2011 June 25 Saturday
Chinese Bridges, American Stimulus Spending

Half Sigma points to a report about how Chinese engineering companies are building bridge sections in China and shipping them to the United States. Remember when infrastructure spending was a reliable way to boost domestic employment? Yet another thing to be nostalgic about.

Today, American bridges are built by Chinese civil engineering companies. Today, most of the world’s longest bridges are in China.

The reason why stimulus spending doesn’t work is because even when spend on construction projects, the jobs created are Chinese jobs instead of American jobs.

Real wages are stagnating and clearly there's something wrong (among the things I see wrong: more people chasing shrinking resources). Your choice (if you even have a choice) is to move up or down. You can't stay in a thinning middle class.

And you should give up trying to change things with political action. You are better off trying to become one of the elite yourself so you can get rich from this stuff and laugh at the little people who don’t have jobs from your Hamptons beach house.

How are those who do not have high levels of skills supposed to do okay? Answer: they can't. They will lose still more ground.

Hard to compete against guys making 75 cents per hour.

Pan Zhongwang, a 55-year-old steel polisher, is a typical Zhenhua worker. He arrives at 7 a.m. and leaves at 11 p.m., often working seven days a week. He lives in a company dorm and earns about $12 a day.

According to the article by outsourcing a large chunk of the new Bay Bridge to China the state of California saved $400 million on a project that cost $7.2 billion. But since the US runs a large trade deficit with China every time we outsource an infrastructure to China we go more deeply in debt to the world. How can that be a good idea?

Seriously: Does it make sense to make the US trade deficit with China even bigger?

Share |      By Randall Parker at 2011 June 25 04:06 PM  Economics Trade


Comments
A.Prole said at June 27, 2011 1:02 AM:

Well, Randall economists insist until they are blue iin the face that 'free trade' enriches America.
They will brush off your concerns with statements like 'you believe in creationism' and that you simply do not understand economics.
The absurdity that the USA gets further into debt with China in order to buy more Chinese goods and then end up even more indebted, doesn't seem to register with economists.

bbartlog said at June 27, 2011 5:02 AM:

The goofy thing is that the Chinese are really also getting screwed here. They're sending us all sorts of goods in exchange for dollars that they likely won't be able to redeem for anything like current value. In the medium term of course they end up with a fantastic manufacturing base while ours is artificially hollowed out... but I'm not sure who is going to buy everything they can produce, once the dollar depreciates by half or more. They have a great depression coming, the allocation in their economy is *severely* distorted towards infrastructure investment (empty cities) and manufacturing.
On the home front we have kind of a cultural problem in that no one wants to work in manufacturing any more. It doesn't help that the military recruits a lot of the people who might have been good material to become skilled manufacturing workers, but the main issue is just the low status of such work. Seems like everyone is supposed to go to college (and rack up six figure debt) and anyone who doesn't is a loser.
As usual you can see occasional news items in places like the WSJ bemoaning the lack of skilled applicants for manufacturing jobs, but it's just supply and demand: pay enough and they will come. I used to work as a machinist, and could do it again on the right terms; the market just isn't offering enough right now. Of course a lot of business plans that make money with $12/hr manufacturing labor end up not working with $36/hr manufacturing labor, but hey, the world doesn't owe you a working business plan any more than it owes me a ten cent soda. If your business plan requires Oompa Loompas, that doesn't mean there's a shortage of skilled labor, it means you're fucking retarded.

Slumlord said at June 27, 2011 5:56 AM:

The goofy thing is that the Chinese are really also getting screwed here.

Just try not paying them back.

a) They can go to war with you to get their stuff back. Remember there are 4 of them for every American.
b) They can stop financing the U.S. lifestyle. (i.e buying treasuries) Interest rates at 20% are a real bummer. Does shit all for the economy.

