Should small businesses be favored over large ones?

[rlg94086]

OK granted, partially. But I won’t take back the statement that the American consumer tends to be short-sighted. Short sightedness seems to be almost a national characteristic for us.

But should the American consumer pay for more expensive goods? If we want to be fair to the American manufacturer, yes. If we make China unpeg its currency it would have that effect, and we would see manufacturing jobs start expanding in this country, because, as I said, the US manufacturer could compete again.

If the consumer did finally end up paying higher prices, then maybe little Johnnie’s dad could get a job that would enable him to send him to a Catholic school. But enough red-herrings.

Do you dispute my point?

So, your brilliant idea for our economy is to drive up prices and drive up our costs by increasing wages. The net effect is nil to the consumer - they are paid more, but now everything costs more. Great idea!

 

[Ridgerunner]

OK granted, partially. But I won’t take back the statement that the American consumer tends to be short-sighted. Short sightedness seems to be almost a national characteristic for us.

But should the American consumer pay for more expensive goods? If we want to be fair to the American manufacturer, yes. If we make China unpeg its currency it would have that effect, and we would see manufacturing jobs start expanding in this country, because, as I said, the US manufacturer could compete again.

If the consumer did finally end up paying higher prices, then maybe little Johnnie’s dad could get a job that would enable him to send him to a Catholic school. But enough red-herrings.

Do you dispute my point?

This will sound weird, and might not be right, but it’s possible China is, in the long run, a great big Japan. A couple of decades ago, everyone swore the Japanese would own everything in the U.S. and there would be nothing in the stores to buy that wasn’t made in Japan. Japan still trashes Detroit in automaking, because they do make better cars, but that’s about it, and the Brits still own more U.S. assets than the rest of the foreign nations of the world put together.

One of the things that happened was the rapid aging of the Japanese population and the consequent higher cost of Japanese goods. At a point, when your population requires more and more of it’s government, competitiveness wanes.

China’s “one child policy” (not to mention the overrepresentation of boys in the births for some time) is going to have the same effect if they don’t change something very soon. My impression is that they really aren’t going to be able to prevent rapid aging of the population no matter what they do now. There are immensely wealthy entrepreneurs in China, but also a very poor general populace. Combine that with an aging population, and China’s future is not all roses.

 

[consumedconvert]

So, your brilliant idea for our economy is to drive up prices and drive up our costs by increasing wages. The net effect is nil to the consumer - they are paid more, but now everything costs more. Great idea!

No, a reasonable and fairly common-sense idea for the economy, that certainly is not original to me, is to make China compete fairly and let the American worker stand a chance. Did you read that article? It’s quite true that you can’t spend money if you’re unemployed.

Which is one more reason small or at least smaller businesses should be favored over larger Mega-Corps, and why Mega Corps should be heavily discouraged by fiscal policy. Wal-Mart (after a period of claiming to sell only “American made products”) has no real reason to buy and sell American because they are essentially multi-national, and are loyal to no one. The same goes for so many manufacturers, which essentially decided to become non-American companies with offices in New York in order to either grab more market share or be able to continue selling to Wal-Mart. You’re telling me none of this makes you uncomfortable?

There’s more to life than low prices and being able to “go for the gusto” by buying everything we want. Perhaps one thing that might possibly be encouraged, if prices do rise (as in reality they must, if we ever see American manufacturers return), is frugality and learning to do with just a little less? I don’t think that would be so tragic. America would learn to deal with it.

It’s essentially a choice. Either we hold on to rock-bottom prices and export all of our industries to China, or we let go of rock bottom prices and hold on to our, or our neighbor’s, jobs. Which is better for America?

 

[rlg94086]

This will sound weird, and might not be right, but it’s possible China is, in the long run, a great big Japan. A couple of decades ago, everyone swore the Japanese would own everything in the U.S. and there would be nothing in the stores to buy that wasn’t made in Japan. Japan still trashes Detroit in automaking, because they do make better cars, but that’s about it, and the Brits still own more U.S. assets than the rest of the foreign nations of the world put together.

One of the things that happened was the rapid aging of the Japanese population and the consequent higher cost of Japanese goods. At a point, when your population requires more and more of it’s government, competitiveness wanes.

China’s “one child policy” (not to mention the overrepresentation of boys in the births for some time) is going to have the same effect if they don’t change something very soon. My impression is that they really aren’t going to be able to prevent rapid aging of the population no matter what they do now. There are immensely wealthy entrepreneurs in China, but also a very poor general populace. Combine that with an aging population, and China’s future is not all roses.

Not weird at all. This is what I have argued with other gloom-and-doom people (esp. my step-dad). As their cost-of-living rises and their labor pool decreases, their cost-of-labor will also rise, causing their cost-of-goods to rise. It is not going to happen overnight, but it will happen. Of course, the next “China” is just around the corner.

