The piece, by Mark Landler (view it here), is a good summary of something that is both so obvious and so significant that it almost doesn't need to be reported, yet it is appalling that it's reported so seldom: China's role in the easy-money, cheap-credit binge the US economy has been hydrophobic on since ... the 80s ... Clinton introduced PNTR with China in 1999 ... the tech boom crashed ... OK, there are many starting points. The reporting here is decent, though it's more like a synposis than anything indicative of the scope of the subject. But, significantly, I hope it's a first step to understanding in much greater detail the root of a collapsing American -- and global -- economy. There were many factors that went into the housing -- and general consumer -- bubble that continues today, and from which we'll still be seeing much worse effects for another year or more. The mess was caused by banks pushing up profits via off-balance sheet credit default swaps and sketchy investments; homeowners and consumers who forgot that they need to have money to finance exorbitant purchases; a weak Congress totally ignorant of what was going on; and Alan Greenspan.
You boys BOTH deserve a medal for that one!
Keep interest rates low so we can sell our products and be employed and not demand our rights, all of which serves the good of lucky scientifically harmonious society
You're a hell of a guy, Phil Knight
But more importantly, US executives, consumers and government officials need to recognize the importance of investing in competitiveness in the domestic market to ensure their long-term success. That means doing what the Germans, Japanese, Finns, Koreans and French do: investing in advanced manufacturing techniques to make production cost- and quality-efficient at home, rather than investing in new facilities in China to exploit cheap labor. The latter route may be good in the short run, but long term it will do nothing but hollow out the US operations of a company: Like telecoms company 3Com, when your production is all in China and most other US companies also have their production there, soon your operations are all their as are your customers. At that point, there's no reason to continue as a US company, while it makes more sense to sell to a Chinese competitor. And those competitors come about via local workers leaving your factories to take government offers to create Chinese-owned competitors. So you sell for cheap to a competitor who beats you on cost and connections in China that never would've existed had you and your fellows not gone for the cheap-labor move. In short, exploiting cheap labor is long-term bad for your company, destroys shareholder value -- and it screws over your kids' economic future.
I have lived in the former Soviet Union. It's ugly. And I can see the US heading in that direction if we too allow our economy and production base to be hollowed out -- as the USSR did by growing dependent on oil, gas and a generally BS castle-in-the-sky economic system. I increasingly am inclined to describe our economy as just that -- a castle in the sky, built on Chinese government investments fueled by Chinese government-subsidized production of goods to Americans living and losing their jobs amid decaying, unused old factories and who wouldn't be able to afford the goods were it not for the Chinese government investments fueled by ... (it's the song that doesn't end -- till it does!).
What you really don't want. Trust me
Thanks to the Times for finally opening up this issue -- but what the hell took you people so long? Three WTFs to Congress for still refusing to address this, the biggest systemic threat to the country at a time when it's proved insane not to address our systemic failures in time.
(Side note: Try using your post-Christmas sale shopping to buy exclusively non-Chinese things. It's really, really hard -- and leaves you feeling satisfied when you can find a non-Chinese product. Moreover, it gives you an appreciation for how addicted to Chinese goods we are. And, if any other overly robust market -- tech stocks, houses -- must come down, then it seems there's something akin to a bubble in Chinese products. They're inescapable, omnipresent, and seem too good to be true. And, given our dependence on them, they probably are. I have no idea how this bubble could fall apart, but they always do, and this one will too. What happens if Taiwan declares independence and the US supports it? We'd be without boots, shower curtains, mops, TVs, computers, sunglasses, watches, auto parts and -- increasingly -- certain food and medicine until we gave in to China's demands. Reliance on one trade partner -- no matter how closely geopolitically aligned your interests are -- and they aren't here -- is dangerous. Chinese goods could well be the next great bubble.)