A.Prole said at June 27, 2011 5:58 AM:

Bbartlog,
Although I think the 'science' of economics #especially modern versions thereof# as nothing more than a big steaming pile of bluebottle infested bull-poopy, I do actually believe in the validility of the law of supply and demand #the only bit that actually works#.
Now, supply and demand DICTATES that if there actually is a 'shortage' of skiled manufacturing workers in the USA, then they WILL command very high salaries, and the social advantages of high salaries will accrue to them - this will attract recruits into the shortage industry, unless restrictive entry barriers exist.No 'ifs', no 'buts' this is a cast iron truth that can never be refuted or disputed #except by complete fucking idiots ie most modern 'economists'#.

bbartlog said at June 27, 2011 9:18 AM:

Yes, we're basically in agreement. My point was more that pro-business publication, which are generally happy to acknowledge the law of supply and demand when it comes to things like oil or copper, will switch gears and talk about an absolute 'shortage' of workers whenever the supply of same shifts in a way that inconveniences their readership. Thus you have people pissing and moaning about fruit rotting unharvested (due to a 'lack' of legal workers) when the reality is that someone's business ideas just didn't work out.

@Slumlord: the Chinese can't fight us directly (nor we them), at least not for real. We both have nuclear weapons. Now I suppose the leadership of both countries *could* still go to war with the idea of having some sort of long-running, controlled conflict that would let both elites have the benefits of wartime (greater control over the populace and so on). But in that case it seems foolish to go to war with another great power that you would really rather trade with; instead pick on a smaller country that can't really hurt you. You know, like Iran.

Lou Pagnucco said at June 27, 2011 9:27 AM:

No doubt, both U.S. 2012 presidential candidates will promote this race to the bottom.
Other industrialized countries already regard the U.S. as a source of exploitable, cheap labor.
See - "Back Home They Wouldn't Dare: Euro-Trashing American Workers"
http://www.counterpunch.org/macaray06102011.html

Does the U.S. government actually work in the interest of the U.S. middle class??

Ross N. said at June 27, 2011 2:13 PM:

The money system colors reality. In effect, it is the water we swim in. In a capitalistic economy, money should serve as a store of value and feedback to properly price goods and services. Since our system is moving toward a a feudalistic statism (corporations/banks/government in alliance), then our republic is being undermined slowly. Credit money, which funds the money masters, is used as the tail that wags our government dogs. Witness Tarp and all the banking maneuvers of recent history to prove this is operative.

China uses State Banking. Much of their money base comes as debt free money. For example, they can spend directly into industry and then forgive the loans. This gives an unfair advantage to Chinese business relative to our Credit money system. All credit money starts out as debt, and hence drags that debt with it, a tax on the right to use money. China's debt free money has a problem in that Fascism is encouraged as Chinese leaders decide on winners and loosers.

The real fix is real money. The only real money system is 100% reserve as codified in HR6650. (Of course the bill failed, as money interests aligned against it.) Austrians will claim specie money as real money, but history shows us that credit money always rides on top of gold or silver. The issue is credit money, not fiat systems. In the case of China their Credit money is a smaller percentage ofthe total money supply, hence they have built in efficiencies (not as much debt cost embedded in every transaction). However, they use their money system to fortify fascism.

With 100% reserve systems, money comes under control of the law, and credit money is eliminated from the supply. This means that money becomes money, and cannot lawlessly expand and contract. Also, any interest income vectors to savers, and not bankers. In debt/credit money systems, bankers create debt money when they make a loan. Debt money is also called credit money; either term means that the money comes into existence with debt attached. In a 100% reserve system, banks remain private and do not pick winners and loosers. Private banks (in 100% reserve) make their fees by finding people who want to borrow money from savers. Private banks no longer create new credit money when they put us in debt with loans. In 100%, interest income vectors to savers (not bankers) and labor will be enriched, thus helping prevent the formation of a plutocracy.

In effect, our current credit money system needs to be Federalized, as money is based in the law. That money is a fiat of the law, is a truism like gravity makes you fall down. Sorry, that is just an insurmountable fact. Money should not be used as a tool for fascists or feudalists or even plutocrats. Unfortunately, China's Fascism seems to be undermining and winning out over our credit funded Statist Feudalism. Credit money carries so much usury that it is easy to undermine and this is the monetary secret that China knows. The amount of hours a Chinese person works is a small variable relative to the high cost of our credit money (approx 40%).

