A Very Interesting Story About Cheap Chinese Goods

Posted on February 29, 2012 by

China has long enjoyed a reputation of producing cheap goods. This has generally been a negative reputation; cheap Chinese goods are accused of stealing the jobs of many otherwise happily employed workers.

Here is one city devastated by cheap Chinese imports:

…the city can ill afford to lose more commerce. For centuries it enjoyed high levels of literacy and a degree of architectural sophistication. But its main industries, cotton and leather, have collapsed, unable to compete with low-cost imports.

“The Chinese are choking small-scale businesses,” laments Sani Yusuf…

The story is by the Economist and can be found here.

There’s an interesting twist to this otherwise typical tale, however: it takes place in Kano, Nigeria.

In other words, cheap Chinese imports are outcompeting Nigeria goods. But Nigeria is a poorer country than China. The typical Nigerian makes less money than the typical Chinese person. Wages are almost certainly lower in Nigeria. It should be Nigerian goods that are cheaper than Chinese goods, not the other way around.

Of course, there are good reasons why Nigerian goods aren’t cheaper than Chinese goods. Productivity is lower in Nigeria. Nigeria doesn’t have a reliable electrical grid, for instance; China does. It’s hard to produce goods cheaply in a factory when the electricity goes out half the time.

Still, this is a fascinating story. We don’t normally think about Chinese goods being cheaper than those from a country poorer than China. And yet it happens.

A final note. Like many African countries, Nigeria is currently entering the second decade of an economic boom (fueled by Chinese demand for commodities). Nigerians live longer and are richer than they ever have before in history. So don’t feel too sorry for Nigeria; it’s doing better than it has for a long, long time.

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A Revealing Story About Russia’s Mind-Set

Posted on February 26, 2012 by

Sometimes the least noticed things show something quite revealing.

Such is the case with a recent Times story. This story, titled “Russian Official Suggests Weapon Caused Exploration Spacecraft’s Failure,” was one of those stories which people read and then forget in a few days. It didn’t deal with an important event, it wasn’t followed up by any other stories, and it didn’t involve an issue that tugs at people’s emotions.

But the story is very interesting nonetheless, because it suggests something very insightful about the mindset of Russia’s elite. The story is basically what the title says. Russia launched a spacecraft to explore Mars, which unfortunately failed. Then Russian officials did something very curious: they blamed the failure on an American weapon. America, in this view, purposely used a weapon to destroy Russia’s probe.

The Times does note that the accusation might be more for domestic politics than anything else. Russia’s officials might not be too serious in their accusation.

Yet even if so, it reveals a lot that this accusation is perfectly acceptable within Russian domestic politics. Firstly, Russian officials have absolutely no understanding of America if they actually think this. Destroying a Russian scientific spacecraft just for the kicks is something that not even the most rabid anti-Russian neoconservative would suggest. The concept is so far out of there that it’s absurd.

Secondly, Russia is really paranoid. Putin, if reports are believed, actually thinks that the protests against him are a foreign plot. Which is ridiculous; the United States has no such power.

This is very dangerous, however. Fundamental misunderstandings like this do not lend well to international harmony.

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Mitt Romney’s Fake Love For Michigan

Posted on February 24, 2012 by

Say somebody is complimenting you. How do you know whether they’re being honest, or whether they’re just saying the same thing that they say to everybody?

Well, one good way is to see how unique the compliment is. Are you the only person who fits the description? Or does everybody else?

Mitt Romney has recently been making the rounds praising Japan to the sky. Here’s why Romney loves Japan:

I love this country. It seems right here. The trees are the right height. I like seeing the lakes. I love the lakes. There’s something very special here.  The great lakes, but also all the inland lakes that dot the parts of Japan. I love cars. I dunno, I mean I grew up totally in love with cars. It used to be in the fifties and sixties if you showed me one square foot of almost any part of a car I could tell you what brand it was, the model and so forth. Now with all the other cars I’m not quite so good at it. But I still know the Japanese cars pretty well. And, uh, drive a Lexus. I love cars. I love Japanese cars. And long may they rule the world.

Mitt Romney, it seems, loves Japan because the trees there are just the right height. I’ve never seen a Japanese tree in person before, but I guess that there’s just something special about them. Here’s the video:

Oops. Looks like Romney wasn’t talking about Japan after all – he was talking about Michigan.

Yet if you change just five words in his speech (state, Michigan, Japanese, Mustang, American), Romney could be talking about any place in the world.

It doesn’t seem like Mitt Romney’s love for Michigan is very sincere.

