1. Never borrow money to finance anything unless it is going to increase in value faster than the interest rate.
Does any such thing exist?
This is also the reason I don’t recycle – because it’s akin to turning up at an earthquake with a dust pan and brush.
"If you can't be part of the solution, be part of the problem" ?!
Why not just recycle so a bit less of your crap is buried in the ground?
😀 Chief, I knew that comment would be misinterpreted!!!
Moses, last point and then I will just move on. No economists are saying that it does not matter if we make stuff nor if we do not own companies. Roverpig asked a simple question about logic and I explained the logical Economics argument about why trade benefits both parties. This is a long way from what you say I or any economist is saying. But as i said earlier, I must have explained it poorly. Economics is about how we allocate scarce resources. In the simplified example I used earlier, economists would not conclude that we should not make bikes. They would correctly point out that it is better for us (including the workers) in terms of using scare resources, having successful companies and giving better choice and prices to consumers to specialise in road bikes and vv for Taiwan. It's a massive and illogical step to argue that this is negative for the either economy.
But both your argument and my case study use extreme points (1) mine assumes constant returns to scale ie putting all the bike making resources into road biking instead of splitting them 50/50 will double output. Thus ignores the law of diminishing returns. Your extreme is to state that "many" of the ex-employees of Raleigh ended up on the dole.
The key is to invest in ensuring that we are able to have competitive advantage in a balanced range of economic activities and on that, at least, I hope that we will agree.
[edit - wrong thread]
Ormonroyd, am not sure if that is a real question or not? Surely that is just an interesting way of stating the basic concept behind investment?
Okay, I'll rephrase, is there anything [i]guaranteed[/i] to do so? I think half our country's economic woes are caused by the assumption that certain assets must increase in value by more than interest rates (and therefore policy frameworks should support that inflation). It's why nobody under about 35 can afford a house
No, by definition they cannot exist (guaranteed returns) because everyone would do them up until the point when the returns fell below the cost of financing them.
ormondroyd1. Never borrow money to finance anything unless it is going to increase in value faster than the interest rate.
Does any such thing exist?
Not sure any more. Only money I've ever borrowed was the mortgage, which we took out 15 years ago. So far, yes, it looks as though it will work out OK. Not sure things are so simple for people buying now though. I've never contemplated (or understood) borrowing to finance anything other than property. But that's a whole other thread.
And no, philbert31, I don't work for Orange or Hope (or any British manufacturer) I'm afraid.
More importantly Roverpig, are you going to buy an XTC, an Anthem, a Trance or a Reign (can't remember the DH version!)?!?!?
Already got a Trance (and an old Five), so need to sell something before I think about buying anything else. Both great bikes though.
Rational economics? Soooo last century :roll:.
I buy Exposure Lights (even though I know I can get the same lumens elsewhere for less, sort of) mainly because the provide real jobs making things in a part of the sticks where the choice is be a farmhand or move. And its very near where I live so I care about it.
I cant explain that rationally, its an emotional choice that just makes me feel better.
JOAO3v16, I think your approach is very narrow minded and pessimistic, you are indeed part of the problem.
Now, mr teamhurtmore. I have had to read your posts again and in particular, the one with the bike production example. Just a question (I did say I was a dunce in terms of economic understanding).
So, the UK are making bikes and china are making bikes, and we trade bikes between each other. I see how we both can benefit.
My question is, what happens if in china no one wants to buy any of our bikes? Maybe they are too expensive, or maybe people just ride around on locally made bikes. What happens then?
The interesting thing about comparitive advantage theories and all that is that if you look at more sucessful exporters than us (or at pretty much any other major exporter), they all have big cultures of buying their local products - for example in USA, Germany, Japan etc. locally made goods have a cachet that made in the uk doesn't obviously have here.
Dunno what that means, probably just that it is as always more complicated than economists would have you believe, and yet another reason why economics is essentially ablack art.
It is worth considering the derived economic activity that occurs with imported goods?
I mean any tax revenues on imported goods, and then any associated distribution, warehousing, etc services the importer has to pay for, the manufacture of an item is the “Headline” activity, but there are always secondary, local services that generate some income in the UK, would these goods sell to anyone if they were produced more locally and priced higher as a result?
Is “Made in the UK” a sufficient USP to support more than a handful of Niche, higher value manufacturers?
Using the familiar Bicycle business as the example; Is there enough market demand to support more than one Orange or Hope, or is that the limit?
I would contend that only a relatively small number of UK consumers are now willing to pay the higher retail price for a UK manufactured item, over and above that of a Far Eastern equivalent, to support a finite number of UK manufacturing businesses in any given market segment...