Since the person holding the loan is over the person who is in debt, then having a population in debt is a form of slavery. In China's case, it serves strategic interests: 1) It sucks jobs out of the West and helps them climb the wealth curve quickly. 2) It keeps our dumb politicians worried about what China thinks. The debt owed to China acts as a psycholgical deterrent.

It is really depressing that so many people, especially our polticians don't understand money systems. There is no need for debt money, and no need for us to have to suffer a lot of the things going on today. We have been kept monetarily illiterate by our government schools. It is up to all of us to go and seek out the truth.

I would recommend reading at www.monetary.org and also Zarlinga's 900 page book. Then start studying MMT theory. Do it in that order in order to de-program yourself, and then learn how our current system really works. You should learn monetary history first before delving into any difficult economics. By then you will be grounded and able to filter out what is B.S. and what is important.

AMac said at June 27, 2011 3:08 PM:

Well, one good thing about outsourcing to China is that it makes us better people.

It works like this. Global warming is a big problem that we have got to do something about. In particular, we must cut our carbon footprint by imagining laws that will do the trick. Then we get Congress or the courts to enact them.

The short/medium term problem is that some people would be made unhappy by the resultant lower standard of living.

The solution is to have China do the heavy, CO2-spewing manufacturing and ship the products here. The electronic transfer of funds back to Guangdong hardly uses any coal at all.

As this process gathers momentum, I guarantee that (1) the C02 emissions calculated for the U.S. will decline, and (2) these virtuous results of our virtuous polices will improve our self-esteem.

"We", "us", and "our" refers to my fellow American elitists. Non-SWPL as well as SWPL. It's a big tent.

bob sykes said at June 28, 2011 6:01 AM:

A 100% reserve means there is no credit and no loans. So if a bank is to survive, it must charge depositors a storage fee on their deposits. The bank is in the business of safely storing money. This actually happened in the Middle Ages in Europe and recently in the secret accounts in Switzerland.

This, of course, means there are no savers in the usual sense of the word because they do not earn any interest. Instead, they pay storage fees.

A 100% reserve system does not eliminate inflation. One need only look at the effect the New World's gold and silver had on prices in Spain.

Also, there is a serious issue as to whether there is sufficient gold and silver in circulation to support the current world economy. A severe contraction in available coinage would collapse the world economy and reduce all transactions to barter.

In the modern world, owning gold and silver (the actual metal, not the certificates) is a bet on economic collapse. If collapse occurs, you really need guns and ammo.

PS. In a barter economy, 22LR rounds are a more convenient trading medium. Much more than trying to shave small slivers off your Kruger Rands.

Ross N. said at July 1, 2011 7:49 AM:

Bob, in a 100% system new money comes into existence at the Treasury level, and it is based on the LAW. In this way we control the money supply volume and we the people can watch it. New money is spent into existence, and it can be spent on infrastructure or spent by head-count into the states. In this way we ensure Federalism by empowering the States.

People need a means to trade their output. In effect you work and your output is monetized. You put you output on the grocery shelf of life and hope somebody else will trade you. Without money we cannot easily monetize our output, and we have to barter. Barter is very inefficient and doesn't allow specialization. Without money we would move backward.

We have done historical experiments where LAW money has never been exceeded. The Continental congress never exceeded authorization. Instead Colonials were counterfeited by the British and hence the bad rep. Lincoln's Greenbacks never exceeded authorization. The actual history of LAW based money is far far better than that of Gold or Silver. Actually Gold and Silver specie money is horrible.

With Gold or Silver, private bankers make paper credit money ride on top. Whenever there is deflation, which bankers can cause, they want their paper money loans back in gold or land. In this way, Gold money has robbed the people of their wealth over the centuries.

A 100% reserve system makes the correct assumption that money = Law. It is the most advanced money system where all liabilities are already covered. You cannot get unlawful credit expansions and contractions in the supply. It also prevents the rise of plutocracies and elites who funnel wealth away from us. 100% reserve is not barter and it is not Gold, it is law based money. It is the answer to our debt problem and the coming future, otherwise we will loose our freedoms. Money is available to loan out as savers want some interest. Your savings in the bank is available to somebody else, which is how people think our system works now. (It doesn't, in today's credit money system bankers never loan out your savings, they create new credit money from nothing.)