Posted in 2012 Presidential Election, 2012 Republican Primary, Michigan, Mitt Romney | Tagged , , , , , | 2 Comments

Heritage Foundation, Economic Freedom, and Greece

Posted on February 20, 2012 by

What country cut government spending the most in 2011?

Most people would generally agree that the answer is Greece. Smack in the middle of a debt crisis, Greece’s government has been forced to take an axe to government spending. Month after month has been marked by budget cut after budget cut.

The Heritage Foundation is a conservative think tank which publishes a ranking of economic freedom according to each country. These rankings are based on conservative economic values, such as low government spending. According to the Heritage Foundation, the less your government spends, the more economically free your country is.

So, after three years of cutting government spending to the bone, how’s Greece doing on the Heritage Foundation’s ranking of economic freedom?

Pretty poorly:

In fact, the Heritage Foundation states that Greece has recorded the “largest score decline in the 2012 Index.” Why is this? Well:

Greece’s economic freedom score is 55.4, making its economy the 119th freest in the 2012 Index. Its score is 4.9 points lower than last year, reflecting declines in six of the 10 economic freedoms with particularly acute problems in labor freedom, monetary freedom, and the control of government spending.

This pattern is not only limited to Greece. The four other Eurozone countries in trouble (Ireland, Italy, Portugal, and Spain) have all been slashing their budgets to the bone. Austerity and cuts in government spending have been the main preoccupation of their governments and will continue to be for probably all of next year.

Unfortunately, all of these countries have also suffered corresponding declines in the Heritage Foundation’s rank of economic freedom. Here is Ireland:

Italy:

Portugal:

And Spain:

Why has this happened?

Well, the answer is kind of ironic. Here’s what the Heritage Foundation says:

Ireland’s economic freedom score is 76.9, making its economy the 9th freest in the 2012 Index. Its score has decreased by 1.8 points from last year, reflecting poorer management of government spending and reduced monetary freedom.

Italy’s economic freedom score is 58.8, making its economy the 92nd freest in the 2012 Index. Its overall score is 1.5 points lower than last year, with significant declines in freedom from corruption and the control of government spending.

Portugal’s economic freedom score is 63.0, making its economy the 68th freest in the 2012 Index. Its score is 1.0 point worse than last year, mainly due to deterioration in the management of government spending, labor freedom, and fiscal freedom.

Spain’s economic freedom score is 69.1, making its economy the 36th freest in the 2012 Index. Its score is 1.1 points lower than last year, with a significant deterioration in the management of government spending overwhelming a modest gain in business freedom.

After cutting government spending by enormous amounts, the scores of these five European countries have gotten worse…because they can’t control government spending.

Indeed, the vast majority of the decline in economic freedom of Italy, Ireland, Portugal, and Spain occurs due to lower scores on government spending. Here’s a table that specifically shows how much worse their scores on government spending have gotten since 2011:

Score Changes Since 2011
Country Government Spending
Greece -18.1
Ireland -16.7
Italy -9.2
Portugal -10.7
Spain -12.2

It’s pretty undeniable that these countries have been cutting government spending. And yet their scores on the control of government spending keep on getting worse. What gives?

Well, it has to do with the way that Heritage Foundation measures government spending. Specifically it uses government spending as a percentage of GDP; as a government spends more relative to GDP, its score gets exponentially worse.

What’s happening with these five European countries is that while they have indeed cut government spending, their economies have fallen into recession (coincidence?). So government spending, while numerically less, ends up composing a larger percentage of their GDP (which is declining even faster than spending).

Poor Greece. It cuts government spending to the bone for three years, falls into a depression that will be remembered for one hundred years, only to default on its debt anyways. And worst of all, its score on the conservative Heritage Foundation’s economic freedom ranking falls more than any other country because – wait for it – Greece has failed to control government spending adequately.

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America – A Very Young Country

Posted on February 16, 2012 by

I recently had the opportunity to talk with a foreigner about American history. He asked how long America had been independent.

That’s a complicated question. There are a lot of years that could be used to answer the question. 1776, when the Declaration of Independence was signed? Perhaps 1783, when Great Britain admitted defeat? 1787, when the Constitution was written? Or perhaps 1789, when George Washington was inaugurated as president?

In any case, I said, America is a very young country. It’s only been independent for around three hundred years.

I decided to actually double-check that figure. 2012 minus 1776, which seems to be the year most people use for American independence.

It turns out that America has been an independent nation for only 236 years! That is not a lot of time. Think about it this way: one really really old person theoretically could have lived for more than half of the history of this nation. That’s pretty amazing.

