Thursday, November 28, 2019

A China Trade Deal Just Finalizes the Divorce

Each party will continue to extract whatever benefits they can from the other, but the leaving is already well underway.
Beneath the euphoric hoopla of a trade deal with China is the cold reality that the divorce has already happened and any trade deal just signs the decree. The divorce of China and the U.S. was mutual; each had used up whatever benefits the tense marriage had offered, and each is looking forward to no longer being dependent on the other.
Any trade deal is like closing the barn door months after the horses left. Corporate America's supply chains are already leaving China for lower cost, friendlier countries, and for its part China has already made its intentions to escape the grip of the U.S. dollar abundantly clear.
Indeed, China has clearly stated its plan to move up the value chain globally and rely more on its domestic consumers to fuel growth rather than exports, which have been weakening for some time (see chart below).
As for supply chains leaving China for good--have you examined the labels of consumer goods recently? What once invariably read "made in China" increasingly reads "made in..." The reasons are numerous:
1. China's labor costs are soaring. Many other countries have lower-cost labor forces.
2. The welcome mat for foreigners has been pulled away. If you need evidence, look at the swelling flood of ex-pats leaving China for good, an exodus that began years ago.
3. China's workforce is shrinking as the populace ages. The demographics of the one-child policy are remorseless.
4. China's repression of Muslim minorities doesn't seem to bother Islamic governments but it presents a serious issue to global Corporate America.
Imagine what would happen to (say) Apple's reputation if even the tiniest part of an iPhone was traced to China's slave-labor force of Muslim minorities. Whatever Apple might save by keeping its supply chain in China would be more than offset by the global PR damage.
For Corporate America, the lowest-risk strategy is to move the supply chain out of China, the sooner the better: lower costs and lower exposure to IP theft and bad PR.
The tide of Chinese students studying in the U.S. on their government's tab is ebbing. China's authorities are playing the trade war as a patriotic battle, and so why pay for students to study abroad?
Chinese corporations are increasingly reluctant to invest in American assets as skepticism about China's agenda rises.
Signing the trade deal is signing the divorce decree, not a signal of a return to the good old days of wine and romance. Each party will continue to extract whatever benefits they can from the other, but the leaving is already well underway.



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Money and Work Unchained $6.95 (Kindle), $15 (print) Read the first section for free (PDF).


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Wednesday, November 27, 2019

Thanksgiving 2019: A Few Things I'm Grateful For

Gratitude as medicinal balm--a little goes a long way.
Of the many things I'm grateful for, the most important are: after 50 years of work I still have my health and more work than I know what to do with; good friends; family; freedom, opportunity, the good fortune that a very few of the many stupidly contrarian / high-risk bets I've made actually paid off, and I have a garden and a library. ("The man who has a garden and a library has everything." Cicero)
Here's a few everyday things that I give thanks for:
1. My readers, correspondents, patrons and financial supporters: Of Two Minds exists because of you.
2. Everyone who supports independent thinkers and creators. On behalf of every independent creator of content, thank you.
3. Everyone who serves the public and maintains a friendly attitude despite the difficulties of their job and a general lack of appreciation. I've been there behind the counter, and I thank you for your problem-solving and positive attitude.
4. Opportunity. Life requires decisions, trade-offs, sacrifices and adaptation when things are no longer working. A reader who managed to extricate himself years ago from an oppressive, dictatorial regime and make his way to the U.S. submitted this comment a decade ago:
We live a very simple and happy life. It is amazing to see how most Americans do not have a clue of the unlimited opportunities we all have here. Most people want 'instant gratification' and they are not willing to sacrifice to get what they want, instead they choose to live above their means and go into debt for the rest of their lives.
5. Being average or below-average. It's really OK to be average, or even less-than-average, as in slow and untalented. Why? Because if you manage through discipline and effort to work up to average, you will have achieved far more than the gifted child of the elite who achieves success without developing self-discipline and without an appreciation, all too often, for the inner wealth of integrity and compassion.
6. Thrift: use it until it shreds / falls apart.
7. Inspiration:
8. When all seems lost... a dramatic reversal:
9. Wildflowers.
10. Rainbows. (Honolulu mauka)
11. Redwoods.
12. Magic.
13. Handmade leis.
14. homemade pizza.
15. Dessert.
16. Camping in national parks: Glacier National Park.
17. Yellowstone National Park: tent camping, first snow of the season.
18. Blue sky. (Mountain View, Hawaii)
19. Harvesting and sharing fruit. (ohelo berries)
20. Undiscovered gems you zoom past a hundred times and then finally stop to enjoy.
21. "He that is without sin among you, let him first cast a stone at her."
And again he stooped down, and wrote on the ground. And they which heard it, being convicted by their own conscience, went out one by one, beginning at the eldest, even unto the last: and Jesus was left alone, and the woman standing in the midst. (John 8:7-9)


