My focus on organic growing has recently been distracted by intrusions from reality – the fox raid on the chicken, a robbery while I was away from the house and, now, by unusual summer heat and the question of the economy.
I have always lived in the West – South Africa, the UK, and the USA and accepted the notion that the West led the way. But not anymore. For me it was the Olympics in Beijing, that signaled the rising ascendency of Asia.
In the 90’s and beginning of this decade we in the West lamented the industrial work camps of Asia where fellow humans toiled in (to our eyes) sub-human conditions producing clothing and footwear for our use. We did not appreciate that these cheap imports represented the export of our jobs. And the press, which guides or maybe reflects conventional thinking, didn’t help either. The view was that we, as an advanced country, shouldn’t worry about losing simple manufacturing processes (clothing and footwear), we would focus on the more complicated products and, of course, services. And then quite suddenly we were not manufacturing tv sets or other electronic products and a whole raft of other manufacturing skills had departed as well.
Conventional warfare where you fire bullets and lob shells and drop bombs has been superseded by economic warfare where the bullets are the consumer goods and the bombs are the vehicles we import. This is not fanciful thinking. A bomb destroys lives and infrastructure. An imported product displaces jobs that used to manufacture it, as well as the factories, technology and experience that produced it, and then disrupts communities and lives. Global competition is good, good for the consumer and for keeping our processes lean and vigorous, but when manufactured imports so greatly engulf our manufactured exports and over such a long period, the result is attrition and decline.
It has taken a long time to get there but we are now lamenting the lost jobs and trying to figure how to get them back and this topic may dominate our politics in coming months.
Perhaps, for starters, we should try figure why we lost the jobs in the first place. Or why do civilizations and nations which were triumphant, decline?
We could consider the decline of ancient Greece, or Rome or other great civilizations. Or look at more familiar topics – the business started by the founder, continued by his son and driven into the ground by the grandson. A familiar recurring theme. Does success go to our heads and hubris lead us to unsafe choices, or do we grow soft, fat and happy with good fortune and have the bread taken from our plate by desperate, wily competitors?
I read an excellent book some years ago (I cannot locate it now) about the decline of British steel manufacturing in the late 1800’s. How was it that Britain, the cradle of the industrial revolution in the late 1700’s and early 1800’s, had by the late 1800’s been overtaken by Germany in steel technology and production? The author’s contention was that priorities changed – that having accumulated great wealth from manufacturing, the tough ruthless industrialists were happy for their children to study the humanities (ancient Greek, Latin, the fine arts) at Oxbridge while in Germany the focus was on technical colleges and manufacturing. This seemed to make sense to me – Maslow’s hierarchy etc. And then, while googling for the above mentioned book, I came across another explanation for German superiority in steelmaking in the late 19th century– tariffs and cartels. With steelmaking the bigger the plant the greater the efficiencies but, with recurring cycles of prosperity and decline, it is more sensible to construct smaller plants with less fixed overhead to burden you during down cycles, than a big plant. However, steel tariffs (import duties and restrictions) and cartels (pricing agreements) provided stability in steel production and pricing and therefore encouraged German manufacturers to commit to large productive plants. I am sure there are several explanations for why German steel production escalated. But interesting isn’t it that controlling the market (Government intervention) may have been a big driver?
So is this relevant? Well Germany is doing very well today and, if Europe does recover, it will probably be due to Germany, and there is precedent for a European recovery – just consider how Germany absorbed East Germany and how powerful the combined entity is today. Although Australia and Canada, which are part of the West, are doing well (in Australia’s case, very well) today, we can attribute much of that success to large deposits of natural resources. Germany is doing very well without natural resources – just sheer competitiveness. And to compound the answer, Germany has strong trade unions – so don’t blame the unions. And German labor is not cheap and German’s lead a good lifestyle so we don’t have to live in dormitories on low wages to compete.
My conclusion is we have to get smart and make tough adjustments to enable us to compete – but we can do it.