China: The World’s Next Great Consumer Society
David Leonhardt has a monster column in the NYT Magazine section on China’s burgeoning consumer society:
“To continue growing rapidly, China needs to make the next transition, from sweatshop economy to innovation economy. This transition is the one that has often proved difficult elsewhere. Once a country has turned itself into an export factory, it cannot keep growing by repeating the exercise. It can’t move a worker from an inefficient farm to a modern factory more than once. It cannot even retain its industrial might forever. As a country industrializes, workers will demand their share of the bounty, as has started happening in China, and some factories will start moving to poorer countries. Eventually, a rising economy needs to take two crucial steps: manufacture goods that aren’t just cheaper than the competition, but better; and create a thriving domestic market, so that its own consumers can pick up the slack when exports inevitably slow. These steps go hand in hand. Big consumer markets become laboratories where companies know that innovations will be tested and the successful ones richly rewarded. Those products can then expand into countries with less mature consumer markets. Look at the telephone, the personal computer and the iPhone and iPad, all of which were designed in the United States and are now sold around the world.”
I can tell this will be my plane reading from Chicago to NY.
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Source:
In China, Cultivating the Urge to Splurge
David Leonhardt
Published: November 24, 2010
http://www.nytimes.com/2010/11/28/magazine/28China-t.html
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November 28th, 2010 at 12:31 pm
A good, if not lengthy, read.
November 28th, 2010 at 12:31 pm
And once they become the next great consumer society shopping replaces thinking or reading, no?
November 28th, 2010 at 12:56 pm
‘The United States, for all of our current problems, is still easily the world’s largest economy, which is partly because we made the transition from an industrial economy to a consumer economy.’
This is a remarkably complacent statement by Leonhardt. America’s ‘consumption economy’ is based on debt, and on the dollar’s obsolete privilege of serving as a global reserve currency — which is in the process of being taken away for being abused (e.g., QE2).
When China does revalue its exchange rate, the vaunted US consumption economy is going to find out how poor it feels to live in a crumbling military empire which is no longer able to supply its own manufactures.
November 28th, 2010 at 1:17 pm
machinehead,
if you’re at a loss, as to what to get yon’ Leonhardt for X-Mas, try one of these http://www.farmandfleet.com/products/277042-duraflex_muck_tub.html
**Makes hauling heavy loads of water, and other chores, a lot easier
~~
and, here: “…Eventually, a rising economy needs to take two crucial steps: manufacture goods that aren’t just cheaper than the competition, but better; and create a thriving domestic market, so that its own consumers can pick up the slack when exports inevitably slow. These steps go hand in hand. Big consumer markets become laboratories where companies know that innovations will be tested and the successful ones richly rewarded…”
v.
“…‘The United States, for all of our current problems, is still easily the world’s largest economy, which is partly because we made the transition from an industrial economy to a consumer economy…”
is a *beautiful contradiction..
we should remember http://www.amazon.com/Toxic-Sludge-Good-You-Relations/dp/1567510604 when reading “All the News, That’s Fit to Print” …
November 28th, 2010 at 2:04 pm
Mark,
Your zingers are becoming artistic. :)
Maybe we could put you in Ableson’s seat when he vacates Barron’s. I doubt you’d tow the party line but it is a nice thought :)
November 28th, 2010 at 2:28 pm
And if YOU want to cash in, I suggest you become a Chinese lobbyist for their rich corporations, once they democratize they will need another way to keep the regular folks subjugated. It’s lucrative here in the US, and the path to success has already been mapped out for you…
http://www.bloomberg.com/news/2010-11-17/insurers-gave-u-s-chamber-86-million-used-to-oppose-obama-s-health-law.html
Also, Did any of the nonsense they made up about Obama’s health insurance plans stick with you? In other words, how much of your brain were they able to buy? Death panels? Companies are cancelling “good” insurance for people? We’re becoming like France? Which one(s)?
November 28th, 2010 at 4:25 pm
Oh yes, China will make that jump. Less than a week ago we’ve learned that China will start selling a competitor to Boeing 737 in just a few short years, probably even before Boeing’s new 787 will make 1st commercial flight… The stories are implying that Chinese “learned” fast after Boeing, in their ultimate pursuit of the maximum short-term profit involved more sub-contractors than ever before, and let them use Boeing’s own blueprints to make larger and larger components. (I wonder if there was no sabotage on the part of some subcontractors…)
Also, as each and every chinese-made car fails mandatory european and US crash-tests, Ford was happy to unload Volvo in the hands of the same chinese. I bet the next gen. of chinese cars will pass the tests, and the 2nd gen in 5-7 years will be as good as Ford today. yes, I bet the chinese will “learn” that fast.
