In the Developing World, Robots Are Short-Circuiting Economic Growth
We began noticing this a few years ago about the time a large manufacture of tongue depressors, and ice cream sticks made the decision to move manufacturing from China to Canada.
Back to the Mead article:
"Amidst all the fears that machines will lead to the unemployment of millions of Americans, the jobs robots are most eager to steal may in fact be in China. The FT reports:
After a six-month trial, the world’s second largest sportswear group has decided to start large-scale production next year at a custom-built, highly-automated facility near Ansbach. Here — and at another factory to be built in the US — Adidas plans to produce about 1m running shoes in developed markets within the next three to five years.
In the past 30 years, when western manufacturers were busy shifting production to emerging economies in an attempt to cut their labour costs, such a move would have been unimaginable. But, as wages rise in China, and advances in robotics allow more tasks to be automated, there are signs that the tide may be turning.
“When I started at Adidas in 1987, the process of closing factories in Germany and moving them to China was just beginning,” says Herbert Hainer, who steps down as chief executive of Adidas later this year. “Now, it’s coming back. I find it almost uncanny how things have come full circle.'"
We noticed this in our most recent Flash Briefing.
As robots get cheaper, and more functional more jobs will leave these Asian manufacturing hubs. Mead is correct it is better and easier, and less fraught with problems to manufacture products at home, than in China. This change will only accelerate.
The other place this problem will accelerate is in China, and the other low cost manufacturing hubs. By automating, these hubs may be able to continue manufacturing products even cheaper than they can be made by robots here. This will not, however, stabilize China's current problems with unemployment.
I do not know if this will create an anti-globalist backlash in the low wage countries, but it stands to reason it could be a problem.
What this really means is that the "easy" model which China followed to build its industrial capacity is closing, and likely for good. We are barely beginning this automation phase, and we are already seeing some dramatic shifts. Interesting.