Art Diamond's web log
(p. 316) India is fast becoming two entities: a rising kernal of world-class modernity within a historic culture that has been for the most part stagnating for generations.
This kernal of modernity appears to have largely leapfrogged the twentieth-century labor-intensive manuafacturing-for-export model embraced by China and the rest of East Asia.
Source:
Greenspan, Alan. The Age of Turbulence: Adventures in a New World Economic Flexibility. New York: Penguin Press, 2007.
In the passage quoted below, the “commission” refers to China’s “National Development and Reform Commission.”
(p. A6) The commission estimates China’s energy efficiency is about 10% below that of developed countries because of obsolete technology. But many experts say Beijing’s policy priorities are a bigger obstacle.
Worries about social unrest and inflation led Beijing to put the brakes on pricing overhauls, at tremendous cost to state refiners PetroChina Co. and China Petroleum & Chemical Corp., known as Sinopec.
“Market prices are a very important and key issue because they send out the right signal to the customer to save energy,” said Yang Fuqiang, vice president of the Energy Foundation in Beijing.
For the full story, see:
David Winning. “Why Energy Efficiencies Prove Elusive in China.” Wall Street Journal (Tues., Nov. 6, 2007): A6.
“At the Dahon bicycle plant in Shenzhen, China, pay has risen 10 to 15 percent a year, but productivity gains have held down costs.” Source of caption and photo: online version of the NYT article quoted and cited below.
(p. A1) SHENZHEN, China, Aug. 28 — At the Dahon bicycle factory here, Zhang Jingming’s fingers move quickly and methodically — grabbing bicycle seats, wrapping them in cardboard and smoothly attaching them to frames.
Working a 45-hour week, Mr. Zhang makes the equivalent of $263 a month; as recently as February, he was making just $197. Some of his higher pay comes from working more efficiently. “When I first started, I wasn’t this fast,” he said.
But a good portion reflects a raise Mr. Zhang got: to 1.45 cents for each bicycle seat from 1.32 cents. It is a small difference that signifies major change.
Chinese wages are on the rise. No reliable figures for average wages exist; the government’s economic data are notably unreliable. But factory owners and experts who monitor the nation’s labor market say that businesses are having a hard time finding able-bodied workers and are having to pay the workers they can find more money.
And higher wages in China are likely to lead to higher prices in the United States — at the mall, at the grocery, even at the gas pump.
Chinese companies are already passing along some of their higher costs to overseas customers. Prices for goods from China, after years of gradual decline, have risen 1.2 percent since February, according to the Labor Department. July’s increase was the biggest yet: 0.4 percent compared with June. Chinese companies and contractors are also passing on the cost of the rising value of their currency, the yuan, up 8.8 percent against the dollar in the last two years.
For decades, many labor economists said that China’s vast population would supply a nearly bottomless pool of workers. So many people would be seeking jobs at any given time, this rea-(p. A9)soning went, that wages in this country would be stuck just above subsistence levels. As recently as four years ago, some experts estimated that most of the perhaps 150 million underemployed workers in the countryside would be heading to cities.
Instead, sporadic labor shortages started to appear in 2003 at factories in the Pearl River delta of southeastern China. Now those shortages have spread to factories up and down the Chinese coast, specialists say.
. . .
(p. A9) The hardest variable to judge in China’s changing labor market is the pace of productivity growth. Since there are few reliable statistics, the best way to assess productivity is to look at individual factories like the Dahon operation here, which produces bicycles that collapse for easy storage.
David T. Hon, chief executive of the privately held Dahon Group, said that while he had been raising wages 10 to 15 percent a year, the average labor cost for each bicycle had actually edged downward. This is possible, he said, because sales are growing 30 percent a year and increasingly large-scale production has brought savings. The cost of engineering a new bicycle design, or handling the accounting and other back-office operations, is spread over more and more bicycles as production rises.
For the full story, see:
KEITH BRADSHER. “Wages Are on the Rise in China As Young Workers Grow Scarce.” The New York Times (Weds., August 29, 2007): A1 & A9.