And while I personally will make every attempt NOT to fly on chinese-made planes or drive chinese-made cars for at lest their first decade in heavy commercial use, other countries, and especially china, will probably use then exclusively! Hey, BA and F! (and GM, Toyota, and Aerobus for that matter) – say “buh-bye” to that “promised land” of chines domestic market. You will be priced out and driven out of China as soon as your “expertise” won’t be needed any longer.
The short term greed (spike in profit, spike in share price, multi-million dollar bonuses and in-the-money stock options – happy retirement with 8- or 9-figure Cayman Island bank account ) of our corporate leaders is mind boggling! I wonder if even a single PRIVATELY OWNED large corporation gave their most advanced technology and trade secrets to the country that has no real patent enforcement system and no independent court system/judiciary? A country where the winners in business disputes are decided based on who is is related to a more powerful member of the Politburo!
You say Ford and Boeing are just 2 examples? Well, that’s because everything else already is made abroad!
November 28th, 2010 at 5:03 pm
b_thunder,
right you are, though, it goes waay beyond BA and F, see http://search.yippy.com/search?input-form=clusty-simple&v%3Asources=webplus&v%3Aproject=clusty&query=Clinton+Trade+Secrets+to+China+for+Campaign+Cash , for starters..
and, what wasn’t ‘given’, or ‘transferred’, to the PROC, they, outright Stole .. see http://search.yippy.com/search?input-form=clusty-simple&v%3Asources=webplus&v%3Aproject=clusty&query=Chinese+Counterfeiting+Zippo+Microsoft
talk about ‘Free Trade’ ~!
~~
HTCMSI,
re: Barron’s, maybe Rupert will let it go in a ‘BusinessWeek’-style deal, though, I’d be doubting He’s as stoopid as McGraw-Hill..
http://search.yippy.com/search?input-form=clusty-simple&v%3Asources=webplus&v%3Aproject=clusty&query=BusinessWeek+McGraw-Hill+Bloomberg+deal+
November 28th, 2010 at 5:06 pm
VD,
take a peek into ‘Accountable Care Organizations’, and let us know what you ‘think’..
http://search.yippy.com/search?input-form=clusty-simple&v%3Asources=webplus&v%3Aproject=clusty&query=Gottlieb+AEI+Accountable+Care+Organizations
November 28th, 2010 at 7:00 pm
b_thunder,
Any good business plan includes research on what the barriers to entry are for the competition. If your competition can simply take your design apart and create a ripoff, that just means that whatever you’re peddling is no longer all that innovative. It is a sign of commodification.
November 28th, 2010 at 10:54 pm
Agreed, this is a masterful piece of analysis which puts China in the proper historical perspective of the agrarian to industrial revolution, during which a country goes through an explosive growth period and can do almost no wrong economically. Leonhardt also looks ahead to see whether China will be able to make the transition to post-industrial society. Russia didn’t, Japan is struggling, Singapore did. Surprising– at least to me– is that many of China’s leaders are aware they will need to make this change, and are trying to take steps to deal with it.
The concern here, which Leonhardt only lightly touches upon, is that China, unlike Russia during its take-off stage, seeks to leverage the capitalist economic system to boost its growth, but like Russia during the Stalin era, philosophically has no problem with cheating or undermining that system, through currency manipulation, theft of intellectual property and cyberespionage, etc.
November 29th, 2010 at 5:26 am
Sir Christopher meyer got it right, it’ won’t restrain candor but will lead to increased security going forward. This appears to be more embarrassing than anything else. Wikileaks is a bunch of amateurs. Just think what the Russians & Chinese have already gotten.
December 3rd, 2010 at 3:04 am
Consider industrialization and “innovation” in economies like that of the U.S. and the others. They have to consume several times more resources than that of most nations in order to sustain a middle class lifestyle.
Now, China, and even India and other countries, want the same thing, and they have much larger populations.
December 3rd, 2010 at 9:09 pm
In China, they all want: a car, a cell phone and a color TV; they will get these. What they will NOT get is more civil liberties (freedom) which in turn will lead to civil unrest, especially by students in the cities and then who knows? Oh yes, food will also be a problem, not to mention the ravages of smoking, everybody smokes there, just got back from Beijing, air pollution galore, wouldn’t trade USA for China or the whole world. Also most people in China constantly lie (with a smile), must be in their genes? or Mao’s legacy?. No, China will not dominate the world anytime soon, not even Asia; we are still Rome! will be for a long time.