Dec 012020
 

The last few years have been a testing time for world politics. Recent events have seen much sabre-rattling, but really, none of this has suddenly “appeared”… it’s been slowly bubbling away for some time now.

Economic tunnel-vision

For a long time now, much of our world has revolved around the unit of currency. Call it the US dollar, the Australian dollar, the British Pound, Chinese Yuan, whatever… for the past 50 years or so, we have been “seduced” by two concepts which developed in the latter part of last century:

  • economies of scale
  • just-in-time production

The concepts are on the surface, fairly simple.

Just-in-time production forgoes having a large stock and inventory of components to feed your supply-lines in favour of ordering just enough of what you need to fulfil the orders you have active at the present moment. So long as nothing disrupts your supply lines, all is rosy. You might keep a small inventory just as a buffer, but in general, that might only last a day or so.

Economies of Scale was the other concept that really took hold last century, and was the reason why smaller workshops got shut down in favour of making lots of a widget in one central place, and shipping it out to everywhere from that one point.

Again, works great, until something happens in that place where you are doing the manufacturing, or something happens that hampers your ability to shift parts or product around.

The latter in particular took a dark turn when instead of making things close to where the demand was, “we” instead outsourced it, shifting the production to places where the labour was cheapest. As a consequence, many countries are forced to import as they no longer have the expertise or capabilities to manufacture products locally.

Both these concepts were ideas conceived with people wearing rose-coloured glasses, they emphasise cost-cutting over contingency plans on the grounds that disruption to manufacturing and supplies are unlikely events.

The rise of “the world’s factory”

Over time, companies pushed this concept of centralised manufacturing to extremes, whereby they were largely making things in one place. Apple for instance, were leaning heavily on Foxconn in China for the manufacture of their hardware.

None of this is without precedent, when I was growing up, Nike used to cop a lot of flack for the exploitation of workers in various third-world localities.

That said, history has often had something to say about putting all of one’s eggs in a single basket. There’s mostly nothing wrong with having products made in China, the problem is having things made exclusively in China.

At first, products made in China were seen as dodgy knock-offs of things made elsewhere. The same was said of things made in Japan in the 1950s and 1960s… but then Japan improved their systems and processes, and with it, the products they made improved too. In the case of China, initially things were done “cheaply”, which gave rise to a perception that things made in China were all “dodgy”.

Over time, processes again improved, and now there are some great examples of products and services, which are designed and built by people based in China. Stuff that works, and is reliable. There are some very smart people over there who are great at their craft.

That said, manufacturing all revolves around the dollar, and so when it came to cutting costs, something had to give.

Trouble in Xinjiang

With this global demand for manufacturing, China had a problem trying to find people to do the mundane jobs. Quality had to be maintained, and so some organisations over there tried to solve the cost problem a different way: cheaper labour.

Now, it’s well known that China’s government is not a government that particularly values individualism. This is evident in the manner in which the Tienanmen Square protests were so violently silenced.

The Uighur Muslim community is one such group that has been in their sights for a long time. This is a group that has been clamped-down on for more than 6 years. Over time, a narrative was developed that tried to cast this group as being “trouble makers” in need of “re-education”.

Over time, members of this community found themselves co-opted into being the cogs in this “global” factory. At first, such actions were hidden from view, including from the direct customers of these factories.

COVID-19 makes its entrance

So, over time, global manufacturing has shifted to China, in some cases involving forced labour in the effort to drive the cost down and make the end product seem more competitive.

Much of these problems have been hidden from the outside world, but for now, whilst we’re starting to learn of these issues, we still do the majority of our manufacturing in one country.

Then, about this time last year, a bizarre respiratory condition started showing up in Wuhan. Nobody knew much about this condition, other than the fact that it was discovered it was highly contagious.

Even today, we’re still unsure exactly how it came about, but the smart money is that it jumped from some reservoir host such as a bat, via some intermediate host, to humans. Bats in particular are major carriers of all kinds of corona-viruses, and as such, are a highly probably suspect in this.

I do not believe it is synthetic in origin.

COVID-19 threw a major spanner in the works for everybody. Community event calendars looked like an utter train-wreck with cancellations and deferrals all over the place. For me, some of the casualties I was looking forward to include the 2020 Yarraman to Wulkuraka bike ride and numerous endurance horse-riding events (where I assist in operations).

It also threw a major spanner in the works for just-in-time manufacturing (since freight was running inefficiently due to a lack of flights) and rolling shut-downs across China as COVID-19 did its worst.

Some businesses have already closed for good.

