We are also making a mistake made by the United States, and we must be vigilant!

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The following article comes from the natural selection essay, the author’s natural selection essay

A few days ago, I read an article by Academician Shi Yigong of the Chinese Academy of Sciences and was deeply touched. In his article, he said that 70% to 80% of the top students in Tsinghua University’s college entrance examination chose finance, which he believed was a big problem facing China.


Academician Shi Yigong

As a school of science and engineering, Tsinghua university should be the place to cultivate scientists, the pillars of the country and national leaders, but in the end, many people flocked to the financial field where they made a lot of money.

Not only finance is popular in Tsinghua University, but also the school of economics and management is popular in any university. Many hot-blooded young people who want to be physicists, mathematicians and chemists come to the university to see that from the perspective of employment, money making, social status and other aspects, finance is still a good major.

What is finance? From a professional point of view, it is the process from savings to investment. For example, controlling the issuance of money, issuing treasury bonds, etc. are all financial.

In fact, the financial industry is derived from other industries. Finance cannot directly produce scientific and technological innovation and promote social progress. In the vernacular, the financial industry is a game of money making money.

The financial industry is undoubtedly important for a country, but when high-end talents are engaged in the financial industry to make money, it seems abnormal, or a huge mistake. And this mistake is exactly the mistake made by Britain and the United States.

It can be said that finance is the fastest industry to make money. The speed of making money in the financial industry is far beyond the imagination of other industries, and even the Internet industry dare not compete with it.

As we all know, the United States is the most powerful country in the world today, especially in the dominant position in economy. Americans use financial means to make money easily and happily, which makes all countries in the world envy, envy and hate.

However, the financial industry is devouring American innovation and American manufacturing, which has directly shaken the foundation of the United States.

Because the over developed financial industry will greatly change the flow of talents and the investment structure. Most of the money will flow to the virtual economy rather than the real economy, even within the enterprise. Many technology enterprises will focus on finance rather than technological innovation for profit.

Lenovo, which has been making a lot of noise a while ago, is actually that enterprises give up scientific and technological innovation and focus on finance in order to make money.

Lenovo Group was indeed a technology company at the beginning. However, the leadership of the company soon found that scientific and technological innovation not only failed to see feedback for a long time, but also had great risks. Instead of putting limited funds on scientific and technological innovation, it was better to focus on financial business.

Lenovo Group has thus changed from a technology company to a financial company. According to public information, Lenovo Holdings’ net profit in 2019 was 3.607 billion yuan, and financial services accounted for 2.076 billion yuan, accounting for 57.55%. In 2020, the net profit was 3.868 billion yuan, and financial services accounted for 1.874 billion yuan, accounting for 48.49%.

Lenovo Group has five business segments, including IT industry, financial services, innovative consumption and services, agriculture and food, and new materials.

The fundamental reason why Lenovo finally invested in financial services is that the money from financial services is fast and easy.

So the godfather said in the interview that he firmly disagreed with the core technology research and development. In fact, Lenovo’s decision is normal. As an enterprise, it must be who makes money.

This is the same in all countries in the world. When finance is underdeveloped, engage in industry, and when finance is developed, engage in finance.

In the 18th century, the industrial revolution in Britain began to sprout and develop, and a large number of factories were born. However, these real industries faced a serious problem. Due to the lack of funds, they could not expand production, upgrade and transform, and insufficient capital investment became the biggest bottleneck in the development of the real economy.

Because there is not much money in the market and there are not many financial companies, the manufacturing industry has the highest profits. Most of the wealth seized by British Pirates from overseas has flowed into the manufacturing industry, effectively promoting the prosperity of the manufacturing industry.

Manufacturing industry is a heavy asset industry, which not only has large investment costs, but also has a long revenue cycle, and the management is very cumbersome. The competition between the same industries is also very fierce. Although capitalist factories are bloody, many bloody factories still can’t make money.

With the development of British manufacturing industry and the circulation of goods around the world, Britain has accumulated a lot of wealth, which directly gave birth to the development and prosperity of the financial industry.

The first industrial revolution made Britain the world overlord at one fell swoop, with industrial output accounting for 51% of the world. London gathered a large amount of wealth and a large number of financial companies were born.


Steam trains in the first industrial revolution

British elites soon found that it was too slow and hard to make money through manufacturing. If a person started a business and set up a factory, he needed others to invest. Finally, the factory made money, but most of the profits were given to investors.

