Along Came China: What we don’t want to know about trade deficit?
Four TVs in a 3 bedrooms house for one couple. The abundance of unnecessary gadgets is too common in our American household. As if we were not consuming enough throughout the year, I had to witness the conversation of 3 families who said they had at least 6 Christmas trees in their house during Christmas.
I want to take you to a very ancient time called the 90s in a far away place called Haiti. The time when there was one TV for several families. For big events like the World cup, relatives would come out from everywhere to our house to watch the World cup on a color TV. Our color TV lasted over 10 years. During its declining years, every time we were watching a movie, several black and multi-color lines would form on the screen and one of us had to get up and bang the TV on the side. It would work again. This went on for years. We were happy as it was.
Growing up my parents were part of the middle class in Haiti. However, coming from a very frugal background, my mother would buy me 2 pairs of leather shoes per year; one to go to school and one for special occasions including Sunday church. I was not allowed to wear shoes at home. These shoes could have lasted my entire childhood if my feet were not growing. To circumvent this problem, my mother would buy shoes that were a “little bigger” so my feet could grow into them. As soon as I got home, I had to wear my sandals. Sandals, fancy or not, were much more popular for the hot climate. I never complained.
Along came China. When the Chinese shoes made way to our house, I was ecstatic. I could have more than 2 pairs of shoes. They were so cheap. My mother would buy them in different color, black for school, white for church, and red for parties. Little by little my shoes started to fit better because we did not have to worry too much about the cost. To my mother’s disappointment, they did not last. Unlike leather shoes that could be repaired, these Chinese plastic shoes had to be thrown away. Bingo. I had found the perfect shoes. I did not have to worry about wearing the same looking shoes for a year. I fell in love with the concept of buying a lot because it was cheaper to buy than to fix.
It is a real case of the chicken and the egg. Are manufacturers pushing their production on consumers or are consumers’ behavior pushing manufacturers to fulfill their needs? As the market got more and more competitive, the promise that China could fill orders at a fraction of the cost became a very lucrative business.
New policies have pushed China to open its door to “free trade”. The US had hoped that China’s appetite for stuff would be as big or comparable to that of Americans. With China opening access to billions of people American multinational companies thought of double or triple revenues. Some American executives somewhere pictured millions of Chinese eating chocolate, fast food, and other American goods. Our executives failed to understand one thing, people are not numbers. People are bound culturally to behave a certain way. As China became more prosperous creating as many millionaires in a very short time as available in the US, spending did not go as expected.
I first had a glimpse at Chinese’s behavior toward money in college. I met several students from China whose parents would send them enough money to buy a brand new car cash to avoid paying interest on a loan. Later on, I heard several stories in Brooklyn, Long Island, Vancouver, and many others where a Chinese person would buy a house with all cash. Some of these houses cost several millions.
As if trying to invest money in real estate was not enough, Chinese families would invest in their kids by sending them to the US to private school so it could be easier for them to attend college.
Trade war is a power trip where the only looser will be consumers, mostly the American consumers. I have a hard time picturing Americans downsizing their home and buying less. Many regular working people I know have over 50 pairs of shoes. Will they ever be able to go back to the time when 2 pairs of shoes was normal? As Americans, if we consume less, we will buy less and decrease our deficit. Trade war is really not going to fix the trade deficit because China has little to do with it. As Americans, we buy without real needs and over consume. China only caters to our whimsical want.