Not that Peter Schiff is unaware of China's negatives, but he does tend to be bullish on China. And of course, he is not the only one.
I only know bit's and pieces about China. This is a lot of anecdote, but it builds a picture...
Motorola built a plant in China, slated to only cost $500 million.
From this I take away:
Chinese workers make even the most beligerent US Union workers, whom I detest, look like honest, productive individuals. Of course, in the case of US Union workers, you can hire 20 Chinese to do what one union worker does, for less wages, and still have a better product. Nonetheless, there seems to be a very deep, pervasive attitude among the Chinese of "from each according to his means, to each according to his need."
Nokia built a plant in China several years ago, intending from the beginning to build cell-phones there that would be sold to the Chinese, primarily. Just as they were ready to begin production, Chinese officials informed Nokia that they would be exporting 65% of their production. Since Nokia had not planned for this, they had to suddenly shut down a plant in Ft. Worth, Texas. I worked at an automation company in the DFW area at the time, and Nokia was giving away automation workcells and industrial robots, capital equipment, from this plant. My company picked up about twenty of these free systems, components of which we utilized in equipment we subsequently built.
China can and will mandate what a manufacturer can and cannot do with little respect to any sort of constitutional law, or basic concepts of property rights.
From: The Bitter Truth about the Olympics by Phil Hearse
Building the Olympics sports facilities and transport facilities has cost a huge sum. The main stadium, the ‘birds nest’ designed by Swiss architects Jacques Herzog and Pierre de Meuron, cost about half a billion dollars. The National Theatre cost $350 million; the National Swim Centre $100m and the Beijing Wukeson Cultural and Sport Centre, incorporating a hotel and shopping mall, another $543million.
Associated with the holding of the Olympics is the Beijing airport third terminal designed by British architect Norman Foster, coming in at a cool $1.9bn and the new headquarters for China’s central television network, CCTV, that cost another $600 million. And these are just some of the major projects.
The private sector is involved in the building of these facilities, and despite their public funding, the private builders will become the operators of these new facilities for a 30-year period. In other words, huge amounts of Chinese state funding is being used to guarantee the profits of Chinese companies for years to come.
In order to clear the way for these new prestige projects, that will project Chinese power and influence on a world scale, 1.25 million people have had their neighbourhoods and homes demolished or their land confiscated. The many people who have complained or organised protests about this have been silenced by jail sentences or violence – not surprising in a country that has one of the most corrupt, violent and repressive state apparatuses in the world.
A famous case is that of Ye Guogiang, who on China’s National Day in October 2003 tried to kill himself by throwing himself off a bridge in the Forbidden City in front of hundreds of onlookers, in protest at the forced demolition of his family’s home and restaurant. But he survived and was sentenced to two years in jail for ‘disturbing social order’. His family continued to protest and were continually harassed by the Chinese authorities. There are many similar cases.
While the cost of the Olympic-related construction projects is enormous, outside China it would have been vastly more. What China had at its disposal was huge amounts of cheap labour. Construction workers, typically migrant workers unable to find work on the land, were usually housed in barracks on the construction site, paid an average of $4.7 a day and forced to work seven days a week. Many of these workers are employed by subcontractors and late payment or no payment of wages is common. The Chinese government itself estimated unpaid migrant workers’ wages in 2003 at more than $12bn."
I read somewhere recently where a recent visitor to Shanghai was marveling at the incredible building going on there. The statement seemed to be one of awe at the incredible economic activity occuring there. But is it rational activity, or is it misallocation on a massive scale?
Now in light of the lack of a true free-market in the US, and the distortions, misallocations, and malinvestment that government interference has caused here, how can China fundamentally be any better. They've certainly benefited by the relocation of manufacturing from many Western nations to China, undoubtedly. But all of the above seems to tell me that the current and future misallocations in China must be significant, and I don't see how they cannot be in for their own version of a deep recession or something worse, though it may take a decade or three to come to pass.
Jaycephus, I think you make good points. I myself do not agree with Peter Schiff that investing in Asia is better, or anywhere in the world to be honest. He thinks the Chinese government is going to smarten up and quit buying t-bills. I do not see it happening as long as the U.S. is the world's powerhouse. As far as I know, every industrialized country in the world is practicing fascism/socialism.
I once had a history professor say that his greatest fear is that "we would become to reliant on the system", meaning the market. I have since come to learn that his greatest fear should have been that the government would have so many restrictions on the market, that the market would not be flexible enough to react to change. This is what we are seeing in the world. Governments are completely inflexible and they are restricting the market through regulations, bailouts, and subsidies. It is not only in the U.S. Other governments are bailing out their banks. The EU is just one big book of regulations. Not one industrialized country in the world has a free currency market. There really is no where safe to put your wealth as long as governments can steal it at will through a printing press.
At most, I think only 5% of the adult population would need to stop cooperating to have real change.
Jaycephus:Another way to look at the figure is that if a migrant worker works full-time all year, and they failed to receive half of their pay for the year, it would take 16.37 million migrant workers to equal the $12 billion figure.
To be fair, estimates from Chinese sources of the number of migrant workers vary between 120 million and 280 million. At 120 million, the average unpaid amount per worker would be $100; at 280 million, it would be $42.86. Not insignificant if your annual income is around $1,700, but not necessarily crippling, either.
ProudCapitalist: I don't think that even the Chinese Communist party has the power to reverse the "greedily productive" feelings of many millions of chinese anymore. It's more like an astronomical phenomena. We westerners had something once, but now that stuff has removed itself to the other side of the planet.
I don't think that even the Chinese Communist party has the power to reverse the "greedily productive" feelings of many millions of chinese anymore. It's more like an astronomical phenomena. We westerners had something once, but now that stuff has removed itself to the other side of the planet.
My hope is that you are right, AND that China doesn't go along the path of fascist Germany.
We do have to start to 'produce' things here in the US again, or we become the next Great Britain.
Bruce, thanks for the missing number, though its fuzziness makes the US estimated number of illegal aliens look dead-on accurate. To the degree that we can trust them, it doesn't sound 'too' bad...
But 280 million migrant workers? That's on the order of the whole US working population roaming around China as migrant workers?
Anyway, the original point was simply that the reported costs of the Olympic venues were large, but building the same thing in a western country could have been greater. Although now that I think about the factors contributing to the ballooning cost of the Motorola plant I mentioned, maybe the productiveness of a US worker would have turned those numbers around!
Also, Thanks spideynw and ProudCapitalist for the inputs.