Profits Vs Everything Else

A couple of researchers with the Asian Development Bank Institute studied up on how the iPhone increases the trade deficit with China (PDF). The paper was published last December and updated last May.

In the study they hypothesize the effect of moving the assembly of the iPhone to the US.

An interesting hypothetical scenario is one where Apple had all iPhones assembled in the US. Assuming that the wages of US workers are ten times as high as those of their PRC counterparts and their productivity would be equal in 2009, if iPhones were assembled in the US the total assembly cost would rise to US$68 and total manufacturing cost would be pushed to approximately US$240. Selling iPhones assembled by US workers at US$500 per unit would still leave a 50% profit margin for Apple. As iPhone sales increase globally, that profit margin would also increase. In this hypothetical scenario, iPhones, the high-tech product invented by the US company, would contribute to US exports and the reduction of the US trade deficit, not only with the PRC, but also with the rest of world. More importantly, Apple created jobs for US low skilled workers; those who could not be the software engineers needed by Apple. Giving up a small portion of profits and sharing them with low skilled US workers by Apple would be a more effective way to reduce the US trade deficit and create jobs in the US.

And their conclusion in part.

PRC workers added a merely $6.50 to the entire US$179 manufacturing cost of an iPhone and the appreciation of the yuan would only affect the assembling cost. Therefore, the appreciation of the yuan would have very little impact on the total manufacturing cost as well as the retail price of iPhones. It is unrealistic to expect the appreciation would lower the demand for iPhones in the US. In other words, the appreciation of the yuan would not help mitigate the US deficit due to iPhone trade. If US high-tech companies, such as Apple, were willing to share their profits with low skilled US workers by keeping assembly jobs in the US, it would be a more effective way to reduce the US trade deficit than by targeting the exchange rate policy of the PRC.

It may also help reduce China's suicide rate.

The Part We Didn't Hear

Recently, Itronix was in the news. They announced that 300 people were being laid off. Depending on how you look at the numbers, it could actually be 360-380 and anywhere from 60-80 people have the option to move to Florida.

But there was something missing from all those news reports. Where will the rugged laptops and handheld computers be manufactured now? What happened to the approximately 300 jobs that disappeared? Don't reporters ask these questions?

What we weren't told was that the manufacturing jobs are going to Taiwan.

During one meeting a 73-year-old employee asked if it would be unethical for him to accept job training because he might displace a younger person and prevent them from taking that training. How heart wrenching to see a 73-year-old employee put in that position and heart warming to see how much he cares about others.

Not to worry. There is a job available for younger people.

It's Possible

We hear and talk a lot about sustainability these days. There's nothing like a crisis to make us realize we do better by growing our own food or riding a bike to work among other things. Here's a worthwhile article about a former weapons engineer who gradually simplified his life, wrote a book about it, culminating into the Global Living Project.

Ethnocentric Blinders For Everyone

I went to Whitworth University and listened to our former congressman, George Nethercutt, give a speech about Citizenship in the 21st Century. The audience consisted of young college students. The only other "older" people were various Whitworth leaders sitting up front and then me sticking out like a sore thumb among the young folks.

Mr Nethercutt started out with some definitions and a fluffy general overview about citizenship. One thing that struck me was his emphasis of American exceptionalism; positing that American society, culture, and it's form of government is better than that of any other country. He also kept harping on the principles and values that guided America without saying what they were. Had he brought those out he could have given a much better speech without having to say "citizenship" over and over.

He made an interesting contrast between (part of) the Bush doctrine of spreading democracy and our founder's feelings on international affairs and entanglements. He questioned whether the founding fathers would approve of spreading democracy to other countries since they obviously had no intent to do so themselves.

Making sure to link in 9/11 the former congressman mentioned that only one of two times that Congress met in session outside of the Capitol was at Federal Hall in New York City not long after the attack. It was sad that he thought this was so significant yet he didn't remember doing it. But he said he knows he was there because he saw he was in the picture that was taken. And he thinks that disconnect is humorous?

He made excellent points about how young people (but this could apply to all ages) are not familiar with American history, are not involved or interested in society and government, and how this adversely affects us as a nation. He said there's an "under education" of our youth. I have to agree. And he re-emphasized the guiding values and principles again, but again without stating what those might be.

He compared the sentence lengths of the inaugural speeches of Washington and John Adams (60-70+ words) with those of Clinton (26) and Bush (18) and then asked, "Is that important?" His answer, "Probably not." So no telling why he brought it up.