Rather than this, it is better to engage in the financial industry directly.

Britain is the birthplace of modern industry, where many scientists were born, such as Newton and Darwin. However, the financial industry has directly changed the flow of talents, and many scientific and technological talents flow to the financial industry.

There is a popular saying in British financial circles: finance will keep rocket scientists away from the satellite industry, and those who dream of becoming scientists and those who want to send humans to Mars now want to make money as fund managers.

Before the financial boom, high school students preferred science and engineering, especially industrial manufacturing, and a large number of elite talents flowed into the manufacturing industry. After the financial boom, a large number of elite talents flowed into the financial industry. London became the global financial center, and the London School of economics became the hottest place.

Moreover, after making money, some manufacturing business owners do not want to expand the scale and improve production at all, but package and sell the whole enterprise, and then plunge into the financial industry. In this way, Britain’s financial hegemony has expanded to the world.

Britain took the lead in the first industrial revolution and accumulated a lot of wealth.

The symbolic industries of the second industrial revolution were mainly electrical and internal combustion engines, and the demand for larger-scale capital concentration and investment was relatively more urgent.

However, British capitalists who are used to making money with finance are unwilling to invest capital in industrial production, but in the financial fields such as stocks and bonds.

The cost of manufacturing in Britain is high. Many British capital give up investing in manufacturing in their own countries and increase investment in manufacturing in Germany, the United States and other countries.

That is to say, at that time, the British capitalists, who were extremely rich, did not concentrate on developing new industries as the United States and Germany did, but invested too much capital in finance and foreign investment, resulting in a corresponding reduction in the capital invested in the renewal and development of the manufacturing industry.

Britain finally missed the second industrial revolution, while the United States became the manufacturing center of the world. In 1947, the manufacturing industry in the United States accounted for 30% of GDP, the highest among all countries.

By 1960, the total economic output of the United States accounted for 39.67% of the world economy, most of which was contributed by manufacturing. At that time, the United States had the most complete industrial categories, ranging from aircraft carriers to toothpaste and toothbrushes.


American aircraft factory during World War II

Manufacturing has accumulated a lot of wealth for the United States, but it is accompanied by a financial curse, that is, American capitalists no longer focus on manufacturing, but on finance.

In the 1970s, in order to save costs, local American enterprises began to invest heavily in Asia because of low labor costs and cheap rents.

The policy of American enterprises to build factories abroad was a great success. For a while, there was a boom of building factories abroad in the United States, and the industrial system and industrial chain that the United States has worked hard to establish for decades were almost empty.

Only the developed financial industry, Internet industry and R & D and design links with high profit margin are left in the United States, and the production and manufacturing are handed over to foreign factories. The United States has successfully realized the industrial transfer, which is, of course, the hollowing out of the industry.

There are also some high-end manufacturing industries in the United States, which pay too much attention to profits and neglect technology research and development, resulting in the decline of product competitiveness.

For example, Boeing in the United States used to be a big Mac, but in order to pursue profits, the management of the company blindly focused on the market value of the company and ignored technological innovation and progress, which directly led to frequent crashes of Boeing airliners.

In 2018 and 2019, two consecutive plane crashes pulled Boeing down from the altar, and the sales of Boeing aircraft also decreased significantly, with a loss of more than $10 billion in 2020.

After the three Chinese airlines purchased 292 Airbus aircraft at one go, Boeing of the United States could only express its dismay and attributed the responsibility to geopolitical differences, and the fundamental reason was the decline in the quality of Boeing aircraft and the lack of safety assurance.

The decline of Boeing is only the epitome of the decline of American manufacturing industry, but we can find that more American manufacturing industry is declining.

The hollowing out of American industry has directly shaken the foundation of the United States. The proportion of American manufacturing industry in GDP is the lowest among major economic powers.

According to public data, the manufacturing output value of South Korea is 422 billion US dollars, accounting for 27.57% of GDP. The manufacturing output value of Germany is US $759.9 billion, accounting for 20.66% of GDP. The output value of Japan’s manufacturing industry is US $1025.5 billion, accounting for 21.05% of GDP.

The output value of U.S. manufacturing industry is 2249.4 billion US dollars, accounting for 11.6% of GDP. As the world’s largest economy, the United States’ manufacturing output value is not the world’s first, but the world’s second.

The output value of China’s manufacturing industry is 3593.1 billion US dollars, more than 1.5 times that of the United States, and it is the country with the highest output value of manufacturing industry in the world. Accounting for 28.57% of GDP.

