Buying up imports in the sales

 

              I went to the sales yesterday in my local area. On item after item there was label which said “Made in China”. A few said something different – “Made in India”  or “Made in Indonesia”  or “Made in Korea”.

               For just six pounds I was offered a reduced set of Christmas lights. They were in an attractive large box. Each light was mounted in  an artificial flower, a poinsettia. One of the forty was a fuse bulb. It came with a 13 amp plug for Uk circuits fitted as standard, and with two spare bulbs, 1.5m of cable to the wall and 4 metres of cable for the set as a whole.

                How can they do it for such a price? That product requires the assembly of flowers, cable, plug, bulbs and bulb holders, all to be mounted on a stiff card and placed in a box. It is then  sent half way round the world in a container ship, sent by lorry to a shop, and finally retailed to the public. The English on the box was fine, and the product betrays considerable knowledge of the UK market at Christmas.

                 In case after case the Chinese product is well designed, appropriate for the shop and the market, of good quality and very price competitive.  It gives me a sense of unreality to see the collosal Chinese industrial achievement on most shelves of our stores, and to realise how much capacity we have given up here in the UK to make things for ourselves.

                       This is just one small and not necessarily the most impressive example of great value from China. It is further evidence that we can import our lifestyle from China,  and borrow the money as a nation to do so. As we hear enthusiaism for the retail boom post Christmas used as evidence of our recovery, we should show a little humility. It may be good news for our retailers, and good news for consumers who still have the money to buy these goods. It is not going to create a large number of jobs in the UK making the things we want to buy.

                    The government has made much of its intention to rebalance the economy, and to shift activity into manufacturing. That will require bolder policies on taxation and regulation than are currently on offer. It will require French and German style skill by government to buy home made products within EU rules. It will also need to relieve the squeeze on the private sector which is programmed to get worse given the trajectory for higher public spending and tax revenues set out in the Budget forecasts.

                     More jobs and more enterprise require more realistic tax rates, which could boost revenues as growth accelerates. A  52% marginal income  tax rate on the successful, 28% capital gains tax, and  an extra 1% on both Employer and Employee National Insurance is not a winning package to promote more industrial risk taking in a very competitive world.

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47 Comments

  1. lifelogic
    Posted December 29, 2010 at 7:17 am | Permalink

    You have trouble printing and making the box or the insructions for £6.00 in the UK and you would probably be taken to a tribunal because one of your box makers made a sexist remark to one of the others while you weren’t looking.

    Meanwhile HMRC happily continue winding up good businesses because they are unable to borrow from the non lending banks (regardless of good security) to pay their tax bills.

    And if you do well 50% tax 40% IHT and the other taxes will take it all off you anyway.

    £1M invested for 30 years at 10% return (pre tax), 4% inflation, 50% tax, and one 40% IHT gives a decline to £0.8M in real terms. With no tax it grows to £5.4M in real terms. So a loss of £0.2 M on your “investment” and your 30 years hard work and the other £4.6M for the state to waste on HS2 or green energy nonsense.

    And that is if the business does well I would not expect much of a queue to form.

  2. James
    Posted December 29, 2010 at 7:45 am | Permalink

    I think you miss a crucial point. The choices that we as consumers make have an impact on the economy. Put together, those choices effectively determine the economy. I imagine (though please do correct me) that Conservatives are generally happy with having massive retail chains of the type you describe, rather than more independent businesses. The latter may have to charge more, but they also benefit the local economy more. Generally, money paid to a chain gets taken away to pay the shareholders, who can be overseas, or in some instances, have taken measures not available to your average joe, to avoid paying tax in the country in which they are meant to be based.

    My point is simple – the more we encourage local, independent businesses (by giving them our custom), the more we support our local economy. In turn, this tends to mean that more products are made here in the UK rather than abroad. I have nothing against the Chinese success, and good on them for being so successful, but I think there is a false economy – by seeking out the cheapest goods, or at least, the cheaper goods, we reduce the support we could give to British producers, which reduces the UK economy’s potential, whilst enhancing the Chinese economic powerhouse.

