- By Clyde Prestowitz
Clyde Prestowitz is the founder and president of the Economic Strategy Institute (ESI), where he has become one of the world's leading writers and strategists on globalization and competitiveness, and an influential advisor to the U.S. and other governments. He has also advised a number of global corporations such as Intel, FormFactor, and Fedex and serves on the advisory board of Indonesia's Center for International and Strategic Studies.
The Dutch have a saying: Goed Koop is Duur Koop, Cheap is Expensive.
That came to my mind yesterday as I read in the Sunday New York Times of the new San Francisco-Oakland Bay Bridge having been made in China and now being readied for shipment to San Francisco where the its modules will be placed on their supports and snapped together like an erector set.
I am old enough to remember the pride my parents took in telling me of the completion in the middle of the Great Depression of the Golden Gate Bridge, then the world’s longest suspension bridge. In that trying time, the bridge, almost entirely made in America, was a symbol of hope because it demonstrated that Americans could still do great things when properly led and organized.
Now, in these trying times as Federal Reserve Chairman Ben Bernanke tells us the economic recovery from the Great Recession is stumbling for reasons he doesn’t understand, it seems that we take pride in what China can do for us. Thus California Department of Transportation program manager Tony Anziano told the Times "they’ve (the Chinese) produced a pretty impressive bridge for us." In this, Anziano was only following the lead of former Governor Arnold Schwarzenegger who strongly backed the Chinese project on the basis of an estimated $400 million saving to the state and who praised "the workers that are building our Bay Bridge" during a visit to China last September.
In view of the quality problems that have arisen with major construction projects in China such as the Three Gorges Dam and the High Speed Railroad lines that have recently had to be speed restricted, U.S. industry and union groups have raised questions about the safety of the new bridge. But those who have awarded the contracts to the Chinese say their audits have convinced them of the engineering integrity of the projects. Furthermore, they say, American companies don’t have the fabrication facilities, warehouses, or deep financial pockets to do these kinds of very large scale projects. " I don’t think the U.S. fabrication industry could put a project like this together," Brian A. Petersen, project director for American Bridge/Fluor Enterprises, told the Times.
So it’s cheaper to do it in China and anyhow Americans can’t do that kind of stuff anymore seems to be the essence of the story. But is that really the case?
Let’s look first at the cost question. The Times notes that 55-year old steel polisher Pan Zhongwang arrives at work at 7 a.m. and leaves at 11 p.m. seven days a week earning $12 a day and a bed in the company dorm. So the $400 million estimated saving is largely a result of cheap Chinese labor. But is that a pure saving? If California and/or the United States have no unemployed workers who could make steel or polish it or do fabrications, then it is a pure saving. But last time I looked both California and the United States have close to 10 percent reported unemployment and closer to 15 percent if we count part time workers who want full time work and those who have become discouraged from even looking for work. Now those unemployed workers get some unemployment compensation and their health care has to be paid for by public means if they can’t pay it themselves, and the banks have to repossess their homes when they can’t make the mortgage payments, and then states and the Feds have to bail out the banks. I can count way over $400 million in unemployment costs pretty quickly and that’s without even considering the downward pressure on all wages in the United States that arises from the import of these low wage products in the midst of high unemployment. I mean, I guess we could have had a cheaper Golden Gate Bridge in 1937 if we had just brought over a bunch of Chinese workers to do the job. But that would have defeated the purpose of building the bridge which was a major project in the effort to cut U.S. unemployment in the midst of the Depression.
Then there is the issue of American capability. I wonder how the Chinese got these capabilities that Americans apparently no longer have. It was by building their own projects for themselves and developing the capabilities. Twenty years ago China didn’t have companies that could do most of this kind of work. But the Chinese didn’t call the Americans in to build their bridges for them. They invested in developing the capacities necessary to build their own bridges. That’s what we did when we built the Golden Gate. People and corporations learn by doing and if they don’t do they don’t learn and they don’t invest and then they can never do.
And the cost of never being able to do is extremely high – a lot more than $400 million. So I say the new San Francisco-Oakland Bay Bridge is not only not inexpensive. It’s going to cost us a fortune.
How apt that this was all carried out by the Terminator. It’s definitely going to terminate a lot of California and American jobs, companies, and skills.