China

A Robot of the Week, Revisited

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In a robots of the week post a while back, I mentioned two companies that are attempting to automate the apparel-production process. Recently, one of these companies, Softwear Automation, announced that its Sewbot product is now also available on a rental basis under the banner Sewbot as a Service.  (SaaS, playing off the acronym for the currently-hot field of Software as a Service.)  From the SaaS announcement:

From 1994 to 2005, the United States lost more than 900,000 textile and apparel jobs to offshoring.

Fast-forward to 2018. The pendulum is swinging back and textiles are returning as lean, highly automated, environmentally conscious production facilities. Within the last six years, there have been significant announcements by foreign-owned textile companies investing in the United States, with site selection choices clustered in the Southeast including the first Chinese owned Cut Make Trim factory in Arkansas.

Despite this industry reversal, the seamstresses are not returning. While the knowledge can be shared to upskill workers, people don’t have the  desire to work in a traditional textile factory.

To solve this and accelerate the growth of US based textile manufacturing, Softwear Automation is announcing SEWBOTS-as-a-Service, a rental lease service to allow manufacturers, brands, and retailers to source and manufacture here in the US at a lower cost than outsourcing and with greater predictability and quality. While we understand the benefits of “Made in America”, the focus of this program is to offer US textile manufacturing more control, greater margin, faster turn times and less inventory.

The rental rate for Sewbot is quoted as starting at $5000/month, which comes to $55/shift for a three-shift operation.Softwear is also now offering production-rate estimates for various kinds of textile products. For microfiber towels, a single operator supervising 6 robots can make 2880 towels in an 8-hour shift, compared with 223 towels for a single operator performing traditional manual activities.   Other product types which the company sees as suitable for Sewbot automation include mattress covers, pillows, automotive floormats, t-shirts, and shoes (uppers).

Most aspects of the apparel supply chain have long been highly automated: indeed, the mechanization of spinning and weaving was the hallmark of the Industrial Revolution.  The sewing process, however, has remained stubbornly labor-intensive, largely because the flexible nature of fabric makes it hard to handle mechanically.  Softwear Automation’s solution involves the use of machine vision for precise fabric positioning.  This article at IEEE Spectrum explains a little bit about how it works.

Depending on how well these systems turn out to work in practice, and how the technology evolves, they may turn out to be not only the robots of the week, but the robots of the year or even the decade.  Apparel-making is a vast industry, concentrated in nations which are not-so-well-off economically, and employs a large number of people. A high level of automation would likely result in much of this production being relocated closer to the markets, thus saving transportation costs and shortening supply cycles.  The consequences for countries like China, Bangladesh, and Sri Lanka could be pretty unpleasant.  For the US, the onshoring of the work would seem clearly to be beneficial.

I don’t know enough about the industry to analyze the economics of Sewbot vs low-wage-country production in any depth, but back-of-the envelope for one product type (the towels) suggests that on a pure direct labor cost per unit basis, a US-based Sewbot can still be undercut by human labor rates below about $4/hour.  (Calculated using the rental rate:  for many companies, purchase may offer better economics.)  But production isn’t the only factor in the product cost equation, of course, and in many situations proximity to end markets will be of considerable value: especially simpler inventory control and faster response to style changes. And a Made in the USA label is surely worth at least something.  Also, the economics may be different for some of the other product types…for the t-shirts, the company is citing a unit cost of $.33 for US-based production using  Sewbot…this compares with something around $.22 for a country such as Bangladesh, and is probably cheaper than China at the current wage rates.

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Even Smart People Get It Wrong Sometimes

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Economist Art Laffer:

“China is a huge plus to the U.S. because without China there is no Walmart, and without Walmart there is no middle class or lower class prosperity in America.”

Actually, the US was known for broad-based prosperity long before either Walmart or China was a significant factor.  It was really only in the 1980s that Walmart’s expansion really took off…and it was then by no means as China-dependent as it has more recently become.  Indeed, starting in 1984 and extending at least through the early 1990s, Walmart was a strong supporter of the Crafted with Pride in the USA campaign, which was launched by textile entrepreneur Roger Milliken, among others.

China’s presence in the global marketplace was greatly expanded by the Permanent Normal Trade Relations bill, which was signed by President Clinton in October 2000, as well as by China’s own economic-liberalization policies.  (Some data on the growth of Chinese exports over time, here)

Real mean US household income, which is effectively a measure of price levels as well as wages/salaries, grew from $71773 in 1985 to $93887 in 2000.  Fifteen years later, in 2015, it had risen to only $95887.  (2017 dollars)

Real median household income   grew from $51455 in 1985 to $59938 in fifteen years later, in 2000. In 2015, this indicator had actually declined to $58476.  (It grew to $61372 by 2017)

There are a lot of factors that affect an economy, of course, and it would be unfair to conclude that the slowdown in American household income growth was caused by the vast expansion of trade with China.  Maybe it would have been even worse without Chinese imports and exports?

