Countries and institutions should always produce things where they are excellent at producing, in forms of specialization and compete in terms of comparative advantages.
Countries and institutions should always produce things where they are excellent at producing, in forms of specialization and compete in terms of comparative advantages.
We surely cant be this naive after the recent history of:
- China weaponizing the world's dependence on rare earth
- The US weaponizing the world's dependence on SWIFT
- Russia weaponizing Europe's dependence on natural gas
- Iran weaponizing the the world's dependence of oil supply through strait of Hormuz
This is true until you add a layer of geopolitics to your analysis.
Supply chain advantages make the country that produces most of the stuff progressively better at doing everything.
Only if you have the people to do it. China has some of the worst birth rate in the world. In ~20 years that manufacturing capacity either goes to robots or goes away. Then what?
One of the (many) areas in which China is doing great is industrial robotics. Not the fancy dancing dogs, but robots that replace workers in factories.
That why I said it either goes to robots or it goes away. Can the current robots replace something like this? I don't think right now but maybe they figure it out.
[1]: https://www.youtube.com/watch?v=yFYxSX6xP2U
That factory looked like it employed a lot of easily replaceable manual work.
You don't have to replace 100% of workforce, replace just the ones whose work is the easiest to do by a robot.
Replacing 50% of workforce buys you enough time that by the time your available worker pool has shrunk 50%, robotics and AI will be much better and you will be able to replace another big chunk.
Production-wise, shrinking demographics are not such a big deal (they still have a lot of youth unemployment).
Shrinking demographics is a problem due to a) the ratio of workers vs seniors, b) shrinking overall demand pool -> shrinking economy c) smaller overall talent pool -> less diversity, less 'geniuses', i.e. the real drivers of innovation, and less capability to mobilize for great projects
how is that different from the rest of the world?
Rest of the world does not rely on manufacturing as a large chunk of its economy. Yes it will be painful for all, entire classes of products might just go away if they dont make sense in the new inflationary environment but countries will still likely suffer less than China overall.
While I agree in passing. I think saying you'll export all your work to places with worse labor laws is short-term thinking. Chinese companies are successful yes but they also don't necessarily compete fairly. We still can export large portfolios of goods to China. So to just say they are best because they have a government protected market, plus subsidies so we should abandon local is a bad optimization in the long term
Those thing are not static! Changing them can be a political decision. It was a political decision in China to become excellent at manufacturing.
That depends on if everybody gets along and is willing to trade
This attitude, if followed without qualifications, is dangerously naive and shortsighted, as the last few years of geopolitical events have shown.
Yes, and no. Yes because you are vulnerable to supply chain disruption by illwilled countries. But illwilled countries that disrupt supply chains greatly incentivise others to diversify supply away from them.
China could have the monopoly of rare earth production and refinery for all of eternity. But because of their reaction towards all the us allies when the us increased tariffs, I don't expect them to be relevant enough to disrupt markets with rare earths sanctions in 10-20 years.
> But illwilled countries that disrupt supply chains greatly incentivise others to diversify supply away from them.
... Except when they can't in any meaningful span of time.
Families should always eat at the restaurants that produce the most excellent cuisine. /s