(Note: ellipsis added.)
Source of graph: online version of the NYT article quoted and cited above.
It is an enduring puzzle why the West has been so much more succesful than China in achieving economic growth over the past several centuries. The puzzle arises because there is considerable evidence of early Chinese acheivements in technology.
One example would be the exploratory voyages of Zheng He. The Chinese ships were much, much larger than those of Christopher Columbus. But as Clayton Christensen has shown in a more modern context, size does not always matter as much as nimbleness and motivation.
(And another part of the story involves culture and institutions.)
The most complete account of Christensen’s thinking, so far, is his book with Raynor:
Christensen, Clayton M., and Michael E. Raynor. The Innovator’s Solution: Creating and Sustaining Successful Growth. Boston, MA: Harvard Business School Press, 2003.
(Note: I am grateful to Prof. Yu-sheng Lin for first informing me of the large difference in size between the ships. I am also grateful to Prof. Salim Rashid, and Liberty Fund’s Mr. Leonidas Zelmanovitz, for my having the opportunity to encounter Prof. Lin.)
“Looking for usable coal at a cinder dump in Shanxi Province in China. Inadequate coal in the north limited power production.” Source of the caption and photo: online version of the NYT article quoted and cited below.
The article quoted below uses the word “tariff” in the sense of “price.”
(p. C4) HONG KONG — The Chinese government issued an “urgent notice” on Wednesday to the country’s power generators, coal companies and railways to address an electricity shortage that has led to rationing in more than a third of China’s provinces in recent weeks.
The rationing, mostly achieved by telling factories that their power will be shut off for a day or two each week, coincides with the annual frenzy of factory production to meet orders before shutting down for the Chinese New Year holidays, which fall in early February this year.
. . .
Power executives and government statements attributed the electricity shortfall this winter to a confluence of problems. Many of the problems appear to have their roots in the government’s imposition of a long list of price controls in recent months in an attempt to tamp down inflation, which reached 6.9 percent at the consumer level in November.
Trucks did not deliver adequate coal stockpiles to power plants before winter snows arrived in northern China, partly because of nationwide diesel shortages. Refiners had cut back on the production of diesel because price controls were forcing them to sell the diesel for slightly less than the cost of the crude oil needed to make it.
. . .
Low electricity tariffs, particularly for residential users, have been another problem.
The central government issued an official “suggestion” to provincial governments last fall that they not allow increases in electricity tariffs charged to customers, as part of national price controls.
Provincial governments have responded by freezing tariffs, and even reducing them in the case of Guangdong Province in southeastern China, the home of much of the country’s export-oriented light industry.
The low tariffs have made it uneconomical for oil-fired plants to operate, and many have stopped doing so.
“It makes absolutely no sense for anyone to run a diesel- or oil-fired plant. They’re all shut down,” said a power company executive in China who asked not to be identified because of the sensitivity of commenting on regulatory policies.
The executive added that even when ordered by the government to resume operating at a loss, many state-owned oil-fired plants had not done so, scheduling maintenance and repairs instead.
For the full story, see:
KEITH BRADSHER. “Pinched by Price Controls, Power Plants in China Scale Back.” The New York Times (Thurs., January 24, 2008): C4.
(Note: ellipses added.)
"Emily Prager at her lane house in Shanghai." Source of caption and photo: online version of the NYT article quoted and cited below.
The centers of dynamism are not set in stone. I once asked the philosopher Alan Donagan why the Scottish enlightenment had occurred where (Edinburgh) and when (in the mid-late 18th century) it did. With his usual good humor he told me that I was asking a bad question–that my question assumed that enlightenments were determined. He instead believed that they were chance occurrences resulting from the free-will choices of individuals.
I think that there was something to what he said. But I also believe that some institutions, and some policies of government, can greatly increase the probability that fruitful dynamism will occur. For instance, free markets tend to tolerate diversity and experimentation, and to reward initiative.
In the past, locations of economic dynamism, also were often locations of intellectual dynamism. I wonder if the connection is still true today, and if not, why not?