We may end up losing our “world leader” status (temporarily or long-term…not sure which), but it won’t be the end of us. Somehow, Europe survived when we surpassed them and became world leader.

 

[consumedconvert]

Not weird at all. This is what I have argued with other gloom-and-doom people (esp. my step-dad). As their cost-of-living rises and their labor pool decreases, their cost-of-labor will also rise, causing their cost-of-goods to rise. It is not going to happen overnight, but it will happen. Of course, the next “China” is just around the corner.

We may end up losing our “world leader” status (temporarily or long-term…not sure which), but it won’t be the end of us. Somehow, Europe survived when we surpassed them and became world leader.

Your contention may well prove correct, I don’t dispute that. But I still fail to see how allowing China to flood our markets with artificially priced goods is not a negative. Why not unpeg that dollar? The US retail market would go ape for a while, until things adjusted; but if not now, when?

 

[consumedconvert]

Your contention may well prove correct, I don’t dispute that. But I still fail to see how allowing China to flood our markets with artificially priced goods is not a negative. Why not unpeg that dollar? The US retail market would go ape for a while, until things adjusted; but if not now, when?

CORRECTION: force them to unpeg their currency from the US Dollar

 

[rlg94086]

No, a reasonable and fairly common-sense idea for the economy, that certainly is not original to me, is to make China compete fairly and let the American worker stand a chance. Did you read that article? It’s quite true that you can’t spend money if you’re unemployed.

Which is one more reason small or at least smaller businesses should be favored over larger Mega-Corps, and why Mega Corps should be heavily discouraged by fiscal policy. Wal-Mart (after a period of claiming to sell only “American made products”) has no real reason to buy and sell American because they are essentially multi-national, and are loyal to no one. The same goes for so many manufacturers, which essentially decided to become non-American companies with offices in New York in order to either grab more market share or be able to continue selling to Wal-Mart. You’re telling me none of this makes you uncomfortable?

There’s more to life than low prices and being able to “go for the gusto” by buying everything we want. Perhaps one thing that might possibly be encouraged, if prices do rise (as in reality they must, if we ever see American manufacturers return), is frugality and learning to do with just a little less? I don’t think that would be so tragic. America would learn to deal with it.

It’s essentially a choice. Either we hold on to rock-bottom prices and export all of our industries to China, or we let go of rock bottom prices and hold on to our, or our neighbor’s, jobs. Which is better for America?

1. What article?
2. You are assuming a zero-sum game.

We won’t be exporting “all of our industries to China.” That is absurd. China also becomes a market for our goods.

I would like you to explain the math problem you seemed to ignore.

Increased wages - increased prices = no net increase in purchasing power.

 

[rlg94086]

CORRECTION: force them to unpeg their currency from the US Dollar

Can you explain what “unpegging” is and how their “pegging” to the US dollar is bad/good for us? I’m sorry, but I am not an economist, and I’m unfamiliar with this.

 

[rlg94086]

1. What article?

Oh…never mind…I’m guessing you mean the *Fast Company *article **in a different thread! **

I read it. You and the Fast Company writer are mad at the wrong company. I went through this on another “I hate Wal-Mart thread.” The problem is not with Wal-Mart. It is with the idiot suppliers who went into a bad contract with Wal-Mart. Wal-Mart can not force anyone to charge the prices they charge. Companies make choices. By agreeing to a bad contract that hurts their own company, they fail.

If they didn’t sign those contracts, didn’t sell to Wal-Mart, and didn’t outsource to China to fulfill the lousy contract they signed, then their higher quality goods would compete with the alternatives that Wal-Mart would have been forced to find. That, my friend, is business.

I am currently bidding for business with the largest semiconductor manufacturer. They are incredibly demanding. We may lose the business. However, the joke in our industry is “the good news is that we won Company X’s business…the bad news is we won *Company X’s *business.” I am standing firm on our quote’s terms and conditions and not caving to all of their demands if they don’t make sense for our business model.

 

[consumedconvert]

Can you explain what “unpegging” is and how their “pegging” to the US dollar is bad/good for us? I’m sorry, but I am not an economist, and I’m unfamiliar with this.

The Yuan is essentially fixed at a rate of 2.1 against the U.S. dollar, meaning it is grossly undervalued, giving Chinese exporters an unfair advantage over US manufacturers. This “pegging” makes Chinese exports artificially inexpensive for the US to import and US exports artificially expensive for the Chinese to buy. It essentially amounts to a heavy subsidy of Chinese exports by the Chinese government (are we surprised? they are communist China).

