New COVID lockdowns in China freshen supply chain pressures

[Chomsky]

New COVID lockdowns in China freshen supply chain pressures

Global consumers could feel the effects in the form of continued delays and higher inflation.

www.axios.com

Most warehouses in Shanghai have been closed, and more than 90% of trucking capacity in the city has been out of service.

[T]he geographical distribution of the latest wave remains extremely widespread, and the outbreak continues across almost every part of China of significant economic importance,”

[Had a tough time deciding where to put this thread, but the article is from a legit source, with a current byline, and appears to be data driven with high general relevance. So, into BN it goes!]

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My comment:

"We just can't seem to catch a break!"

 

[ttwtt78640]

The high cost of dependence on lower cost imports.

 

[Cardinal]

The high cost of dependence on lower cost imports.

If you think people are pissed about inflation now, just think how pissed they'd be if they had to pay for the value of all American-made goods. And if you really want to piss people off, get rid of all undocumented labor here in the United States and pay the cost of produce picked only by American citizens.

Nearly all of our economy is based on cheap foreign or undocumented labor.

 

[Chomsky]

The high cost of dependence on lower cost imports.

There is some truth in this, I believe.

For example, we are woefully inadequate in I.C chip foundries, even though we owned the industry in the 60's.

It's not just economics at stake. It's a matter of strategic importance.

 

[ttwtt78640]

There is some truth in this, I believe.

For example, we are woefully inadequate in I.C chip foundries, even though we owned the industry in the 60's.

It's not just economics at stake. It's a matter of strategic importance.

We have become primarily a service economy. Wandering through a typical US ‘big box’ store you will find few US made items offered for sale. Even US (sounding?) brands like DeWalt tools and Johnson levels are now made in China.

 

[Antiwar]

No crisis is too big to fail to generate obscene profits!

 

[Lovebug]

If you think people are pissed about inflation now, just think how pissed they'd be if they had to pay for the value of all American-made goods. And if you really want to piss people off, get rid of all undocumented labor here in the United States and pay the cost of produce picked only by American citizens.

Nearly all of our economy is based on cheap foreign or undocumented labor.

That is true. Could we pay more for American made products if we had more American workers earning higher wages? I don't think there is an easy answer. Reliance on foreign products, even dependency to the point of a standstill in our economy, i.e. chip manufacturing, could have dire consequences.
We should find a middle ground?

 

[Cardinal]

That is true. Could we pay more for American made products if we had more American workers earning higher wages?

That's a difficult question to answer because the supply chain is completely global. If something is "Made in America," what that really means is that it was assembled in America. There's foreign labor in nearly every American-made product you own, and that's why even then it's cheaper than it might otherwise be.

Only a professional economist could tell you what the real price of a completely all-American product would be, and I am not that economist.

I don't think there is an easy answer. Reliance on foreign products, even dependency to the point of a standstill in our economy, i.e. chip manufacturing, could have dire consequences.
We should find a middle ground?

If the earth's resources were conveniently distributed to all of the nation's countries, then every country could be completely self sufficient. And that's why the notion of a truly self sufficient country will always be pure fantasy.

 

[TU Curmudgeon]

That is true. Could we pay more for American made products if we had more American workers earning higher wages?

Good question.

If (as an oversimplified example) 100% of American purchased goods could be manufactured in the US, but it cost 50% more to manufacture them, what percentage would the average wage have to go up in the areas where those goods were NOT manufactured in order that the people who worked in those areas could still afford to purchase them?

I don't think there is an easy answer. Reliance on foreign products, even dependency to the point of a standstill in our economy, i.e. chip manufacturing, could have dire consequences.
We should find a middle ground?

Would one potential middle ground be to have "Country A" reliant on the "X" that is produced by "Country B" as "Country B" is reliant on the "Y" that is produced by "Country A"?

If so, how can you ensure that "Country C" doesn't come along and start producing "X" or "Y" in competition with "Country A" or "Country B"?

 

[Gateman_Wen]

There is some truth in this, I believe.

