Manufacturing

China, The Hollow Dragon

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chinaCharles Hugh Smith – In terms of profitability and trade-generated wealth China is a hollow dragon.

It is widely assumed that manufacturing (a.k.a. the world’s workshop) is the source of China’s wealth. But how can this be true, given that manufacturing profit margins are razor-thin in China, and have been since the early 2000s?

Given that as little as $10 of the value of every iPhone or iPad actually ends up in the Chinese economy, how can anyone claim manufacturing has generated enormous profits?

(Mis)leading Indicators – China

Analysts differ over how much of the final price of an iPhone or an iPad should be assigned to what country, but no one disputes that the largest slice should go not to China but to the United States. That intellectual property, along with the marketing, is the largest source of the iPhone’s value.

Taking these facts into account would leave China, the supposed country of origin, with a paltry piece of the pie. Analysts estimate that as little as $10 of the value of every iPhone or iPad actually ends up in the Chinese economy, in the form of income paid directly to Foxconn or other contractors.

Foreign funded enterprises (FFEs–typically joint ventures between a foreign firm and a domestic Chinese company) dominate Chinese manufacturing. In the 2000s, the share of industrial machinery exports produced by FFEs grew from 35 percent to 79 percent. In computer equipment, FFEs’ share rose from 74 percent to 92 percent. Continue reading →

Deconstructing Edward Bernays’ ‘Propaganda’ (Part 5)

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“If you turn on a television set, you see in one minute that the goal of advertising is to create uninformed consumers making irrational choices.” ~Noam Chomsky

EdwardBernaysGuy Evans examines Chapter 5 of Edward Bernays’ ‘Propaganda’. Chapter 5 features several recurring topics; notably, aspirational culture, the manufacture of new customers, and controlling the public mind.

Guy looks at each of these key themes, and with the help of Mad Men‘s Don Draper investigates the strength of the emotional connection between ourselves and the products that we buy.

Click here to download this podcast.

Chapter 5 Transcript – “Business And The Public”

THE relationship between business and the public has become closer in the past few decades. Business to-day is taking the public into partnership. A number of causes, some economic, others due to the growing public understanding of business and the public interest in business, have produced this situation. Business realizes that its relationship to the public is not confined to the manufacture and sale of a given product, but includes at the same time the selling of itself and of all those things for which it stands in the public mind.

Twenty or twenty-five years ago, business sought to run its own affairs regardless of the public. The reaction was the muck-raking period, in which a multitude of sins were, justly and unjustly, laid to the charge of the interests. In the face of an aroused public conscience the large corporations were obliged to renounce their contention that their affairs were nobody’s business. If to-day big business were to seek to throttle the public, a new reaction similar to that of twenty years ago would take place and the public would rise and try to throttle big business with restrictive laws. Business is conscious of the public’s conscience. This consciousness has led to a healthy cooperation. Continue reading →