My recent books:
Money and Work Unchained $6.95 (Kindle), $15 (print) Read the first section for free (PDF).


If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.

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Thank you, John W. ($100), for your outrageously generous contribution to this site-- I am greatly honored by your steadfast support and readership.
 

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Tuesday, November 26, 2019

We Can Only Choose One: Our National Economy or Globalization

The servitude of society to a globalized economy is generating extremes of insecurity, powerlessness and inequality.
Does our economy serve our society, or does our society serve our economy, and by extension, those few who extract most of the economic benefits? It's a question worth asking, as beneath the political churn around the globe, the issues raised by this question are driving the frustration and anger that's manifesting in social and political disorder.
A recent essay examines these issues in light of Brexit, which the author sees as a manifestation of dramatic but poorly understood changes in Britain's economy over the past 60 years:
How Britain was sold: Why we need to rethink the case for a national capitalism in the age of uncertainty.
"One of the reasons Brexit has become unstuck is that the changing nature of the British economy since the 1970s and 1980s has made it hard to identify what the economic interests of the nation really are.
If nothing else, Brexit has been a long overdue education in the realities of BritainĂ¢€™s economy.
While both liberals and Marxists argue that the nationality of capitalism does not matter, there is a need to rethink the case for a national capitalism in this age of economic inequality, political fracture and geopolitical uncertainty. If nothing else, by embedding the economy more deeply into the nation and the daily lives of its citizens, and by directing itself towards national purposes and having a greater stake in developing national skills and innovations, a national capitalism would underline and reinforce that lost idea of the common good."
It's shocking to recall that Britain had a large and vibrant domestically owned auto industry in the 1960s, and remained a major industrial power / exporter.
Now the primary source of "wealth" (to indicate the inclusion of what may well be phantom wealth as well as real wealth) is the global financialization industry centered in London, which spins off enough income and wealth to attract and support millions of domestic and international migrants.
The author makes a critical distinction between economies which retained domestically domiciled ownership of key industries and resources (Germany, Japan, Italy) and those countries that allowed core industries and resources to be bought (and exploited) by corporations headquartered elsewhere (Britain and Sweden, whose Volvo brand is owned by China's Greely).
If private-sector profit is all that matters-- that is, "the national interest" is defined as the expansion of private-sector wealth-- what does that do to the national economy and society?
This issue is illustrated by what domestic corporations are allowed to be sold to companies domiciled in competing or even potentially hostile nations. Imagine Japan allowing a Chinese company to buy Toyota, or Germany allowing a Chinese company to buy BMW.
In the U.S., Chinese efforts to buy "strategically sensitive" corporations have been rebuffed for self-evident reasons of national security: do we really want a hostile power's companies to control criticial energy, manufacturing, banking and technology industries? The obvious answer is "no."
The neoliberal ideology glorifies the notions that everyone benefits from everything being turned into a global marketplace, in which price/cost are "discovered" by the global market and financial profit is a priori end all to be all: the most profitable transactions will benefit everyone by maximizing the return on capital.
By this neoliberal, globalization logic, every nation should happily sell its core assets if the price is high enough.
The flaws in this notion are glaring: geopolitical conflict hasn't been eradicated by globalization, even as global corporations are erasing national boundaries, and the nations that sold off all their national assets for a quick profit will be an extreme disadvantage in any conflict, as they are essentially hollowed-out shells dependent on (or exposed to leverage wielded by) foreign entities.
The author takes some pains to note that it's very difficult to untangle globalized supply chains. As I've often noted in the blog, China is considered the "source" of Apple's iPhones (i.e. an "exporter" of iPhones), but as little as $6-$12 of the $400 phones actually stays in China: the vast majority of the money flows to parts suppliers around the world and to Apple HQ in Cupertino CA for the marketing, intellectual property/software and branding.