National Review writer Robet VerBruggen cites “research” suggesting that “consumers save hundreds of billions of dollars per year thanks to expanded trade with China, and six-figure sums for every manufacturing job lost.  (Tucker) Carlson may be right that cheap junk from China doesn’t make us happy in any fundamental way, but it would put serious strains on family budgets if all that junk got expensive again.”

Maybe. But I doubt if the strains would really be all that serious over time. If manufacturers did not have vast reservoirs of low-wage labor available for production of a particular product, then the incentives to improve productivity when making that product with high-wage labor would be greatly increased. Capital investment that makes no sense when you are paying workers $1.50/hour may make great sense when you have to pay $15/hour.  Furthermore, product designs themselves can often be changed in minor ways to make them more manufacturable; again, this would help reduce the cost impact of domestic or other high-wage-country manufacturing.

I doubt if the strains on family budgets resulting from such changes in production-labor costs would have anywhere near the impact that has resulted from dysfunctional public schools (resulting in a need to pay for private schooling or move to a pricier neighborhood), unreasonable constraints on home-building, and out-of-control administrative and facilities spending by universities, coupled with irresponsible marketing of degree programs and student loans by same.

One thing that has definitely been beneficial about China’s export trade is the drastic reduction in poverty in that country; this reduction is indeed something that we should all celebrate.  I suspect, however, that given economic liberalization, China could probably be doing just as well or almost as well with an economic approach that is not so extreme in its trade orientation but more focused on satisfying domestic demand…and this would probably be much more sustainable for them in the long run.

Also, here are some additional links on US wage trends for anyone who’s interested:

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Worthwhile Reading

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Why do journalists love twitter and hate blogging?

The legacy of China’s Confucian bureaucracy.  Related:  my previous post on the costs of formalism and credentialism.

Stroking egos does nothing for students — raising expectation does.

Magic and Politics.

Related to the above:  Witches: the new woke heroines.

Legos, marketing, and gender.    “In 1981,” says a woman who as a child was pictured in a Legos ad back then, “LEGOs were ‘Universal Building Sets’ and that’s exactly what they were…for boys and girls. Toys are supposed to foster creativity. But nowadays, it seems that a lot more toys already have messages built into them before a child even opens the pink or blue package.”

What will be the economic impact of China’s increasing emphasis on economic control and preferential treatment for state-run enterprises?

What is the fastest the US economy can grow?

Midnight at the Gemba.  Kevin Meyer visits the night shift at the medical-device molding plant he was running.

The Costs of Formalism and Credentialism

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Via Grim, an interesting post at the Federalist:  Our Culture War Is Between People Who Get Results And Empty Suits With Pristine Credentials.

Subtitle:  Donald Trump declines the authority of the cultural sectors that most assertively claim it. That’s  the real conflict going on.

I’m reminded of an interchange that took place between Picasso and Matisse as the German Army advanced through France in 1940.  Monet was shocked to learn that the enemy had already reached Reims.  “But what about our generals?” asked Matisse. “What are they doing.”

Picasso’s response: “Well, there you have it, my friend. It’s the Ecole des Beaux-Arts”

…ie, formalists who had learned one set of rules and were not interested in considering deviations from same.

It was an astute remark, and it fits very well with the observations of Andre Beaufre, who before the invasion had been a young captain on the French General Staff. Although he had initially been thrilled to be placed among this elevated circle…

I saw very quickly that our seniors were primarily concerned with forms of drafting. Every memorandum had to be perfect, written in a concise, impersonal style, and conforming to a logical and faultless planbut so abstract that it had to be read several times before one could find out what it was about…”I have the honour to inform you that I have decided…I envisage…I attach some importance to the fact that…” Actually no one decided more than the barest minimum, and what indeed was decided was pretty trivial.

The consequences of that approach became clear in May 1940.

In addition to the formalism that Picasso hypothesized (and Beaufre observed) on the French General Staff, the civilian side of the French government was highly credential-oriented.  From the linked article:

In the first days of July, 1940, the American diplomat Robert Murphy took up his duties as the  chargé d’affaires  at the new U.S. embassy in Vichy, France. Coming from his recent post in Paris, he was as impressed as he expected to be by the quality of the Vichy mandarinate, a highly credentialed class of sophisticated officials who were “products of the most rigorous education and curricula in any public administration in the world.”

As the historian Robert Paxton would write, French officials were “the elite of the elite, selected through a daunting series of relentless examinations for which one prepared at expensive private schools.” In July 1940, the elite of the elite governed the remains of their broken nation, a few days after Adolf Hitler toured Paris as its conqueror. Credentials were the key to holding public office, but not the key to success at the country’s business.

It certainly appears that the current protests and riots in France are at least in part due to long-simmering resentment at that country’s credentialed class, whose performance has not matched their pretensions.  An interesting anecdote about Macron, in the Sunday Express:

This is a man who chastised a teenager at an official event for calling him “Manu” (the friendly diminutive of Emmanuel), saying that he should not express a view until he has acquired a degree and a job.

and

Macron is a graduate of the Ecole Normale d’administration (ENA), an elite Grande Ecole created by General De Gaulle in 1945 to break the upper class control of top Civil Service positions.  

