Oded Shenker – Are We Toast?

Oded Shenkar is the Ford Motor Company Chair in global business management at Fisher, the business school at Ohio State University. His recent research is on the business and economic impact of the China on the global economy, including a book, “The Chinese Century”. He subtitles his talk: Are we toast?

The answer seems to be, “Yes. Specifically cold toast, like they serve in Britain.”

Shenkar urges us to consider timelines in Chinese terms. The “transition period” the country is going through could be a very, very long one. Professor Shenkar doesn’t expect to see China giving up labor-intensive manufacturing any time soon. Furthermore, for anyone who isn’t worried that China has taken t-shirt manufacturing away from the US, people should seriously consider worrying about the fact that the Chinese are now manufacturing higher and higher technology items, especially computer components.

Shenkar shows a Jeff Danzinger cartoon, where a family has decided that, for their Christmas presents, “We’re going to buy goods made in the good old USA”. Under the tree is a wheel of cheese, a bag of soybeans and some concrete blocks. So much for “Buy American!”

Shenkar points out that the US is currently running a trade deficit – 6% of GDP – which is generally at a level where economies get into major trouble. He further points out that other Asian countries aren’t running deficits with China, and that the EU only recently began running a deficit with China. This is an oddly US-specific problem, which has a great deal with the US tendency not to save money.

He posits a future automobile – an attractive truck made by Rover, available for $119 a month in payments, financed through the Bank of China. The car would be assembled in the US, out of primarily Chinese and Mexican parts, and marketed under a brand that sounds English, but is now owned my Shanghai Automotive, which has stated a desire to go from manufacturing zero autos for export to being one of the five largest auto manufacturers in the world in 5 to 10 years.

Shenkar shows us a quote, suggesting that our advantage in global trade can’t extend forever and that we need to assume our dominant position in global trade is going to be overtaken by a large set of enterprising and skillful nations.

It’s a quote from Britain in 1881, as prescient thinkers started to see the empire strain. Is it possible that we’re seeing the end of our own empire?

Shenkar gives us another parallel between China and the US, and England and the US a century earlier – like the US, currently fighting piracy in China, Charles Dickens used to complain that he wasn’t getting royalties from American pirate versions of his books. Shenkar points out that China has already published the seventh and eight books of the Harry Potter series. They weren’t written by JK Rowling, but they have been released… Oddly enough, when Shenker’s book was published in China, there was no chapter in it on copyright.

What happens next? Professor Shenker says he doesn’t know. We’re in uncharted territory – no country has ever had an economy primarily based on services.

It can’t help but be an interesting ride.