It has long since been something of a strange hobby of mine.
I like to look at where products I buy have been made and mentally ‘collect’ new countries I haven’t bought things from before.
This particular penchant might have had its origins one Christmas in either the late 1980s or very early 1990s when the family was unwrapping far too many presents we had given to each other.
I’m not quite sure what led us to doing it, but we ended up examining all the product boxes to find out where the goods were made. EVERY present in the room had been made in China. Nowadays you may well say ‘so what?’. Then, I can assure you, it was a big deal. It was a very new thing. We were shocked. Hello 'globalisation'.
And so, subsequently I have taken fascination in discovering ‘new’ countries of origin; my first product made in Peru (a cycling shirt). Products made in Myanmar (jerseys). I’m not quite sure (I missed this one) when every second item of clothing started being made in either Bangladesh or Pakistan. A particular surprise, and I’m not sure why, was to discover my toothpaste du jour was now being made in Poland.
Lurking beneath the curiosity of where all these goods are manufactured is the knowledge that I’ve been paying less money to buy them then I would if they were produced in New Zealand. We’ve all been able to afford things we wouldn’t be able to afford through globalisation.
But now what?
Cold winds had already been blowing on globalisation for some time, particularly after Donald Trump became US President.
Then Covid broke supply chains and has led to a regrouping and reorganisation.
And now we have Putin’s War.
The biggest significance of the latter development is that the massive wave of sanctions against Russia set quite a precedent in terms of the sheer scope. It would be hypocritical (though, let’s face it, not surprising) if any subsequent bad behaviour by a global power is NOT now greeted with the same thing. But I suspect we are now in a new environment where it will be less fashionable to turn a blind eye to what goes on in other countries.
One obvious question mark is whether China gets dragged into all this either now or later. This would matter to us. Boy, would it. According to Stats NZ, in the December 2021 quarter New Zealand exported $20.7 billion of goods - of which $6.2 billion went to China. We imported $24.6 billion of goods, with $4.9 billion coming from China.
That level of trade would need quite some replacing, if for some reason we needed to.
But this is not an NZ v China discussion as such. The point of this is more about the fact that the world having all ‘joined up’ is now for various reasons seemingly heading for a more fragmented future.
Look, it’s difficult to see us ever going completely back. Gosh I remember when I first moved to Wellington from my home town of Nelson in 1980 that the Wellington region then had a handful of motor vehicle assembly plants, as well as things like a meatworks. All gone.
It’s long since been a thing that we don’t ‘make things’ in this country, well not many in terms of our overall need for goods. And the key reason has been of course the cost. And you can’t ever imagine us turning back the clock completely. But then again, we may be forced to step back at least a little.
Moving production of goods to ‘low cost’ countries has been a big factor in the driving down of global inflation.
I had long been of the view that we would see a return of global inflation as the world naturally ran out of ‘low cost’ production. And this of course would happen as ‘low cost’ countries played catch up with the standards of living elsewhere and developed their own burgeoning middle classes.
We in New Zealand were one of the many countries benefiting from the gap between the cost of production and cost of living in one country compared with another. But such a differential was never going to last forever. In the meantime, however, the ever-reducing cost of products such as electrical goods has helped to disguise rises in the price of things like food in overall inflation figures.
Now, thanks first to Covid and now to Putin, we seem to have reached a period of reckoning that we were always going to face - but ahead of time.
I wonder if the days when we just buy products off anybody regardless of their relationship with the world at large have gone. Rather than the world as a global village perhaps we are indeed heading more towards a system of trading blocks, perhaps of varying sizes.
However, if there is to be a sort of redrawing of world trade boundaries and definitions it can only mean that that products will cost more on an ongoing basis.
Yep, inflation.
We thought we had slayed the beast but maybe we just put it to sleep for a while.
The idea that globally we could keep squeezing costs of goods ever lower has maybe had it’s day.
If that’s the case then obviously it’s huge in terms of worldwide standards of living in the future.
Perhaps the pandemic has signalled, not so much a ‘transitory’ wave of supply chain disruption and inflation, but the start of a new more uncertain, perhaps lengthy, period where living standards might get pressured in a way not seen in years. This might not be temporary folks.
Maybe the last 30 or so years might come to be viewed, at least by the wealthier nations, as kind of halcyon days.
A big point of discussion of course is the extent to which the ‘dividend’ of the effects of globalisation has been evenly shared around.
Well, it hasn’t has it?
And there may be interesting ramifications for those who haven’t had their share of the growth dividend if we do now face a more protracted period of inflation. We already worry about poverty. There may be more to worry about in future.
The process by which more and more wealth was concentrated into fewer and fewer hands is therefore likely to be much more scrutinised than it has been to date.
What does all this mean? Good question.
I think that as a country little old NZ needs to be having a much closer look at who it trades with and how - just in terms of ensuring we don’t get caught out if there’s a change in the wind. We need back up options. Difficult thing to do perhaps till you are faced with it, but I think we are now in a new environment where we can’t take trade for granted.