    We don’t need policies or protectionism, we just need British consumers to be more aware of the unintended consequences of their actions. If something seems cheap, it probably means your purchase will support overseas people (whether Chinese or wealthy tax avoiders) more than it will support British people. Take your choice, but don’t be in any doubt, you pay a price later, because your money left the UK rather than staying in it.

    • Liz
      Posted December 29, 2010 at 11:19 am | Permalink

      If we want more independent shops and businesses then the Shops and Offices Act will have to be repealed or reformed. Very long leases, upwards only rent reviews (Labour was going to abolish that remember) and high business rates make trading in the High Street very, very expensive and it is not how other countries do it – hence they have more small and independent shops. Successive Governments have always listened more to the powerful commercial landlord lobby than the small trader or the consumer,who pays “Rip off Britain” prices for this nonsense. The one good thing Edward Heath did was to abolish Resale Price Mainenance – the Coalition should finish the job.

    • Thomas Ross
      Posted December 29, 2010 at 1:14 pm | Permalink

      Your logic also applies to the majority of “immigrant” uk based workers, who we are told, send the bulk of their wages back to their home countries to the considerable detriment of the UK economy.

    • Posted December 29, 2010 at 3:51 pm | Permalink

      Entirely agree. I would also transfer monies from vast banking corporations to smaller, local banks and building societies, which have sustainable, “sound money” constitutions.

      We have become mindless consumers, preferring cheaper prices over quality, without considering the consequences.

      As corporations increase in size and consolidate, so our choices diminish. Once critical mass occurs, prices that these large supranational corporations charge begins to increase, as competition for their goods and services diminishes.

      If local Mom and Pop stores charge a bit more, buy from them, but buy less than you might’ve done. You’ll probably find that you don’t do without – you’ll just end up with less junk and goods of greater quality that will endure.

      Given the difficulty in disposing of large unwanted items, such as furniture and white goods, it makes sense to return to purchasing “furniture for life”, as was the case in the ’50s.

      Astonishingly, in 20 years, I’ve purchased 7 microwaves, whereas I recall that my parents had the same refridgerator for approximately 50 years.

      We should aim for localism and quality and ditch our manic consumption propensities, fostered by successive governments over the past few decades.

      • APL
        Posted December 31, 2010 at 11:51 am | Permalink

        FaustiesBlog: “We have become mindless consumers, preferring cheaper prices over quality, without considering the consequences”

        It seems to me that preferring price over quality is a result of ‘built in obsolescence’, it has become an obsession.

        As but one example: Century old, school buildings are deemed (by the self selected political class) to be ‘not fit for purpose, knocked down or, sold off and replaced with structures which have an expected life span of twenty years.

        Destroying structures that give continuity to a people and hint at roots deeper than the topsoil is of course part of Marxist collectivist doctrine.

  3. Nick
    Posted December 29, 2010 at 8:43 am | Permalink

    How are you going to cut taxes when you are raising spending 10.8% over last year?

    You’ve also got 6,800 billion of debts that the government has run up?

    Compared to a 27 bn loss on the banks, its not surprising you as politicians want to talk about banking failure when its your failure to keep your hand out of other people’s wallets that is the problem.

    You can’t even claim it’s labour, since you blame all bankers, all politicians are at fault.

  4. CDR
    Posted December 29, 2010 at 9:16 am | Permalink

    There was once a time when people were happy to pay a little bit more for a British-made product, because it used to stand for quality. Not any more. The relentless demand for cheap everything has, of course, forced production out of the country and into the hands of countries such as China and others who are obviously now in the swing of it.
    During my son’s school-days I can remember a lot of well-heeled parents banging on about wanting everything “cheap” ….that covered most things, including food (although they usually rolled up to school in an expensive Merc or some chrome-plated weapon-bearing 4×4). Subsequently it is the majority of British people themselves who have helped drive manufacturing out of this country over the years.
    I try and buy British-made stuff, and food, whenever I can, but these days it’s not very easy. Talk about more choice….I think we now have less; it’s either Chinese, Chinese or Chinese.

  5. Posted December 29, 2010 at 9:46 am | Permalink

    JR: With a view to improving the balance of trade, you want to “shift activity into manufacturing”. And you try to persuade us of the merits of doing so by prefixing the latter phrase with the phrase “rebalance the economy”. The latter is a nice sounding phrase, but I’m not persuaded.

