This is not in any way to toot my own horn, but to make a point. In the last two weeks, I have twice been introduced to big multinationals as a speaker about China and Japan. These are both companies with operations in China, and one is definitely a group you've heard of. Both times, the conversation has gone like this: The company and I chat about what kinds of issues I think are interesting going forward as China tries to move away from an export-dependent model to a more consumption-oriented economy.
They listen politely, express enthusiasm, and then say: many of our staff are in other countries, so we're not sure they're really interested in China. Or, to quote directly from an email sent to the person acting as my representative in this: "Alex sounds great! Very interesting background. Just thinking, as the audience is from all over Asia. It would be useful if it was something that has relevance/interest to people across the region rather than just those in China and Japan.” The other company mentioned that they had staff in South America, where staff definitely didn't care about China.
What amazes me is that anyone today sees economic and business issues in China as somehow only relevant within Chinese borders. It feels kind of moronic to repeat here, as I know my readers already know this, but pick a subject - commodities markets, cars, America's debt, industrial design, innovation, manufacturing, inflation or deflation - and China's fingerprints (and sometimes its whole paw) are all over it. Officially now the world's second largest economy, China is a driving force in most industries.
There is a debate underway about the gap in understanding or knowledge of each other between China and the US, or China and the West. The Chinese migrant workers I speak to don't have a very sophisticated understanding of the US, but I am starting to wonder how different this is from the executives at these big multinationals.
Tuesday, August 17, 2010
Friday, August 6, 2010
The mummification of Japan
I'm in Osaka this weekend to appear on Yomiuri TV's Wake Up Plus, that rare beast: an intelligent TV show. The story of the moment in Japan is the nationwide hunt for missing centenarians, following the discovery of a modern-day mummy in his bed, 30 years after his death. Officials suspect that a relative did not notify the government of his passing in order to receive the man's benefits.
For the moment, the debate in the Japanese media (including Wake Up Plus) is focused on three main elements: the government's failure to detect which of its benefit-receiving citizens are living and which are dead; the Japanese tendency to leave family matters to the family; and the fact that Japan's privacy laws hinder investigations into this kind of fraud. To me, the tenor of the debate itself reflects Japan's self-flagellating tendency to blame the government and politicians in the first instance.
The fact is that these missing pensioners are a reflection of how deeply and painfully Japan's long stagnation has affected its oldest and youngest citizens. Trite as it sounds, I'll recount a conversation I had with a taxi driver here in Osaka yesterday: at 65, he receives about US$1200 a month in pension benefits from the government. His rent accounts for half of this, and after utilities, his cell phone bill and food, there isn't much left. So he continues to work as a taxi driver, taking home about $1800 a month. (One might wonder how he is allowed to work while receiving public benefits, but the benefits, like the minimum wage, were not meant for people to depend on entirely, I believe.) $36,000 a year isn't bad by global standards, but consider that this man might live for another 30 years and this is as good as it will get for him. While he is clearly putting money aside for his retirement, he expects he will have to move into a smaller apartment when he retires. This is not the fancy globe-trotting retirement that I, at least, had imagined for Japan.
While we hear much talk about China getting old before it gets rich, Japanese people are getting poor before they get old. Younger Japanese will not receive the $1200 a month that that taxi driver gets; they will likely receive much less.
Putting aside the fact that pension fraud is a crime, one larger issue behind these missing old people and their mummified remains is that younger Japanese need to rely on their parents' retirement benefits because the economy is not providing sufficient job opportunities.
Every trip to Japan is more depressing than the last these days; I stay in hotels that will, without the help of big spending Chinese tourists, likely lay fallow, listen to music from pianos that play themselves, pass through ghostly tourist districts designed for a wealthier country. Japan is no longer the country it once was. Policymakers in other rapidly aging countries (and those that struggle to create new jobs, like the US) should take notice.
For the moment, the debate in the Japanese media (including Wake Up Plus) is focused on three main elements: the government's failure to detect which of its benefit-receiving citizens are living and which are dead; the Japanese tendency to leave family matters to the family; and the fact that Japan's privacy laws hinder investigations into this kind of fraud. To me, the tenor of the debate itself reflects Japan's self-flagellating tendency to blame the government and politicians in the first instance.
