Free Markets Work

Here is another article on the working free market, in addition to this earlier  article on Systeme D, or "black" markets...

You'll note in business we use the term black to mean good, such as "in the black" to mean profitable (as opposed to "in the red") and "black market" to mean quality, integrity, voluntary and fair pricing.

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Re: Volt ing

I rambled on about the Chevy Volt, design, competition and subsidies a while back, and now it gets worse.   Chevy Volt need special crews if you are trapped in a wreck.  They can catch on fire weeks after a collision.  What sales they do get are taxpayer mulcted fleet sales.  They cost taxpayers about $250,000 each although they are priced at about $20,000.

This sounds like government motors.

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China Begins Outsourcing

China will begin making cars in Bulgaria, to enter the European market.  This article in der Spiegel hits on three points I make, that people find controversial, relating to cheap labor fallacy, China's debt strategy, and export strategy.

1. If world trade is about cheap labor, then why is China outsourcing products?  Bulgaria may have lower labor rates than other parts of the EU, but they are higher than in China.  What Bulgaria has is cheap management.  That is what China is exploiting in Bulgaria.  Bulgarian labor is a part of the cost of a car, but efficient cheap management trumps all.  But do note, economic recover is coming to Bulgaria, because prices have fallen.  The US Govt is doing everything it can to stop prices form falling.  We cannot have economic recovery until prices fall dramatically, across the board, wiping out debts and debt-holders.

2. China owns a lot of debt, US Treasuries in particular.  The USA world political strategy and domestic security is based on China being trapped by owning so much USA debt.  It seemed obvious to me long ago that China would simply use this debt as collateral to build an infrastructure world wide that serves China.   When that debt goes bad, it will be Bulgaria hurt by the Americans, not China.  Worldwide people will love China for the factory, hate America for the bad debt.  Why this is not obvious I do not know.

3. The best way to build and export market is to import first.  China I following 3M here, in buying from Europe, as a way to sell to Europe.  I had dinner with a top 3M exec back in 1977 in China.  He explained 3Ms strategy to me.  At the time China's rules on foreign investment were 1. A foreign company could not own more than 49% of a Chinese company.  2. Everything a joint venture made had to be exported.  3. The profits could not be expatriated. 4. They could not make anything China already makes.  Within five years China had waived all these conditions in 3M's case.

I suppose lawyers hear much nonsense from outsiders regarding their work, as do doctors, etc...  and so it is with international trade. This is one reason why regulations do not work...  the regulators have no idea what they are talking about.  So they turn to lobbyists for help writing the rules.  What a mess when you try to centrally command an economy.

Great Wall Automobile

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State Department And Export promotion

Our State Department has announced that is is getting into the jobs creation business.  Here is how:

Although it’s unclear what the exact structure of the State Department-private sector relationship will be, the concept could potentially be a boon to the U.S. economy, said Ted Alden, a senior fellow at the Council on Foreign Relations.  “You’ve got in the embassies abroad what really amounts to market intelligence—people on the ground who are familiar with the business environments in the countries in which they are working and companies are looking to break into,” he said.

Now, haven't they being doing this all along?  Haven't I over the last 35 years been told this is exactly what they do?  State has always had paid programs where you can buy "market intelligence."  I guess since no one wanted it, they will know give it away for free.

Speaking on Tuesday before more than 200 major U.S. executives operating in more than 120 countries, Clinton laid out the State Department’s plans through a concept Clinton coined “Jobs Diplomacy.” Under this approach, U.S. diplomats will take a more active role in looking out for U.S. business interests abroad, making a stronger effort to share their knowledge of foreign markets with U.S. multinationals.


This is something new?  Is not the reason we were in Vietnam and the Balkans and Iraq and Afganistan precisely to protect American biz interests, to make the world safe for kleptocracy?  And note "multinational" means huge business, so we are out on this one, as usual.  And does she think a single one of those 200 executives thinks there is a single person in the State Department who has the slightest understanding of business, let alone their business?

