Saturday, November 5

The Count Dracula system of manufacturing. Or why only fools refuse to vote for Trump

If you want to offshore your company's manufacture of widgets to a factory in China, you have to provide the factory with the product specifications and any and all proprietary processes that go into making the widgets. 

Then all that the Chinese factory owner has to do is set up a separate factory to manufacture your widgets to sell on the side, or do the same with the factory he uses to fill your order. Instead of just assembling X number of widgets for your order, he runs off an extra million widgets for sale.

Now is this counterfeiting? No. 

Is it theft? Let me put it this way. If you call it theft, you have zero legal remedy. And even if you yank your business from China, the factory owner still has your specs. And your customer base, if the factory ships your product for you.    

When this is done on a vast scale, it can't be called theft. It is a shadow system of manufacturing that like shadow banking vampires the host industry. Eventually, the host collapses.  

This parasitical way of doing business is slowly but surely destroying China's economy for reasons I won't discuss here. But the story of American business offshoring its manufacturing to China is a riff on the old saying that there's no such thing as something for nothing. American business and consumers have paid an astronomically high price for a system that is bleeding them to death.

What's the solution? The ultimate solution is to dismantle all standing armies; i.e., not allow governments to maintain their power through the use of armed force. But that solution is still ahead on the timeline.  

For the present, Donald Trump is offering a stop-gap remedy that allows American manufacturers to set up factories in their own country without losing their shirts. He also plans to levy what would be, in effect, a tax on China's government for its support of their shadow factories. 

In other words, Trump is accepting reality but he's saying that Americans should get more out of the reality than they're doing now.

Americans who aren't aware of all I've explained are deluded when they criticize Trump over what they call free trade. This is not a trade issue. Such Americans are also wrong when they justify offshoring America's manufacturing sector by arguing that a rising tide lifts all boats. They're overlooking the shadow manufacturing sector, which just like shadow banking punches big holes in all the boats. 

So these are like the people in Gothic stories who think Count Dracula is offering them a good deal if he can suck their blood. What's a little blood if you can become immortal? But stripped of all the verbiage in the prospectus is the fact that Dracula is running a Ponzi scheme. In the end everybody dies except him.

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