Chinese Infrastructure and American Supply Chain Weakness

A couple of items from the nc links.  First, MacroBusiness looks at the Chinese infrastructure investment plan, and its weaknesses:

high-speed rail accident has attracted a lot of attention.  Even the FT Lex coloumn has something to say about it, believing that the pace of investment should be slowed.  While I have been arguing here for a while that investment has to be slowed, it is rather harder to see if the “accident” can really be marked as the turning point of the Chinese investment-led growth model as some believe.

Before considering whether it is a turning point, let’s look beyond high-speed rail. And there is a spectacle to see, with more bad news concerning Chinese infrastructure besides the crashing high-speed rail. Four bridges have collapsed just this month on 11 July in Yancheng, Jiangsu, 14 July in Wuyishan, Fujian, 15 July in Hangzhou and 19 July in Beijing.

We have 4 bridges collapsed in 9 days, with another one with some sort of structural failure.  Truth be told, we probably all know that things in China aren’t as reliable as we wish.  Is the wave of “accidents” really unexpected?

Four bridge collapses?  Here is the story of one, built in 1987.  The pictures are amazing.  This article says that 3 of the bridges were 14 years old.  What a bunch of shoddy construction.  China is not in as good of shape as we think.  We can start fixing our problems if we get our heads out of our asses.  I don't know that the Chinese have the political will to fix some of their built-in problems. 

In the second story, Matt Stoller looks at the fragile supply chain in The Nation:

Lynn has continued to study industrial supply shocks and says, “What I have found most interesting recently is the apparent role supply chain shocks played in triggering a synchronized slowdown of industrial economies in April—production down (in USA, China, Europe, Southeast Asia), jobs down, demand down, GDP numbers down—due almost entirely to the loss of a single factory that makes microcontroller chips for cars.”

Today, the problem manifests as shortages of videotape or auto parts, but the global supply chain is so tangled and fragile that next time it could be electronics, weaponry, or even food or medicine. As Lynn noted in an interview with Dylan Ratigan, China controls 100 percent of the national supply of ascorbic acid, which is a basic food preservative. Leading oncologists are already warning that we are experiencing severe shortages of generic yet pivotal cancer drugs, because there’s no incentive for corporations to make them.
According to Lynn’s groundbreaking book End of the Line, the essential problem is a basic shift in the way that American multinationals operate. In the 1980s, the competitive manufacturing threat from Japan led most large companies to eliminate waste in their production facilities. As a result, they stopped keeping spare parts on hand. Eventually, companies began outsourcing production itself, as profits came increasingly from extractive monopolistic power over an economic system. Walmart is an important example; its profits come from the power it can exert on its suppliers, telling them what to make and how to make it, while the company itself functions as a giant autocratic marketplace and trading operation. Increasingly, this is the model of success in our global economy. Boeing, Cisco, Apple—all of them rely on their power over an ecosystem of production facilities halfway around the world. They have become rent extractive profit-machines, which is a relatively new phenomenon.

In some ways, the stories are interrelated.  Chinese corruption and shoddy construction leaves their infrastructure prone to failure.  U.S. corporate greed and shortsightedness leaves our industrial economy at risk of supply shortages and shutdown.  Even worse, where do our multinational corporations relocate industrial production, to China and India, where corrupt local officials and shoddy infrastructure are constant concerns.  There is a lot of bad stuff built into those two stories.  It is enough to get a person depressed, without even bringing up U.S. politics.  Things will get worse before they get better.