The fact is that these missing pensioners are a reflection of how deeply and painfully Japan's long stagnation has affected its oldest and youngest citizens. Trite as it sounds, I'll recount a conversation I had with a taxi driver here in Osaka yesterday: at 65, he receives about US$1200 a month in pension benefits from the government. His rent accounts for half of this, and after utilities, his cell phone bill and food, there isn't much left. So he continues to work as a taxi driver, taking home about $1800 a month. (One might wonder how he is allowed to work while receiving public benefits, but the benefits, like the minimum wage, were not meant for people to depend on entirely, I believe.) $36,000 a year isn't bad by global standards, but consider that this man might live for another 30 years and this is as good as it will get for him. While he is clearly putting money aside for his retirement, he expects he will have to move into a smaller apartment when he retires. This is not the fancy globe-trotting retirement that I, at least, had imagined for Japan.
While we hear much talk about China getting old before it gets rich, Japanese people are getting poor before they get old. Younger Japanese will not receive the $1200 a month that that taxi driver gets; they will likely receive much less.
Putting aside the fact that pension fraud is a crime, one larger issue behind these missing old people and their mummified remains is that younger Japanese need to rely on their parents' retirement benefits because the economy is not providing sufficient job opportunities.
Every trip to Japan is more depressing than the last these days; I stay in hotels that will, without the help of big spending Chinese tourists, likely lay fallow, listen to music from pianos that play themselves, pass through ghostly tourist districts designed for a wealthier country. Japan is no longer the country it once was. Policymakers in other rapidly aging countries (and those that struggle to create new jobs, like the US) should take notice.
Tuesday, August 3, 2010
Techimerica
If there is anyone out there still reading, I apologize for the long silence. Since I last posted, the issues I raised in The China Price have become headline news internationally. I’ve been traveling for most of that time, mostly in China and the US. I have become increasingly worried, in my travels back and forth to the US, about the lack of debate about one of the consequences of China’s rise for the rest of the world: the increasing difficulty developed countries will have creating jobs.
A brief conversation I had yesterday with two business types – one an investor, the other the CFO of a coal company heavily involved in China – underscores the point. I said I was worried about the way that China’s economic growth, the flypaper nature of manufacturing and technology combined to make creating jobs for ordinary Americans substantially more difficult. They swiftly changed the subject.
What I was talking about is not just “Chimerica”, but “Techimerica”, or China + America + technology. I haven’t drawn any grand conclusions on this subject, but it seems to me that as China’s manufacturing engine draws in more (not less, ye “rising wage rates will drive factories out of China” enthusiasts) jobs, the Chinese consumer becomes more important to the global economy, and American companies become ever more focused on cutting costs by eliminating jobs at home, there will be less and less for Americans to do. Technology accelerates this trend, in part because so much of manufacturing is related to technology, and so much of that manufacturing now happens in China, but also because technology makes the economy more efficient. We no longer need as many people to get the same job done (that’s the old “increasing productivity” chestnut-argument about US manufacturing, but it applies more broadly to things like the iPod, which has created more jobs in China than in the US.)
What I’m describing on the cost-cutting side is the same kind of full-throated capitalism that daily leads to the excesses of “the China price” for Chinese people. But despite all the rhetoric about creating “green jobs”, the larger problem is that there is not a greater sense of urgency about the long-term consequences of these factors for American job creation, and therefore for the standard of living for many Americans. Anyone who wants a preview of what this will look like can visit the people I talk to in Japan, who, after years of standing elbow-to-elbow with mainland Chinese on factory lines in Chiba (competing with the Chinese factory worker in their own country), are giving up hope of ever making a living above the poverty line. Or talk to some of the ordinary Americans who already have little choice but to work at Wal-Mart in order to be able to shop at Wal-Mart.
Andy Grove wrote eloquently of this problem in Bloomberg BusinessWeek last month, describing how Silicon Valley start-ups don't create American jobs the way they used to, how that mechanism is broken, and thus how this blind faith that innovation will save the US economy is a fallacy. Grove asks: “what kind of a society are we going to have if it consists of highly paid people doing high-value-added work—and masses of unemployed?” The US has become “wildly inefficient” at creating technology jobs, he says, citing compelling calculations. Bob Herbert also wrote passionately about this subject in the New York Times last week.
One luxury of blogging, as opposed to writing papers, books or newspaper articles, is that you don’t have to strain for policy recommendations. Commentary suffices. Though I have no grand plan for creating American jobs, I will say that while I agree with the arguments that both Grove and Herbert make, I am interested in the arguments Matthew B. Crawford makes in Shop Class as Soulcraft. I worry about the policies Grove and Herbert propose. Grove wants to tax American companies that rely on offshore labor (good luck with that protectionist gambit). Herbert, in an outro so vague that if written by an external contributor it would never pass the New York Times op-ed editors’ muster, suggests that we follow the examples of Germany and Japan and “value our workers”. Anyone who has spent any time in Japan in the last few years can tell you Japanese workers don't feel valued.