    The best tool for dealing with a balance of payments deficit is devaluation. Witness the disaster that results when PIG countries cannot devalue.

    Having devalued (if that is necessary, and I’m not sure it is), individual firms – exporters, importers, manufacturers, the service industry, etc, etc – can decide for themselves how best to reallocate resources.

  6. Posted December 29, 2010 at 9:51 am | Permalink

    Why is making something you can drop on your foot better than providing a service for someone else? For a longer iteration of this question, see my blog post

    • David Wickes
      Posted December 31, 2010 at 12:18 pm | Permalink

      This point is probably fair – the target is misplaced though. Our economy is based neither on manufacturing, nor on clever ideas and services: it’s based on buying other people’s manufacturing on credit. That’s the position that needs to be rebalanced from.

  7. Alte Fritz
    Posted December 29, 2010 at 9:58 am | Permalink

    Mr R has had one of the most sobering experiences possible. For many years, governments have been happy to ‘sub contract’ manufacture to China and other ’emerging’ economies which have now well and truly emerged.

    Friends who import from China now tell me that their businesses now more or less rely on what happens in China for goods to get to the docks and then the time it takes to ship the containers. You are quite right that it will take more than pious sentiments to make more than a dent in this problem.

  8. Richard
    Posted December 29, 2010 at 10:02 am | Permalink

    The manufacturing business I worked for closed due to Chinese competition. In the space of 2 years over half of our turnover, built up over 50 years of trading, disappeared off to China.
    We calculated that if we were charging £1 for an item, the Chinese were charging 25p and that they were making a greater net profit, in money terms, on their price, than we were on ours.

    Perhaps there still is an opprtunity for small scale, high added value manufacturing to succeed in the UK but a revival of our larger manufacturing base is impossible.

    There has been billions wasted by Government in trying to prop up our manufacturing industry and most of this money has done little except prolonging the inevitable.

    My advice to Government would be to concentrate on reducing or even removing the many osbstacles they continually place in the way of industry starting up, succeeding and surviving.
    This is a very cheap option and would have a great positive effect.

    Politicians need to ask themselves, is this latest set of regulations or new law an actual incentive to create wealth and employment ?

  9. Posted December 29, 2010 at 10:03 am | Permalink

    Ah, it has begun to dawn on you. So have some of the implications. Is there any chance you could convey this realisation and awareness to your chaps on the government benches. I suspect that you have little hope of a hearing from any of the opposition. They are still in their own little fantasy world.

  10. waramess
    Posted December 29, 2010 at 10:11 am | Permalink

    I am obliged to make a new years resolution not to be wound up by the nonsenses introduced by this non-administration.

    It would seem that they are hell bent on making me break it

  11. oldtimer
    Posted December 29, 2010 at 10:17 am | Permalink

    The Chinese are also starting to make inroads in other, unexpected sectors. A very small example is in software. One of my interests is video editing using a programme called Edius (written in Japan) which is now making inroads into the US broadcast market. A Chinese company has now come up with easily the best titling programme for the software. Admittedly the competition is weak but they have spotted the opportunity and produced a superior product. It is also very well supported with extremely prompt responses (usually less than 24 hours) to questions and issues raised on the Edius forum.

  12. Gary Burgess
    Posted December 29, 2010 at 10:36 am | Permalink

    The tax (and benefits) system needs to be re-written to take account of a globalised world.

    It is pointless collecting income tax and employee and employer national insurance contributions if it makes employing UK workers less cost effective.

    Maybe there should be a shift from employee based taxation to consumption based taxation (e.g. VAT) so that products and services supplied using UK employees are not disadvantaged compared with those from China. It would also help with exports.

    • Posted December 29, 2010 at 4:09 pm | Permalink

      Agreed – except that VAT mostly goes to the EU. Short of withdrawing from the EU, I don’t see how we can benefit from consumption taxes. I would hope to see local Sales Taxes introduced on goods produced locally.

      In the US, counties have their own local taxation systems.