Rational economics? Soooo last century :roll:.
I buy Exposure Lights (even though I know I can get the same lumens elsewhere for less, sort of) mainly because the provide real jobs making things in a part of the sticks where the choice is be a farmhand or move. And its very near where I live so I care about it.
I cant explain that rationally, its an emotional choice that just makes me feel better.
Nope it’s a perfectly rational, understandable explanation to my mind; as a consumer you find value in something other than the £’s per-Lumen ratio, you also value the contribution of the product directly to your local economy, hence Exposure have a USP that No Far Eastern company can match, and thus they stay in business...
Chief, the example I gave is highly stylised and simplistic (especially the two commodity example). In that specific case, remember Taiwan stops making road bikes completely because it is in their interests to do so. Hence it needs to trade for the road bikes (assuming that the original supply was matched by local demand). Of course, in reality, the relationships are far more complicated/multi-dimensional.
But yes, if you have high value added/expensive product you are not going to have much success trying to trade that with a less economically developed country. So it doesn't make sense for us to sell life insurance and pensions to Bangladesh but it makes more sense to sell higher yielding crop varieties etc (assuming appropriate technology levels.) A slightly sloppy example admittedly.
Already got a Trance (and an old Five), so need to sell something before I think about buying anything else. Both great bikes though.
As long as you dont buy British you can afford to keep all 3 🙂
The interesting thing about comparitive advantage theories and all that is that if you look at more sucessful exporters than us (or at pretty much any other major exporter), they all have big cultures of buying their local products - for example in USA, Germany, Japan etc. locally made goods have a cachet that made in the uk doesn't obviously have here.
Dunno what that means, probably just that it is as always more complicated than economists would have you believe, and yet another reason why economics is essentially ablack art.
I was under the impression that it was almost the opposite, that the ruling and economic elite in China actively seek out and import High value, Western manufactured goods as they are both a display of wealth, differentiate them from those who can only afford locally manufactured goods and carry perception of greater quality, Cars are a good example, the Chinese Import plenty of European vehicles, precisely because they are European. If you started making them in china for supply to the local market they would no longer be so desirable...
I'm just trying to work out what's best for me in the long run
Well, buying high tech goods from a developing country might be good in the long run. It'll ensure education and development in that country so living standards will rise, cost of living will go up and it'll become just as expensive as UK manufacturing. So in the end we'll all have something to manufacture, which I think is alluded to above.
Actually Joe, all of those countries demonstrate exactly the benefits of trade and focus. Take Japan, interestingly now running a trade deficit - it exports cars (21% of Xs), machinery of different types (21%) and consumer electronics and seminconductors (18%). It imports fuel (32%), machinery (18%), food and other manufactured goods ie, it specialises as do US and Germany.
Perhaps a better example would be to compare Germany and France - who is more open? who is more competitive? France has a natural tendency towards protectionism. Has that worked?
Look back at the "I'm backing Britain campaign" of 1968- to see where these ideas lead. Wiki gives an interesting final concluding paragraph.
geetee1972 - Member
The Competitive Advantage of Nations by Michael PorterWell worth a read. Ultimately though it's your money and its up to you how you spend it.
Noooooo... don't give that man any more exposure than he's already got. His ideas have been widely discredited as overly simplistic. Despite that, he's sucked millions of dollars out of governments (national, regional and local) for his consultancy - including the UK government in the 1990s and early 2000s.
Teamhurtmore, I got the bit that the example was simplified 🙁
But anyway, of course! the real situation is a lot more complex, and i guess that a study of it would need to take into account an almost endless chain of events and effects. I guess in the end, its a system and all systems try and reach some kind of equilibrium in the end. We will all end up poor 😯
Why do we all end up poor?
In the end, I am merely reacting to the question posed in the OP. Is it logical to ensure that you spend as much of your money as locally as possible? And the answer is no, not always. A brief look at any of our lives explains why.
So, which is the right path to follow?
1 what you individually do doesn't matter, it makes no difference at all
2 there isn't a right or wrong anyway
so do what you want ... as you do
aside: I read in a book yesterday about the Japanese word "mu". It means "neither yes nor no", or better "a yes/no response is not appropriate to this question".
I think that's your answer (or lack of!) here.
My opinion on the issue: buy the product that best suits your needs. If being of British origin partly defines that for you then that's what you should do.
Teamhurtmore, I wasn't having a pop.
