20 September 2010

Chinese Growth Hurdles toward a New Great Wall

China’s unique capitalist/marxist hybrid manufacturing-based economy has grown at an eye-watering rate for the last three decades. While economists have predicted a leveling off in its awesome rate of growth for a multitude of reasons, viz, infrastructure, rising labor costs and the like the Chinese miracle has continued completely oblivious to such warnings. Serious trouble for China is on the way, though, from a completely unexpected direction created by hacker technologists who had no intention of causing it.

The “capitalisation” of Chinese industry during the last quarter of the 20th century is strikingly similar to what occurred in the American agricultural sector a century before.

In the last quarter of the 19th century America’s rapidly expanding railroad network put vast areas of new farmland in cost-effective range of both expanding metropolitan areas in the US and its export harbors serving European markets. This was very fortuitous for Europeans in that their farmland was largely exhausted and it would be some time before German chemistry invented inexpensive, ammonia-based fertilizers.

It was at that time that corporate farming in the sense that we know it today first appeared in the US. These large-scale farming operations were predominately found in the new lands of the Dakotas and Iowa which were possessed of rich topsoil hundreds of feet thick deposited there by the glaciers of the last ice age. These corporate farms were vast in extent, heavily mechanized and employed hundreds and sometimes thousands of laborers. The Dakotas and Iowa were that era’s Saudi Arabia of food production. They could put grain and meat on European tables for pennies on the dollar of what it cost European farmers to produce. Exported American foods let Europe avoid famine and poverty and might have staved off Europe’s collapse as a civilization.

Rich, hitherto untilled soils were not the only reason for American corporate farming’s economic success. Its emergence and market domination was also made possible by the invention of steam-powered farm machinery. These machines were huge for that time and capable of efficiently farming very large tracts of land. This machinery was also expensive and its sassy steam technology required skilled personnel to be operated safely. Its very nature demanded large, well-organized operations, the antithesis of small family farming enterprises.

It is shocking, therefore, to discover that within thirty years these large, highly profitable corporate farms had almost completely disappeared. Why? The answer lay in the development of practical, internal combustion engines coupled with the opening of American oil fields that provided their liquid fuels. Their horsepower/lb ratios were immensely better than equivalent steam engines. Internal combustion was much cheaper, safer and less technically demanding of farmers than steam had been.

The most important advantage, however, lay in their scalability. The technology of soils preparation, tilling and harvesting had been developed around the horse and a power supply. These technologies had been scaled up for steam and readily scaled down when smaller internal combustion engines came on the market. Internal combustion engines largely eliminated the economic advantages that large farming corporations over family operations. They disappeared for many decades thereafter.

Chinese manufacturing will be facing in the next decade or so much the same problem that late 19th century American corporate farms faced. Its success thus far has been a result of having access to a large, disciplined and relatively inexpensive labor force and access to international capital to invest in large, expensive manufacturing production lines. That is about to change in a rather dramatic fashion.

When you look at a typical “high tech” consumer item coming out of a Chinese factory dispassionately you quickly discover that it is mostly air and enclosure. Take a laser jet printer, for example. Over 90 percent of it is plastic and air. The actual “high tech” parts of it will fit nicely in a small, zip-lock bag. The cost of those “high tech” parts will typically be less than 20-25% of the cost of the printer. What you are buying is mostly volume and appearance.

The Chinese economic miracle would have been impossible without the transportation revolution made possible by containerized cargo carriers. This technology made it cost-effective to move such low-density cargo as consumer appliances.

When you visit a factory that makes such consumer items what strikes you most forcefully is the sheer size and power of the injection molding machines that make the housing for those appliances. An injection molding machine capable of producing an ink jet printer’s plastic housing will fill the better part of your home. It draws hundreds of kilowatts of electrical power and requires skilled personnel to operate and maintain. It can produce many thousands of such housings per day. They can cost millions of dollars. Is this beginning to sound familiar?

What are known as 3D prototyping machines are rapidly becoming a David to large injection molding machines’ Goliath. 3D prototyping machines began to be seen some thirty years ago. At that time you typically saw them in the aerospace industry making models of complex parts in critical parts of aircraft such as turbines. The machines were expensive as was using them. Since then, however, the technology has leveraged CNC (computer numerical control) technology and gradually come down the market pyramid to the point that you can now buy a full-blown system for about $30,000 that can produce prototypes for under US$2.00/cubic centimeter (US$30/cubic inch). While this sounds rather expensive, it is worth noting that the famous Lockheed “Skunk Works” that produced such aircraft as the U-2 and the SR-71 spy planes and the F-117 stealth fighter has recently adopted 3D prototyping in a manufacturing mode to produce their newest unmanned spy plane, the Polecat at a fraction of the cost that it could be built on a conventional production line.

