16 ms·

China is almost like a big blackhole. Destroying industries one by one - the coolest thing about it is they are only doing it to improve the standard of living

by 1971genocide 11y ago

China is almost like a big blackhole. Destroying industries one by one - the coolest thing about it is they are only doing it to improve the standard of living for their people - having a global monopoly is not the #1 reason. Like the rest of the world's economy wont matter and are like small planets.

guyzero 11y ago
China needs to ship almost everything it makes somewhere else to buyers, so it's not exactly alone. Besides, if the yuan rises against the dollar or Chinese electricity costs go up, all the smelting will eventually go somewhere else.
gotchange 11y ago
That's creative destruction. Nothing wrog about that. If China's competitive advantage lies in manufacturing Aluminum more efficiently than the US, the market forces and even economic common sense dictate that they expand in this activity and for the US to abandon theirs and focus more on what they're really good at and what could prove as a competitive advantage for them.
- SixSigma 11y ago
  Ricardian Comparative Advantage of Nations. Keeping agrarian societies in their place since 1817.
- krschultz 11y ago
  China generally is not more efficient. Rather, China doesn't have the cost of externalities included in the price of the goods. The US doesn't ensure that all the cost is put back on the manufacturers, but our environmental and labor regulation ensures at least some of it is included in the price. I imagine if China had the same requirements on its power plants and manufacturing facilities as the US does then the advantage (if any) would not be very much.
  - gotchange 11y ago
    I was referring implicitly to the fact that China is the single largest coal producer in the world. Setting aside the environmental considerations for a moment here, this is definitely a competitive advantage in electricity generation given that aluminum production is an electric energy intensive activity.
  - meric 11y ago
    Then U.S. is benefiting from China drawing down on its natural capital (much of the pollution from Coal excluding CO2 emissions is local to the continent). U.S. should mothball it's aluminium industry and buy China's.
    - bzbarsky 11y ago
      China makes it illegal for foreigners to own controlling interests in Chinese companies, so your last proposal won't work.
      - meric 11y ago
        I mean China's aluminium.
        bzbarsky 11y ago
        Ah, that makes more sense. Though note that there may be strategic reasons for having some aluminum production capability.
fweespeech 11y ago
The scary part is they largely do this due to two factors: 1) Cheap labor. [ But India and other countries have cheap labor ] 2) A willingness to completely disregard ecological damage. Its #2 that makes them into a blackhole and since everyone on Earth breathes the same air...yeah.
- cromwellian 11y ago
  Does smelting actually need a lot of labor? I'd imagine this process is very scalable, bauxite flows into the plan, into furnaces, into machines which create ingots or sheets, etc. Labor would mostly be at the input/output stage of unpackaging/packaging, and of running the factory machinery and management. But this is not like manufacturing phones where labor = O(number of phones produced). Am I wrong? Why is aluminum production not almost purely capital intensive? If so, it would suggest that the advantage of China isn't cheap labor costs, but either cheap energy, cheap regulations, or cheap currency. Which really means Chinese aluminum needs to be taxed to price in the full costs of environmental damage. If for example, the aluminum is produced by carbon emissions, or just plain old soot and other pollution, the costs of this should be estimated and other countries which import Chinese aluminum should slap a tariff on it equal to those costs. They should also domestically tax carbon. Actually, I'd argue that you can't really tax carbon domestically unless you tax it internationally.
  - fweespeech 11y ago
    > Does smelting actually need a lot of labor? https://agmetalminer.com/2009/02/27/cost-build-up-model-for-primary-aluminum-ingot-production/ https://agmetalminer.com/2009/02/27/cost-build-up-model-for-... I've seen estimates from 7-10% are labor costs. > But this is not like manufacturing phones where labor = O(number of phones produced). Am I wrong? Why is aluminum production not almost purely capital intensive? You still need people to handle the machines, repair the machines, perform billing, HR, etc. You don't have giant automated aluminium factories devoid of people. > If so, it would suggest that the advantage of China isn't cheap labor costs, but either cheap energy, cheap regulations, or cheap currency. Yes. It is more the cheap energy/regulations but the labor savings isn't 0. Aluminum factories in the west regularly have 7-9 figure environmental problems. http://www.geelongadvertiser.com.au/news/geelong/epa-orders-alcoa-to-start-cleaning-up-the-toxic-cocktail-at-point-henry/story-fnjuhovy-1227288298308 http://www.geelongadvertiser.com.au/news/geelong/epa-orders-... http://www2.epa.gov/enforcement/case-summary-alcoa-inc-conduct-243-million-cleanup-grasse-river-superfund-site-new-york http://www2.epa.gov/enforcement/case-summary-alcoa-inc-condu...
flatM 11y ago
To be fair, there is a positive side of China being the "World's Factory". For example, without the inexpensive components from Chinese factories, Wind/Solar Power won't be as affordable as now. Also I suspect without China mobile phones especially Android phones would be much more expensive.
- bsder 11y ago
  This is debatable. Cheap Chinese labor is used because it is cheap. In terms of prices, we would be better off if things were more integrated and automated. We rely on gigantic volumes to drive prices down. There is no reason why automation couldn't drive the prices down in the same way on much lower volumes.
  - meric 11y ago
    A country having a trade partner that can provide goods for half the price, is equivalent to having a machine that can manufacture the same goods for half the price, except the former requires no capital investment. As the trade partner gains wealth from providing that good, the price will rise and incentivise investment into automation technologies. Things will be better off when things are more integrated and automated. That is true because the country can delay the investment into increasing capital, which it can invest in another industry, and while that's happening, the trade partner will have increased income in the mean time. Let's take an example to the extreme. U.S. can spend 20% of it's GDP over the next 10 years building Strong A.I., but it will probably be better off to import human-level intelligence over the internet from low income countries, and gradually ramp up it's investment into Strong A.I. as the cost of importing intelligence from low income countries increase. Over-investment into capital is not economically efficient.

guyzero 11y ago

China needs to ship almost everything it makes somewhere else to buyers, so it's not exactly alone. Besides, if the yuan rises against the dollar or Chinese electricity costs go up, all the smelting will eventually go somewhere else.

gotchange 11y ago

That's creative destruction. Nothing wrog about that. If China's competitive advantage lies in manufacturing Aluminum more efficiently than the US, the market forces and even economic common sense dictate that they expand in this activity and for the US to abandon theirs and focus more on what they're really good at and what could prove as a competitive advantage for them.

