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China's Robot Army
Taking the Man Out of Manufacturing

China is losing ground in auto manufacturing to Mexico, as wages rise for Chinese workers at a faster clip than in Mexico. The FT reports that a Mexican auto factory worker now makes about $3,645 a year, compared to $5, 726 in China. The cheaper cost of doing business in Mexico means the country’s auto industry has been attracting more foreign direct investment: 12.6 of the global total in 2013 compared to China’s 12.4. Foreign direct investment is going to the country with the lower wages.

But China has a secret comeback weapon: robots. An army of them, in fact: by 2017, it should have 428,000 “operational industrial robots,” double its current stock. That could help China attract more investment by lowering manufacturing costs, but not in a way that will benefit auto workers.

International competition and automation, that is, are slowing the growth of manufacturing wages around the globe. This has big implications for future social stability in the developing world. It also means that manufacturing jobs will never never never be the base of the American middle class again.

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  • EdReal

    If China is putting its workers on the street, what exactly is the point of them beating out Mexico?

    • Josephbleau

      To in turn put the Mexicans on the street and keep the money as we approach a world where common human capital has no value.

      • JR

        The idea that automation somehow leads to decrease in common human capital value is bunk if your time frame is longer that a few years. History has shown us time and time again that innovation and automation disproportionately benefits those at the very bottom of the socio-economic ladder. That’s what one of the definitions of “progress” is.

        • Anthony

          I have been living in America for thirty years, and free trade and automation have benefited two groups of people. One: the ownership class, which has neutered organized labor by using global labor arbitrage to drive wages to rock bottom levels. Two: the poorest people in america do live much better due to the cheap stuff they can buy at Wal Mart.

          The lower middle class if you will, has been destroyed. People with above average IQ have been able to move up, but people who must rely on mass employment are in dire straights. I guess this is hardly news these days.

        • Josephbleau

          I have spent much time in Mexico and there used to be a feeling that strong backs were cheaper than metal This is past, heavy equipment is in. I am reluctant to enter this argument for many reasons, but in Northern Europe factories are run by a few experts in white coats tuning robots and automatic PID controllers. There are a few good folks who clean up. There are people from less affluent EU areas flown in monthly for maintenance. The net result is we have no future for honest strong backs, what will become of them? They will be supported, fed and clothed better than the kings of 1000AD but sadly what will they do and what will they strive for? Many will be talented and athletic but you can’t live a decent life at the Soccer pit or watching television. 50% don’t pay taxes now but everyone has a cell phone, car and 2 tvs. what else can we give them to allow them to have dignity and let them grow?

          • GS

            “Google will not hire folks who are not near genius.” – and they have every right to do so. The only possible advice is: if you want to work at Google – become a genius, or come no more than a quarter-inch short of that.

          • f1b0nacc1

            You obviously have very little experience with Google. There is a lot of room for people who are nowhere near genius level (i.e. average), though not in the latter-day equivalent of assembly line work. Work is changing (more fluid, more entrepenaurial, more dynamic), and people are going to have to change with it. This is hardly a new thing though. In 1860 the bulk of Americans worked on a farm, now almost none do…

      • FriendlyGoat

        One reason for having democratic politics is to ensure that people have a vote in whether human capital has a value. Perhaps one of the most overlooked truisms of our time is that we are worth more if we insist on fashioning our markets around the interests of people. Some imagine that markets are phenomenons of nature rather then inventions of man, but they’re not.

        • GS

          Well, you cannot decree or vote yourself a value as a human capital. Your value is in the eye of beholder – i.e. a potential or actual employer or customer. If anything, those insisting on being valuable when they are not, produce a strongly negative impression.

          • FriendlyGoat

            Actually, societies can and do decide whether they will allow child labor, whether they will or will not have minimum wages, whether they will or will not allow one-sided contracts where only party holds coercive sway over the other party, whether they will or will not allow monopolies, whether they will or will not tax incomes and estates, whether they will or will not allow prostitution as a form of employment, whether they will or will not have government assistance programs, whether they will or will not have public education, whether they will or will not have gender discrimination.

            Citizens in concert either make the rules they want to live under, or dictators do it for them.

          • GS

            Decide as much as you wish: and I will neither hire not patronize you – at any price or wage whatsoever, be you a child laborer or anything else. And where is your self-proclaimed or self-voted “value” then?

          • FriendlyGoat

            You imagine that you PERSONALLY control everything, I suppose, or that everyone in the world has your attitude—-whether employer or customer?

          • GS

            I control whom I am dealing with – and I am doing my best to shun your ilk: wrong attitudes.

          • FriendlyGoat

            But your personal purchases or hires don’t make up most of the economy. Most corporations which sell something are not trying to shun the “ilk” that make up the majority of customers and potential employees.