Could there be scope, does there need to be scope, for actually starting to produce some goods in New Zealand again? It would have to be cost-driven and clearly we are not at a point where such considerations would be given yet. But in future?
In terms of ‘the person on the street’ I think the obvious thing is we are going to have to learn to deal with inflation all over again. Maybe there really is a way of slaying the beast. Properly. But we probably need to find it. The search goes on.
45 Comments
I agree xing....the greatest generation and silent generation were the last generations to appear to have had their stuff together....since then its been about personal greed above society...now we have disfunctional governments, disfunctional housing markets, disfunctional central banks.....I think when the deadwood is cleared out from the top (mostly boomer and Gen X leaders) then we will see positive change. Millennials have been scared from watching this insanity around them and if the theory of the 4th turning is correct, will look to 'fix' what the generations above them have broken (much like the greatest generation did post WW2).
The question is, is how insane will things get when you have extraordinarily wealth boomers in key global positions leading divided countries with massive wealth inequality and very low respect for modern democracy? Like the 1930's, its the perfect recipe for financial carnage and international wars.
They have 20 years to leave the world in a better place than they found it (more like 10 for many).....but they appear too focused on the next trip in the RV with the e-bikes, receiving rental income and superannuation, to worry about making a meaningful change to society.
But yes....go the boomers.
Green-eyed would be more a thing of perspective....many landlords think everyone is envious of them and their financial success....but why would one be envious of success that causes suffering for others/the wider society? Same for boomers...they have collectively enriched themselves at the expense of other generations (and most couldn't give a damn)...hardly worthy of celebration given the hell its created for many in their 20's and 30's.
Xingmowang thinks in a primitive, collective way. The West hasn't fallen, it's transitioned to a civilization where the individual is sacrosanct.
Just look at the insanity in China now with their response to COVID-19. Thankfully we have woken up and are now pursuing a rational Western approach to the pandemic.
Collectivism is merely a tool for the service of individuals. A single human is a far more complex structure than any collective organisation which tend to operate at a primitive level at the best of times.
Just as long as we keep in mind what the collective is for and steadfastly refuse to raise it up to a level that it doesn't deserve or warrant we will probably be okay. Hence mockery of government and institutions and even individuals is a fine Western tradition.
Are they (Global South) with us or against us?
Yellow states have sanctioned Russia, gray have not. Nearly the entire Global South hasn’t sanctioned Russia and their condemnation likely isn’t coming any time soon. Vast majority of the Indo-Pacific is included in this group. Link
Interesting post with some good points.
I do sense some level of rejection of consumerism and "more, more, more" in younger people and an embracing of essentialism, or even minimalism in some cases. A recognition that quality of life is not found in quantity of useless stuff. "Greed is good" may be dying out (let's hope that optimism isn't misplaced).
Sure, there are visually obvious opposites to this - e.g. some on Instagram - but there are plenty for whom the downsides of ostentatious consumerist 'prosperity' are too great and too wholly unattractive.
Buy fewer but better things. Things that will last. Fast fashion is out, a polluter and (too often) exploiter.
I suspect we will see a refocusing of government spending in future too. The days of endless sprawl and individual car-dependence can't last forever, with their willful ignorance of the future and its NRR constraints. Localisation, intensification around transport alternatives, and more spending on health and education as essentials, perhaps. I'm not surprised that Warren Buffet sees his train sets as a great investment.
There's 32,339 residential homes currently for sale on TradeMe (you can add up subsets, it's a bit manual!).
And, yes, there seems to be a limit of "32,000+" on TradeMe as a whole. If you search Marketplace as a whole, it will say the same thing: "Showing 32,000+ results", but there's 1.8m within TradeMe Motors alone, 64,967 on TradeMe Property, 26,002 on TradeMe Jobs etc.
Would be an interesting exercise to see which countries (or trading blocks) hold the bulk of the raw materials we all need to maintain anything like our current lifestyles/populations.....I suspect the bulk of them are not located in North America, Western Europe and Oceana.
The winners of the 21st Century will be planned economies, including some raw material producing countries in the global South who will break free from the stranglehold of the West and the IMF and increase their food, energy, water, and technology security.
If we are not careful, we will quickly become a pawn in a bigger game - heavily reliant on sending primary goods to China, and importing technology the other way - whilst watching our standard of living collapse as we pay more and more for the things we need to support our population.
Seven of New Zealand's the top ten export destinations are in Asia, as are seven of the top countries from which New Zealand source imports.
China is number one in both categories by a long way. China is the most important export destination for all of dairy, beef, lamb, timber and kiwifruit
Australia comes second in each category, with a little over half the importance of China for two-way trade with New Zealand.
If the world breaks into trading blocks, then it is somewhat obvious as to where New Zealand sits.
Europe and the USA take considerable quantities of kiwifruit, lamb and wine. The USA is also a good market for beef but minimal beef goes to Europe. Dairy goes mainly to Asia.
Nearly all electronics come from Asia.
KeithW
Breaking into 'trading blocks', assumes some kind of residual cohesion. I don't see that; not one nation has complete internal resource-supplies, only a few are energy self-sufficient. More likely disintegration and war(s). Then a very modest level of local living
https://simplicityinstitute.org/
Ready, KW?
