2008/03/22

Mechanical engineering industry

Did you ever ask yourself how the Soviet Union transformed itself from a mostly rural, civil war-torn country into a titan that was able to withstand the German onslaught and even replace its almost entirely lost army within months?

Well, the answer is rather simple; planning economies are better than their reputation concerning industrialization of countries that have no middle class - and lots of machine imports from the USA.
Russia was in fact every major customer for American machinery in the inter-war years. They also learned the economics of quantity production there.

The mechanical engineering industry is one of the most demanding industries. It's easier to build a super-complicated chemical factory with ten thousands of pipes and valves in a 3rd World Country and let it work at 80% capacity than to build factories for often custom-produced machines. That business is not so much about hardware as it is about experience and skills. That's why the mechanical engineering industry is still strong in the Western World and not so in industrializing countries.

If the Western societies were really determined to slow down or end the rise of the Chinese not only as military power, but also to keep their own remaining industries from moving to countries like China....well, if that was the case, we could simply embargo them concerning machine sales. The PR China would be set back by at least a decade in its economic and military expansion.

That doesn't happen, was probably even never proposed seriously - so let's sit back and watch China's rise.

(Their rise will not look like the common predictions. They'll be hit hard by the current financial market crisis effects, they will have their own bubbles blast and will have significant internal stress due to inequality and some inefficient national industries. Their list of troubles is as long as their potential.)

Sven Ortmann

2 comments:

  1. America's share of the precision machine market has fallen over the past four decades.

    Taiwan and Japan produce a lot of the new precision machine tools. Perhaps the USA could pressure them to restrict machine tool exports -- I don't know.

    I'm not sure how this factors in to your analysis.

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  2. Germany is still extremely strong in mechanical engineering. I'm quite sure that the Western world (including Japan) has a dominant position in that industry.
    Taiwan wouldn't embargo the PR China in my opinion - Taiwan is coming too close to PR China economically since the they behaved so well in Hong Kong.

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