For example, we are woefully inadequate in I.C chip foundries, even though we owned the industry in the 60's.

It's not just economics at stake. It's a matter of strategic importance.

National security even.

 

[RAMOSS]

We have become primarily a service economy. Wandering through a typical US ‘big box’ store you will find few US made items offered for sale. Even US (sounding?) brands like DeWalt tools and Johnson levels are now made in China.

With modern technology, we can start moving back manufatoring and use robotics. The jobs won't come back as easily, but the products can be made more local

Robotics could bring manufacturing jobs back to the US

And these Utah companies are leading the way.

www.utahbusiness.com

 

[Chomsky]

National security even.

Actually, yours was the phrase that slipped my mind. Thank you!

 

[Plasmaball]

Totally bidens fault

 

[Hamish Howl]

Sounds like their supply chain is hurting worse than anyone else's.

Reason #638 not to rely on China for anything.

 

[TU Curmudgeon]

With modern technology, we can start moving back manufatoring and use robotics. The jobs won't come back as easily, but the products can be made more local

Robotics could bring manufacturing jobs back to the US

And these Utah companies are leading the way.

www.utahbusiness.com

Indeed, with robotics the amount of manufacturing in the US can be increased significantly.

Unfortunately the people who are capable of operating those automated plants are [1] in short supply, and [2] far fewer than needed to run non-automated plants. That means that the wage cost of the automated plants is actually lower than for non-automated plants. That, of course, means that the total spending by the workforce of an automated plant is less than the total spending by the workforce of a non-automated plant. And that, naturally, means less purchasing and, hence, a slower economy.

And then there is the cost of building the automated plants. Does it make economic sense (at the shareholder and management levels) to spend millions of dollars to replace perfectly adequate facilities (and to walk away from those facilities because there would be no market for them) simply "for the good of the country" - especially when "the good of the country" would actually mean a shrinking of consumption capacity?

Let's take the situation to a (theoretical) extreme and assume that the workforce in an automated plant is 10% of the workforce in a non-automated plant of equivalent output. Let's also assume that the workforce at the automated plant earns 50% more than the workforce in a non-automated plant. Theoretically that would mean that prices could drop by 45%. However, the cost of building the plant has to be calculated into the price and that would mean that the prices would NOT drop by 45% and the difference between what the prices did drop (let's call it 25%) and the wages paid out would mean that there would be around 30% less "wage money" being pumped into the economy and that would mean that consumption would, necessarily, decline by a related amount.

 

[Lovebug]

With modern technology, we can start moving back manufatoring and use robotics. The jobs won't come back as easily, but the products can be made more local

Robotics could bring manufacturing jobs back to the US

And these Utah companies are leading the way.

www.utahbusiness.com

Oh I like this

the dishes are prepared by robotic arms, and the food is delivered to the tables mechanically

 

[ElChupacabra]

That is true. Could we pay more for American made products if we had more American workers earning higher wages? I don't think there is an easy answer. Reliance on foreign products, even dependency to the point of a standstill in our economy, i.e. chip manufacturing, could have dire consequences.
We should find a middle ground?

Sure, and diversifying certain critical components so they're made domestically could help. Bringing back manufacturing to the level we would be close to self sufficient is a whole other can of worms.

 

[ElChupacabra]

Oh I like this

Yeah, but the downside is the people who are replaced by machines. The more technical jobs get, the more training and education the workforce needs to meet those requirements. Given the high cost of education and training in this country, it isn't an easy thing for people to do without ending up in serious debt. Ideally, the companies making these moves toward automation will train existing employees so they can transition, but there's nothing to guarantee that.

 

[ttwtt78640]

Indeed, with robotics the amount of manufacturing in the US can be increased significantly.

Unfortunately the people who are capable of operating those automated plants are [1] in short supply, and [2] far fewer than needed to run non-automated plants. That means that the wage cost of the automated plants is actually lower than for non-automated plants. That, of course, means that the total spending by the workforce of an automated plant is less than the total spending by the workforce of a non-automated plant. And that, naturally, means less purchasing and, hence, a slower economy.