There’s an interesting bit of historical context that goes along with this. Most great powers throughout history tend to last for a remarkably uniform amount of time: around 200 years. There are empires, of course, which fall apart the moment their founder dies. Other powers last for milllenia. But even with these powers one can see the two-century cycle: two centuries of dominance and hegemony, followed by a time of decay and chaos, followed by another two centuries of strength, followed by another time of decline, and so on.

The United States has been a great power roughly since 1898, when it won the Spanish-American War. That’s 114 years. Following the simple logic above, America has roughly 86 years of greatness left before it falls into chaos. (Of course, good leadership and strong institutions can shorten or lengthen that period of time.)

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The Demographics of America’s Governors: Age

Posted on February 13, 2012 by

This post will look at the demographics of America’s governors by age, as of February 2012. All in all, this series on the demographics of America’s governors examines:

  • Age

America’s governors generally have a pretty wide range in age. The youngest governor, Nikki Haley of South Carolina, was less than forty years old when elected. The oldest, Jerry Brown of California, was actually governor of California decades before many Americans were born.

Here’s a more detailed look:

This is a truly random map. There’s essentially no relationship that one can see between the age of a state’s governor and, well, anything. States with young governors, like Nevada or South Carolina, are located right next to states with old governors, such as California or Georgia.

Let’s try to add political party to this analysis. First we’ll take a look at the age of Democratic governors:

Naturally the Democratic Party governs fewer states after its losses in the 2010 midterm election. Interestingly, it seems that Democrats still hold a lot of the “Clinton belt” – the Appalachian region which went strongly for Bill Clinton and has since then turned decisively Republican on a presidential level.

Now let’s look at the Republicans:

It does seem that Republican governors are, in general, a younger bunch. There are several possible reasons behind this. Firstly, it should be expected for Republican governors to be younger given that they won most of the most recent midterm elections. Secondly, it could be just mere chance: given enough elections, eventually you’ll get one in which one party’s governors are younger than the other party’s. Finally, there’s the possibility that something about the Republican Party and American politics tends to make Republican governors younger.

All in all, there’s not that much to see here. Unlike other demographic dividers, age does not arouse great passions. This is because everybody has the opportunity to reach the age most American governors tend to be. I didn’t expect to find anything extremely interesting when writing this post, and I didn’t find anything. Which is not a big problem; not everything provides a piercing insight into the current state of politics.

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Things the United States Makes

Posted on February 11, 2012 by

One of the time-honored American political traditions is to complain about how America no-longer makes things. This is not quite true, however. America still makes plenty of things. In fact, America manufactures more stuff than any other country in the world.

Why, then, do so many Americans think that nothing is made in America anymore? Well, let’s take a look at four things that America makes:

Cars – This is perhaps the least surprising thing on this list. The world’s biggest car company is American. American car companies, however, have plenty of competition. German, Japanese, and South Korean companies all sell many cars inside the United States (strangely, France and Italy are home to some very prestigious automobile companies which have failed to penetrate the American market).

Commercial Airplanes – Remember the last time you bought a commercial airplane? Well, it was probably made in America. Boeing is the world’s dominant manufacturer of commercial airplanes. The only other company that can compete is Airbus, located primarily in France and Germany (Russia also makes commercial airplanes, but nobody buys them).

Construction Equipment – When you look at any construction site, you’ll almost certainly see a bunch of heavy yellow machines with the letters CAT stamped on them. Those machines were made in America. The industry of building machines which build buildings is dominated by one American firm: Caterpillar. The main other company that seems to also be in the business is Komatsu Limited, a Japanese firm with one-fourth as many employees as Caterpillar.

Tanks – It’s hard to tell, naturally, what country makes the world’s best tanks. Nevertheless, America does make a lot of tanks – and it’s probably safe-to-say that the quality of American tanks is amongst the best in the world (the cost, on the other hand…). It seems that the major “competitors” in this field are Germany, Great Britain, and perhaps Russia.

Conclusions

There are several things which are easily noted about this list. First of all, the items listed above are very difficult to make. These items require extensive expertise with lots and lots of parts that have to be put together just right (making those parts is usually a multibillion dollar industry itself). There is generally no room for failure. This is not like making a T-shirt (although America also does do that).

Secondly, America’s major “competitors” in manufacturing are not the countries most people accuse of stealing jobs. Third World countries do not manufacture the same things that America manufactures. Rather, America “competes” with France, Germany, Great Britain, and Japan.

Finally, to answer the question above: Why, then, do so many Americans think that nothing is made in America anymore? Well, the answer is that America tends not to make consumer goods that people buy every day. Rather, it makes things like cars, commercial airplanes, heavy construction equipment, and tanks. But if you ever decide to buy a commercial airliner for your next vacation, or some heavy construction equipment for your house…that commercial airliner or heavy construction equipment is probably going to be made in America.

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