iPhone manufacturing and mining

http://www.nytimes.com/2012/01/22/business/apple-america-and-a-squeezed-middle-class.html?_r=4&pagewanted=all (Registration required)

Here’s an article which says what I’ve been saying for a while now, albeit with researched evidence. If you want to save half an hour of reading, the lengthy piece is about how the iPhone is manufactured in China, and why the operation will, in the words of the late Steve Jobs, never return to the USA.

This drives home the point that despite what people may think, manufacturing is a very specialised industry which requires a lot of skilled engineers and workers. Taking the iPhone as the example, it would not only cost significantly more to do it in the United States, it would be nearly impossible to get the necessary parts, skills and labour to put it together.

With that said, whether you agree manufacturing should stay in Australia is now a moot point. Decades of inaction has meant that it’s far too late and most manufacturing jobs have already gone overseas. Only a few exceptions remain, but their long term existence is questionable given that they’re receiving massive taxpayer subsidies (ie. car industry).

While it may be nearly over for big manufacturing in Australia, it serves as a powerful example that once an industry goes overseas, it generally does not come back. The current economic trend in Australia is obviously the booming mining industry, which now has the greatest share than ever of the Australian economy. Primarily the big two companies, BHP and Rio are gearing Australia’s economy towards being a raw materials exporter.

The consequence of this economic realignment is that it is causing a brain drain of talent and labour away from other industries. In fact, it’s already a struggle to find tradesmen, engineers and labourers to do odd jobs, and when you do find them, they’re incredibly expensive. But this is only the beginning, and in the future it will be far more difficult as these individuals are further tempted towards the mines.

And just as it will become impossibly expensive to hire tradespeople and physical workers, the mining boom will also start siphoning Australia’s best minds. Young students and talented workers will increasingly become frustrated their relatively low pay scales and start thinking that they’re better off driving a mining truck for triple the pay or getting into a mining company’s corporate headquarters.

These are just a few consequences of the supposed mining boom. While it is a positive that Australia’s economy is temporarily being saved by the money brought in by resource exporters, it is a dependency which in the long term will cause irreversible damage to Australia’s other industries.

The story of the iPhone and manufacturing is a lesson to be well heeded, as one day the mines will run out or other nations will start developing their mining capabilities to a competitive standard. And when that happens, Australia needs to have alternative sectors which will sustain the economy.

So, a couple of weeks ago this article appeared on the Business Spectator. It contained a couple of graphs which I found very interesting and have reproduced below.

In the article ‘An ageing Asian will weary Australia’, author Robert Gottliebsen argues that China and Japan have rapidly ageing populations. As such the Australian government and Australian companies are short-sighted in setting strategies which rely on increasing Asian growth and demand. In short, the predicted wealth of Asia will be curtailed by a severely diminished workforce.

Sounds like a good story on the surface, but if you delve deeper into the details, it looks like Mr Gottliebsen has intentionally missed out on some details. The source of the data quoted in the graphs is the UN, and a quick search reveals this UN page which contains data on predicted population ages for each country.

In the report, the UN describes the problem of ageing populations as a ‘global phenomenon’ which ‘has profound implications for many facets of human life’. While some countries are more ‘aged’ than others, the report data reveals that it is predicted that by 2025 Australia and the USA will both have 24.8% of their total population over 60 years of age. This is compared with 19.5% for China. In fact, the ‘ageing index’ which is the measure the UN uses, puts China at a better rating than not only the USA, but most of Europe. Japan does have a greater ageing issue than all of the previously mentioned countries, however the fact remains that the ageing issue is global.

So given the facts, lets put aside the ageing issue for the moment and assume that it will effect countries equally. Does China still have potential for further economic growth? The news is filled with stories of incredible Chinese economic growth and how rich the country is already. Well, rather than writing a book arguing my case, lets just look at the per capita GDP graph below as I think it alone conveys a compelling story.

The reason why I’ve included Singapore and Hong Kong as comparisons is because both cities have populations of overwhelmingly ethnic Chinese. As much as some of the inhabitants would like to deny it, but each of the countries share similar sets of beliefs, philosophy, language and culture. This is not to say that there are other enormous differences in say resources and history, but the graph provides insight into how much more growth there is to be had from China.

Robert Gottliebsen is certainly entitled to his view. But I question why he has so obviously picked out the issue of ageing populations as his primary counterargument to the Asian growth story, when it is in fact a worldwide problem. Chinese economic growth and the potential for further growth, should be convincing enough.

Environmental bling

So I’m just reading an article before I head off to bed, and I’m somewhat bitterly glad to read a sentence providing evidence on a topic I’ve felt strongly about for quite some time. So the article I’m reading is in The Age and here’s the quote I saw:

A social researcher, Mark McCrindle, of McCrindle Research, says his studies have shown while most people are concerned about the environment, they are not prepared to pay more to make a difference.

And how true is that?

Throughout life, I’ve known so many people and organisations who profess their deep and passionate love of the environment. Then when prompted to elaborate, these people often then talk about how they switch the lights off at home, choose to reuse supermarket plastic bags or even plant trees on volunteer days. While those are great sentiments, the reality is that they’re token acts which don’t actually affect the environment much at all.

What does effect the environment is the fact that these supposed environmentalists drive two cars, live in McMansions and eat loads of meat. I’m not just referring to the amount of carbon produced from these acts, such the burning of petrol when driving a car, but also the environmental impact in producing the products themselves. For example, huge amounts of energy and coal would have been used/burned, in the process of mining the iron used for the steel in the car.

The truth is, a lot of these passionate lovers of the environment pay lip service to environmental causes in an effort to feel better about themselves. Yet these same people will absolutely refuse to make any real sacrifices for the benefit of the environment, because it would mean compromising on their lifestyle. They’ll continue driving their four wheel drives or building decks for their homes because in the end, the reality is that they actually don’t care that much. To borrow a term from a friend, this supposed care of nature is just ‘environmental bling’; a shiny fashion accessory with with no real value or worth.

This isn’t to say that everyone who isn’t committed to the environment are evil sinners. But if you do make the claim that you’re a committed environmentalist, back your talk up. Or then again, it might be easier to just admit that you actually don’t care that much.

Public transport fiend

First post!  I’m intending on using this blog as an opportunity to rant and rant often…  So here goes!

In today’s edition of The Age, there was an article of some idiots literally riding on the back of a suburban train.  Well, it turns out that I had witnessed a similar happening not so long ago and I managed to take a pic of it!  I’ve emailed it to The Age though I doubt it’ll be published.