      Should Eric Pickles succeed in his localism push, perhaps we can begin to decouple county revenues from national revenues and institute local taxes, with a view to reducing national taxes to an absolute minimum.

  13. lola
    Posted December 29, 2010 at 10:39 am | Permalink

    I read somewhere that the Chinese State consumes just about 25% of China GDP. The Uk State consumes over 50%.

    I have a very good friend who has dealt with the Chinese in business for many years. He maintains that the Chinese have much more basic freedom tham we do.

    Nuff sed, thinks Oi.

    • Posted December 29, 2010 at 10:14 pm | Permalink

      Agreed- It’s been said time and again on the blogs – so suprised that everyone is still out of the loop. Incredible.

  14. The ESSEX BOYS
    Posted December 29, 2010 at 10:41 am | Permalink

    We often wonder if Whitehall has ever done a serious analysis of the ever-growing import figures.
    There’s a wealth of information showing the product categories we import in some of which British manufacturing COULD compete. Those products requiring hand assembly by cheap labour should be ignored – probably including John’s Christmas tree lights – but, like the Chinese and the Japanese before them, we could simply copy other products and do them better or sometimes cheaper. At the same price would do if ‘Made in Britain’ is made to mean something again.
    And, of course, anything relying on innovation, technical know-how or better branding should be well within our scope.

    Perhaps the Whitehall backroom boys and girls could be put to positive use by starting with analysis of raw data and then publishing it for an entrepreneurial audience instead of the politicians merely banging on about the CONCEPT of more manufacturing.

    • Simon
      Posted December 31, 2010 at 6:05 pm | Permalink

      Essex Boys ,

      I would not be so quick to discount those jobs involving hand assembly by cheap labour .

      There are millions of unemployed and underemployed and the number is likely to continue to grow , even if the brakes were to be put on immigration and our population were not to increase .

      I just cannot see what the British Worker is going to be doing in 20 years time .

      Unemployment could well pass 4 million this decade .

      When that happens it will be extremely difficult to maintain law and order – unless you educate people to become apathetic , controllable zombies …. oh , hang on .

  15. Denis Cooper
    Posted December 29, 2010 at 11:07 am | Permalink

    Eventually the standard of living and therefore production costs in China may rise sufficiently, and those in the UK may fall sufficiently, for some basic manufacturing to be transferred back to the UK.

    As there are far more Chinese than us most of the convergence will be have to be achieved by a relative lowering of our average standard of living. The extent to which that relative drop in our living standards will translate into an absolute drop will depend on the pace of economic growth compared to the pace of convergence.

    Any serious attempts by the UK government to use increased public spending to prevent or even mitigate this process, or to protect the living standards of our unemployed, our poorest employed and our retired, will inevitably lead to chronic and rising government budget deficits and eventually state bankruptcy.

    This is what happens when two populations with radically different standards of living and employment costs are suddenly put into competition through free trade.

    But even when our standard of living has been reduced to converge with the rising standard of living of the Chinese, there will still be other countries, for example in Africa, with over-abundant and still-expanding supplies of cheap labour available to drag us down further.

    On behalf of myself and my children and prospective grandchildren I’d like to thank all those free trade fanatics who’ve brought this about.

    • Stuart Fairney
      Posted December 30, 2010 at 5:20 pm | Permalink

      Presumably then, you don’t allow your grandchildren to cut your lawn, and do something more profitable yourself, on the basis you ‘cannot compete’ with the £2 per hour you pay them.

      It’s not cheap labour and cheap goods that kill us, it’s lunatic over regulation, over taxation and over government.

      • alan jutson
        Posted January 2, 2011 at 10:01 am | Permalink

        Stuart

        Yes the good old payment for jobs completed incentive.

        Worked for my two daughters to help teach them the value of money.

        Paid for cutting the lawn, washing the cars. But they had to keep their own room tidy, and do some help in the house as part of the more normal non paying functions of life.

        If they wanted more money, then they were encouraged to get a part time job in school holidays or weekends.

        It works.

  16. Gary Burgess
    Posted December 29, 2010 at 11:40 am | Permalink

    Manufacturing has been lost and we have moved to a service based economy. However even in that area we have a tax system that benefits companies importing low taxed cheap labour into the UK.

