The China Syndrome

Two decades ago, a cashmere sweater was a soft symbol of wealth and status warn by pipe smoking duffers at the club. Eventually women also wanted to wear the wool from the shaggy goat. The boosted demand beyond the capability of shepherds filled in the production shortfall.

But the sharp folk in Bentonville Arkansas who run Wal-Mart believed that cashmere was not the exclusive wool for the rich, and decided cashmere sweaters should be brought to the masses. It was the perfect Christmas present. They asked the disintermediating question, “Why not sell a $49 cashmere women’s sweater, or a $39 or even a $29 one?”

And the Shepherds in China and Mongolia heard them. A herder with 30 goats living in a tent soon had 300 grazing goats. He did what capitalists everywhere do – expand to meet the demand. And shepherds reaped the reward of Wal-Mart’s audacious bet on the desires of its customers to have buttery sweaters for $30 to $40. And soon the Asian shepherds had small homes and televisions and toilets and life was good.

Except 10 times more goats ate all the green grass, and the bigger herds needed to move to greener pastures. The old land turned to dust and the wind blew. Huge clouds of dirt miles long and wide lifted off the ground, browning the local air and ultimately circling the earth. The shepherds had to leave their newly built homes to search for new grass, and China and the world was a dirtier grittier place. But Wal-Mart got their cheaper wool, and you and I got our comfy cardigans.

The net gain for the Chinese economy was real in this case. New sweater factories were built. Girls got jobs at the sewing machines after fleeing the poverty of rural China. The sewing machine firms sold product and the machine guys sold them components for bobbins and stitches. The shepherds tasted prosperity and the goats found more company. But the gains were diminished by the communal degradation of the air pollution. That is not in the Chinese growth statistics, but the people  on the ground know it’s real. This is the yin and yang of “Wild East” growth. Eventually the Chinese people will not take it anymore.

By the numbers, growth will slow and the markets will no longer fawn over the Chinese stocks. The Olympics will come and go. Wal-Mart will still sell cashmere sweaters. I don’t know if they’ll cost more or less than they do today

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4 thoughts on “The China Syndrome

  1. AvatarBob Winstanley

    If we could turn the clock back a few hundred years, these words could have been used to describe the Industrial Revolution that started in England during the 1700’s and later on throughout Europe and later, in New England and then the rest of the USA.

    It is sad that the Chinese and others have not learned our mistakes and continue to growm so rapidly. Can we blame them though? We, the western “developed” countries are driving this madness and companies like Walmart, Target, Costco etc are just happy to supply us with cheap stuff we dont really need.
    I am afraid it will only end when as you say, the Chinese people say enough because I do not think we, the western worls have the guts nor motivation yet to slow it down – there’s too much money involved and we are all guilty.

    The fear I have is that if and when the Chinese people do say enough, we in the USA will not be able to pick up any tools to make what we really need as we will have forgotten how to make anything –

    Oh wait – I forgot! We can always go to Walmart and get it there as I am sure they will have already gone somewhere else on this globe to start the destuction process over again!

     
  2. AvatarNoah Graff

    Very interesting analogy Bob about the industrial revolution. I see some parallels, but this is different because the globe is so small now. Communication and transportation are so good, and money can transfer from one country to another in a few seconds.

    But you are right in the fact that history is sort of repeating itself because China is going through their own industrial revolution. It’s easy for us to point fingers at their environmental practices because “they should know better” in this day and age. Didn’t they learn from our mistakes? They should know not to pollute and that child labor is bad right? It’s the whole “do as I say not as I do (or did)” in this case.

    The people will probably learn that they have to change for their own good and the good of the world. I just hope it ain’t to late and that the world isn’t too messed up by that time.

    As far as Americans forgetting how to build things and use tools — Never happen. I think making things is just innate for people. We are animals and we’ll learn to adapt. If Americans had to make everything themselves, if our families had to make everything ourselves we would survive. That’s just human nature. Of course maybe we couldn’t wear much cashmere anymore.

     
  3. AvatarBob Winstanley

    Noah,

    I do hope that you are correct that we don’t forget how to make things!! Tool, die and mold makers amongst others are a very rare breed now and I am sure you have also seen the numerous manufacturing facilities closed down across the country.
    We can’t all flip burgers and sell insurance or financial services so as you say, maybe we will adapt and make something else in the future. Sounds like another opportunity is opening up if we knew what!
    As for cashmere, makes my skin itch!!!
    Regards,

    Bob

     
  4. AvatarTeplokru

    Можно ли построить дом дешевле 1000 уе за метр? Можно комплексные решения от ТЕПЛОК из качественных аэроблоков позволяют строить быстро индивидуальные дома при цене квадратного метра до 300 уе!
    Вы знаете существуют нормальные европейские технологии каменного домостроения малоэтажного например технология ИТОНГ и комплексные решения от ТЕПЛОК где высококачественные материалы и просте решения позволяют существенно экономить на возведении стен и отделке!

     

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