There are still auto assembly plants in Britain, but the parts originate from many other countries and the profits flow overseas.
Does a fully globalized economy serve the national interest, which is fundamentally social and political? Or does globalization hollow out the nation to benefit the few who gain the most from the sloshing around of globalized private capital?
The basic claim of neoliberal globalization is that "free trade" enriches us all by lowering costs of production and boosting the efficiency of capital. But spiraling costs and stagnating productivity suggest this claim is either false or contingent on factors outside the simplistic model of neoliberalism.
My recent book Will You Be Richer or Poorer? Profit, Power and A.I. in a Traumatized World focuses on intangible capital, and certainly national control of key resources and industries is a form of intangible capital, as is autarchy / self-sufficiency. What is the value of not being dependent on other nations for the essentials of food, energy, technology and capital?
We might also ask, what sort of society results from the globalization of the economy? Brexit and many other uprisings against the status quo reflect the inconvenient realities of social decay and disorder: soaring wealth-income inequality, loss of social mobility, decline of economic security, and a winner-take-most economy that favors those with access to cheap credit (to buy up productive assets and buy back stocks) and monopolistic control of domestic and global markets.
Defenders of neoliberalism say that these ills result from sources other than globalization, but as this essay shows, the most fundamental changes in national economies are clearly the result of neoliberal globalization, which glorifies the free flow of capital and credit around the world, exploiting inefficiencies, low-cost labor, untapped resources, lax environmental regulations, corrupt governance and the general dominance of private capital over labor and national identity.
Defenders of neoliberalism defend the hollowing out of national economies by pointing to cheaper consumer prices for goods such as shoes and TVs. This presumes the only thing of any importance is the price consumers pay at the point of purchase: that the domestic job market has been reduced to insecure positions doesn't count, that homes are no longer affordable to domestic workers, that the national identity has been reduced to consumers driven solely by the endless quest for the lowest prices-- none of this has any value or meaning in a neoliberal, borderless world of maximizing profit and shareholder value.
This is not to say that trade is never mutually beneficial: trade and capital flows have been an economic reality for over 3,000 years, dating back to the very lively trade of the Bronze Age. What does need to be challenged is the largely unexamined notion that the critical interests of political entities (nation-states) and societies are magically served by private capital maximizing returns via borderless global markets.
This neoliberal ideology conceals a corrosive reduction of national and social interests to market price and profit, as if a lower price offsets the hollowing out of national economies and the destabilization of the social order.
(Recall that U.S.corporate profits expanded to unprecedented heights once China entered the WTO and became Corporate America's low-wage workshop. If corporations cut production costs by $5, $1 was passed on to the consumer, $4 was pure profit and the reduction in quality--never calculated, of course--was minus $10. In other words, the supposed benefit to consumers ended up being minus $9, as the reduction in quality, quantity and durability offset any modest reduction in price. If we consider all costs, including the decline in quality, moving the supply chain to China was a catastrophe for consumers, despite claims to the contrary.)
What sort of national economy does the U.S. have? It remains an open question, but what is not in doubt is the servitude of society to a globalized economy is generating extremes of insecurity, powerlessness and inequality that are increasingly destabilizing socially, politically and economically.



My recent books:
Money and Work Unchained $6.95 (Kindle), $15 (print) Read the first section for free (PDF).


If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.

NOTE: Contributions/subscriptions are acknowledged in the order received. Your name and email remain confidential and will not be given to any other individual, company or agency.
 
Thank you, Marc Z. ($5/month), for your superbly generous pledge to this site-- I am greatly honored by your steadfast support and readership.
 