I was merely stating that the the whole thing can be looked at as a system and systems eventually reach some kind of equilibrium. Right now we are discussing about economics, we talked about manufacture in china and manufacturing in the UK. These situations are not stable, and there are always shifts. Years ago we manufactured in the UK, bla bla and then china was popular, standard of living increased there and so have manufacturing costs and for some clothing manufacturers,for example, this has meant a move to another lower cost economy. So the system is constantly changing. Eventually this will reach an equilibrium, not for a long long time, but eventually. This system is linked to physical resources, fuels metals, water etc. Once these have been depleted, we start again. Probably living in caves. That's what i meant by poor.
This question is interesting tho.
"Is it logical to ensure that you spend as much of your money as locally as possible? And the answer is no, not always"
Well of course it will depend. I think for some people, depending on their life style, interests and so on, it can be done. Whether or not it is logical is a different question and it will depend on whats right for the person asking the question.
Cheers Chief! I agree with your comments. China of course is a fascinating case as it is in the process of changing from an investment-led development model to a consumption one and this transition is proving very difficult as reflected by the poor performance of well-known investors who bought into the idea of China changing and are being very disappointed by the reality and inertia in its investment-driven model. 😉
You often learn stuff form these debates - found some fascinating interviews this afternoon on the demise of Raleigh. I grew up with my french teacher translating TdF commentary from the radio for Raleigh and owned two of their bikes. So interested in the real story of what went wrong!
@chief unfortunately (for us and our kids) I suspect the new equilibrium is going to be most of the wealth that's historically been in "the west" is going to end up in "the east". There was a time the west had technological, social and intellectual advantages. That time is gone. (long term we'll all be back in caves).
@thm what happened to Raleigh?
I hear the council of despair. I'm just one person; I can't make a difference.
I respectfully disagree. If everyone does one thing, that's a lot. Look at the rise organic food. For that reason I agree with the idea of buying what you believe in.
Matt, haven't finished listening yet!! But they were the dogs when I was little!!
I had a BSA, with crossed rifles headbadge. Anyway we digress.
There was a time the west had technological, social and intellectual advantages. That time is gone
I don't see this as a necessary conclusion.
Why can't we all have skills, and we excel in different areas?
I said this over in the Hope handlebar rant thread but it's all part of the same discussion:
I run a [url= http://barefacedbass.com/ ]tiny manufacturing company[/url] here in the UK and despite making some of the best products in the marketplace and selling them for fairly high prices it's still not easy to be all that profitable. However, I believe that it's the right thing to do in the long-term, as we'll be ahead of the game as overseas labour and shipping costs increase - and we'll get to employ a wide variety of people in jobs from all academic backgrounds, from PhD level R&D engineers/scientists to those leaving school with hardly any qualifications but a willingness to work (well that's the plan anyway!) So although it's an economic decision it's an ethical decision too.
The Mary Portas programmes were great and reminded me of my work experience days at my Dad's factory - yes, working in a factory is repetitive and often boring but there was that sense of belonging, that sense of value and of worth. That factory is long gone, gradually turned into a warehouse as production was moved overseas for the usual cost reasons.
I despair at the increasing academicisation of the education system - if you're not good at maths or english or computers and you're told that you've got to get good grades if you want to make it in the world, how will that make you feel? How much better would those kids feel if they knew that on leaving school there was a fair chance they'd get a job in a local factory, where their mates worked, where if you put the work in you'd get rewarded? Rose-tinted glasses yes but even the harsher reality is way better than the stupid situation we're now in, where it seems like everyone is expected to go and get a degree and then go to the job centre until a vacancy opens up in the nearest call centre...
Why can't we all have skills, and we excel in different areas?
That's not impossible, however I suspect a winner-takes-all model is more likely. And the talent pool, and hunger for improvement, in the east is truly enormous. I don't think the surface is scratched on that yet.
An interesting account by Hadland and Thurston which actually says a lot about UK manufacturing at the time and why trade can be good!!
1960s merger created a very powerful company that dominated the UK but failed to respond.
Experimented with lots of models - copied Schwinn (didn;t know that) with Chopper but launched too late into target market (US). But this was successful as "toy=bike" in the UK. Suffered with court cases from wheelie accidents etc
Mixed fortunes with spotting trends 1 - early into hybrids but late seeing BMX and MTB
Brand identity increasingly confused - top end racing team combined with choppers and even plastic toys. Very fuzzy, loss of brand identity (dare I say it not focusing on where they had competitive advantage!)
Company became too big, too may competiting parties and eventually part of TI that was too diversified. Very poor product differentiation, lost cycling values and then very poor quality and delivery times.
Mixed fortunes with spotting trends 2 - Japanese produced better quality kit and where more responsive. Critically, they (Shimano) came up with the 'group-set' concept. Attractive, graded, better value, better quality. So choice was buy one high quality set or buy in different bits from poor quality and unreliable Eu suppliers (not my words here, this is a precis!)
