Tuesday, November 29, 2005

Ben Stein on globalization

Ben Stein is most likely familiar to you as a comedian in movies and on TV. Earlier in life he attended Yale Law School and worked in the Nixon White House as a speechwriter. Below he gives the positive spin on globalization. However, at the very end he addresses the winners and losers issue, and his description of losers sounds a lot more like the average american than his description of winners!

China: Friend or Foe?
Wednesday, November 23, 2005

A few nights ago, I had the pleasure of speaking to and MC'ing the annual dinner of the Semiconductor Industry Association (SIA). Attending were the major players in the chip world, the Texas Instruments, AMDs, National Semiconductors, and -- well, you get the picture. Very successful, super smart men and women filled the room -- real geniuses who did things like create programs that read and check immense software codes written in India, only do it in real time over the internet. These are people who started and run incredibly complex and productive businesses.

You might have thought it would be a rollicking good time, but it was not at all.

The three main speakers -- George Scalise, head of the SIA; Charlene Barshefsky, formerly Clinton's Special Trade Representative; and Byron Wien, a major power at Morgan Stanley -- were deeply worried about Far Eastern competition in the chip world. It is simple enough: China, Taiwan, Thailand, and India have far lower labor costs than we do. They have up-to-date machinery and a highly trained, well motivated labor force. They can make chips for less, and they are starting to become players in a big way -- not just in chip manufacturing (or "fabbing," as they say) but in design, which was formerly an American fiefdom.

Trees Do Not Grow to the Sky

The three main speakers showed charts and graphs pointing out Asian inroads and the declining U.S. share of production and design. And one speaker expressed doubt that we would see our kids live as well as we do because of Asian competition.

This prompted several thoughts in my wooly head.

First of all, we start out very far ahead of China in wealth and income. The per capita GDP of the U.S., depending on how you measure it, is as much as 40 times Chinese per capita GDP and not less than 12 times by any measurement.

Yes, China is growing much faster than we are, at roughly 10 percent per year. If current trends last, China will overtake the U.S. in per capita GDP sometime this century. But current rates for China are extremely high. No nation has ever been able to sustain the rates China is experiencing for very long. History argues that China will not be able to do so either. Put simply, trees do not grow to the sky.

However, the Chinese are an amazing, intelligent, hard working, well disciplined people. Possibly they will be able to enjoy super high growth rates for a prolonged period. It would be a historical anomaly, but maybe it will happen.

Is What's Good for China Good for the U.S.?

Even if China became much richer than it is now though, that would not necessarily make us poorer. China is a prodigious buyer of foods and resources, and we have a lot of both. Chinese industry will be partly owned by U.S. investors, and Chinese prosperity will (if no fraud is involved) make them much richer. The fact that a very large nation like China becomes rich makes individual American workers who compete with China worse off, but it does not make America as a nation worse off.

Next, is it not interesting that China, in a state of brutal totalitarian rule, was really not a threat to us except in fiction? But under capitalism, China is making us all run around screaming in fear. I am really not sure what we have to fear from China. The country is our partner in prosperity, not our enemy. The earlier we work out a durable framework of respect and cooperation in trade and policy, the better off everyone will be.

But the main thing I want to express, as I did to the SIA, is that China is getting rich because its people are getting well educated, because they are working hard, because they are saving, and because they are investing. These are exactly the same things that made America rich. And these are exactly the same things that are allowing Hispanic and Asian immigrants to America to move up the economic ladder.

Who Wins, Who Loses?

Young Americans who study hard, learn serious subjects, do not lose themselves in computer games, avoid doomed industries, learn good work habits, save prudently, and invest sensibly will be well off no matter what happens in China or Taiwan or India.

Americans who are slothful, do not pay attention to economic trends, learn no useful skills, do not save, and do not invest wisely will roll downhill fast.

But for the disciplined among us who learn from the Chinese the keys to wealth as the Chinese learned from us and we learned from all of history, the future is bright.


Anonymous said...

Frankly, I don't treat Ben Stein very seriously. Too often in the past he has proven himself to be nothing but a wingnut, fierce Republican Apologist who just doesn't have a clue.

I don't believe he is a respectable person in any way.

CBBB said...

The problem is that almost every industry in North America is a "doomed industry", except for Walmart, McDonalds, and running Outsourcing Consultant firms perhapes.

So once again we have that naive, pie-in-the-sky belief from people like Stein that getting a quality degree in math, science, or engineering will put you on the right path.

Mike Reardon said...

Advanced Nations are transferring production and advanced design and development to several competing Lower Wage Nations. We will receive in the bargain, advancing technological products and services, which are kept at lower prices because of the competition from Lower Wage Nations.

We the Advanced Nations, can use these advanced innovations to maximum effect, and so gain still higher productivity, and gain high profit return to our investors, directly increasing wealth while not starting inflationary forces.

The Lower Wage Nations will increasingly have to spend more on commodities, to retain production at sustainable levels. Also they can not fully use the advanced productivity, that will be available to Advanced Nations because the forces would be disruptive to the fuller employment they do need to retain power.

It is only for the Advanced Nations, to find the most effective social and economic input for these increasing advanced innovations, that will be made available by this transfer.

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