    There’s too much paranoia in this story, so here’s a reverse conspiracy question – did the United States print boatloads of money and skyrocket the debt purposely to devalue the dollar and steal auto jobs from Japan and Europe?

    I think anybody can come up with a story to try to prove something they believe in.

  • avatar
    PaulyG

    I love ya Jack, but I am in the bond world and this is heading deep into tin foil hat territory. China did not buy our junk (below investment grade) bonds. This is actually a very small market in the grand scheme of debt instruments. Most of the bonds are held by U.S. pensions, insurance companies, and mutual funds.

    WE financed our profligate lifestyle by having the Chinese buy our treasury bonds. In essence, we borrowed from the Chinese to buy cheap goods from them. WE as Americans decided that low prices at Wal Mart were more important than jobs. WE dug our own graves, not some secret cabal of bankers.

    • 0 avatar
      Jack Baruth

      I appreciate the chime-in. I’m not a part of cabal of bankers, secretive or otherwise, so the more information I have the better :)

    • 0 avatar
      billfrombuckhead

      Or it could be argued that China financed our war in Iraq so China could get the Iraqi oil contracts. I guess it’s better for the oil companies that Saddam’s not pumping that $30 a barrel oil anymore. They made out like bandits when the per barrel price went over $100. Was this the first war to raise the price of a commodity?

    • 0 avatar
      Ryoku75

      While I agree with your comment, I want to mention that Wal Marts low prices were not driven by us but an attempt on their part to compete with local Mom and Pop shops and the like.

      • 0 avatar
        jeffzekas

        +1

      • 0 avatar
        Vega

        Yes they were. If consumers would really value the mom and pop shops higher, they would tolerate the higher prices and Walmart would not be thriving with their low price strategy.

      • 0 avatar
        raph

        Compete? That’s a bit euphemistic, I think dominate would better describe Wal Mart’s strategy when it comes to mom & pop businesses.

        • 0 avatar
          Ryoku75

          Wal Mart versus other business’s in general is better said as “dominate”, they even have a Sams up to compete with a local mall!

          But I always like to shop and local Mom n Pop stores, I often show others the “vintage” stuff I find at good prices to encourage them to do the same.

          Plus, I’ve never had people on their phones walk out in front of me at Mom n Pop stores.

    • 0 avatar
      Vega

      “Most of the bonds are held by U.S. pensions, insurance companies, and mutual funds.” Don’t forget the stupid German money…:)

    • 0 avatar
      danio3834

      “WE financed our profligate lifestyle by having the Chinese buy our treasury bonds. In essence, we borrowed from the Chinese to buy cheap goods from them. WE as Americans decided that low prices at Wal Mart were more important than jobs. WE dug our own graves, not some secret cabal of bankers.”

      This right here. Meddling with the finances at the top however only makes things worse, intentional or not.

    • 0 avatar
      Pch101

      “In essence, we borrowed from the Chinese to buy cheap goods from them.”

      I understand that point, but it’s actually the reverse.

      A trade deficit, by its very nature, has to be financed. That means that the cost of the deficit has to be funded through debt, or by selling off assets.

      If we want to run trade deficits, then it’s necessary to borrow some money. Other nations are willing to make those loans to the US because it is a major economy with predictable growth and an impeccable track record of repaying public debt, i.e. Treasury bonds. (The US has never defaulted.)

      If we don’t want to accumulate more debt from the trade deficit, then we could do that tomorrow by running a trade balance. But that would come at an enormous cost to us in the form of business losses and reduced lifestyles, so we aren’t inclined to do that.

      If the US reaches a point that it becomes a bad credit risk, then this situation will be forced upon us. The problem won’t be with the debt per se, but with the substantial reduction in lifestyles that come from the reduced access to imports.

      Much of the trade deficit is a reflection of the US’ desire to export inflation. In effect, it’s wage arbitrage — we import goods with prices that are cheaper due to the lower wages abroad, and therefore get to buy more and better versions of them.

  • avatar
    billfrombuckhead

    Today’s conspiracy theorys are tomorrow’s history. The Wall Street banksters have earned the distrust about anything they do.

  • avatar
    sportyaccordy

    I would need to see China’s bond purchases over time to confirm this. But China is far from a majority stakeholder in our public debt. You can look to the Fed, who was in the game way before China, for that.

  • avatar

    The answer is obviously yes.