    Imported skilled intra company transfer migrants have tax (through tax free allowances) and NIC advantages over UK workers. See the answers to some questions asked by Lord laird:
    http://www.theyworkforyou.com/wrans/?id=2010-12-22a.340.0&s=laird#g340.1
    http://www.theyworkforyou.com/wrans/?id=2010-12-07a.44.0&s=laird#g44.1
    http://www.theyworkforyou.com/wrans/?id=2010-11-16a.196.0&s=laird#g196.1

    JR: Did the Home Secretary ever answer your questions?
    http://www.johnredwoodsdiary.com/2010/11/26/inter-company-transfers-2/

    Reply: still awaiting her replies.

    • Simon
      Posted December 31, 2010 at 6:15 pm | Permalink

      It’s so one sided no wonder the British Worker cannot compete .

      British Jobs for British Workers are a price that the political elite have decided it is well worth paying to help European Pharma to collect patent royalties on drugs in India and help the British parasitic financial services industry to infect another host .

  17. D K McGregor
    Posted December 29, 2010 at 12:06 pm | Permalink

    When the river of cheap credit to Britain dries up and our indebtedness has to be addressed , then we might find ourselves able to export bamboo calendars to the Chinese for their New Year .

  18. Julian Bishop
    Posted December 29, 2010 at 12:43 pm | Permalink

    I know most men are a nightmare to take shopping, but your poor wife must have really have regretted taking you yesterday!

    reply: I no longer have a wife – and I like shopping.

  19. AJC
    Posted December 29, 2010 at 12:58 pm | Permalink

    JR – you didn’t mention the pre-sale price.

    If we intend to manufacture more we clearly need to place the emphasis on high added value manufacturing. How are we going to service the needs of this manufacturing without a strong nudge to the education system to deliver skills appropriate to future jobs?

    At one time the FE colleges and our Polytechnics met a large part of that need. Since they were “promoted” to Universities many seem to have switched emphasis to Media and Leisure Studies!

    Nuclear Engineering is another fine example of lack of (strategic) thought on the part of Governments. How are we going to service any dash for nuclear when the qualified workforce is now at or reaching retirement age?

    • alan jutson
      Posted December 29, 2010 at 5:32 pm | Permalink

      AJC

      Agreed

      Similar points made in my blog on Universities a couple of weeks ago.

      It will all end in tears eventually.

    • David Price
      Posted December 30, 2010 at 8:24 am | Permalink

      Agree, I looked around the county for practical engineering courses to retrain and the only thing available was car maintenance for school leavers and nothing practical for adults.

      I disagree with a sole emphasis on high value manufacturing though. I think you need to support a range of skills as not all jobs can be high end, high skilled. You also need to foster a broad range of technology and engineering areas to have a critical mass of capabilities.

      A few years ago an A1 Tornado was built in Darlington, this was a major achievement but for me there was a degree of sadness that the boiler itself, the core technology of an engine invented in this country, had to be imported from Germany. This seems symptomatic of what has happened to engineering and technology in this country.

      • Simon
        Posted December 31, 2010 at 6:17 pm | Permalink

        At least that Tornado works properly .

        Unlike the Tornado’s we have to rely on for defence now that the Harriers have gone .

  20. Mark
    Posted December 29, 2010 at 1:41 pm | Permalink

    Should you be surprised? We provide university places for over 50,000 Chinese every year. Our brightest engineering management are finding amenable jobs working in China, where there quality of life seems to be better than in the UK – so our own graduates are adding to the Chinese and giving them the benefit of detailed cultural knowledge of markets as well as business and engineering expertise.

    In 1988 our trade balance with China was £3 million in deficit (HK £649m). By 1997 that deficit had grown to £1.46 billion (HK 0.94bn), and by 2009 to £18.9 billion (HK 3.9bn) (up from £14.9 bn in the pre-recession economy of 2007 when HK was £4.3bn). By end October 2010 the deficit had already reached the £18.9bn total for 2009 (HK £3.1bn YTD). The Chinese have been very happy to replace the industry that the EU and government have regulated and taxed out of existence in the UK.