During Katrina, four man teams with machine guns managed to disarm the citizenry. If you are a patriot you should study monetary history. Be sure and stay armed and vigilant though. see: www.monetary.org

Wolf-Dog said at July 3, 2011 5:49 AM:

California saving money by hiring foreign companies is a short sighted solution. If we hired the more expensive American workers, this would reduce unemployment and increase tax revenue, even with higher financial cost on the surface. Ultimately the former will be more destructive than the latter.

Ross N. said at July 4, 2011 10:31 AM:

Right. High unemployment is expensive when you transfer real wealth to subsidize people who sit on thier butts. Future opportunity is lost at the cost of today. When the money system works properly, it puts people to work and you end up in a virtuous cycle. Think of it like a machine that is barely turning over due to lack of fuel. Give it fuel and there is more output for everybody.

In the case of China, they are a fascist country with State banks. That's it. You won't hear this from our poliicians, our intelligentsia, our econmists, or our mult-national business community. The fact that China has fascist control over their state money, means that they pick and choose winners by direct spending into industry. They often forgive loans, so it is not unusual for a Chinese company to carry both debts and profits. China creates and spends Yuans into the economy to trade out for our dollar money, and to stimulate their industry. It is well known that they are mal spending in some areas, like building out un-populated cities. But, on average, their State Banks will outperform our private credit based money system. Why? Because credit money is very inefficient, and we have evolved into a financialized pariah feudal state, where government/private banks/business are interlocked with each other. Our credit money banking system greases Senators and funds business and wants to be served.

By contrast, much of China's money is issued debt free. They direct spend efficiently into industry, which allows them to target and take over. Debt free money will displace credit money, so the amount of usury dragged around with each monetary unit is less. The percentage of debt based money in the Chinese economy will be lower than the U.S. This explains how a person can make low wages in China, yet not starve and in fact live a life. Their prosperity is increasing, and that is a function of efficiencies, not slavery per se. Although, there is an element of financial slavery, that is not the whole pattern.

State banks were used in Canada, and as recently as 1974 they had free education, free medical, and no debt. State Banks were used by Austrailia during WW2 to good effect and no debt. BUT, State banks can be used in a fascist way to reduce freedom. Germany emerged from the weimar hyperinflation to become the richest country in Europe by 1939 using this technique. WW2 can be seen as a fight of monetary systems, with Gold based private banks of the WEST verses the State Banking Fascist (non gold) system of Germany.

China is a serious threat, and they have a money system they can use to bludgeon us with. In the meantime, our system is being taken over by credit money banking Statists. We are becoming financialized, which means that we cannot respond to stimulus properly, as our feedback nodes are corrupted.

Isn't it obvious that the money and polticial systems are perverted if you can ship heavy bridge sections from China cheaper than building them here, on-site?

It's not that American's suddenly got stupid and lazy, its that our captalistic system has a cancer in its veins. It is the money system, which in turn has corrupted the government. In the meantime our feudalistic Statist system is doing economic battle with fascism, and freedom may be the ultimate looser.

WJ said at July 6, 2011 7:42 PM:

Infrastructure spending here no longer makes much sense because increasingly the jobs created go, directly or indirectly, to immgrants. We have ~7 million illegals performing work that could be done by Americans, and we're legally importing >1 million new immigrants per year.

I'm not bragging about my powers of prediction, but this is one of the problems I foresaw with the Obama Administration all along, since even before he was elected. In a country where spending cannot increase dramatically, because we're broke, the leftist/neocon/big business preference for open borders will keep the unemployment rate from dropping. Big business wants it that way, of course, a sit prevents them from paying out raises, which is why business profits are at record highs but they're still not giving raises.

Of course if McCain had won he would've followed the same policy vis-a-vis immigration, and probably even gotten an amnesty to go with it - which is why I preferred an Obama victory to McCain.


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