    After all why hire Americans when you can hire Chinese workers for one tenth the price?

    • 0 avatar
      ihatetrees

      To answer your question:
      With automation, rapid changeover ability, fast custom production runs, and high skill sets US firms can compete.

      German workers crush Spanish/Greek workers for productivity in many fields. Smart US firms have similar advantages over their foreign competition.

    • 0 avatar
      Scoutdude

      The problem is that we don’t have enough workers with the right skills necessary to support much of an increase in manufacturing in the US. Specifically manufacturing engineers to support the production lines. China has way more engineers of all types and are graduating them at a much higher rate than the US. A recent article on the new Motorola X phone that will be made in the US showed that the extra cost of producing it in the US would amount to about 1% of the unsubsidized retail price.

      Which is why I’m a big supporter of FIRST, usfirst.org that inspires today’s youth to pursue careers in science and technology while teaching them valuable life skills.

      • 0 avatar
        danio3834

        This is very true. There are tons of employment opportunities in engineering an technology. There is a major shortage in these fields and as such anyone with an engineering degree can basically walk into a well paying job.

        The problem is it can be hard, and most people still think they can go somewhere with an English degree.

        • 0 avatar
          Superdessucke

          Problem is our public schools, especially in inner cities which are teaching the largest groups, are turning out a bunch of illiterate dummies. We need to revamp our educational system to remain competitive!

          • 0 avatar
            danio3834

            I agree that’s one of the biggest parts of the problem. Many High School graduates are functionally illiterate, let alone capable of tackling problems that involve the use of calculus.

  • avatar
    readallover

    Really? I thought the conspiracy was the Foreign nations saying: `Sure, we will buy your bonds and keep you afloat, but while we have near-unfettered access to your markets, we reserve the right not to allow you into ours`.

  • avatar
    ihatetrees

    Sorry, there are so many interconnected reasons why Detroit and much of US industry is suffering. To pick THE main reason is open to endless interpretation (although I’d settle for crap management).

    Southern Michigan is mostly very nice and economically OK… Of course, disfunction and degeneracy increase geometrically when crossing into certain municipalities.

    US manufacturing is doing pretty well. For those with skilz who are willing to relocate, near six figure incomes with moderate OT is not uncommon. That said, low skill manufacturing jobs that pay ~$25 hour are almost GONE. Outside of government or other unionized protection rackets, they’ll be automated away to a higher skill set.

    Excellent piece on a US auto parts manufacturer from a libertarian perspective:
    http://www.econtalk.org/archives/2012/02/adam_davidson_o.html

  • avatar
    J.Emerson

    Palast seems either incapable or unwilling to understand why the Eurozone is experiencing the problems that it is. Greece doesn’t have 25%+ unemployment because the United States (unwisely) deregulated some financial instruments near the turn of the century. No amount of failed American mortgage derivatives will paper over glaring structural weaknesses, crushing sovereign debt, widespread tax evasion, and bad currency policies. I’m for bank reform as much as the next plebe, but this flogging of the Amercan financial bogeyman is getting stale.

    Whatever damning memo he might have won’t do anything to dismiss the simple allure of low-wage manufacturing. You don’t need vague intimations of financial blackmail to understand why Company X might want to import parts from a country with a $3 hourly wage rather than make them in the United States.

    • 0 avatar
      billfrombuckhead

      Wall Street banksters were in from the ground floor of Greece’s Euro problems.

      “On the day the 2001 deal was struck, the government owed the bank about 600 million euros ($793 million) more than the 2.8 billion euros it borrowed, said Spyros Papanicolaou, who took over the country’s debt-management agency in 2005. By then, the price of the transaction, a derivative that disguised the loan and that Goldman Sachs persuaded Greece not to test with competitors, had almost doubled to 5.1 billion euros, he said.
      Papanicolaou and his predecessor, Christoforos Sardelis, revealing details for the first time of a contract that helped Greece mask its growing sovereign debt to meet European Union requirements, said the country didn’t understand what it was buying and was ill-equipped to judge the risks or costs.
      “The Goldman Sachs deal is a very sexy story between two sinners,” Sardelis, who oversaw the swap as head of Greece’s Public Debt Management Agency from 1999 through 2004, said in an interview.
      Goldman Sachs’s instant gain on the transaction illustrates the dangers to clients who engage in complex, tailored trades that lack comparable market prices and whose fees aren’t disclosed. Harvard University, Alabama’s Jefferson County and the German city of Pforzheim all have found themselves on the losing end of the one-of-a-kind private deals typically pitched to them by securities firms as means to improve their finances.”

      http://www.bloomberg.com/news/2012-03-06/goldman-secret-greece-loan-shows-two-sinners-as-client-unravels.html

      BTW, the derivatibes markets are very weakly regulated, so who knows what goes on between Wall Street and China.