    Our cumulative deficit with China from 2000 totals some £120bn.

    • Mark
      Posted December 29, 2010 at 1:55 pm | Permalink

      Exchange rate averages (using USD as a proxy for trends in renminbi/yuan) were

      1988 13.9 HKD 1.78 USD
      1997 12.68 HKD 1.64 USD
      2000 11.8 HKD, 1.52USD
      2007 15.62 HKD, 2.00 USD
      2009 12.14 HKD, 1.57 USD

  21. Posted December 29, 2010 at 2:51 pm | Permalink

    What is and is not an export is obscure these days. In the boom years people were borrowing Yen, selling it for Sterling and buying our mortgage and corporate debt with it. We were exporting our debt to Japan in effect.

    Foreign savers and surplus nations also sell forex to buy London listed stocks that have no actual UK assets (such as mining companies) or a mix of worldwide assets (such as most of the FTSE100). We are exporting other nation’s natural resources and foreign telecoms infrastructure.

    As far as I know, neither of these ‘exports’ counts towards to ‘official’ trade deficit but it supports Sterling and allows us to keep buying cheap merchandise from the developing nations.

    I suspect if it wasn’t for all the financial assets we export Sterling would be much weaker and we would probably manufacture more things like ships and consumer durables. We should be careful what we wish for, as many manufacturing-based economies stitch sneakers and baseball caps for a dollar or two a day.

    • Mark
      Posted December 29, 2010 at 5:25 pm | Permalink

      You should read the chapters of a Pink Book that describe what is included where in the Balance of Payments accounts. The Current Account includes payments of interest, profits and dividends in each direction: FTSE companies receive large sums from their overseas subsidiaries under this heading, but pay out to foreign lenders and shareholders. It also includes remittances by foreigners to their home countries (usually to support their families there).

      Trade flows are mainly recorded on the basis of the origin and planned destination – so if an oil cargo is sold by the producer to a trading company registered in Bermuda who on-sells it to a refiner in the USA, provided the destination is known at the time of loading it will be recorded as an export to the USA, not Bermuda (but if a hurricane then causes the cargo to be diverted en route the real destination may not be recorded).

      Because payments have to balance overall, care is needed in interpreting financial flows. For example, the UK borrowed some £800bn abroad in order to fund mortgages over the period 2000-2008. Much of that money leaked out into paying for high ticket foreign goods and holidays – i.e. it funded the goods trade deficit. Back in the 1960s our BoP deficit was funded by payments out of official reserves and eventually a loan from the IMF. The last government privatised the trade deficit.

  22. Martin
    Posted December 29, 2010 at 4:13 pm | Permalink

    Why not ask the Treasury to try to lower tax rates for manufacturing only? Our service sector is doing relatively well at present tax rates.

    • JimF
      Posted December 29, 2010 at 4:24 pm | Permalink

      That can be done through increasing Capital Allowances, which this government has reduced.

  23. Bazman
    Posted December 29, 2010 at 5:32 pm | Permalink

    Difficult to resist these cheap products even if you can afford better. Like or hate em’ the discount supermarkets and pound shops offer good value for money. Even though they have become a bit more expensive in recent years they have upped their game and only snobbery stops people shopping there. You can use the money saved to buy, in my case a very expensive Swedish washing machine that will last for 20 years+. An ISE 10 if you are interested.

    The cheap ones will turn out to be expensive in the long run, but if you have no money then the Chinese it is.
    British manufacturing will never win the race to the bottom, though many people seem to think we can as long as we cut costs enough often by the only cost can control. The wages and conditions of the workforce. I wonder how the workforce at ISE fare and what their profit margins are like?

  24. alan jutson
    Posted December 29, 2010 at 5:43 pm | Permalink

    How about 3 pairs of frameless prescription reading glasses for £2.97.

    Excellent value in the 99p Shop..

