Friday, March 24, 2006

Big Blue Sells Out To The Reds

Commentary by Martin Kelly
December 16, 2004

In the year 2000, the UK’s automotive industry was worth $15.

This was the price paid for MG Rover, our last mass auto producer, by a consortium called Phoenix, consisting of four West Midlands businessmen.

One of MG Rover’s most famous models was the Mini Cooper, used by Michael Caine for his getaway in the original ‘Italian Job’. The Gang of Four have proved themselves to be a very capable Self Preservation Society, and announced a few weeks ago that they are negotiating the sale of part of their stake to Shanghai Automotive Industries; the last flight of the phoenix.

Last week, IBM sold its PC manufacturing arm to Lenovo, a partly state-owned Chinese business. Lenovo has paid IBM $1.75 billion, and IBM will retain a 19% stake in the merged corporation.

Big Blue has thus sold out to the Reds, it says in order to concentrate on its software and services businesses. However, for a company that would not exist had it not been founded in the only society where it could ever succeed, the USA, IBM’s decision to sell out to an agency of a government that detains without trial and forces abortions on its females is utterly beneath contempt.

One of the UK’s most insightful business commentators is Dominic Rushe of the ‘Sunday Times’. On December 12, Rushe, in an article co-written with David Smith called ‘Devoured by the Dragon’, reported that later this month, the Bureau of Labor Statistics will release a report outlining the relative differences between the average hourly wage costs of factory workers in the USA, UK and China.

The average hourly wage for a factory worker in the USA is $21.97. In the UK, the figure is $20.37.

In China, it’s 64 cents.

All hail the foundations of China’s economic miracle.

Rushe also reported on other acquisitions by Chinese corporations. The French electronics group Thomson has sold its manufacturing business to a Chinese TV manufacturer called TCL. China Netcom has paid $1 billion for one of Global Crossing’s businesses.

But getting a little piece of Big Blue is the real deal for these guys. The Chinese Communists have proven themselves to be the ultimate Thatcherite free-marketeers; the only thing that matters is making money. They do not care about the standard of living of their people; they do not care about frivolities such as civil liberties and human rights; instead, it’s all just ‘show me the money, baby’, and boardroom barracudas from Boston to Berkeley are more than happy to buy the labour of some wee Chinese lassie who’ll assemble their stuff, breathing in toxic gases and getting mercury on her skin, for an average wage of 64 cents an hour.

Of course, it’s not all going their way, something which, being Communists, they find very hard to handle. BBC News recently reported that there is a shortage of labour in the Pearl River Delta, Chinese manufacturing’s heartland of heartlands. A labour shortage in the world’s most populous nation may seem bizarre, but they’re 2 million workers short – they’ve opened too many factories, and the despised but indispensable migrant labour is now very much more choosy about where they wish to work. Don’t you just love the market in action!

They pay the same inflated petroleum prices as the rest of us – this boom is fuelled by imported energy. The oil price affects them as much as everyone else. The only thing giving them a competitive advantage is that 64 cents an hour.

Also, as previously reported, they’ve ripped up so much of their productive farmland to build factories that in several years time they will also be a net wheat importer. China may be the only country in the world ever to develop starving millionaires.

Some areas of public life in China are opening up, - in the same edition of the ‘Sunday Times’ that carried Dominic Rushe’s report, it was reported that a woman called Ma Weihua, a drugs mule, had undergone a forced abortion on the orders of Li Junyi, the commander of the drugs squad in the city of Lanzhou. According to the ‘Sunday Times’ it would seem this practice is not out of the ordinary. Ma’s case has become widely known through the determination of a newspaper called the ‘South China Weekend News’, maybe the first flowering of a free press.

It’s also been reported that the great excluded masses are not happy at seeing such wealth, and its associated lavish living (China is one of only two countries to which Davidoff exports its Millennium cigars, the other being the USA), in the midst of such poverty, and the October 17 ‘Sunday Times’ reported that there have been some violent protests.

But they won’t make very much difference. Before he went totally neo, the greatest advocate of why the West has succeeded was Victor Davis Hanson. Hanson, now reduced to mining Tolkien for analogies, used to say the West won because its traditions of democracy, free speech, free enquiry, open capital markets, gender equality, property rights and the rule of law created the ideal atmosphere in which progress could take place and thus enable entities like International Business Machines to come in to being and thrive. The management of IBM haven’t realised the debt they owe to history; and, instead of making the changes required for them to regain their dominance in PC manufacturing, have selected the easy option of selling out to a country that wants the products of these Western traditions, but not the traditions themselves. And which, both politically and commercially, wants to own everything in sight.

It can’t happen. And, in a fair and moral world, the top guys at Big Blue really should avoid paying themselves bonuses for selling off some of America’s best family silver.