  • avatar
    Pch101

    The thing that I most loathe about conspiracy theories is that they’re a sure sign of intellectual laziness. It’s easier to blame The Other and their black helicopters than it is do some research and develop a genuine understanding of the subject.

    Technology and the opening of markets has facilitated the offshoring of production to lower wage countries. Auto production is essentially an oligopoly, which gives automakers tremendous leverage in driving down parts prices. That, in turn, creates pressure for parts makers to reduce their costs.

    All of that means that some of the auto supplies business is destined to be offshored. Some of that business will go to China. (And surprisngly, a lot of it hasn’t.)

    The US domestics parts industry was becoming more geographically diffuse two decades ago. Detroit has been losing population since Eisenhower was president. The decline of that city is nothing new; five minutes of research should make that apparent.

    In essence, the US exports inflation. If everything was made here, then prices would be higher in order to pay for the higher wages, and there would in turn be fewer people who could enjoy those products because they would cost too much. The only conspiracy here is the extent of the effort made to keep the American consumer happy. Bread, circus, and all that.

  • avatar
    HerrKaLeun

    didn’t W. bush also collaps the World Trade Center, and didn’t the Landing on the Moon only happen in hollywood and aliens invaded the US in the 1950′s?

    what all conspiracy theories have in common is that they put way too much faith into the conspirator’s. Could W. really pull off 9/11? Could the landing on the moon really be faked for the enitre world, especially for the soviet union that had space ships themselves and could have called the hoax in no time?

    It wasn’t clinton, bush or the chines that forced us. We wanted cheap 4,000 ft² manisons with zero down, we wanted 1000 cheap plastic toys for our children. People here on the forum complain about the EPA all the time, all the red tape. But we gladly complain about lead-painted Chinese toys while at the same time we praise the chinese economy for having less red tape.

    We want an iPod that cost $200 and has more computing power than the NASA in 1960. but now we wonder why the workers in china get paid so little, or why Walmart employees only make minimum wage.

    It is so easy to blame someone else.
    UAW workers wanted to make $35 an hour for 25 years and then have a big pension with free medical… and it worked for a while. the same UAW employees happily went to Walmart buying Plasma TVs, PCs etc. because it was made so cheap by people that make $1 a day. Of course we accepted it as our right to make $35 an hour while someone in china makes less. however, reality caught up with us…..

    • 0 avatar
      Jeff S

      Good points and now we are paying the piper. It is not only the greed of the banks and financial institutions but it is our own individual greed. As Charlie Brown said, “We have met the enemy and it was us.”

  • avatar
    -Nate

    @ Jeff S. ‘ As Charlie Brown said, “We have met the enemy and it was us.” ‘

    I thought that was Pogo .

    -Nate

  • avatar
    jimbob457

    Be careful about taking advice on economic policy from drunken blowhards in airport bars or ‘economic experts’ wearing tinfoil hats. The facts are that by far the largest holder of US debt is the Bank of China (a wholly-owned subsidiary of the Communist Party of China). They could hardly have avoided this given their long-standing policy of deliberately depressing the value of the Yuan in order to stimulate exports. It is called promoting export-led economic growth.

    The basic facts are clear enough. The Chinese (PRC) own $3.5 trillion in financial claims against the rest of the world – more than three times more than Japan (another export-led growth promoter) and, probably, 5 to 10 times than they actually need. About 70% of this hoard is held in the form of US dollar-denominated claims. Most are either issued by the federal government or co-signed by it.

    I have summarized the Wikipedia references below:

    List of sovereign states by foreign-exchange reserves

    The list below is based on IMF data – when available; Otherwise – U.S. Central Intelligence Agency data are indicated.
    For consistency, forward currency swap contracts are not included in this list until they mature, figures that include them may be higher or lower than those listed here.
    IMF or other outstanding loans are not shown here; if they were accounted for many nations would list lower.

