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It’s difficult these days to read any Philippines newspaper which
does not contain material which is “corruption centric” or
“China centric,” or usually both! The international media is
very concerned with the condition of the US economy and its currency
the US Dollar, and rightly so in the light of fourth biggest
investment bank Bear Stearns take over by JP Morgan at 6 percent of
its value. Even though in this business news environment there is
speculation that the recent fall of the Dollar is the result of a
deliberate strategy of the Chinese, who by not allowing the Renminbi
to appreciate have achieved their current position of world
manufacturing dominance (at least in market share terms if not in
quality terms). On this, China’s pre-eminent position in
manufacturing particularly for the low end retail sector has been
achieved by application of the Chinese lowest price approach-quality
which is normally a consumer selection criterion has been
marginalized due to wholesaler buying patterns and quasi
monopolistic retail markets (e.g., how many different major toy
stores are there in the Philippines? or for that matter why do all
UK High Streets look the same ?). The World is being forced—and
ably helping itself toward the adoption of the Chinese “virtue”
of frugality—“never mind the quality, feel the width,”
supported by ready availability. Cheap, often poor quality Chinese
products are readily available and it becomes increasingly difficult
to find better quality more expensive items manufactured in places
other than China. Is it any surprise that China has become the
World’s factory for the sectors for which it is best equipped.
The Western world’s overly sophisticated and
highly regulated financial sectors look as if they are managing to
do a lot of damage not only to themselves and the banks and
speculators which make up much of the sectors (and who can afford
it), but also to ordinary people who need shelter and food (who
struggle to afford it). Its going to become much more difficult for
ordinary people to get a mortgage now, largely because banks have
been relaxing their lending criteria to people over the past few
years to levels which clearly are unsustainable—lending 5 or 6
times annual income and 125 percent mortgages! (mainly in order to
protect or increase their own domestic property securities). The
bubble had to burst, “pop!” So despite the high levels and much
publicized regulation—“at a distance of course because we
don’t want to impede the private sector’s ability to do what it
does best …” the system has still gone “pear shaped.”
Personal greed and self interest are not effectively constrained by
the regulator but the penalties for flaunting the regulations do
motivate people to cover up mistakes. Not a healthy mix.
There are therefore qualitative issues, on the
one hand the ability and desire of consumers to be able to use
quality as a selection criterion when buying, and on the other hand
the quality of decision making in the financial sector when it is
left largely to its own devices. Both these aspects of quality can
be seen to seriously affect macroeconomics. China is building
(cheap) environmentally undesirable production facilities and
employing cheap labor in order to capture and feed the World’s low
end consumer appetites, and through this undermining the US (and
probably the Western World’s) economy which in turn is
contributing to its own demise through poor quality practices in its
financial sectors.
Unless there is a higher regard for real quality
and real choice, which in turn will lead to better quality in
peoples behaviors, then the Chinese will indeed dominate the World,
whether or not this would be a good thing is another issue!
Mike can be contacted at mawootton@gmail.com.
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