          • GS

            You are mistaken. I have been working in biotech, and I am a witness to the contrary. But do not lose hope: Ben &Jerry or Starbucks might be interested.

          • FriendlyGoat

            In biotech, per you, the corporations do not want any liberals as customers?

          • GS

            We do not want cretins. And our customers are institutions.

          • FriendlyGoat

            Oh, the much-vaunted man of high IQ would now have us believe that individuals do not matter in biotech because the customers are all institutions. It would be really cool if all your clients knew you were ascribing a disdain for “cretins” to their corporations and brands. The mythical “we” is particularly mythical in your case.

          • GS

            No matter how high [or not so high] my IQ might be, yours is insufficient for a simple reading comprehension. “individuals do not matter” – from what orifice have you pulled it out? Some individuals do matter, and they matter a lot. But the individuals with a chip on their shoulder who have nothing or next to nothing to offer, do not matter, as they create nothing but disruption. And in a start-up, and even after the start-up phase, one cannot afford it. Our products are marketed to the institutions only. Even a research group led by a PI [Principal Investigator] is a mini-institution.

          • FriendlyGoat

            Look, you originally took me to task for asserting that citizens can positively affect their value by electing the rules by which they will be treated and will treat each other. That is done through a thing called government. It does not make the participants cretins, nor does it suggest that I (or they) have EVER been dependent upon YOU to hire me (us).

            This notion you have (here and in other posts) of being smarter and more worthy than the average run of American citizens is getting old.

          • GS

            You, by your proclaimed values, do not have a value, nor can obaa bestow it on you. What is there not to understand?

          • FriendlyGoat

            “There you go again”, as Ronald Reagan said. What is not to understand—–and you don’t—-is that you are not the “decider” of my value, or that of any other human beings as individuals or in concert.

          • GS

            Why, I am a decider – and as far as I am concerned, you are worthless as lacking in moral fiber. If anyone else holds a different opinion, it is his right.

          • FriendlyGoat

            You are the decider of your own arrogant opinions, GS, nothing more.

          • GS

            And nothing less. If I am an interviewer, spare yourself a trip.

    • Pete

      Whether works are on the steet or not, money would still flow into China — into the hands of its elite.

  • Jacksonian_Libertarian

    It is wrong to think China is going to be competitive using robots, as robots can be used in the US as well which has cheaper energy, better transportation, better infrastructure, the “Rule of Law”, and the all important “Feedback of Competition” of free markets. Why would any investor want to risk their capital in corrupt China, when labor is cheaper elsewhere, and energy costs are improving in America?

  • fastrackn1

    The money is just getting funneled to the few on top.
    We used to build great cars here up until the early 70’s with labor that was equivalent to $30/hr in today’s wages. And you could buy a new loaded pick up for under $3000. Now they are using labor under $2 an hour and a loaded pick up costs $60,000.
    Every one in the business world is saying they need foreign labor to make a profit. It is all BS….

  • f1b0nacc1

    China is whistling past the graveyard, though in truth they have very little choice.
    As robots become more useful (robotics is still in its early infancy), the idea of using cheap labor to kickstart an economy is becoming less and less practical. Unfortunately for China, however, they are growing old before they grow rich (their society is aging at a frightening pace), they have an export-driven (rather than consumption driven) economy that is deeply vulnerable to non-manpower related competition, and they have far too few non-peasants to drive their economy if they become uncompetitive in the export market. Robots + 3-D printing will create a huge problem for an economy that relies so heavily on producing cheap products for the wealthy West, especially when the benefits of this new production is siphoned off by their corrupt elites.
    Couldn’t happen to a nicer bunch of guys.

    • GS

      And let it be their headache. We have ours.

      • f1b0nacc1

        I couldn’t agree with you more. As the technology matures, manufacturing will become more atomized, with positive knock-on effects for everyone EXCEPT those who depend upon cheap labor as a competitive advantage. Not.Our.Problem.

        • GS

          From your keyboard and to God’s monitor… I recall reading about the chinese [at least in some parts of their economy] being exceedingly flexible: if memory serves, it was about something connected with the iPhones- how the chinese manufacturers and suppliers were able to organize a supply of freshly re-designed glass screens in an unbelievably short time [like days]. I recall reading the reaction of American executives, something like “in the US it would have taken us months”.

          • f1b0nacc1

            Yes, but it is one thing to be able to adjust your supply chain (easy enough when you run a police state and the enterprises are integrated into it), another thing entirely when large chunks of that supply chain become largely irrelevant. The Chinese advantages of cheap labor and the lack of external stakeholders are rapidly diminished once you introduce robotics and 3-D printing.