All this would be a bit too up market for such everyday items as your ink jet printer save for one thing. When someone mentions “open source” thoughts inevitably go to software like Linux. While products like Linux get the press thousands of hackers have quietly been building quite a respectable open source hardware presence. One such team of hackers are busily producing an ultra cheap, open source 3D prototyping machine. The RepRap (Rapid Replicator) project directed out of the University of Bath in the UK. RepRappers are currently in an advanced stage of working the bugs out of their first open source prototyping machine in New Zealand. Their machine is on target for a build price of about US$400 and will be capable of making objects for about US$0.02/cubic centimeter. That represents a considerable slide down the market pyramid from their current commercial competition. Their development systems will easily fit on the top of your kitchen table.

The truly revolutionary aspect to the RepRap 3D protyping machine is that it can more or less make copies of itself save for that small Ziplock bag of “high tech” items like small motors and cheap integrated circuits all of which have long been commoditized. This means that you do not need a conventional factory to make it. It can make itself. It can diffuse over a society in a viral manner like peer to peer file sharing rather than a serial manner like conventional consumer appliances. It also means that anybody can start a manufacturing company for US$400 and scale it up and down to match their production levels.

While a RepRap protyping machine can not reach production levels of a conventional production line such as those that China has invested so heavily in during the past few decades it can, for example, make the parts for five very different appliances one after the other with no retooling or setup time whatsoever. Short production runs now means one-of-a-kind rather than several thousand. The concept of the RepRap machine is not known as the “Santa Claus Machine” for nothing.

Open source consumer technology can be expected to share the same characteristics as its software cousins such as Linux. Can you, for example, imagine an open source ink jet printer that requires ink cartridges that cost nearly as much to replace as it would cost to buy a new printer? More than a few industrial business models are in for some very hard times.

China, with its heavy emphasis on low cost manufacturing is headed for big trouble economically. So are consumer appliance manufacturing industries elsewhere.

{published in Agoravox, 26 July 2006}

A manifesto of sorts

I see both political parties in the US as existing primarily to protect the interests of their moneyed supporters. The two parties otherwise vary only in what special interest interest groups provide their foot soldiers.

The bottom line from where I stand is that the political class hasn't managed to increase the wealth of the majority of Americans, as opposed to the moneyed supporters that bankroll their campaigns in just over 30-35 years.

When I look at the special interests represented in either party, I see their basic demands as comprising...

  • You can twist the rest of society into a pretzel but don't you dare make me change the way I do business.
  • Make laws that either criminalise or bankrupt those who I hate or see myself threatened by.
  • Make laws to protect my interests from competition from new technologies.
  • Throw some tax money my way while you're at it.

Both parties provide this kind of protection for their special interests.

For (1) you need look no further than, inter alia, military contractors' cost-plus contracts, teachers' unions, doctors and trial lawyers.

For (2) you need only review the explosion of behaviours that have been criminalised in the past forty years. Most of the stuff I did as a kid and that my parents did and never thought twice about would get us all thrown in jail quick these days.

For (3) review as an example what's become of copyright law in the past thirty years.

For (4), I don't think I have to give any examples. They're to be seen anywhere both now and in the past.

As to negotiation and compromise, I learned in Africa that negotiations are seen by virtually anybody and everybody involved as merely a means to getting a bit closer to their ultimate goals, and never to create a stable accord. This means that negotiations are inevitably done in bad faith because whatever compromises are reached will be kept only till one side or the other gains enough of an edge to violate the compromises and go even further along the road to where they want to be.

That's not a good recipe for social harmony. In fact it's no recipe at all, yet that's what we do here and that is what has made politics a blood sport in the US, for better or worse.

My personal politics are those outlined in Simak's Ring Around the Sun, which is to say, destroying existing social structures by means of a careful introduction of disruptive technologies.

I've spent my spare hours for the past five years working with the Reprap open source 3D printer project that has brought the cost of 3D printers down by approximately two magnitudes ($50K - $500) and their feed stock down by over one {$250/lb - $8/lb}. In this project I've done a considerable body of work.

That technology was described eloquently in Cory Doctorow's Print Crime back in 2005. You need only browse through Thingiverse to get an inkling of the flood of creativity that widespread availability of 3D printing unleashes.

Reprap epitomizes the last line of Printcrime, viz,

"Lanie, I'm going to print more printers. Lots more printers. One for everyone. That's worth going to jail for. That's worth anything."

Reprap having already achieved that, I'm undertaking to make the technology that served as the basis for Alex Rivera's Sleep Dealer, vis, active telepresence.

Active telepresence, the ability to do physical labour anywhere on the planet via broadband, is the ultimate destroyer of the nation state that has caused so much grief for the past millennium.

Basically, my approach is to create disruptive technologies that get inside the OODA loop of societies at a rate that the existing social order collapses for lack of revenue in the manner conceived by Simak in Ring around the Sun.

It's past time that this happened.