Nope, unless a significant apportion of the consumer base is impacted by that automation.

And then there is the cost of building the automated plants. Does it make economic sense (at the shareholder and management levels) to spend millions of dollars to replace perfectly adequate facilities (and to walk away from those facilities because there would be no market for them) simply "for the good of the country" - especially when "the good of the country" would actually mean a shrinking of consumption capacity?

Let's take the situation to a (theoretical) extreme and assume that the workforce in an automated plant is 10% of the workforce in a non-automated plant of equivalent output. Let's also assume that the workforce at the automated plant earns 50% more than the workforce in a non-automated plant. Theoretically that would mean that prices could drop by 45%.

The market price of a widget does not change (anywhere near that much) based on where or how that widget is produced. Let’s say that company X decides to (heavily invest) and automate production of it’s widgets - why would they have an incentive to (significantly) drop their widget’s price instead of making more profit per widget?

If automation allowed them to produce more widgets then that might give them a small incentive to try to gain more widget market share, but other than that there would be little incentive to reduce their widget’s price.

However, the cost of building the plant has to be calculated into the price and that would mean that the prices would NOT drop by 45% and the difference between what the prices did drop (let's call it 25%) and the wages paid out would mean that there would be around 30% less "wage money" being pumped into the economy and that would mean that consumption would, necessarily, decline by a related amount.

Again, that “wage money” is only reduced for those no longer making widgets at the automated facility and only if they do not find other (comparably paying) jobs.

 

[MTAtech]

New COVID lockdowns in China freshen supply chain pressures

Global consumers could feel the effects in the form of continued delays and higher inflation.

www.axios.com

[Had a tough time deciding where to put this thread, but the article is from a legit source, with a current byline, and appears to be data driven with high general relevance. So, into BN it goes!]

--

My comment:

"We just can't seem to catch a break!"

Thanks Biden.

 

[TU Curmudgeon]

Oh I like this

And you don't have to pay even minimum wage.

"Ideally" your staff would consist of one "bin loader" to ensure that the mechanical cooks had the raw materials needed to prepare the food and one "mechanic" to ensure that the mechanical cooks were functional.

The "bin loader" would only have to have enough training to know "The stuff in the RED containers goes in the RED bins." (and the like) while the "mechanic" would only have to have enough training to know that "If 'Module 6' breaks down, pull it out of its slot, insert a new 'Module 6', and send the defective 'Module 6' off to 'Central Maintenance'." (the receipt of a 'Module 6' at 'Central Maintenance' would result in the automated dispatch of a replacement 'Module 6' to the outlet which sent the one to 'Central Maintenance'). Since next to no actual skills would be required on the parts of either the "bin loader" or the "mechanic", they would qualify for minimum wage. The people with some actual knowledge and training would all be located at 'Central Maintenance' and far fewer would be required there than if the "mechanic" at an outlet were actually required to be able to fix anything.

Not only that, but you would be 100% certain that anytime you visited "Abdhul von Rostock's House of Siamese Pyrogies" and ordered a "#10" it would be absolutely identical to any "#10" that you ordered in any other "Abdhul von Rostock's House of Siamese Pyrogies" location.

 

[MTAtech]

That is true. Could we pay more for American made products if we had more American workers earning higher wages? I don't think there is an easy answer. Reliance on foreign products, even dependency to the point of a standstill in our economy, i.e. chip manufacturing, could have dire consequences.
We should find a middle ground?

This reminds of a Times article, which laid out interesting facts. Although Apple is now the biggest or next to biggest American corporation as measured by market value, it employs only 43,000 people in the United States, a tenth as many as General Motors employed when it was the largest American firm.

Apple does, however, indirectly employ around 700,000 people in its various suppliers. Unfortunately, almost none of those people are in America.

Why does Apple manufacture abroad, and especially in China? As the article explained, it’s not just about low wages. China also derives big advantages from the fact that so much of the supply chain is already there. A former Apple executive explained: “You need a thousand rubber gaskets? That’s the factory next door. You need a million screws? That factory is a block away.”