The decline of U.S. manufacturing industry has greatly reduced the proportion of U.S. GDP in the world economy. In 2020, the U.S. GDP reached $20.89 trillion, and the economy is still the strongest in the world, but the proportion of GDP in the world is only 24.7%.

In 1960, the U.S. economy accounted for 39.67% of the world economy, and the proportion of the U.S. economy in the world economy fell by 15%.

However, we should also see that although China’s manufacturing industry has developed, the financial industry has also developed, and the financial industry is excluding the real industry. There are too many examples. Let’s give a random example:

Shanxi once had a richest man called Li Zhaohui. Haixin Group, controlled by Li Zhaohui’s family, is the largest iron and steel company in Shanxi and is highly known in China.

The steel industry is the foundation of the manufacturing industry. When Li Haicang was the head of Haixin Group, he paid great attention to the upgrading and transformation of the industry, caught up with the free ride of China’s infrastructure construction, and the enterprise became bigger and stronger step by step.

However, the good times did not last long. After Li Haicang’s sudden death, only his 22-year-old son Li Zhaohui was ordered to take over Haixin Group. After taking over Haixin Group after studying in Australia, Li Zhaohui thought that it was slow to make money in industry and it was very hard, so he decided to focus on the development of the group on financial business.

At the beginning, the financial business of Haixin Group relied on the mode of “money begets money” and developed smoothly. In only a few years, Li Zhaohui topped Shanxi’s richest man with a value of 12.5 billion.

However, as the financial business continued to decline, Li Zhaohui’s investment failed one after another. Most of the money used for industrial upgrading was invested in financial business. With the failure of financial business, Haixin Group also disappeared.


Li Zhaohui’s wedding

In fact, both Lenovo and Haixin want to transform from industry to finance, but Lenovo’s transformation is relatively successful, but how far can financial services go without industry support?

The economic development of Britain and the United States shows that when the financial industry is over developed and the country does not control it, the decline of manufacturing industry is inevitable.

The financial industry is an asset light model, which will not generate much employment. The more developed the finance is, the higher the house price will be, and the more exclusive the manufacturing industry will be. Today, China is the same. The financial industry is excluding manufacturing, and many industries in China are transferring to Southeast Asia.

The first wave of manufacturing transfer occurred in 2008, and many factories moved to Southeast Asia. This wave peaked around 2014.

The first wave of manufacturing transfer mainly occurred in low-end manufacturing, mainly in clothing, footwear and other low value-added industries. These industries have low profit margins and are very sensitive to costs, so they first began to migrate.

The second wave of supply chain transfer is dominated by the electronics industry. Samsung, Intel, LG and other companies have invested in factories in Vietnam. Take Samsung as an example. Around 2018, Samsung began to move its factory in Huizhou, Guangdong, to Vietnam.

Some electronic industries in China have also been transferred to Vietnam.

This transfer order is the same as that of Britain transferring industries to the United States and the United States transferring industries to China.

Of course, it is an objective law that industries always shift to low-cost areas, but we must be vigilant and guide and regulate them in all aspects.

Because the transfer of industry is easy, but it is very difficult to return to manufacturing. Even the United States, once a world manufacturing power, cannot do it.

Cao Dewang, who invested and built factories in the United States, was very impressed by the painful lessons brought by the de industrialization of the United States, and some signs in China made him worried that China’s manufacturing industry would repeat the mistakes.

Caodewang said that the United States began the process of deindustrialization in the 1970s, and reached its peak in the 1980s. People went all out to do virtual economy. The places that young people most want to go are Wall Street and Silicon Valley. Now there is a shortage of management cadres at every level in industrial enterprises. Fuyao’s factory in the United States lacks hundreds of workers.

Caodewang also saw a similar phenomenon in China, so he attacked the real estate, Internet Finance and other industries for raising the cost of manufacturing.

Even for Huawei, a big company, Ren Zhengfei also complained that there was no large industrial land in roast, and the rent was too high. He also said bluntly: high costs will eventually destroy your competitiveness.


Fuyao American factory

Fortunately, we have recognized this problem, so the Central Committee has repeatedly stressed:

The real economy is the foundation of a country’s economy and the source of wealth. Advanced manufacturing industry is a key to the real economy, and economic development cannot be divorced from reality to illusion at any time.

Everything is established in advance and abandoned without advance. Problems are not terrible. The key is to find and solve problems.

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