He made quite a few references to God throughout the evening. And he said that since the founding fathers were all Christian, they intended this to be a Christian nation. I thought that made as much sense as saying since they were all white they intended this to be an all white nation. However, after looking around the room, I think he would've been singing to the choir on that point as well.

Overall, he had a valid argument that people should be involved in their community, society, and government. But for me he didn't sell citizenship well at all.

There was a short Q&A period afterward. A young man said he wanted to be a good American citizen. He agreed with the idea that American culture was better than any other country's. (What does that mean exactly?) But since we live in a global environment, he wanted to know how could he be a good global citizen. (No doubt, once life is discovered on another planet he'll be concerned with being a good galactic citizen.) Mr Nethercutt's answer: the young man should be a good American citizen and "export that", which seems to run contrary to the intent of our founding fathers he mentioned earlier.

I was most disturbed by this sense of American exceptionalism and American superiority. I don't know if there was a general consensus or just a lack of expressed disagreement in the room. But having lived in and visited other countries, I am not about to say that American culture, society, and/or government is better than any other. There are aspects I would say are better as well as some that are worse, respectively, freedom of religion and health care are good examples. International respect for America is in the tank and we're not about to win that back by looking down our noses and telling others they should be like us. When I go to Italy I want to experience their culture. I don't go to Rome to eat at McDonalds. It's wonderful to experience the differences and doing so opens your eyes. Sometimes it makes you appreciate what you have at home. Sometimes it makes you envious. But to approach it with an air of superiority is a good way of ensuring that, at best, you get spit in your food.

Speculating About Speculators

Recently, the Wall Street Journal opinion page had an op-ed piece concerning a recent report from the Commodity Futures Trading Commission which the author of the op-ed piece says conclusively proves that speculators had nothing to do with the rapid rise of oil during the summer. I found the CFTC report difficult to read. There's way too much technical language in there for me. However, the Executive Summary was easy to follow, especially where it says, "This preliminary survey is not able to accurately answer and quantify the amount of speculative trading occurring in the futures market." It goes on to explain that both commercial and noncommercial entities engage in hedging and speculative activity and that all gathered data classifies positions by entity and not by trading activity. So I'm curious how the WSJ was able to completely dismiss the effects of speculation based on a report that admits it's unable to address it.

There's an independent report (Note: You have to unzip the file and there are actually two PDF files) that was also released recently that claims speculators are driving up the prices of food and oil and goes on to explain in easy to understand language how.

So which do I believe? Given the administration's less than sterling record of being forthcoming with facts, the CFTC's obtuse report, and the government's lack of direct access to transaction data I have to say I place much less stock in their side. So unless presented with evidence showing otherwise, I continue to maintain that speculators had an adverse effect on the oil market this year.

Where's Paul Harvey When You Need Him?

In today's Spokesman Review there was a short article about 30,000 Atlantic salmon escaping from a fish farm in the waters off British Columbia and the provincial Environmental Ministry is going to investigate. Then it explains how the salmon got out due to an anchor slipping and pulling a corner of the net down. At first glance I joked to myself that a bunch of fish had engineered their own Great Escape. But then I wondered why this was important enough to put in the paper yet it still doesn't say much of anything. Ah, a Canadian paper has more details on the impact of the escaped fish.

"You get juvenile Atlantics, they're not indigenous to the coast and they start competing with the wild salmon and they start putting the wild salmon at risk. Everything has to be done to stop having those Atlantic salmon in the ocean," she said. "Any time you bring in an invasive species or a non-indigenous species ... it poses a threat to the existing biological diversity."

Well, these are pen-raised salmon. I refuse to buy Atlantic salmon because they create an ecological nightmare.

"Disease is rampant among captive salmon and shrimp, Molyneaux contends, while medications used to cure disease make bacteria disease-resistant. Are shrimp and pen-raised salmon safe to eat? Don't count on it, according to "Swimming In Circles." The book cites studies that find high levels of PCBs in farmed salmon, plus organic pollutants "10 times higher" than levels in the wild fish."

Another article about the escape says there are still 450,000 salmon at the operation where the escape took place. So nearly one-half million fish are fed in the same enclosed area and all of their waste drops to the same area of the sea floor. Once you have a look at the global scale of pen-raised salmon farming it's not difficult to piece together the rest of the story.

Random Thought For The Day

It occurred to me that America's foreign aid could be considered the world's heroin. We tantalize countries with it. We get them hooked on it. They crave it. They can't live without it. If we cut them off they suffer dearly. They will do anything to keep getting it. Things like lowering tariffs on goods so that corporations can crowd the locals out, accept genetically modified (patented) seeds, build factories and provide low-cost workers, etc. Just a thought.