America, the land of endless possibilities

Stelian Muscalu

Made in USA appears on more and more labels. Until now, almost everything we bought was produced in China and we taught that this will be the same for a long period of time. But the things seems to change. American industrial production recovers and, more than that, it seems to have a strong growth.

A study conducted by the famous BCG (Boston Consulting Group) shows that in this moment the production cost in USA is only 5% greater than in China and 10-20% less than in UE.
For only 5% difference it doesn’t worth to import goods from China. There are transportation risks and requires more time to deliver. It is better to produce locally.

Let’s see how the Americans have succeeded to reduce so much the costs and what can we learn from the American lesson.

When we’ll try to find explanations, the first thing that came in our minds is “fracking”. Yes, since the Americans have started to use this technology on industrial scale, things are dramatically changed on the energy market. We assist to a new era of energetic resources abundance. Now, the Americans afford to re-open energy-intensive industries (like steel, aluminum, glass, petro-chemical etc). And there is a chain reaction.

But hydraulic fracturing is not the only explanation. If the energy and especially fossil combustible became cheap, so they are for the rest of the world. The other countries can benefit also from these cheap resources.

The second explanation comes from China. A regular Chinese citizen is not happy anymore only with a bowl of rice. The wages are exploded, the labor is no longer that cheap.
I would say, to this situation contributed also the greed and too much ambition of the Chinese leaders. They want to burn stages, they want to make China too powerful in a too small period of time. Perhaps they have short memory.  Their former leader, Mao, wanted the same. And he taught that he needs steel, so almost every Chinese, farmer or worker, started to produce steel. But obviously, it wasn’t good. Quantity is not everything. It needs quality also. In our days, in China, we can see the construction fever. No matter if is needed or needless, the Chinese build something. And in this way were born phantom cities, empty roads and much bigger than necessary factories. Once again it proves that bigger is not obligatory better. All these buildings require maintenance and maintenance implies bigger costs.

But China is not the sole explanation. Evan if the wages in China have increased, they are still far below American wages. And than, what is it about? It’s about productivity.
To have an idea: if the Americans kept 2000-levels of productivity and applied them to 2010-levels of production, they would have required 20.9 million manufacturing workers. Instead, they employed only 12.1 million. It means almost 100% growth in productivity. Of course, there are issues, like unemployment, the real wages or the working hours, that make the American workers not very happy, but the productivity increased dramatically and they should be very proud of this.

The Romanian economists talk also about the need for productivity increase. But the government doesn’t have ears to hear. It is easy to issue a law, stating that the minimum wage will increase starting with tomorrow. But based on what? The productivity was increased? No, not overnight. And then? Then, we smash ourselves our fingers with the hummer. We ruin ourselves the competitiveness comparing with other countries. The productivity cannot be increased overnight by law. It requires wise economic measures – better transportation infrastructure, better technologies or better education.
And… better work. If we want to live like Americans, we must learn to work like Americans.

Hello Greece! It is true for you also.

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