The cost of a bicycle

excepting the effects of natural competitive advantage, the cost of making a product or providing a service is the same whether you're doing it in Illinois or Shanghai.
Written by Paul Murphy, Contributor
In a talkback about the top ten technology trends in Unix today, contributor "Southernpride" talks despairingly about American debt to Chinese interests and thus backdoors in the whole out-sourcing, off-shoring, and related economic issues agenda.

I don't agree with him on this; on the contrary I believe that the only long term threat Americans face comes from Americans - specifically from the people whose political hatreds blind them to the realities of world economic and political conditions.

On Southernpride's specific issue, however, I'd like to posit a relatively difficult answer: specifically that, excepting the effects of natural competitive advantage, the cost of making a product or providing a service is the same whether you're doing it in Illinois or Shanghai.

Since Walmart will sell you a Chinese made child's bicycle for $40 while its American made counterpart runs $225, you'd assume that the underlying manufacturing and distribution costs are different. I don't think so, what I think is that cost totals are constructed and weighted differently, but the difference is an artifact of our inability and/or refusal to account for non monetary and temporal costs.

In particular we measure neither the effects on human value associated with practices like child labor or enforced indenture, nor the long term economic consequences of environmental exploitation.

There is a theoretical basis for my views - but it's wildly esoteric: basically an extension of the marginal Leontief I/O model (itself derived from work by Morgenstern and van Neumann) to allow additional product/product solutions.

The obvious problem, however, is that we have no generally accepted method for measuring these kinds of costs and no way to ensure that those who incur them, pay them. On the contrary environmental costs are almost always paid by subsequent generations and human costs are almost always paid by people who have no social status or importance.

In other words, when a steel factory in Gdansk creates an environmental mess during the fifties and sixties it lowers its apparent output costs in the short term but accumulates a non monetary debt in terms of human and environmental damage that ultimately has to be paid -in poor health, education, and lifespan expectation for the people who live there at the time and in cleanup costs or local economic depression some time after the political regime changes.

And that brings me back to SouthernPride's comment about American debt to China: in the end the books have to balance - and every time the Chinese ship a $15 product that would cost $100 to make in the U.S. they incur an $85 dollar non monetary debt that will ultimately have to be paid.

Basically, the faster that debt builds up, the more pressure they put themselves under - until either we get regime change and the kind of rebuilding we're now seeing in eastern Europe or a bloodbath of historic proportions.

So, bottom line, when a Walmart shopper sends a dollar to communist China: don't think of it mainly as part of an American job lost, think of it first as a tiny soldier sent to serve in an information war aimed at heading off a bloodbath affecting two billion or more people. Similarly, when the Chinese communists use that same dollar to invest in American treasuries or assets, don't think of it as debt to China, think of it as an eighty-five cent subsidy for America taken from the Chinese people to serve the Chinese government's own political agenda.

And bear this mind: the piper will have to be paid, no question, but by the Chinese, not by Americans and meanwhile the only thing that can fundamentally hurt the United States is internal political naivete, internal political hatreds, and the narcissistic national self-loathing preached by the Michael Moore's of this world.

Editorial standards