On September 24, 2003, members of the Congressional-Executive Commission on China urged a U.S. trade official to consider challenging China’s fixed currency exchange rate at the World Trade Organization (WTO). Rep. James A. Leach (R-Iowa), chairman of the Commission, put forward the idea that China’s currency could be “a subsidies issue under the WTO, so it’s not exactly a non-WTO issue.” [1]

        U.S. manufacturers have strongly criticized China for maintaining an artificial exchange rate with the dollar. Groups such as the National Association of Manufacturers argue that China's currency, the Yuan, is undervalued by 40 percent because the Chinese government has fixed its value in dollars. The lower Yuan makes Chinese exports to the United States less expensive, and conversely makes U.S. exports to China more expensive. Before his trip to Asia, President Bush underlined that "we expect the markets to reflect the true value of [a] currency" and "countries need to be mindful that we expect fair trade."

…

…the Chinese fixed exchange rate system would most likely be challenged as a prohibited de facto export subsidy, under Article 3 of the WTO Subsidies and Countervailing Measures Agreement (“SCM Agreement”). Article 3 prohibits subsidies contingent, in law or in fact, on export performance.

Do we really think US manufacturers stand a chance in this kind of environment?

asil.org/insights/insigh117.htm

 

[dacoobob]

Can you explain what “unpegging” is and how their “pegging” to the US dollar is bad/good for us? I’m sorry, but I am not an economist, and I’m unfamiliar with this.

The Chinese Yuan (RMB) is “pegged” to the US Dollar-- in other words, the exchange rate (relative value) of the USD and the RMB is fixed (mostly). Now, the US buys a lot (I mean a LOT) of Chinese manufactured goods. Normally, this would drive up the value of the RMB relative to the USD, making Chinese goods more expensive to import. Since the RMB is pegged to the USD, its value is kept artificially low, encouraging continued massive imports. Note that I’m no economist either, but this is my rudimentary understanding of the situation. I do work for an American-owned company in China at the moment.

EDIT: Drat, preempted!

 

[dacoobob]

The Yuan is essentially fixed at a rate of 2.1 against the U.S. dollar, meaning it is grossly undervalued, giving Chinese exporters an unfair advantage over US manufacturers. This “pegging” makes Chinese exports artificially inexpensive for the US to import and US exports artificially expensive for the Chinese to buy. It essentially amounts to a heavy subsidy of Chinese exports by the Chinese government (are we surprised? they are communist China).

The rate is currently about 7.35 RMB to 1 USD. It used to be more like 8.2, but the Chinese government has lowered it somewhat under US diplomatic pressure in recent years. They don’t seem anxious to lower it further or to allow it to trade freely, understandably-- an undervalued yuan is a huge benefit for their economy (at our expense).

What were we talking about again…? Oh yes, distributism. I’d never heard this word before reading this thread, but doing a little research (ok, mostly on Wikipedia…), distributism seems very close to what I’ve believed for a long time now. Well, chalk up yet another thing I’ve discoverd I agree with the Catholic Church on. I’m afraid I’m going to have to convert sooner or later…

 

[consumedconvert]

Oh…never mind…I’m guessing you mean the *Fast Company *article **in a different thread! **

I read it. You and the Fast Company writer are mad at the wrong company. I went through this on another “I hate Wal-Mart thread.” The problem is not with Wal-Mart. It is with the idiot suppliers who went into a bad contract with Wal-Mart. Wal-Mart can not force anyone to charge the prices they charge. Companies make choices. By agreeing to a bad contract that hurts their own company, they fail.

If they didn’t sign those contracts, didn’t sell to Wal-Mart, and didn’t outsource to China to fulfill the lousy contract they signed, then their higher quality goods would compete with the alternatives that Wal-Mart would have been forced to find. That, my friend, is business.

I am currently bidding for business with the largest semiconductor manufacturer. They are incredibly demanding. We may lose the business. However, the joke in our industry is “the good news is that we won Company X’s business…the bad news is we won *Company X’s *business.” I am standing firm on our quote’s terms and conditions and not caving to all of their demands if they don’t make sense for our business model.

Considering the situation of US-Chinese trade outlined above, however, how can we possibly call it “fair trade” for Wal-Mart to threaten an established supplier?

“Year after year,” Carey, a partner at Bain & Co., says, "for any product that is the same as what you sold them last year, Wal-Mart will say, ‘Here’s the price you gave me last year. Here’s what I can get a competitor’s product for. Here’s what I can get a private-label version for. I want to see a better value that I can bring to my shopper this year. Or else I’m going to use that shelf space differently.’ "

In other words, “slash your prices (which were already rock bottom last year), regardless of whether or not your costs have risen, or Wal-Mart will shut you out of your largest market and instead buy and sell products that have essentially been heavily subsidized by the largest communist government still in existence.”

And it’s all the supplier’s fault? Riggggghhhht.

It’s true, “that’s business” in the US right now. But should it be?

 

[rlg94086]

The rate is currently about 7.35 RMB to 1 USD. It used to be more like 8.2, but the Chinese government has lowered it somewhat under US diplomatic pressure in recent years. They don’t seem anxious to lower it further or to allow it to trade freely, understandably-- an undervalued yuan is a huge benefit for their economy (at our expense).