This was a campaign speech that cost us taxpayers a few million dollars. We need freedom, not programs.

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China and the Clean Business Campaign

Here is an example of the new "clean business" project encouraging people to trade in China...  what company is more concerned with IPR than Dreamworks/SKG?

I was there 35 years ago when China was changing into what it is today.  It is changing again, and it looks like for the better, although who knows...

For exporters, if you thanked your lucky stars you stayed away from China, it may be time to take a look again.

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Canada To Open Base In Germany?

This can't be right...  Canada?  Have Canadians thought this through?

When I first went to China, after Nixon opened it, the Canadians we already there, since they were not into all that invasion stuff.  Canada freely trades with Cuba. This is the Canada I remember....

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Safety Devices

Here is a sad story of several skiers dying in avalanches.  There is a lesson about design in the article, though.

Saugstad, who skis frequently in Europe, where inflatable emergency air bags are popular in the backcountry, opened hers. It allowed her to stay largely on the slide's surface.

"Hey, I though of that!  That's my idea!"  People think someone else stole their idea when in fact countless people have the same idea at the same time.  I have no idea who re-purposed a car crash-bag to skier safety, but it has been done.

This is also why we go shopping for our new idea.  We may think it is new, but someone else may have already done it.

And the third lesson is when it comes to safety innovations, the result is often we spend the safety margin.  As safety gear makes our normal activities more safe, we begin to push the limits, because we feel safer with our new gear.   Regulations act this way too, as we feel safer due to whatever, we begin to be more reckless.  We all have tolerance for X amount of risk.  We'll go to that level.

Costs begin to go up when the eventual disaster occurs in ever more extreme places, and we foot the bill to recover people.  This is why the state has begun to charge people to extricate them from their disasters.

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Indirect Government Subsidy

The Computer Industry has grown hand in hand with the government.  Even Steve Jobs had a top security clearance from 1988 to 1990. In the measure government spending is not market driven is the measure that the market signals are misdirected and we get malinvestment. One reason we are plagued by spam, which is 90% of internet traffic, is that the internet was developed first on contract to the government, in an era of monopoly, wherein security was assumed since no one except those with security clearances could access the system.

So we have this convoluted result where after the "natural monopoly" nonsense was dismissed, we had an infrastructure designed based on that as a premise.  From this faulty basis we built a system on top of that.  Now it is hopelessly defective. So we pay for an infrastructure system of which 9/10ths of the traffic is destructive to the 1/10th who legitimately make use of the system. And it cannot be fixed.

As a principle, government should never be allowed to get near funding basic research, since its principles are contrary to sound fundamentals and market justice.

Here is Dell cleaning up with an ad served to a DrudgeReport headline.

Notice the headline which is sure to draw countless government employees for a peek, and then the ad that is served by Dell.

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What More Do You Need To Know?

The US Govt gives $50,000 in taxpayer money to "help" a potato chip maker (real shortage there) market their product.  To quote the recipient:

“Getting the big contracts is a hard job,” Ms. Sidor said. “I’m sure this will be a big help. We wouldn’t be able to do it otherwise.”

Well, it is hard because it is a bad idea.  You ought to be specialty, not mass market.

Ms. Sidor said the federal funding will go toward updating North Fork Potato Chips’ website and brochures. The company has also started working with Northport-based marketing firm Slightly Mad Communications to help boost sales.

One of the consultant’s suggestions that Ms. Sidor said she’s looking into is sending samples to hotels located throughout the state in order to secure new contracts.

Wow.  For this the federal government needed to step in.  And that is how you rope in the big boys, a better brochure and free sample.  Watch out, Lay's!

And there is nothing that can be cut from the federal budget they tell us.  At the same time the Solyndra of potato chips is being created, the government spent years and millions destroying this business...

What more do you need to know?

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