    1 People’s Republic of China 3,515,738 Mar 2013[1]
    2 Japan 1,254,033 Jul 2013[2]
    Eurozone.svg Eurozone 781,536 Jul 2013[2]
    3 Saudi Arabia 688,431 Jul 2013[3]
    4 Russia 512,834 Jul 2013[2]
    5 Switzerland 507,998 Jun 2013[2]
    6 Taiwan 411,716 Jun 2013[4]
    7 Brazil 371,966 Jul 2013[2]
    8 Republic of Korea 329,709 Jul 2013[2]
    9 Hong Kong 303,582 Jun 2013[2]
    10 India 287,897 May 2013[2]
    11 Singapore 261,096 Jul 2013[2]
    12 Germany 197,279 Jun 2013[2]
    13 Algeria 191,600 Dec 2012[5]
    14 Thailand 172,249 Jul 2013[2]
    15 Mexico 168,901 Jun 2013[2]
    16 Italy 154,705 Jul 2013[2]
    17 United States 148,767 Aug 2013[2]

    The composition of foreign exchange reserves is presently regarded as a state secret in the People’s Republic of China. All financial records pertaining to the foreign exchange reserve have been poorly documented.

    The official sources elaborate that US dollar holdings make up 60% of the reserve, and that a fifth (up to 400 billion USD) of the reserve is held in Fannie Mae and Freddie Mac bonds.

    As of June 2008, the PRC held USD 447.5 billion of US agency bonds.[2]

    The reports from the Bank for International Settlements, released by Reuters, reported that the US currency represents most of the settlements of China’s international trade.

    An unofficial spokesperson considered that the US dollar asset accounts represent 70% of the reserve, as the Japanese yen takes up about a 10% portion,
    while the Euro and the British pound occupy the rest.

    • 0 avatar
      HerrKaLeun

      Thanks for summing up all these amounts.

      Having large currency reserves doesn’t necessarily mean that country wants to have huge $-reserves. What it means they have a trade-surplus with the US (or another country that pays in US$) and don’t find someone else to take the US$.

      For example Germany has a trade surplus and accumulates US$. what would the German government want to do with US$? All bills (except oil, that is traded in US$) have to be paid in Euros. Germany also doens’t have ambitions to ruin the US economy, or influence US politics with its currency reserves. So the only proper solution would be to sell all those US$ and get euros. Well, since many other countries have the same surplus of US$, that woudl devalue the US$ very quickly. So in order to keep the value of their reserves, and to be able to continue sellingthey need to keep US$.

      The problem is the US doesn’t have many exportable goods to reduce the trade deficit. What does the US produce the world needs? export good #1 are agricutlural products. Boeing sells airplanes, Microsoft sells software… but that almost ends the list of “really great” products the world is hot for. So untill the US makes good that are very desirable and still keeps buying goods fromt eh world, thsi trade deficit and the currency reserves will prevail.

      • 0 avatar
        jimbob457

        Collecting debts, keeping order in the world and inventing a few new industries like the integrated circuit and the internet has, up to now, been a good choice for the US. Nothing lasts forever, but so far, so good.

        Keep an eye on ‘fracking’. We are really good at mining.

      • 0 avatar

        You forgot a couple things. First it is dollars and other valuable papers – it is the biggest export. Chinese sell us almost everything and we sell them back dollars and treasuries (that is how trade is balanced, paper is really valuable, unless you really think that we will ever buy them back – how – paying other $$)? Then there are patents – US is #1 in the world, know how. Military equipment, agricultural products, multimedia content, pharmacy, cigarettes and so on so on. You will get a pretty long list.

    • 0 avatar
      Xeranar

      I would point out the largest individual debt holder is the bank of China, they’re still a minority holder of all debt though, if we’re talking nationalistically US citizens and entities hold the majority, followed by China, followed by other groups. Nobody can seriously call their chip in on the US though, in fact it’s actually structurally built into the T-bond in that it will be paid off at such time like any other normal municipal bond. The only worry we would have is if people stopped buying T-bonds which is highly unlikely as they’ve never faulted and will effectively built inflation in almost every case. They’re the surest bet on the planet.

      • 0 avatar
        jimbob457

        As a practical matter, you are altogether correct, in my opinion, at least for the foreseeable future.

        Still, one can assume too much. One day at a private lunch with Ernie, the head of our local Federal Reserve Bank, he asked me what I thought of the Fed’s handling of the then recent failure of Chicago’s Continental Illinois Bank. They had just made whole everybody but the shareholders.

