The China Trade
One of the most depressing things I read recently was a column in the New York Times (can't link it) by Ben Stein, who basicly said things could get really bad in our future, all because of the continuing gross imbalance in foreign trade between the U.S. and China. Stein may not have been quite that specific about China, but that's what he meant. He predicted the U.S. dollar could fall to one-third the value of a Euro, and that foreign oil producers could then decide to abandon the U.S. dollar as a reserve currency. If they picked the Euro, that would mean that our dollars would have to be converted to Euros before they could buy foreign petroleum. It's a bad, bad thing.
What sold in the U.S. isn't made in China these days? Or some other foreign country? Once we made everything, now we make almost nothing. I purchased an Apple laptop last summer, great computer, and it was shipped to me directly from the factory in China. No or very few autos sold here are made in China, but I suspect the days of cheap-China not being in the auto market are numbered. It is simply too cheap to make things in China, and the quality can be as good as U.S.-made. Yes, U.S. consumers benefit in the short term from those cheap China prices, but I suspect U.S. manufacturers who ship jobs to China are the real winners, and don't pass along nearly all the cost savings they achieve.
Yesterday, I took my family to the Holland Aquatics Center, a big indoor pool complex in my home town of Holland, Michigan, where we're spending the week visiting my parents. While warming myself in the hot pool, a man who appeared to be about 44 years-old began telling his economic woes to whomever would listen. Call him the Jeremiah of the hot tub.
He had come to the pool after his shift let out at the furniture factory where he worked, and was clearly mentally handicapped. But his story rang true. He said he had worked for 26 years at an old-line furniture manufacturer in Zeeland and Holland, but had been laid off last year. I asked him why. Because they now make what we made overseas, desks in China and clocks in the Philippines, he said. His new job was a significant pay cut. He didn't say what he made now, but in his old job he made$12.44 per hour. The medical benefits at his new job were bottom-of-the barrel, but cost him $25 for single coverage every two weeks. He had to pay the first $1,000 of doctor visits and that sort of thing himself before the insurance kicked in.
What bothered him most was that he had been laid off four years before qualifying for the desk or clock you received as a gift at 30 years of service. Employee's choice.
Around that time, my wife joined me in the hot tub. He's mentally handiapped, she whispered. She works in the field and knows. We decided to go check on the girls and left. I later saw the same man bending the ear of a woman in the hot tub, telling her of China and clocks and cabinets and the plight of the American working man.
What would it mean for the economy if we announced one day that we weren't going to import anything that we can make or mine here? We'll be happy to export to you, but those are our terms. Would it just mean paying a few dollars more, or would it be worse than that? People may be asking themselves this question in not too much longer.