Years back when Japan started exporting good cars to the USA in a big way in the ’80 s of the last century, there was a lot of noise created in the US! The US decided that this needs to be handled at the highest level. During a visit of a President of the US, they had informed the Japanese government that the President would push Japanese to open their market for American cars. Japanese agreed immediately. During the meeting it was it was declared officially. When the detailing was being worked out, Americans found that American car makers, engineering-wise, were unprepared, to make right-hand drive cars needed in Japan. They lost ¾ years in this! Rest as they say is history.
In the last few years, the winds against the so-called free trade have started blowing in the USA! Even in Britain, Brexit has happened, and Britain is hoping to walk out of the European Union. Brexit is a classic case of a referendum. The young people who did not want Brexit were too busy to take part in the poll. The seniors did. Currently, the British people have a significant advantage of visa-less travel to Europe. The young brigade could jump to holiday locations, for a job or weekend excursions to the places of their choice. British business had a big, trade barrier-free market available to them. Current British Government is trying its best to find a face-saving formula or do what the majority population wants. (even though referendum said otherwise) Another option may be a second referendum.
Every nation, every society needs to look after self-interest and self-respect. As the country grows, its business grows. The business growth will make the nation and its people proud. Value-added growth could happen when modern products and services are developed in the nation internally. The business needs support from the government, for such a growth. The Indian government is attempting to follow this method. When they sign a contract for import of high technology defence items like radar, planes etc. they try to ensure that the deal is in two parts. Initially, India imports some quantities fully assembled; later at least 30% of production is done in India along with some local partners. Make in India is the name of this project. The results of such initiatives will be seen 20 or 30 years hence.
Why do nations change their thought processes? A country like the United States is technologically the most advanced nation in the world. In the last 50 years, they have many world-class organisations, especially in the IT field. Most of the other countries play the catch-up game with them. They have created world-class hardware and software products like iPhone, Android OS, Windows OS, Microsoft Office to name a few of them. They are also famous for aircraft manufacturing facilities. But where hardware manufacturing was involved, they slowly moved production to China. China also has done a terrific job of going up the value chain; China is now called the world’s manufacturing setup. Similarly, India has become back office of the world. Since the last couple of years, India is also trying to go up the value chain.
With the election of Trump, thinking in the US has started changing. Why did this happen? When we refer to the USA, we think only of the East coast and the West coast. We never bother regarding the Rust Belt. Rust Belt is the American midwestern area where industries went into decline due to various reasons. The decrease is mainly in sectors like steel, mining and to some extent automobile. Add to that the local culture which went into a social rot. The problems of this area can be understood if you read a book called “HillyBilly Elegy” by D Vance.
We will understand better, Trump’s election victory, after reading this book. Jingoism has started after the win and America began to looking inwards by having tariff wars with China and India. Trade wars also led to the wave, “Make in America”!
History repeats due to lack of proper planning. Apple is the classic case of Make In America failure. There is the story “A Tiny Screw Shows Why iPhones Won’t Be Assembled in the U.S.A.” in New York Times. Apple started churning out great products in the last decade, after struggling since ’80 s of the previous century. They wanted to make the most of it and began subcontracting work. This improved their profitability. Over a period, they shifted all their assembly work in China to Foxconn. Most of the significant components in iPhone were made in the USA or other parts of the world. Assemblies and small parts were made in China. As assemblies entirely moved to China, US industries were left with unused capacity for many small items, and they closed shop or moved to other business. The classic case is of a non-standard screw needed in the assembly. China can produce any quantity of such screws. When an attempt was made to move production back to the USA, capabilities for producing such items were found missing. On top of this, Chinese wages are the US $ 2.10/hr for workers as against the US rates which are very high. On top of this, the totalitarian regime in China does not bother about labour laws. Meeting the targets are achieved by waking up the workers from home at night (when required) and are made to work the night shift. Getting people out of bed for factory work is not possible with US laws and culture.
Jingoism does not solve the problems; it merely creates an unhealthy atmosphere. In the case of Apple, history is getting repeated as it did in the case of cars in the last century! Governments and industry both need to be pragmatic. Apple is facing another issue. The iPhones assembled in China get a tag “Made in China”! The US government wants to charge high tariffs on “Made in China” items. On one side iPhone sells are sliding, margins are slipping; market capitalisation is dropping fast. Higher tariffs will add to Apple’s woes!
While taking any decisions in life, especially when these decisions are business related pragmatism should come to the fore and not Jingoism. The British decided in the referendum about Brexit. The analysis found that high % of citizens in the group above 55 age were for Brexit. Whereas against Brexit was a mixed group, young and old. Brexit is going to create problems for the young ones.
Jingoism takes a society towards a situation where governments promise something during an election or political rhetoric but are not able to deliver — not being pragmatic leads to further churning. Governments try to show their strength by taking a firm stand which is not sustainable. Politicians remain in political mode all the time leading to Jingoism.
Hope the leaders and nations who are following the path of Jingoism learn their lessons quickly; otherwise, the voters correct the same anyway. But for the period till next election, a lot of damage is done to the fabric of the society, and most importantly economic setbacks can cause long term damage to all concerned.