Thanks for the explanation. (I knew the 2.1 figure was wrong, because I have sold to and visited a customer in Shanghai…it was around 8 at the time.)

So, and I’m sorry as I’m sure this is Economics 101 but I never took that class, how are the values normally determined? By the buying and selling of currency?

 

[consumedconvert]

The rate is currently about 7.35 RMB to 1 USD. It used to be more like 8.2, but the Chinese government has lowered it somewhat under US diplomatic pressure in recent years. They don’t seem anxious to lower it further or to allow it to trade freely, understandably-- an undervalued yuan is a huge benefit for their economy (at our expense).

I read, somewhere, that it was 2.1; but I’m sure your sources are better and more up-to-date than mine, esp. since you deal with Chinese industry.

 

[consumedconvert]

In July 2005, China revalued its currency by 2.1**%** against the US dollar

cia.gov/library/publications/the-world-factbook/geos/ch.html

DOH! Apologies.

 

[rlg94086]

In other words, “slash your prices (which were already rock bottom last year), regardless of whether or not your costs have risen, or Wal-Mart will shut you out of your largest market and instead buy and sell products that have essentially been heavily subsidized by the largest communist government still in existence.”

And it’s all the supplier’s fault? Riggggghhhht.

It’s true, “that’s business” in the US right now. But should it be?

Absolutely!

Contracts between suppliers and retailers are done up front. The supplier does not have to sell their goods at Wal-Mart. The only reason the supplier **has to **slash their prices is because they agreed to! By choosing to go into a lousy contract, they have hurt themselves.

Take Vlassic as an example. If they had said “no” to Wal-Mart, then the consumers who like Vlassic pickles would be buying them at Wal-Mart’s competitor. Why? Because they like Vlassic pickles better than Company P’s Generic Pickles. Instead, they let themselves be lured by the big sales, gave up profit, and lost in the long run. So, yes, it is their fault. if quality goods that customers like to buy are available at a lower price, then the customer would be stupid to buy the same good at a higher price next door (unless that retailer is doing a phenomenal service job…but that is a different issue).

Read The Man Who Said No to Wal-Mart*. *This CEO made the right decision.

You seem to think that the supplier should be focused on maximizing their sales at the expense of their quality, profit and their employees. Isn’t that the opposite of what you have been arguing?

I know…I know…they were held at gunpoint.

 

[dacoobob]

I read, somewhere, that it was 2.1; but I’m sure your sources are better and more up-to-date than mine, esp. since you deal with Chinese industry.

Type “1 USD in RMB” into Google and hit enter.

I’m currently in the belly of the beast as it were, working for a company that manufactures stuff here in China for export to the US. In my defense, though, our company isn’t here to minimize costs-- our founder and president was/is a Christian missionary, and we’re as much a ministry as a business. Many of our employees are former beggars, ex-Buddhist monks, or handicapped people (who have a rough time in China); and a hefty chunk of our profits go to various local community development and evangelization projects (the rest is reinvested). Because we pay our workers well and provide benefits, our costs are higher that a lot of our Chinese competitors’, and we have yet to get any contracts with the big guys like Wal-Mart of Home Depot.

If the Yuan were un-pegged from the Dollar, we’d probably go out of business, so I’m a little ambivalent on whether it ought to happen. Still it would probably benefit the US economy as a whole.

 

[dacoobob]

I know…I know…they were held at gunpoint.

Wal-Mart (among others) does wield a fair amount of monopsonistic power, which is growing as they systematically put their competitors (i.e. other potential buyers) out of business.

 

[rlg94086]

Type “1 USD in RMB” into Google and hit enter.

I’m currently in the belly of the beast as it were, working for a company that manufactures stuff here in China for export to the US. In my defense, though, our company isn’t here to minimize costs-- our founder and president was/is a Christian missionary, and we’re as much a ministry as a business. Many of our employees are former beggars, ex-Buddhist monks, or handicapped people (who have a rough time in China); and a hefty chunk of our profits go to various local community development and evangelization projects (the rest is reinvested). Because we pay our workers well and provide benefits, our costs are higher that a lot of our Chinese competitors’, and we have yet to get any contracts with the big guys like Wal-Mart of Home Depot.

If the Yuan were un-pegged from the Dollar, we’d probably go out of business, so I’m a little ambivalent on whether it ought to happen. Still it would probably benefit the US economy as a whole.

My company is European, and we sell manufacturing equipment. China is our biggest market, and we compete against Chinese, Japanese and Korean manufacturers primarily.

So, while you are at it, consumedconvert, type in “1 Euro in RMB” and explain to everyone why we are able to be the number 2 supplier and very successful in that market. Hint: it isn’t always about price.