I don’t know what the solution is, but to return to my discussion with the investor and the coal man, I can say that very few people want to talk about it. It’s a lot more fashionable to opine about the US deficit and the Krugman-Ferguson spat.
American companies and investors (not workers) are benefiting so hugely from Techimerica in the short and medium term (and who really wants to think about the long term?) that it will require discussions as painful as the ones we had about “death panels” in the health care reform discussion to address it. But, as I meet American aerospace engineers helping the Chinese design airplanes and talk to my brother, a talented industrial designer whose work is increasingly being outsourced to Chinese engineers at a fraction of the cost, I know that this is a debate we must have, and soon.
A brief conversation I had yesterday with two business types – one an investor, the other the CFO of a coal company heavily involved in China – underscores the point. I said I was worried about the way that China’s economic growth, the flypaper nature of manufacturing and technology combined to make creating jobs for ordinary Americans substantially more difficult. They swiftly changed the subject.
What I was talking about is not just “Chimerica”, but “Techimerica”, or China + America + technology. I haven’t drawn any grand conclusions on this subject, but it seems to me that as China’s manufacturing engine draws in more (not less, ye “rising wage rates will drive factories out of China” enthusiasts) jobs, the Chinese consumer becomes more important to the global economy, and American companies become ever more focused on cutting costs by eliminating jobs at home, there will be less and less for Americans to do. Technology accelerates this trend, in part because so much of manufacturing is related to technology, and so much of that manufacturing now happens in China, but also because technology makes the economy more efficient. We no longer need as many people to get the same job done (that’s the old “increasing productivity” chestnut-argument about US manufacturing, but it applies more broadly to things like the iPod, which has created more jobs in China than in the US.)
What I’m describing on the cost-cutting side is the same kind of full-throated capitalism that daily leads to the excesses of “the China price” for Chinese people. But despite all the rhetoric about creating “green jobs”, the larger problem is that there is not a greater sense of urgency about the long-term consequences of these factors for American job creation, and therefore for the standard of living for many Americans. Anyone who wants a preview of what this will look like can visit the people I talk to in Japan, who, after years of standing elbow-to-elbow with mainland Chinese on factory lines in Chiba (competing with the Chinese factory worker in their own country), are giving up hope of ever making a living above the poverty line. Or talk to some of the ordinary Americans who already have little choice but to work at Wal-Mart in order to be able to shop at Wal-Mart.
Andy Grove wrote eloquently of this problem in Bloomberg BusinessWeek last month, describing how Silicon Valley start-ups don't create American jobs the way they used to, how that mechanism is broken, and thus how this blind faith that innovation will save the US economy is a fallacy. Grove asks: “what kind of a society are we going to have if it consists of highly paid people doing high-value-added work—and masses of unemployed?” The US has become “wildly inefficient” at creating technology jobs, he says, citing compelling calculations. Bob Herbert also wrote passionately about this subject in the New York Times last week.
One luxury of blogging, as opposed to writing papers, books or newspaper articles, is that you don’t have to strain for policy recommendations. Commentary suffices. Though I have no grand plan for creating American jobs, I will say that while I agree with the arguments that both Grove and Herbert make, I am interested in the arguments Matthew B. Crawford makes in Shop Class as Soulcraft. I worry about the policies Grove and Herbert propose. Grove wants to tax American companies that rely on offshore labor (good luck with that protectionist gambit). Herbert, in an outro so vague that if written by an external contributor it would never pass the New York Times op-ed editors’ muster, suggests that we follow the examples of Germany and Japan and “value our workers”. Anyone who has spent any time in Japan in the last few years can tell you Japanese workers don't feel valued.
I don’t know what the solution is, but to return to my discussion with the investor and the coal man, I can say that very few people want to talk about it. It’s a lot more fashionable to opine about the US deficit and the Krugman-Ferguson spat.
American companies and investors (not workers) are benefiting so hugely from Techimerica in the short and medium term (and who really wants to think about the long term?) that it will require discussions as painful as the ones we had about “death panels” in the health care reform discussion to address it. But, as I meet American aerospace engineers helping the Chinese design airplanes and talk to my brother, a talented industrial designer whose work is increasingly being outsourced to Chinese engineers at a fraction of the cost, I know that this is a debate we must have, and soon.
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