        Moral hazard, moral schmazard, I thought. So, I made a joke. “You have acted to avoid all bank failures but one” said I, “the really big one.” You had to be there to appreciate the look on Ernie’s face, to say nothing about the other guys at the table who worked for him.

  • avatar

    Outsourcing auto part production to China a brilliant move by Detroit – beat Asians with help from other Asians. After outsourcing to China the quality and reliability of Detroit built cars quickly caught up with Japanese counterparts and in some cases even exceeded. Today there is not much difference in quality between US Big 3 and Japanese Big 3. Only if Europeans and esp VW did the same…

  • avatar
    jeffzekas

    I work at Walmart. Shoes sell for $12 to $50. All made in China. All junk, lasting 5-6 months. Spend $50 to $100 for good, non Chinese shoes and they last 3-5 years. The problem: most WM shoppers are poor, uneducated, and shop for the here and now. Same for most auto parts buyers.

    • 0 avatar
      Xeranar

      ‘shop for the here and now’ is a bit of an anecdotal stretch. The issue is that they need an item today and can’t afford to wait for a shoe maker to build them good shoes or take the time to chase down a pair of red wings or something of the sort. It’s a matter of market accessibility combined with leverage from these groups. Not to mention the total loss of real wages due to the fall of unionization and the drive of corporate profit as taxes were lowered on corporations so that institutional profit became a real support structure for the capitalist class.

      But yeah….Good shoes are hard to come by…

    • 0 avatar
      Ryoku75

      That explains why whenever I walk into a Wal Mart almost everyone bumps into me, despite the stores being frankly too big.

      I only shop there for cheap bird seed and some day I’ll find a cheaper place with a safer parking lot.

      • 0 avatar
        Sceptic

        Exactly. I found it extremely offensive to be blasted with messages in Spanish on my once a year visit to Walmart a couple of years ago. And this is an area with maybe 5% Hispanic population. Target from then on when I need cheap stuff now.

        • 0 avatar
          Ryoku75

          Considering this is Wal-Mart we’re talking about, I’m surprised that the employees would judge someone on their ethnicity but never bat an eye at the weird tattoos that so many people have these days.

    • 0 avatar
      28-Cars-Later

      I’ve worn Nikes forever and I think on average I get a year out of them before they show reasonable wear.

  • avatar
    TomHend

    Jack I love you, but if you are just finding out about this now, you should stick to driving mustangs fast at Laguna Seca.

    What do you think “crony capitalism’ means?

  • avatar
    Big Al from Oz

    Contrary to how some view the US it is mostly economically free, NOT economically free. The US is similar to Germany, Sweden, etc with its economic freedom. So who’s socialist?

    Here’s and interesting map. There will be non-believers of the depiction of the how the world really is.

    Wall St and the lax regulatory controls in the US banking and finance sector is half the problem. Also, don’t forget it all isn’t a one way street working against the US in the motor vehicle manufacturing sector. Those differing regulations, tariffs, etc. This give the US a large buffer as well.

    The US has positioned itself. You can’t have a ‘pretend’ FTA or any trade agreement. I would rather all or nothing.

    http://upload.wikimedia.org/wikipedia/commons/9/93/2012_World_Map_of_the_Index_of_Economic_Freedom.PNG

  • avatar
    Scribe39

    Simplistic, but with a grain of truth. First, the global banks don’t give a damn about the U.S., only about where their profits come from.

    Second, China is sending poor quality auto parts over here. Sadly, that’s not the worst thing — they are also apparently sending a large amount of bad parts to our military, which should NEVER be buying from a potential enemy.

  • avatar
    Felis Concolor

    The kingpin angle on those skateboard trucks is terrible.