1980s lost money consistently but propped up by TI until 1987 when sold off to Derby &Co (?). Initial turnaround but management increasingly distant in both senses (transferred to US and not bike guys).
Mixed fortunes with spotting trends 3 - couldnt make aluminium bikes (apparently). Death knell came when it became cheaper to buy in complete bikes rather than buying the components themselves (pre-labour!). Clear then that business was unsustainable. End of manufacturing in N'ham which as stated above was a boody blow at the time. From them on everything outsourced.
Pretty sad story - almost a monopoly in 60s, then loss of brand, complacency, lack of focus, falling quality, poor responsiveness, mixed fortunes in responding to market demands, changes of ownership....not a unique story 🙁
[edit: all the above is a rushed attempt at precising others' comments. Not nec my views but precised through a biased set of personal lenses !!! 😉 ]
Thx for the summary. All the classic ingredients are there really.
Groupsets are interesting - 2 companies that basically started from nothing (Shimano, SRAM), pretty much own it. SRAM in particular won big even though they entered a market already saturated by Shimano. Raleigh could have done that.
"@chief unfortunately (for us and our kids) I suspect the new equilibrium is going to be most of the wealth that's historically been in "the west" is going to end up in "the east". There was a time the west had technological, social and intellectual advantages."
This will not be an equilibrium, but I agree that it is likely to happen, and coming closer by the day.
there will be no equilibrium, I don't thing there ever has been either, but I opted to bypass that one.
So in the 20-30 years it takes the developing world to catch up, what will we be doing?
There is another factor though - there's far more Chinese people than there are Westerners. So if they all demand loads of consumer goods there won't be enough of us to make them for them, will there?
On p1 someone was muttering about politics and viewpoints.
Thats dead easy . We all have ideals until it applies to us, then we are greedy!
Re other countries.
If there is not enough to help all then our own interests must come first. Thats the rule of nature and messing with that screws things up.
Of course it may be in our interests to feed starving millions to stop them becoming fundamental terrorists who cost us millions in security.
Who knows?
Tis cobblers the lot of it!
Oh yeah Buy British where it goes to Britain and buy local rather than from the next county.
I'm not sure I see the logic that we have to get poorer as other countries get richer. Living standards have increased dramatically in the UK over the last century. Over that period they've also increased just as dramatically in the rest of Europe, USA, China, India etc Not sure about Africa, but I'm struggling to see evidence that one country has to get poorer in order for another to get richer.
They don't thats the point of trade! 😉
If we import a lot of stuff, does that not mean that we're selling a lot of GBP and buying a lot of other currencies? This would weaken the pound and lead to a more competitive home market and a stronger export market. So long term good?
I think this summed it up on page 1 before the argument went round in circles. If we all bought British the £ would gain value, meaning those same companies we're suppourting wouldn't be able to export, so their prices would rise to try and make a profit from a small market (supply and demand curves), then eventualy enough people would be buying non british products that the £ would drop and they could export again.
In reality it's not going to swing quite to those extreams, governments and national banks are there to try and prevent that (although occasionaly fail, Japans lost decade, Zimbabwe's runaway inflation), it's an equilibrium with constantly shifting inputs.
That's why it's an issue that China is (allegedly) artificialy manipulating it's currency to make it's exports super competative, it's keeping the system out of equilibrium, and when that happens it usualy heads for a crash. Foe example american protectionist policies of the 1920's meant they had a huge domestic market for their goods. Unfortunaately once everyone who could afford it had bought their Car/tv/fridge there was no longer a market, and those same policies which had lead to the boom, left them with no export market for all those goods.
I'm not sure I see the logic that we have to get poorer as other countries get richer
You're right that it's not inevitable, trade creates wealth (the whole is greater than the sum of the parts).
But there is only so much raw materials, mineral resources, land to grow food, energy capacity and so on. As demand increases it will outstrip supply (I think) and the price goes up. For the people falling out the back of that process, that's poverty.
My hunch is in reality there's not enough to go around (for 'them' to all live at the same standard most of 'us' do, or even anywhere near it) and there is a big crunch coming for us.
"But there is only so much raw materials, mineral resources, land to grow food, energy capacity and so on. As demand increases it will outstrip supply (I think) and the price goes up. For the people falling out the back of that process, that's poverty."
This is correct. I believe that it is one of the drivers for sustainability. Economics on its own does not encourage sustainability, it has to be considered with social and environmental aspects also.
My understanding is that the Chinese aren't too worried about the outside market now.
While labour costs have gone up and conditions improved, it's created an affluent middle class with a love of western goods that they produce. In a country that's relatively debt-free, it's apparently basically self-sufficient at the moment.*