SixSigma 11y ago
Ricardian Comparative Advantage of Nations. Keeping agrarian societies in their place since 1817.
krschultz 11y ago
China generally is not more efficient. Rather, China doesn't have the cost of externalities included in the price of the goods. The US doesn't ensure that all the cost is put back on the manufacturers, but our environmental and labor regulation ensures at least some of it is included in the price. I imagine if China had the same requirements on its power plants and manufacturing facilities as the US does then the advantage (if any) would not be very much.
- gotchange 11y ago
  I was referring implicitly to the fact that China is the single largest coal producer in the world. Setting aside the environmental considerations for a moment here, this is definitely a competitive advantage in electricity generation given that aluminum production is an electric energy intensive activity.
- meric 11y ago
  Then U.S. is benefiting from China drawing down on its natural capital (much of the pollution from Coal excluding CO2 emissions is local to the continent). U.S. should mothball it's aluminium industry and buy China's.
  - bzbarsky 11y ago
    China makes it illegal for foreigners to own controlling interests in Chinese companies, so your last proposal won't work.
    - meric 11y ago
      I mean China's aluminium.
      - bzbarsky 11y ago
        Ah, that makes more sense. Though note that there may be strategic reasons for having some aluminum production capability.

fweespeech 11y ago

The scary part is they largely do this due to two factors: 1) Cheap labor. [ But India and other countries have cheap labor ] 2) A willingness to completely disregard ecological damage. Its #2 that makes them into a blackhole and since everyone on Earth breathes the same air...yeah.

cromwellian 11y ago
Does smelting actually need a lot of labor? I'd imagine this process is very scalable, bauxite flows into the plan, into furnaces, into machines which create ingots or sheets, etc. Labor would mostly be at the input/output stage of unpackaging/packaging, and of running the factory machinery and management. But this is not like manufacturing phones where labor = O(number of phones produced). Am I wrong? Why is aluminum production not almost purely capital intensive? If so, it would suggest that the advantage of China isn't cheap labor costs, but either cheap energy, cheap regulations, or cheap currency. Which really means Chinese aluminum needs to be taxed to price in the full costs of environmental damage. If for example, the aluminum is produced by carbon emissions, or just plain old soot and other pollution, the costs of this should be estimated and other countries which import Chinese aluminum should slap a tariff on it equal to those costs. They should also domestically tax carbon. Actually, I'd argue that you can't really tax carbon domestically unless you tax it internationally.
- fweespeech 11y ago
  > Does smelting actually need a lot of labor? https://agmetalminer.com/2009/02/27/cost-build-up-model-for-primary-aluminum-ingot-production/ https://agmetalminer.com/2009/02/27/cost-build-up-model-for-... I've seen estimates from 7-10% are labor costs. > But this is not like manufacturing phones where labor = O(number of phones produced). Am I wrong? Why is aluminum production not almost purely capital intensive? You still need people to handle the machines, repair the machines, perform billing, HR, etc. You don't have giant automated aluminium factories devoid of people. > If so, it would suggest that the advantage of China isn't cheap labor costs, but either cheap energy, cheap regulations, or cheap currency. Yes. It is more the cheap energy/regulations but the labor savings isn't 0. Aluminum factories in the west regularly have 7-9 figure environmental problems. http://www.geelongadvertiser.com.au/news/geelong/epa-orders-alcoa-to-start-cleaning-up-the-toxic-cocktail-at-point-henry/story-fnjuhovy-1227288298308 http://www.geelongadvertiser.com.au/news/geelong/epa-orders-... http://www2.epa.gov/enforcement/case-summary-alcoa-inc-conduct-243-million-cleanup-grasse-river-superfund-site-new-york http://www2.epa.gov/enforcement/case-summary-alcoa-inc-condu...

flatM 11y ago

To be fair, there is a positive side of China being the "World's Factory". For example, without the inexpensive components from Chinese factories, Wind/Solar Power won't be as affordable as now. Also I suspect without China mobile phones especially Android phones would be much more expensive.

bsder 11y ago
This is debatable. Cheap Chinese labor is used because it is cheap. In terms of prices, we would be better off if things were more integrated and automated. We rely on gigantic volumes to drive prices down. There is no reason why automation couldn't drive the prices down in the same way on much lower volumes.
- meric 11y ago
  A country having a trade partner that can provide goods for half the price, is equivalent to having a machine that can manufacture the same goods for half the price, except the former requires no capital investment. As the trade partner gains wealth from providing that good, the price will rise and incentivise investment into automation technologies. Things will be better off when things are more integrated and automated. That is true because the country can delay the investment into increasing capital, which it can invest in another industry, and while that's happening, the trade partner will have increased income in the mean time. Let's take an example to the extreme. U.S. can spend 20% of it's GDP over the next 10 years building Strong A.I., but it will probably be better off to import human-level intelligence over the internet from low income countries, and gradually ramp up it's investment into Strong A.I. as the cost of importing intelligence from low income countries increase. Over-investment into capital is not economically efficient.