Among past centers of dynamism were Miletus, Athens, Florence, Amsterdam, Edinburgh, and New York City. Today, centers of economic dynamism include Las Vegas, Dubai and Shanghai. The article quoted below paints a generally appealing picture of Shanghai.
(p. D1) I decided to move myself and my 12-year-old daughter, Lulu — whom I had adopted as a baby in China — from the old capital of the world to the new: to make a home in Shanghai, a city of the future.
I knew something about Shanghai, having been here on trips several times in the last few years. The city was always so excited it could hardly contain itself. It is a microcosm of the Asian boom, stuffed with people giddy on hope and thrilled to be changing. It recalls the greatness of New York in the early ’70s, except for one thing: Like the rest of China, Shanghai was largely closed to the outside world, and real economic growth, for nearly 50 years after World War II. It is a place where every car on the road is brand new and every pet recently acquired, but the person you just met might trace his family back 70 generations. The modernity and polish that Manhattan learned between 1945 and 1995, Shanghai is cramming for as fast as it can, and it’s fascinating to watch.
. . .
(p. D6) Pets are new to Chinese people and they don’t know very much about them. Dogs are not neutered and they are walked without leashes. Many people are terrified of dogs, particularly given the country’s serious rabies problem.
Twice when I was walking Skippy, young women caught sight of him and screamed in terror at the top of their lungs. Because having a pet is so new, there is a video showing how to pick up after a dog and wash his paws after his walk, which appears many times a day on a huge video screen on Huaihai, the city’s other main shopping street.
For the full story, see:
(Note: ellipsis added.)
"On the streets of Shanghai, the author’s injured foot attracts less attention than her pet dog, still a rare sight in the city." Source of caption and photo: online version of the NYT article quoted and cited above.
"Wong Yuen enjoying breakfast at a Hong Kong restaurant. The government, he says, "shouldn’t be telling anyone how dim sum should be served."" Source of caption and photo: online version of the NYT article quoted and cited below.
Longtime dim sum lovers are indignant.
"The government is putting its thumb on every part of citizens’ lives, and it shouldn’t be telling anyone how dim sum should be served," said Wong Yuen, a retired mechanic and truck driver who says he has eaten dim sum every morning for the last two decades. "People can make their own decisions. If it’s unhealthy, they can eat less. They don’t need the government to tell them."
For the full story, see:
"Infosys employs workers in Brno, Czech Republic." Source of caption and photo: online version of the NYT article quoted, and cited, below.
(p. A1) MYSORE, India — Thousands of Indians report to Infosys Technologies’ campus here to learn the finer points of programming. Lately, though, packs of foreigners have been roaming the manicured lawns, too.
Many of them are recent American college graduates, and some have even turned down job offers from coveted employers like Google. Instead, they accepted a novel assignment from Infosys, the Indian technology giant: fly here for six months of training, then return home to work in the company’s American back offices.
India is outsourcing outsourcing.
One of the constants of the global economy has been companies moving their tasks — and jobs — to India. But rising wages and a stronger currency here, demands for workers who speak languages other than English, and competition from countries looking to emulate India’s success as a back office — including China, Morocco and Mexico — are challenging that model.
Many executives here acknowledge that outsourcing, having rained most heavily on India, will increasingly sprinkle tasks around the globe. Or, as Ashok Vemuri, an Infosys senior vice president, put it, the future of outsourcing is “to take the work from any part of the world and do it in any part of the world.”
. . .
(p. A14) Such is the new outsourcing: A company in the United States pays an Indian vendor 7,000 miles away to supply it with Mexican engineers working 150 miles south of the United States border.
In Europe, too, companies now hire Infosys to manage back offices in their own backyards. When an American manufacturer, for instance, needed a system to handle bills from multiple vendors supplying its factories in different European countries, it turned to the Indian company. The manufacturer’s different locations scan the invoices and send them to an office of Infosys, where each bill is passed to the right language team. The teams verify the orders and send the payment to the suppliers while logged in to the client’s computer system.
More than a dozen languages are spoken at the Infosys office, which is in Brno, Czech Republic.