          • GS

            Police states are not that flexible. They have tremendous bureaucratic inertia and what Clausewitz called [in a different context] “friction”. It appears that the Chinese managed [in some sectors, far from overall] to reduce that friction. Therefore it better be studied and learned from.

          • f1b0nacc1

            I understand your point (and for the most part, agree), but in China’s case they have managed to simply ‘cut out’ input from any stakeholders other than those actually operating the enterprises and their patrons in the Party. No NIMBY, no unions, no regulators, no customers (they are all foreign), no anything. This has the advantage of being incredibly flexible in the short term, but extremely dangerous (and quite inflexible) in the long term, as interests become entrenched and ossified.
            This is the mistake that all believers in centralized planning make, they assume that the tactical efficiencies that might accrue in the short term come at no cost, and that the long term strategic inefficiencies have little impact. A great example of this myopia in action is Thomas Friedman, but some of our commenters here seem to have the same problem….

          • GS

            I was born and grew up in the effing ussr. So I know a tad about the central planning. It does not offer any tactical efficiencies whatsoever. What it offers [and even delivers on a rare occasion] is the promise of strategic efficiency. To illustrate, in that same China, a mega project, their three gorges dam, was executed in a more streamlined fashion than it would have been in the US [just imagine what the enviros would have made of it here]. If you need something requiring a massive mobilization of resources, then that they can do, and do reasonably well. But here we are talking the flexibility in the different end of the spectrum.

          • f1b0nacc1

            My condolences on the circumstances of your youth…hopefully you are enjoying some karmic rebalancing (smile…)
            I suspect that we are really saying the same thing, but coming at it from different positions. Megaprojects, however much they are portrayed as strategic, are typically tactical choices made for tactical reasons. The Three Gorges Dam is in fact an excellent example of the weaknesses of the command system in that it was built reasonably quickly, but is even now falling apart and produces far less power than originally planned for. Worse still, the overall costs (aside from the financial ones) have been excessive, though I suspect that wouldn’t have made much difference to the planners even if they had known that in advance. Command systems make it easier to make huge mistakes quickly, take a look at the Aral Sea as an excellent example.

          • GS

            which is precisely the point: the more of them are cut out, the easier the work could become [whether it is a work worth doing, is a totally different question]. Why, you are familiar with Dilbert(tm); everyone is. How much more productive would Dilbert, Asok, and Alice become, were their PHB with his idiotic inputs/interference to become paralyzed and cut out of the decision loop?

          • f1b0nacc1

            You are making my point, with yours. of course we could accomplish more with fewer layers of management (most managers think otherwise, by the way…grin), but is that necessarily a good thing? Being more efficient at building boondoggles isn’t something that is positive, no matter how delightful it appears at that particular moment. Without the thousand layers of checks and balances, Jerry Brown would already be far further along flushing billions in taxpayer money down the low-flow toilet in order to build high-speed rail to nowhere, so should we applaud the barriers to him doing so? The staggering damage done to urban neighborhoods by Robert Moses in NY was made possible by the lack of any reasonable checks on his behavior, though it did allow a lot of concrete to be poured….
            Command systems are often far more efficient tactically because they cut out most of the checks and balances that freer systems include. You don’t need regulatory compliance managers, for instance, if you simply buy off (either with bribes to or judicious use of influence upon) the relevant party boss. That might look efficient and nimble, but in the long run, it is anything but. This is why Blue Model cities like Chicago, Detroit, Baltimore, etc. are such cesspits…they have the worst of all possible worlds in that they combine the overweening regulatory state with pervasive corruption. Of course this is largely inevitable as the former makes the latter not only possible but necessary, something our fellow commenters on the left often fail to take into account.

          • GS

            “but is that necessarily a good thing?” – it depends. Sometimes, it is good, and sometimes it is not so good. And then the question, good for what? The ancient Romans, for example, had the institution of Dictator just for the emergency situations – he was to cut out everyone else. An extreme example, but of the same idea. What it boils down to is the necessity of wisdom in the approach – how much input to allow in what situation, and from whom.

          • f1b0nacc1

            Yes, and the long term effects of the Dictator for Rome speak for themselves. This is, in fact, one of the examples that the founders used to describe why it was essential to limit government as much as possible, and that why an efficient government was a major threat.
            Wisdom is in a short supply everywhere (sadly in the red states as well as the blue, and I say that as a crimson citizen!), which is why we must hobble government wherever possible. We cannot depend upon government to be run by the good and the wise….we must protect against it being run by the evil and foolish.

          • GS

            Yes, you cannot depend on the wisdom of others, but it still depends on it – they better be wise, which in the vast majority of cases they are not. It all depends, there are no easy prescriptions. An ultimate ad hoc.

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