Competitiveness and Economic Models G.M. – Obama – China…


During the last few days there have been some very important statements by General Motors , Obama and chinese authorities .

G.M. says they are now ready to bring back home the production of home appliances that some years ago they had to relocate abroad , because of the loss of competitiveness they suffered at a time labor costs became comparatively higher in the U.S.

What is happened between then and now ?

Very simple , as GM was forced to relocate production abroad the costs of the company in the production of home appliances were very sensitive to labor costs because the added value of the production was relatively low .

Currently G.M. confirms ( and that is the important news ) that they have been able to reduce the time of production at the production chain to a third of what it used to be .

Does it mean that american workers are now three times faster than before ? Of course not .
What GM has obviously done is to invest in new production means to achieve those results through more advanced robotics and logistics . ( money and brains )

G.M. had thus to relocate production abroad till the new production scheme was ready , because american wages level did not allow to compete on a model that was strongly based on direct labor costs .

What is valid for home appliances is also valid for cars and the recovery of GM world leadership in this area is obviously a demonstration that the injection of big amounts of liquidity to help american car industry is indeed working successfully . Of course as far as cars are concerned the loss of american leadership was not just a matter of costs but of outdated technology and performance as compared with japanese , south corean and german productions .

Obama’s recent defense of the money spent in saving american car industry is thus perfectly justified .

Of course the future at this stage does not only depend on what traditional productions from the US , Europe , South Korea and Japan do or offer , because now a very strong player both in production and purchase capacity has come to live . That is China –

China which is already much more than just a hub for cheap labour , has recently announced three things :

– The country is now going to promote the production and consumption of chinese brands . This is real important because China is now number one market not only in the number of cars purchased but also in the so called premium cars segment . This decision may have a tremendous impact in world future competition .

– China confirms the launching of an aircraft to compete with Boeing and Airbus and has already booked a very important number of orders to confirm that the venture is going to be widely successful .

-China is now promoting a change of economic model that will shift cheap labour ventures towards more added value productions and services in new technologies , which includes incentives to foreign qualified labour to join chinese factories in those fields .

All this is affecting of course the future of world biggest economies where mass production fields are a must , but in parallel we are watching how smaller countries with less advantages in mass production fields , are concentrating in very high added value technologies that will doubtless mark the trend of world logistics , communications , remote control and detection , embedded technologies etc …Israel, South Korea , Danmark , Britain , Netherlands , Canada , Singapore , Australia …are countries worth watching in that respect .

Of course when talking about new technologies we should never omit India , but that is a totally different story .

Curiously enough allegedly leading economies such as Germany , are clearly lagging in technologies other than those related to production fields and german authorities should already be doing something about it as this fact will surely condition their future . Their low domestic purchase power reflects it with consumption figures clearly low .

Finally it is also curious that the most backwards economies are still limiting their concept of competitiveness to the level of labour costs of their production and services , which obviously shows that their model is still stuck in very old solutions relying exceedingly in the usage of a high number of labor forces with low qualification and low average salaries . This model of which south and east european countries are a good example , leads inexorably to very high private indebtment and low added value GDP with poor export capacity .

Does all this mean that thousands of millions of humans have the right and possibility of living up to Hollywood depicted standards ? Of course not . Human interests are not the only important thing to Gaia .

We are just talking about economy .

Brahmason

Brahmason@gmail.com

Published in: on marzo 11, 2012 at 9:28 am  Comments (11)