If you haven't done so already, you should try to catch an episode of An Idiot Abroad on the Science Channel. Comedian Ricky Gervais sends his naive, plain-spoken friend Karl Pilkington – the 'idiot – to different countries with a film crew for the sole purpose of getting a laugh out of Karl's blunt observations of other cultures.
In China, shocked at the crude living, sanitary and dietary conditions, Karl reacted to the place with, "I didn’t think it was going to be like this. I thought it was where they made the iPod. I think I have the wrong place because this isn’t a place where they need an iPod. I think they need a toilet roll first. I think it’s weird because whenever you buy stuff it says Made in China. I think they would be using it here first." I found myself in total agreement with him. Having a healthy ego, my first reaction was to sympathize with Karl because he had been branded an idiot when clearly he is not. Then the realization dawned on me that perhaps the fact that Karl and I see China pretty much the same is not proof of his intelligence … maybe it only proves that I am as much an idiot as he is.
Just maybe, however, Karl and I are not quite a stupid as we look and often sound. My reaction to China (and Karl is even more shocked when he gets to India) was similar – to immediately think that this cannot possibly be the great economy of the 21st century. It was a place of incredible poverty where the overwhelming majority of the people live in wretched poverty without the basic things western countries have been taking for granted for centuries. I did not take long at all to become convinced that all of the experts cannot possibly have seen the same China I was seeing and I was sure that manufacturing here cannot possibly be a good idea, and certainly not an idea that can sustain.
The growing silence from the northeast is beginning to indicate that Karl might not be an idiot but someone who applies a great deal of common sense. The only possible indication of stupidity is his failure to appreciate the reprcussions from a distinct lack of political correctness.
But the silence is noticeable. The academic and investment elites are no longer loudly extolling the virtues of China to the degree they once were. Perhaps it is because inflation in China is escalating at a dramatic rate. Perhaps it is because outfits like International Energy Agency are questioning the absurdity of official Chinese economic data – asking how the economy can be growing while energy consumption is shrinking. Perhaps it is because clothing retailers and outfits like Walmart who have gone all in on China are whining about inflation and the need to raise prices, while the bigger concern for the US economy has been stemming the tide of deflation … seems it is Chinese inflation that is causing their problems and the average US consumer isn't going to go along with higher prices from these folks. And perhaps it is because even Wall Street is starting to have second thoughts about the third world geese they were promised would lay an endless stream of golden eggs.
The revolution in Egypt was neither politically nor religion driven. It was purely a matter of economics, largely the inevitable reaction to a dysfunctional economic system that led to food costs equal to 48% of average household income. No one can or will long put up with that. When Karl says China – where food requires 40% of the paychecks - "isn't a place where they need an iPod. I think they need a toilet roll first", he isn't quite the idiot he is made out to be. Just maybe China is not too far away from an Egyptian-style upheaval. Maybe India and Vietnam where food gobbles up 61% and 51% of income respectively need toilet rolls a lot more than iPods too. This compares to food consuming 8-9% of US income. Big changes are inevitable in these countries.
It seems to me – keeping in mind that I may well be an idiot – that there is a golden opportunity for western manufacturers to get back in the game in a big way. The customers who dumped you for China or India, and the potential customers who wouldn't let you in the door are in a little bit of trouble. They are paying a price and don't know what to do about it. It is only going to get worse for them. I have visited four companies in the last week or so and every one of them is increasing their business, closing sales that a few years ago would have gone to Chinese suppliers. Lean manufacturers are sitting on the verge of a tremendous boom.
I think it is time to stop wringing our hands about the unfairness of it all, get out there and take the economy back, and I think the lean companies can do it. But then what do I know? I'm the guy who sees the Idiot Abroad as a pretty astute guy.