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Sunday, November 24, 2019

Darn, This Is Inconvenient: Apple Is Destroying the Planet to Maximize Profits

Stripmining the planet to maximize profits isn't progressive or renewable--it's just exploitive and destructive.
How do we describe the finding that the planet's most widely-owned super-corporation is destroying the planet to maximize its smartphone sales and profits? Shall we start with "inconvenient?" Yes, we're talking about Apple, famous for coercing customers to upgrade their Apple phones and other gadgets if not annually then every couple years, as the most effective way to maximize profits.
Unfortunately, smartphones require stripmining the planet, as described in this report, Smartphones Are Killing The Planet Faster Than Anyone Expected Researchers are sounding the alarm after an analysis showed that buying a new smartphone consumes as much energy as using an existing phone for an entire decade.
Smartphones are particularly insidious for a few reasons. With a two-year average life cycle, they're more or less disposable. The problem is that building a new smartphone--and specifically, mining the rare materials inside them--represents 85% to 95% of the device's total CO2 emissions for two years. That means buying one new phone takes as much energy as recharging and operating a smartphone for an entire decade.
despite the recycling programs run by Apple and others, "based on our research and other sources, currently less than 1% of smartphones are being recycled," Lotfi Belkhir, the study's lead author, tells me.
The researchers point out that mobile apps actually reinforce our need for these 24/7 servers in a self-perpetuating energy-hogging cycle. More phones require more servers. And with all this wireless information in the cloud, of course we're going to buy more phones capable of running even better apps.
Google, Facebook, and Apple have all pledged to move to 100% renewable energy in their own operations. In fact, all of Apple's servers are currently run on renewable power. "It's encouraging," says Belkhir of these early corporate efforts. "But I don't think it'd move the needle at all."
As consumers, we have more reason than ever to hesitate when it comes to our next shiny tech splurge. The bottom line is that we need to buy less, and engage less, for the health of this entire planet.
This is true not just for Apple, of course, but for Samsung and other manufacturers, but Apple has the rose-tinted "progressive" reputation, and so we should start with Apple, which has always been particularly aggressive in crippling the functionality of older products with a variety of tried and true tricks to force customers to buy a new device (sorry, Bucko, your old phone can't handle OS X.yz so it's now a useless brick).
It's not just CO2--smartphone components demand the expansion of environmentally destructive mining for essentials such as lithium:
Climate Change's Great Lithium Problem: The future of technology metal mining in South America and elsewhere could look eerily similar to centuries of colonial exploitation, dressed up as environmentalism: American highways could buzz with Teslas traveling between sprawling suburban rooftops and office parks decked out in solar panels, all premised on capitalist profiteering and disregard for indigenous rights.
What would happen to Apple's gargantuan profits were it to design, build and market smartphones and other devices to last a decade or longer? We all know what would happen: sales and profits would fall off a cliff, and hundreds of billions of dollars in stock market "wealth" would vanish as Apple stock declined to align with much lower profits and the end of the "endless growth" story.
(Apple enthusiasts claim Apple TV and other services will replace profits from phones, but at this point that is speculation without much supporting evidence.)
The disastrous environmental, social and political consequences of maximizing sales and profits regardless of "externalities" is not just Apple's problem--it's the entire developed world's problem. As for Apple's vaunted "renewable power"--the alternative energy technologies are not actually renewables, they're actually just "replaceables," in analyst / author Nate Hagens' succinct terminology; solar panels and wind turbines must be replaced every 20 years or so, if not earlier, and as a result their lifecycle costs are permanently high.
What looks "paid for" in year 19 suddenly becomes expensive in year 21.
Stripmining the planet to maximize profits isn't progressive or renewable--it's just exploitive and destructive. "Renewable power," blah blah blah-- corporate PR is no replacement for making truly durable-for-a-decade products that drastically reduce the disastrous environmental, social and political consequences of ever higher growth chasing ever higher profits.



My recent books:
Money and Work Unchained $6.95 (Kindle), $15 (print) Read the first section for free (PDF).


If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.

NOTE: Contributions/subscriptions are acknowledged in the order received. Your name and email remain confidential and will not be given to any other individual, company or agency.
 
Thank you, Michael J. ($5/month), for your splendidly generous pledge to this site-- I am greatly honored by your steadfast support and readership.
 

Read more...

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