Grosse point Hyperopia (Part Two – the part where we trash the Chinese)
Of late, when automotive industry business analysts talk about the future, they have only three names: Toyota, General Motors, and China. The first two are car companies. But, if you think the third is a nation, you’re missing the point. China desperately wants to become a player in the global market, and it figures it has an edge. It has one of the biggest developing markets in the world.
Or, at least that’s what everybody says.
And, in a sense, it’s obvious.
China does have one of the biggest developing markets in the world,
Because it is one of the least developed countries in the world.
But, there’s a reason why.
Government and culture.
China is one of the most repressive societies in the world. It cannot possibly achieve, because it considers its most important resource – its people - a commodity.
Analysts have been trying to explain China for a very long time, but without much success. This is because they have attempted to explain it in Western terms, in terms of our own American and European past.
This is a mistake, because China has a very different culture, past and present.
The United States is unique because it, unlike virtually every other country in the world, had a “frontier.” That frontier happened to coincide with the industrial revolution and the only successful instance of land redistribution in the history of civilized man. Of course, that all happened because of that previously mentioned “frontier.”
Rather than having to take the land from the rich, for the United States it was only necessary to take it from the Indians. This was relatively easy because the native Americans didn’t think of it is theirs, in an ownership sense. But, once done, that land feed American industry and American industry fed that frontier into the middle class.
The Homestead Act – that land giveaway that coincided with the industrial revolution and the communications revolution created by the telegraph and the transcontinental railroad – created the one thing that was needed to make the automobile a success:
The middle class.
The Model T didn’t change things. It just moved them along. The pressure was there. Ford vented it first, but not best. He was the most visible, but he was far from the only one: think of Edison and the light bulb. (As they say at the museum Ford founded, it’s the difference between invention and innovation. Fortunes are seldom made from the former.
We got cars, lights, central plumbing, telephones, and much, much more – all at about the same time. For a reason. There was a market. That market was created by our own people.
China is very different. While the United States was formed in a setting of too much land and too few people, China has always been the opposite.
To this day, China comprises one of the broadest and most concentrated places of poverty on Earth. 300 million people in China – i.e., the equivalent of the population of the United States – live on a dollar a day, or less. China is spending vast sums of money on looking good to the outside world, building Olympic palaces for next year and an infrastructure that they believe will make them modern, but much of their country is little different than it was in World War Two.
In World War Two, after the Americans developed the B-29, the realized they could overfly Japan from Midway if they could land in China. But that required runways. China built them. To do that, they had men, women, and children break rocks into gravel. By hand. With hammers.
China is thought to have a vast and untapped potential, and by the numbers it does.
But China does not now have, and never has had, the one basic for a true vibrant manufacturing economy: domestic consumption of that which you produce.
And that is because it is unwilling to give its citizens the liberty to be productive.
When the United States developed its frontier through homesteading, it empowered a middle class. It took an emigrant population, one that had fled a poverty-ridden Europe, and gave them the chance to be owners, and producers.
The government did only one other thing: it drove a railroad across the country, one that made it possible for those producers to bring everything that they could produce to the industrial market of the East, and buy that which the East’s industry had to sell.
The next time you think about China, think about it in those terms.
Chery is in the process of selling cars in Mexico.
Because they can’t sell them in China.
And, as long as the people that rule that country continue to do so, they never will,
Nor will, in the end, General Motors.