Knee-jerk reactions

Numerous countries, notably ours, called for an investigation into the origins and initial handling of the COVID-19 pandemic.

I for one, think such an investigation should go ahead. We owe it to the people who have lost their lives, and those who have lost their livelihoods, to this condition, that we try and find out what went wrong. It’s not about blaming people.

We’re not interested in who made the mistakes, it’s more a question of what the mistakes were. This event will repeat itself again, and again, until such time as we get to understand what “we” (globally) did wrong.

China’s government does not seem to have seen it this way. It’s as if they see it as a witch-hunt. As a result, we as a nation that seems to have been singled-out, with heavy tariffs placed on goods that we as a nation export to China.

Notably absent in this trade-war is iron ore, partially because the other major producer of iron ore, Brazil, has been left a complete basket-case by this pandemic, and Australia was a major supplier of iron ore long before COVID-19 reared its ugly head.

A plan “B”

Right now, things are escalating in this diplomatic row. Whilst the politicians are trying to resolve this with as little fuss as possible, I think China’s position is becoming very clear. They’ve told the world “F You” in no uncertain terms.

We are most definitely dealing with a rebellious and violent teenager, more than capable of smashing holes in a few walls and inflicting grievous bodily harm.

I think it would be wonderful if things could be reset back to the way they were, but at the same time, I think that really, we may need to realise that “peak China” days may be behind us now.

I know there are organisations that have built their entire business model around exports to China, and that literally overnight, conditions have changed which now make that greatly risk business viability.

They are geared around the huge appetite that this country’s people have previously demonstrated for our goods and services. I think now, more than ever, we should be looking around. Where else can I outsource to? Where else can I sell to? How can we make do with less demand?

If China does come around, then sure, maybe a certain portion of your market can be serviced there. I think it folly though to be reliant on one single region for your supply or demand though.

Two or three alternatives may not totally balance things, but having at least a partial income is better than none at all!

The Australian coat-of-arms features the emu and the kangaroo. These animals are quite different from one another, but they share a few common attributes. Yes, some might say they’re two of the less brainy members of the animal kingdom, but also, they are not known for going “backwards”.

Whilst we momentarily look over our shoulder at our past, I think it important that we keep moving “forwards”.

Learning from our mistakes

I think in all of this, it’s fair to say none of us are perfect. Yes, our SAS troops have been implicated in some truly horrendous war crimes. Not all of them, thankfully, but enough to cast a cloud over the military in general. Some of the Army’s chopper pilots are not exactly famous for fast reporting of fires either.

We’re investigating this, and yes, some of the top brass are ducking for cover, as it’s likely some know more than they’ve been letting on. An analysis of what went wrong will be done, and we, collectively, will learn from those mistakes.

In the case of COVID-19, for the first few months of 2020, we were told “No, we don’t need help, we’re fine, we’ve got this!”. Taiwan saw this, and immediately sprang to action, as did many other nations close to China. They’ve seen similar things happen before (SARS, MERS), and so maybe their scepticism shielded them somewhat.

I think one of the biggest lessons of all is to realise that asking for help is not a sign of weakness, it’s a sign of maturity. We’re on this planet, together. We are in this mess, together. We need to work this all out, together.

What am I doing?

So, based on the above… where do I sit? Not on the fence.

I myself have started seriously considering my suppliers.

In particular, I have practically destroyed my credentials for AliExpress, having bought the last few things I’m likely to want from there. I’ve ordered printed circuit boards from a supplier in Hong Kong.

During last year, I had ordered a few PCBs from their sister factory in mainland China as I was concerned about the civil unrest there (and on that, I do think the people there have a valid point to raise) causing delays, but had originally intended to move things back once things settled down. However, with China being so adamant that Hong Kong is “theirs”, I’m forced to treat Hong Kong the same as mainland China.

As such, I’ll probably be looking to the US, Europe or India to evaluate options there. I might still use the old Hong Kong supplier, but they won’t be the sole supplier.

Where possible, I’ll probably be paying more attention to country-of-origin for products I buy from now on, and preferring local options where possible. This won’t always be the case, and some things will have to be imported from China, but I aim to diversify my sources.

I may start making things myself. Yes, time-consuming, expensive, but ultimately, this means I become the master of my own destiny, it’s likely a worthwhile journey to undertake.

Above all, I am not out to discriminate against the people of China. I may not always agree with some of their customs, but that does not give one the right to indulge in racism. My only real complaint with China at this time, is the conduct of its government.

Maybe with time, diplomatic relations might turn this around, and we may see a more co-operative Chinese government, only time will tell on that.

In the meantime, I plan to not reward their government for what I consider, bad behaviour.