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Guess what year this is referring to? I slightly edited it from the original.

… villages in the lower Yangtze became congested hives of small … factories, attracting workers from other parts of China and spewing (wintercow: nice choice of words, huh) out goods at frightening (wintercow: nice choice of words, huh) volume. Yuengang merchants sold this (stuff) … making profits of 30 to 40 percent.

(other) merchants doubled, tripled or even quadrupled the price and still sold their goods in America for a third the cost of European (products). Incredibly, they sold manufactured goods from China – that had crossed two oceans – in Europe for less than it cost to produce it in Europe. So much raw material poured into Mexico (a way station from China to Europe) that a secondary industry sprang up there, with thousands of weavers and dressmakers making clothes from Chinese fabrics and exporting them throughout the Americas and across the Atlantic.

Alarmed Europeans saw their textile (and other) mills threatened — and fought a covert regulatory war against Chinese competition. They importuned the government to restrict fabric imports to bolts of fabric rather than finished clothing. They insisted that they block direct travel between the exporting cities and any place in the world except CITY (the way station in the trades) so that Chinese imports could be monitored. They demanded that the government set import quotas by restricting incoming fabric to a given number of containers of a specified size. Chinese merchants evaded every trade barrier, often aided by Europeans. They built special containers with false bottoms and sides to conceal pre-made clothing. They sent agents to CITY to facilitate smuggling on the CITY side of the trade. They designed special presses to mash huge quantities of fabric into the containers, packing them so tightly that according to Li, … “a single container could not be picked up by a simple machine.”

Read the US trade rules and you can see very similar responses, right down to the finest details, or how some items may be exchanged today. Of course, the passage above is a modified version of Charles Mann’s account of the 16th century Chinese silk trade between the Phillipines and Spain, with a stop in Acapulco along the way. The more things change …

Or how’s this story, about 100-pages later in the book:

In 1635 the city’s Spanish barbers petitioned the municipal council to stop the chinos’ “excesses” and “inconveniences.” The complaint was artfully worded, but one detects the real cause of grievance: the Chinese were willing to pay higher rents for space in the center of town, even at the risk of lowering their profits, because that brought them closer to their customers. And they spent long hours on the job, forcing European barbers to work equally hard to compete. To Spaniards, the solution was obvious: expel the Chinese from the city center and restrict hair-cutting hours so that they wouldn’t have to work so hard and accept such low profits. Six months later the viceroy banned Asian barbers from the Plaza Mayor. Twisting the knife, he restricted the number of razors they could possess, thus ensuring that their shops couldn’t grow too large.

Despite the ban, the government kept approving applications for chino barbershops in the Playa Mayor – perhaps, one is tempted to speculate, because influential customers didn’t want to have to travel long distances to have their hair cut and teeth cleaned. European businesses again complained about the competition. In 1650 the government created a barbershop czar, empowered to extract hefty fines from bootleg hair salons. The post was ineffective: Chinese barbers proliferated by the score.

That was Mexico City which had the first Chinatown in the Americas. Maybe this Spanish mindset can help us understand a little better why their unemployment rate stands at 20% today.

2 Responses to “China: Manufacturing Powerhouse”

  1. Harry says:

    What puzzles me is how many people who should know better do not. Unlike climate change science, which Al Gore proclaimed was settled, we have had enough experience with the benefits of free trade and with the perils of mercantilism to say that that part of economic science is settled. I wish economic pundits would lay their cards on the table, making the debate about the interests of consumers versus producers, and who has a right to be protected by the state.

    Cross my heart, I did figure out you were talking about the silk trade, although I had forgotten the details, including placing it in the correct century. This textile story has been told over and over, including during my lifetime. You have to remind me, Mike, to make some practical notes about textiles, energy, labor productivity, and capital cost.

    I can understand the sentiment of anybody threatened by competition, domestic or foreign. Today in the WSJ someone wrote a piece that threatens the US law industry cabal, and I thought Good Luck changing that system. Why not try something easier, like convincing Wahabis to let women drive cars?

  2. Harry says:

    Understand, I have zero sympathy for Chinese communists. When people reduce their criticism to how human rights are violated, that is a lukewarm condemnation of over a half century of indiscriminate slaughter in the name of Marx. I wish Bianca Jagger or Theresa Heinz would include the Chinese among their villains when condemning Central- and South-American manufacturers for making cheap, non-PC t-shirts.

    But who are we to condemn the Chinese who get dollars for their goods? What do we expect them to do with them? Well, they bought treasurys, and a lot of other securities. Not only did they get screwed by buying bundles of mortgage-backed securities that they supposed were almost as good as treasurys, but they still hold a continent of US-denominated debt. Yes, they could exchange all those paper dollars for paper Euros, or gold, but how much does gold earn, and is it undervalued or overvalued?

    Who is the screwer and screwee in this process? The Chinese hold a depreciating currency, in the form of T-Bills, that pays hardly anything. Who is taking the hit? The person in the US who buys a knit shirt?

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