Surely, stability of supply and price of the export input side of the equation are of paramount importance - diesel, for instance? Not to mention fertiliser.
UAE energy chief reaffirms commitment to Opec+ alliance with Russia
Wrong in all respects.
First, China isn't 'Communist' - it's an autocracy.
Second - the less people on the planet, the more planet there is per capita. Less competition for planetary parts ought to cheapen them.
The problem isn't 'cheap'. The problem is EROEI, sometimes referred to as ECOE:
https://surplusenergyeconomics.wordpress.com/2022/03/04/223-trading-wit…
NZ will have to flag away the US as a source of imports.
Rent In US Continue to Rise While Real Estate Firms Pocket The Profit
Rents are continuing to rise in the US. According to realtor.com, February 2022 was the seventh month in a row with a double digit increase in rent prices from the year prior. Rents in February were 17.1% higher than in February 2021. The median rent in the 50 largest metro areas has risen to $1792 a month.
This is why the United States cannot industrialize as long as the house prices absorb this high a rate of income, and as long as the banking sector is supporting this, and as long as the political parties say we will not tax real estate so that all of the rising land value will be able to be pledged to banks to pay interest instead of to pay taxes. Essentially, it’s the (lack of) taxing of real estate in the United States that has subsidized the increase in housing prices, because housing prices are worth whatever a bank will lend to buy a house. If you have to go to a bank, and if they lend more and more and this money isn’t taxed away, the price is going to go up. So you have the government policy, the bank policy, all trying to promote this high diversion of income into paying land rent. Again, this is the exact opposite of what Adam Smith and John Stuart Mill and classical economics and the whole 19th century had advocated. This has priced American labor and industry out of world markets.
If you have to pay 43 percent of your income for rent, then even if the government were to give you all of your goods and services for nothing, all of your food, all of your clothing, all of your transportation for nothing, you’d still have to pay so much money for rent and for health care that you couldn’t compete with labor in Asia or the Third World or even Europe. And so this is what has essentially excluded the United States from having a successful empire. It’s the greed of the financial sector, basically, and the takeover of the government by the financial sector here as happened under Margaret Thatcher in England and then Tony Blair. You’ve had both countries essentially enter permanent austerity programs, and the only way to cure this is for housing prices to go down. But if the housing prices go down, then the banks will go broke. That’s why Obama said he had to support the banks: because if he’d actually lowered the housing prices to realistic levels, that would enable America to survive, but the banks would go under. Until you’re willing to restructure the banking system, you’re not going to be able to industrialise the American economy. - Link
The real problem with 'globalization' is that it is, in reality, global corporatization. Freeing up trade between peoples in different countries has much to recommend it. Globalization that just opens up the world to giant corporates/conglomerates is what people are really afraid of, and justifiably so, IMHO
China’s planning at least 150 new reactors in the next 15 years, more than the rest of the world has built in the past 35. The effort could cost as much as $440 billion; as early as the middle of this decade, the country will surpass the U.S. as the world’s largest generator of nuclear power.
China became the first country in the world to connect a Generation 4 PBR to the grid. Another is under construction.
Meanwhile we spend our time and resources on cunning plan intermittent offshore windfarms and cycle bridges.
https://www.reuters.com/markets/commodities/china-puts-pioneering-pebbl…
https://www.bloomberg.com/news/features/2021-11-02/china-climate-goals-…
3D printing, AI and renewable energy sources will lead to localised manufacturing being more cost efficient.
Huge fossil fuel based supply chains simply will not be efficient or cost effective as the new generation of AI and tech take root. It’s a matter of time and not as far in the future as you think. Recency bias has us underestimating the rate that these tech changes will occur. Like driverless cars, which will vastly reduce the number of cars on the road and the need for parking, while governments and cities are still being planned around the old model.
>Like driverless cars, which will vastly reduce the number of cars on the road and the need for parking, while governments and cities are still being planned around the old model.
I think you're 100% wrong about that unless other changes are made to force the cost of owning/using a private car through the roof. Why would you not have the car drive you into the CBD then drive itself home to avoid parking fees. You get your nice private aircon bubble, with the media of choice as the car deals with traffic so who cares if it takes a little longer, you just get to fit a full episode of MAFS or whatever junk TV show of the month is in.
If you reduce the cost (in terms of inconvenience) demand will increase, basic economics.
...the ever-reducing cost of products such as electrical goods has helped to disguise rises in the price of things like food in overall inflation figures.
Food inflation has remained relatively low until recently. Many food commodities, like wheat and corn, have actually beaten inflation for decades despite the rapid growth in the human population. It's truly the miracle of agriculture.
The culprit of inflation has been non-tradables and that's what RBNZ must seek to control to offset the jumps in tradables inflation we are currently experiencing. We should be seeing costs like rents, utilities etc. relatively fixed if not falling. At the moment both tradable and non-tradable are above the upper CPI target band which is really hitting consumers hard.
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