For the full story, see:
(Note: the somewhat different title of the online version was: "Outsourcing Works So Well, India Is Sending Jobs Abroad.")
Source of table: "World Publics Welcome Global Trade — But Not Immigration." Pew Global Attitudes Project, a project of the PewResearchCenter. Released: 10.04.07 dowloaded from: http://pewglobal.org/reports/display.php?ReportID=258
(p. A10) WASHINGTON, Oct. 4 — Buoyed and battered by globalization, people around the world strongly view international trade as a good thing but harbor growing concerns about its side effects: threats to their cultures, damage to the environment and the challenges posed by immigration, a new survey indicates.
In the Pew Global Attitudes Project survey of people in 46 countries and the Palestinian territories, large majorities everywhere said that trade was a good thing. In countries like Argentina, which recently experienced trade-based growth, the attitude toward trade has become more positive.
But support for trade has decreased in recent years in advanced Western countries, including Germany, Britain, France and Italy — and most sharply in the United States. The number of Americans saying trade is good for the country has dropped by 19 percentage points since 2002, to 59 percent.
“G.D.P. growth hasn’t been as dramatic in these places as in Latin America or Eastern Europe,” said Andrew Kohut, president of the Pew Research Center, referring to gross domestic product, the total value of the goods and services produced in a country. “But worldwide, even though some people are rich and some are poor, support for the basic tenet of capitalism is pretty strong.”
For the full story, see:
CHONGQING, China, March 23 — For weeks the confrontation drew attention from people all across China, as a simple homeowner stared down the forces of large-scale redevelopment that are sweeping this country, blocking the preparation of a gigantic construction site by an act of sheer will.
Chinese bloggers were the first to spread the news, of a house perched atop a tall, thimble-shaped piece of land like Mont-Saint-Michel in northern France, in the middle of a vast excavation.
Newspapers dived in next, followed by national television. Then, in a way that is common in China whenever an event begins to take on hints of political overtones, the story virtually disappeared from the news media after the government, bloggers here said, decreed that the subject was suddenly out of bounds.
. . .
What drove interest in the Chongqing case was the uncanny ability of the homeowner to hold out for so long. Stories are legion in Chinese cities of the arrest or even beating of people who protest too vigorously against their eviction and relocation. In one often-heard twist, holdouts are summoned to the local police station and return home only to find their house already demolished. How did this owner, a woman no less, manage? Millions wondered.
Part of the answer, which on meeting her takes only a moment to discover, is that Wu Ping is anything but an ordinary woman. With her dramatic lock of hair precisely combed and pinned in the back, a form-flattering bright red coat, high cheekbones and wide, excited eyes, the tall, 49-year-old restaurant entrepreneur knows how to attract attention — a potent weapon in China’s new media age, in which people try to use public opinion and appeals to the national image to influence the authorities.
. . .
“I have more faith than others,” she began. “I believe that this is my legal property, and if I cannot protect my own rights, it makes a mockery of the property law just passed. In a democratic and lawful society a person has the legal right to manage one’s own property.”
Tian Yihang, a local college student, spoke glowingly of her in an interview at the monorail station. “This is a peculiar situation,” he said, with a bit of understatement. “I admire the owner for being so persistent in her principles. In China such things shock the common mind.”
. . .
With the street so choked with onlookers that traffic began to back up, Ms. Wu’s brother, Wu Jian, began waving a newspaper above the crowd, pointing to pictures of Ms. Wu’s husband, a local martial arts champion, who was scheduled to appear in a highly publicized tournament that evening. “He’s going into our building and will plant a flag there,” Mr. Wu announced.
Moments later, as the crowd began to thin, a Chinese flag appeared on the roof with a hand-painted banner that read: “A citizen’s legal property is not to be encroached on.”
Asked how his brother-in-law had managed to get inside the locked site and climb the escarpment on which the house is perched, he said with a wink, “Magic.”
For the full story, see:
(Note: ellipses added.)
On left, Wu Ping, with her tall brother in the background. On right, a map showing the location of Chongqing in China. Source of photo and map: online version of the NYT article cited above.