If you want American manufacturing, you need to bring the supply chain back too.

 

[TU Curmudgeon]

Nope, unless a significant apportion of the consumer base is impacted by that automation.

The amount of decrease in "economic churning" would be proportional to the amount of the consumer base that was involved in the conversion from non-automated to automated production facilities.

The market price of a widget does not change (anywhere near that much) based on where or how that widget is produced.

True.

Let’s say that company X decides to (heavily invest) and automate production of it’s widgets - why would they have an incentive to (significantly) drop their widget’s price instead of making more profit per widget?

They would have absolutely no incentive whatsoever - as long as their competition could not afford to also lower their prices. That, as you indicated, would greatly increase profits. That, in consequence, would result in a greater concentration of wealth in the hands of the small percentage of the population that already controls the majority of the country's wealth. And THAT means that the portion of the population that does not control the majority of the country's wealth would end up with less disposable (real) income. The lack of disposable (real) income does tend to slow down a consumer economy.

Again, that “wage money” is only reduced for those no longer making widgets at the automated facility and only if they do not find other (comparably paying) jobs.

True. However someone who has spent 20 years running a manually fed bolt making machine is going to have just a bit of a problem finding another (comparably paying) job at age 35 and with only Grade 12 education (considering the actual quality of education that High School graduates actually get).

Is the problem insolvable? Not in the least. Is the problem insolvable using the currently acceptable postulates? Most likely.

 

[TU Curmudgeon]

This reminds of a Times article, which laid out interesting facts. Although Apple is now the biggest or next to biggest American corporation as measured by market value, it employs only 43,000 people in the United States, a tenth as many as General Motors employed when it was the largest American firm.

Apple does, however, indirectly employ around 700,000 people in its various suppliers. Unfortunately, almost none of those people are in America.

Why does Apple manufacture abroad, and especially in China? As the article explained, it’s not just about low wages. China also derives big advantages from the fact that so much of the supply chain is already there. A former Apple executive explained: “You need a thousand rubber gaskets? That’s the factory next door. You need a million screws? That factory is a block away.”

If you want American manufacturing, you need to bring the supply chain back too.

For some reason your post reminded me of the analogy to digging a foxhole.

When you start you get some advantages. As you continue digging those advantages increase. If you keep digging you get below the water table and start getting disadvantages but the still increasing advantages make up for them. If you continue digging, you get further and further below the water table, the disadvantages keep on increasing and the advantages stop increasing. If you persist in digging you eventually reach a point so far below the water table that there are nothing but disadvantages.

Now you could reverse that process by tossing the dirt you dug out back into the foxhole - unfortunately it has all been trucked away. That means that about the only realistic option is to quit digging, expose yourself to potential fire, and start on a new foxhole.

 

[ttwtt78640]

The amount of decrease in "economic churning" would be proportional to the amount of the consumer base that was involved in the conversion from non-automated to automated production facilities.

Exactly, so if the bolt factory reduced its staff from 1,000 to 100 employees, that would (potentially) reduce the (global?) bolt market by 900 people. In other words, no big deal at all.

True.

They would have absolutely no incentive whatsoever - as long as their competition could not afford to also lower their prices. That, as you indicated, would greatly increase profits. That, in consequence, would result in a greater concentration of wealth in the hands of the small percentage of the population that already controls the majority of the country's wealth. And THAT means that the portion of the population that does not control the majority of the country's wealth would end up with less disposable (real) income. The lack of disposable (real) income does tend to slow down a consumer economy.

Yep, but by a very small amount. Mr. Bolt Local may see his income rise from $100K/year to $300K/year. He might make as much as a lawyer then.

True. However someone who has spent 20 years running a manually fed bolt making machine is going to have just a bit of a problem finding another (comparably paying) job at age 35 and with only Grade 12 education (considering the actual quality of education that High School graduates actually get).

Is the problem insolvable? Not in the least. Is the problem insolvable using the currently acceptable postulates? Most likely.

Again, for that to become major problem it would have to become very widespread. When power tools replaced hand tools it did not reduce the number of carpenters.