Posts for Tag: this american life

Chinese manufacturing... Love it or hate it, you can't live without it

Apple released its annual Supplier Responsibility Report which discusses the status of its manufacturing partners (mainly in China) on issues of worker rights, factory conditions, etc.  Not so coincidentally, last week's This American Life episode centered around Mike Daisey and his one man show about what he saw while on a visit to Shenzen where many of the big manufacturing companies are located.

Though the first act of the episode was meant to illicit an emotional response in favor of the poor downtrodden workers, the second act painted a much more balanced and realstic view of the plight of workers in these plants.  The fact of the matter is that places like Foxconn have improved the lives of many of these people.  Are conditions as good as they are in first world countries?  Of course not, but that's a very first world opinion.  Ask anyone who used to make $50 a month in the country side doing back breaking labor if they would trade it for a $250 a month job doing a different kind of hard labor in Shenzen.  It's a no brainer.  As consumers in developed nations, we should absolutely push for better working conditions for the people who make our goods.  But progress takes time and why should we expect developing countries to suddenly leapfrog steps in their industrialization when countries like the US did not.

The one hopeful thing I took from the episode was that cold hard economics and not journalists or people like Mike Daisey will ultimately effect greater change.  As workers become more skilled, they also have more options to work at places that have better working conditions.  If places like Foxconn wish to retain these skilled employees that they've spent time and money training, they'll need to improve the environment these people do business in.  That, more than a sensationalistic one man show, will be how China and other developing countries move forward.

Rate cuts are not necessarily good...

I'm far removed from my days as an economics grad but I think rate cuts by the Fed are not necessarily a good thing. Yes, it'll make it cheaper for banks/corporations/small businesses to borrow money but it seems somewhat artificial versus real value/wealth creation. Remember it was this artificial (and arguably fraudulent) boost that led us into the current recession. It's almost like a drug that the economy has grown accustomed to. I wonder if the Dow would have jumped almost 900 points today had a rate cut not been rumored.

But why is the rate cut necessary? As a corporation, would borrowing money at 5.5% versus 4.5% swing you from profitability to a loss? As a small business, if your credit card rate was 15.99% versus 14.99% would that really matter much? And if you couldn't afford to buy a house at 6.75%, you probably won't be able to afford that house at 6.25%. If nothing else, the market correction of the past few weeks should reset everyone's expectations that life won't be as it was during the boom. We should all adjust our spending accordingly and move on to the business of true value creation. Innovate more - work harder. Then the gains you have are real gains and not artificial ones.

If you have the time, This American Life has a great show on the background to the mortgage implosion and how interest rate cuts made by Greenspan contributed greatly to the downward spiral.