  • avatar
    threeer

    Scribe…and nobody seems to care. I wrote my congressional representatives regarding the infiltration of cheap Chinese goods into our military systems (and use of Chinese satellites for comms to troops overseas). All I got was a “I’ll keep an eye out” comment from one of them. China is neiter friend nor ally to the US. We butt heads with them on the world’s stage at every turn, then have our government sign agreements to allow them to process food for us (four Chinese facilities were given the green light to process chickens raised and slaughtered in the US to be sent all the way to China for processing, then sent BACK to the US. Go figure). When a country can no longer produce for it’s self, it becomes dependant on those that can. In our case, though we are certain to face China down the road (if not directly, then indirectly. Again.) in the Pacific to some degree, we are gleefully providing the financing for their rise to power and influence. I try really, really hard to read labels and buy as much of my goods from America as I can. And yes, it does sometimes require some planning ahead. There used to be a time when that was a good thing…

  • avatar
    Blue-S

    The proliferation of crappy Chinese-made auto parts is a damned shame. You can’t trust much of the stuff from your local Autostoned anymore. I trust used, OE parts from the U-pull-it junkyard for much of the repair needs on my 10-15 year old fleet. It’s frustrating that the low-priced junk is pushing out higher quality products…for which I’d gladly pay a premium if that superior part were available. The China-fresh eBay exhaust down pipe only lasts 16-20 hours race time on the LeMons/Chump racer before the flex joint breaks in two. The appearance of the polished stainless steel aside – it’s trash.

  • avatar
    Oelmotor

    This does not surprise me. If I see a GS1 number on a barcode starting with 690 to 695 (Made in China), I put it back on the shelf and try to find a better product.

  • avatar
    Jeff S

    Yes Nate you are correct it was Pogo, thanks for the correction. It still holds true.

  • avatar
    Jeff S

    It is easier said than done to avoid Chinese products. Computers, electronics, auto parts, and items for the garden. I have noticed some of the garden stuff made in China falls apart immediately. I keep buying shower nozzels for my hose to water my deck plants and before the end of the season either the sprinkler head falls off and will not stay on, it leaks, or it stops working all together. Not a real complicated item, but the Chinese have managed to perfect planned obsolence, but better a shower nozzel failure than a failed part on a car or plane. Can’t pull over to the side of the road to fix a failed part on an airplane.

  • avatar
    Stumpaster

    Let’s get something out of the way quickly – Chinese auto parts are junk; given a chance, Chinese would rather make junk.

  • avatar
    -Nate

    @ Stumpmaster : ” Let’s get something out of the way quickly – Chinese auto parts are junk; give a chance, Chinese would rather make junk.”

    That’s the same easy out thing Americans said about the Japanese in the 1960′s just before they got the quality thing down pat and zoomed past us in all aspects of manufacturing including taking good care of the worker bees who made the things we bought because they were both cheaper and better .

    Be *very* careful of underestimating our enemy and yes , I truly think China is our enemy .

    FWIW , one part of my job is buying tools & supplies for a large munincipality and on my watch , I don’t buy Chinese junk because it doesn’t last long and so wastes Taxpayers $ , a thing I detest .

    The worthless Chinese crap showing up in our Military is caused by AMERICANS who buy and re package it , make no mistake about that ~ it’s your own countrymen who are selling us out for a few lousy Dollars .

    -Nate

    • 0 avatar
      cartunez

      If you are refusing to buy Chinese made goods because they are all “junk” you should be fired. Yes the Chinese have had some quality lapses (but not America right?) but to paint their entire manufacturing base as a junk product maker is obscene. Maybe you should visit a few Chinese plants and see for yourself just how much junk they are making.

  • avatar
    redav

    Considering how China has set up their entire economy, educational system, etc., to be the world’s manufacturer of just about everything, I don’t really see a need for such a deal to have happened. They would have taken the autoparts business just like every other one, anyway.

  • avatar
    shelvis

    http://www.democracynow.org/2012/10/18/greg_palast_mitt_romneys_bailout_bonanza

  • avatar
    shelvis

    Dismissing this as a conspiracy theory because somehow Chinese product would eventually have ended up here thanks to the low cost of labor and little regulation completely forgets that we are supposed to have trade agreements and tariffs to keep that from happening. Not to mention the idea that we have infrastructure that is bought and paid for here. Cheap labor is not a reason (or at least not the only reason) for a company to uproot production here and reinvest cash in Chinese operations. There has to be further incentives for a company to invest as well as a relaxation of tariffs.
    If Palast can show that tariffs were changed around this time to favor Chinese auto parts and can further connect the dots back to the memo referenced, he could certainly be onto something.