In reality, only nine percent of ENA the graduates that fill the corridors of power in industry and government have a working class background.    The top 12 or 15 students will move to L’Inspection générale des finances (IGF), and then into a career in politics, or finance, Macron’s chosen route since he became a partner with Rothschild and Cie bank.

Americans should not feel smug about our relatively-lesser obsession with credentials.  I’ve previously quoted  something Peter Drucker wrote in 1969:

One thing it (modern society) cannot afford in education is the “elite institution” which has a monopoly on social standing, on prestige, and on the command positions in society and economy. Oxford and Cambridge are important reasons for the English brain drain. A main reason for the technology gap is the Grande Ecole such as the Ecole Polytechnique or the Ecole Normale. These elite institutions may do a magnificent job of education, but only their graduates normally get into the command positions. Only their faculties “matter.” This restricts and impoverishes the whole society…The Harvard Law School might like to be a Grande Ecole and to claim for its graduates a preferential position. But American society has never been willing to accept this claim…

and

It is almost impossible to explain to a European that the strength of American higher education lies in this absence of schools for leaders and schools for followers. It is almost impossible to explain to a European that the engineer with a degree from North Idaho A. and M. is an engineer and not a draftsman.

We as a country are a lot closer to accepting Grande Ecole status for Harvard Law School and similar institutions than we were when Drucker wrote the above.  We haven’t gone as far as France and other European nations, but the trend has clearly been in the wrong direction.

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China is our enemy.

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UPDATE: Richard Fernandez has has a new column that bears on this issue.

He describes a new article about what was called “The Third Way,” a political movement that was to replace the Democrats after 1988.

The Third Way, the political movement that crested at the end of the 20thcentury and the beginning of the 21st, represented the most recent effort to reimagine the centre-left in the face of massive economic and social changes.

At its apogee, when it dominated the politics of United States, the UK, and Germany, it was thought to provide a stable template for governance well into the new century. Confidence ran high that the business cycle had been tamed and that the forces of globalisation and technology could be managed for the good of average citizens as well as meritocratic elites.

You could almost call it “The Deep State” and it has lost its way.

China, in the meantime, has moved into a lead.

As events proved, the unipolar world did not remain the only game in town. “Russia regressed to autocracy; radical Islamism went to war against the West; China became far more prosperous without becoming a whit more democratic, confuting decades of modernization theories,” Galston wrote. Entrepreneurship declined, middle class incomes stagnated and a revolt against unlimited immigration began. Most of all new decentralized technological possibilities arose within the West. In a word, the power of the elites at the center was challenged as never before. All this came to an unexpected head in 2016.

Now all enemies are near enemies, as the supply chain problem and the “collusion” allegations in every Western country illustrate. We are engulfed in a civil war because in a globalized world that’s the only kind there is. Yet in retrospect Brexit and the election of Donald Trump should not have been the shocks they were. They were only surprises because the media refused to see the growing storm.

There has been quite a bit lately about the China trade deficit. Trump has proposed tariffs on Chinese imports until China treats US products fairly. The recent trade talks with Mexico and Canada are based on the knowledge that much of this NAFTA trade is really with China that send products like steel to Mexico and Canada, which is then incorporated into products imported by the US as north American manufactures.

Now we have evidence that China is more than a trade rival.

But that’s just what U.S. investigators found: The chips had been inserted during the manufacturing process, two officials say, by operatives from a unit of the People’s Liberation Army. In Supermicro, China’s spies appear to have found a perfect conduit for what U.S. officials now describe as the most significant supply chain attack known to have been carried out against American companies.
One official says investigators found that it eventually affected almost 30 companies, including a major bank, government contractors, and the world’s most valuable company, Apple Inc. Apple was an important Supermicro customer and had planned to order more than 30,000 of its servers in two years for a new global network of data centers. Three senior insiders at Apple say that in the summer of 2015, it, too, found malicious chips on Supermicro motherboards.

This was an espionage act that infiltrated US Defense computer systems.

I have been convinced for some time that Russia is a stalking horse form Democrat politicians, like the Clintons, who have been bought and paid for by China.

One government official says China’s goal was long-term access to high-value corporate secrets and sensitive government networks. No consumer data is known to have been stolen.
The ramifications of the attack continue to play out. The Trump administration has made computer and networking hardware, including motherboards, a focus of its latest round of trade sanctions against China, and White House officials have made it clear they think companies will begin shifting their supply chains to other countries as a result. Such a shift might assuage officials who have been warning for years about the security of the supply chain—even though they’ve never disclosed a major reason for their concerns.

I do sometimes wonder at the violent opposition to the Trump China initiatives.

America’s leading business lobbies, which represent every sector of our economy, have declared all out war against President Trump’s trade tariffs.
Manufacturers, corporations of every size and shape, retail businesses, agricultural industries, and consumer groups — 45 associations in all — have joined forces to defeat the president’s plans to impose higher trade taxes on our long-standing trading partners and most loyal allies.
The largest of these organizations, the U.S. Chamber of Commerce, which represents more than 3 million businesses nationwide, is launching an unprecedented campaign against the tariffs.

Is this ignorance or what ?