The fact that we are borrowing money from future generations and spending it like drunken sailors on shore leave is well documented. Less clearly known is that we are putting it to them on the other end, as well. Not only will they pay taxes through the wazoo to cover the bailout bill for our greedy excesses and the Obama spending orgy, they will be paying a lot more for just about every manufactured item they buy. Unless we get back into manufacturing and get real lean real soon, that is. And assuming the grandchildren have any money with which to pay taxes or buy things.
In an article from the BBC, a guy named Haruhiko Kuroda who is the big thinker behind the Asia Development Bank, stated the obvious. He said that Asian countries needed to reduce their reliance on exports and build up their own consumer demand. Good thinkin', Haruhiko, except for one small detail: The economies of Asia are pretty well built on cheap labor. Cheap labor, by definition, means you don't pay your folks enough to buy anything. If you want to boost consumer demand in your own countries, you're gonna have to pay the people working for a living a little bit more. That, of course, means you are not a cheap labor source any more. So there you have the conundrum.
I have stated time and again that no country can build an economy on the strength of being a cheap labor source, and Mr. Kuroda and his buddies at the ADB are going to figure that out pretty soon, if they haven't already. The foreigners who are paving your streets with gold now have no loyalty to you and your countries, Haruhiko. They will pack up and move out so fast your head will spin as soon as they find a place where people will work for a few grains of rice per day less than your people. Don't let the economists fool you into thinking the rest of the world wants you to make their Weed Wackers and Barbie Dolls because you are particularly good at it. They are in your country only because you are willing to keep your people in deep enough poverty to do this mundane work cheap.
Mexico already learned the hard way that as soon as the working stiffs wanted an extra peso or two the great American and European outsourcers packed up their signed, leather bound volumes of "The World Is Flat", and headed for Korea, then China and India, and now points south.
The problem is that we – the American and European consumer – want stuff now and we want it cheap. We don't want to do the hard work of overhauling our management practices, rethinking our tax policies, and getting lean. That will take too much time and will rock too many comfortable boats on Wall Street, in Washington and in the hallowed halls of academia.
At the same time, we don't want to pay the cost of labor when we make things in the old, non-lean way. American and western European labor costs include stuff like good food, good schools, health care, time off with the family and all sorts of things we want everyone in our country to have, but we don't want to have built into the cost of the things we buy. So we outsource – save all the pain and effort that goes with getting lean, and avoiding having to pay for all of the creature comforts it would cost to make things here in our old non-lean model.
The problem is that it is not sustainable.
I figure that by the time our grandchildren come of age, the jig will be up. We will have built a factory in the last, remote corner of Africa where we can find someone to work for nothing – the last folks who think that a hot meal and a cot is luxury – and we will be back where we started. We will – or more accurately the grandkids will since I will be long gone by then – have to figure out how to manufacture stuff efficiently. They will be painted into a corner where lean is their only way out.
That, of course, assumes there will be any money left in the US or Europe with which to buy anything at all. The ridiculous notion that we could bail out of manufacturing, become a service economy, and somehow be able to export those services is quickly coming unglued. No one is lined up to have our service experts – the financial wizards, teachers and lawyers - come to their countries to help out. And all of the technical support and customer service has proven as out-sourceable as manufacturing. In the height of irony, Slum Dog Millionaire, a movie largely centered on the outsourcing economy of India won 8 Oscars, thereby demonstrating that even the glittering service industry of Hollywood can be imported from a cheap labor country.
So we buy manufactured goods from other places (money out) and export less and less (money in). The lotta money out -little money in' math may well kick in before we run out of cheap places to build stuff. Any way you cut it, if we don't get lean manufacturing going in the US and Europe very soon, the grandchildren are up a long, long creek.