  • avatar
    Jeff S

    The Chinese manufacturing is going the same route that most developing industrial economies. Japan and Korea both started out making toys, textiles, and lower skilled items. Then they produced clothing and small electrical appliances. Then more sophisticated electronics, motorcyles, and then cars. The Chinese quality will improve over time just as the Japanese and Korean quality. The next move for the Chinese is to export vehicles to North America. If you have noticed a lot more textiles and furniture are produced in Vietnam. Vietnam will most likely follow the same industrial progression. The difference today and in the future will be a lot of the lower skilled assembly jobs that have gone to China will come back to the US, but labor will be replaced with robotics. Last night 60 Minutes had a story on robotics and stated that robots would replace most lower skilled labor jobs.

    • 0 avatar

      Finally some intelligent thoughts about subject. It already is happening – wages go up in China and manufacturing jobs are returning back to US but this time to be performed by robots. It is already clear that there will be less and less manufacturing jobs in USA and unions will go a way of National Socialism and Communism i.e. to the junkyard of history. Unless of course unions can organize robots and Democrats bestow voting rights on robots (which is quite possible if you think about it).

      • 0 avatar
        Big Al from Oz

        @Inside Looking Out
        You’ve hit the hammer on the head of the nail. I laugh at the people who think that the Chinese or whoever else are taking jobs away.

        A classic example is agriculture. The advanced economies are the most productive at agriculture and manufacturing will head down that road too. The same can be applied to manufacturing, as I’ve stated in the past auto manufacturing isn’t high tech a auto plant can be built in any country with a port and electricity.

        I think what will in the ‘longish’ term made a country wealthy isn’t just manufacturing. That train of thought is very 1940s and 50s. Too many of us look at the past and not the future.

        What will make countries wealthier is the control of trade, not production alone. This is where the US is losing out.

        The Eurozone was set up to counter the large US market, now the Chinese will be as large as the US market within a few years. The BRICs are even discussing the formation of common financial/banking systems. In the auto manufacturing industry you have the US/Canada on its own with design. Much change is coming.

        If the US is to succeed in this new post GFC world it will have to work with others more closely. I do know from comments I have received on this site not many like this idea and want to manage the US with the same arrogant view the French have tried to employ.

        Look at France now.

        I will guarantee that the world will be completely different within a couple of decades and the US will not have the leverage it has now, it will have to work with others.

        The US will be powerful, it just will have to review the way it uses its economic power.

        The shale oil/gas boom the US is currently under going isn’t going to last forever. Even now India and the Japanese want cheaper gas.

        The US’s recent competitiveness isn’t just because of this oil/gas boom. In real terms the US has had a drop in the cost of wages (standard of living). Once this ‘honeymoon’ period ends the US will become less competitive and manufacturing increases will reduce.

  • avatar
    Volt 230

    Did anyone see the 60 ins report last night about US workers now have new competition: robots are replacing thousands of workers, that is why unemployment remains high despite a better economy, BTW my mechanic would use rebuilt, CV axles and rack and pinion units but now he gets them from China, almost the same price, with a better warranty, cause he said the locally rebuilt units were poorly re-manufactured.

  • avatar
    Jeff S

    @Big Al–The major productivity gains in the US are mainly due to robotics. If you get a chance google the CBS 60 Minutes segment on robots. It is amazing what robots can do from filling orders in a warehouse with a preciseness of a Swiss watch to the repetitive tasks on assembly lines 24/7 with the only downtime for routine maintenance and repairs. The gains in quality on fit and finish on cars and trucks is mainly due to robotics. In the 60 Minutes segment for $22k a robot can be purchased that does the same amount of work as 2 assembly line workers and if you include $3 an hour wages in China the robot still comes out a head cost wise even in a US plant. Many of the lower skilled jobs that can be automated will eventually leave China and be replaced by robots in North America. The cost savings are even before you add the shipping cost from China and the time it takes to ship goods from China. Much easier to change production to meet increases and decreases in demand if products are produced locally.
    That would be just as true for foreign owned plants in the US as well as domestically owned manufacturing.

    • 0 avatar

      The irony is that industrial robots are made either in Germany or Japan. Talk about German engineering. I am no expert in robots but it does not look like US is even a player in this area in any shape or form.

      China has a serious social and structural problems. They may go into depression in near future. Chinese history is the sequence of the one popular revolt followed by another. As recent as in 20 century – several times. So I would not rely on China taking over US any time soon or even ever. Socialist countries always have serious social problems and are inherently unstable. May be that is why they are labeled “socialist”.

      But replacing people with robots means there are no jobs available for humans and then you need high taxes and welfare system to help people to survive and it a moral hazard too.


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