    Just about the limit of my shopping in Brackell today.
    Good job I did not have to pay for Car parking (first two hours free), that would have increased my spend by about 200%

  25. Bill
    Posted December 29, 2010 at 7:55 pm | Permalink

    Yes the Christmas boom is another rock in the sack of our balance of payments deficit.
    Of concern is that the Chinese will soon be exporting to us more complex products, highly engineered. Products where the state has been both the venture capitalist and the producer.
    Stuttgart is booming as Mercedes and Porches’ work have increased production to meet Far East demand – the UK, with some notable exceptions just hasn’t the industrial infrastructure anymore.
    If we are not to be left behind totally the government needs an industrial strategy (not sure what, beyond my pay grade) and needs to slash key taxes to generate enterprise here

  26. Ken
    Posted December 30, 2010 at 1:41 am | Permalink

    Surely we have distorted the jobs market in the UK with layer upon layer of employment legislation, including the minimum wage which has priced people out of the market and left them drip-fed with dole money or useless college courses (in the case of younger people).

    As staff costs are a major element in overall costs, we should free up the jobs market and get our factories working again and give people, especially the young, some self esteem.

  27. stevered
    Posted December 30, 2010 at 11:44 am | Permalink

    As a bit of a scrooge who, unlike JR hates shopping, I try not to buy cheap STUFF that fills the home and is depressing to look at and fall over. This bloody Yuletide I have received a stuffed dog to put on my armchair. It holds a beer can and TV remote . I am having to find space for new things in the kitchen by throwing out older things that are still working. Everything is made in China.

    For customers that like to buy new STUFF from China, their inflation rate is low and the statisicians count all this cheap rubbish into their ‘basket’. So for customers that don’t keep buying rubbish, such as huge TVs and mobile phones that show the night sky, inflation is higher. It therefore suits governments to have cheap manufactured imports in order to conceal high real inflation with homemade items, food and fuel.

    Many people notice that household electrical and mechanical items all break down after 5 years. In the past, washing machines or boilers could last 20 years. Computers maybe 10. I am convinced that industry sources parts which are tested to last no more than 5 years. If planned obsolescence is deliberately organised then nothing could be more wasteful in terms of personal cost, energy and resources. But whilst regulating in the most ridiculous areas, no EEC official would dream of setting standards to increase the durability of products. Why? The word ‘lobby’ comes to mind.

  28. APL
    Posted December 31, 2010 at 11:11 am | Permalink

    JR: “How can they do it for such a price?”

    It’s called (cheap -ed) labour.

    Reply: but it includes raw materials, western design, shipping and UK transport, Uk retailing etc.

  29. sm
    Posted January 3, 2011 at 5:17 pm | Permalink

    We live in interesting times? I believe has a Chinese interpretation.

    Global imbalances which have been unleashed need to be smoothed. The problem is how? And not just by currencies, they revalue up or we revalue down.(note the US,UK depreciation)
    The playing field needs to be levelled, so that the chinese or another worker gets similar fair pay and conditions and is not exploited by capital /consumers in the west or otherwise.

    I heard the minimum wage was increased 21% in China recently, as inflation bites, i think the west and east need to sit down and carefully agree a path through these great imbalances. Otherwise sustainable trade will cease when the west can borrow no more and hence cant spend. Resulting in currency collapse/insolvent countries whoose debt is probably owned by the self same exporters. The debt will be inflated away and QE will be used to lubrciate the imbalances until we finally balance out.

    The EU could be useful here but it isnt, i suspect the US currency will collapse or China will suffer a temporary setback due to overinvestment .

    Where does sustainable growth and working conditions appear or feature in trade arrangements?

    I don’t fancy the idea of working at Chinese wage levels so what should be the correct policy response. A 21% increase in the minimum wage? and perhaps some tarriffs on countries who are over reliant on exports rather than domestic consumption.

    Where is all the profit being made and in which countries and by whom and what tax is being paid to fund neccessary state services. Country by country reporting would help, as would closing down the tax fiction of offshore business relocation where the economic activity and substance of transactions remain in the UK.?

    There are consequence for allowing capital/money to rampage completely uncontrolled or controlled by er bankers/government.

  • About John Redwood


    John Redwood won a free place at Kent College, Canterbury, He graduated from Magdalen College Oxford, has a DPhil and is a fellow of All Souls College. A businessman by background, he has been a director of NM Rothschild merchant bank and chairman of a quoted industrial PLC.

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