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Saturday, June 16, 2007

European sclerosis and a Chinese freebooter

I have just begun reading James Kynge's book, "China shakes the world". He takes as his starting-point the move of the enormous ThyssenKrupp steelworks from the German Ruhr to China in 2002. Lessons are leaping off the page immediately:

1. German steelworkers expected a 30-odd hour working week; the Chinese demolition team worked 12-hour shifts, seven days a week and unmade the factory in a third of the estimated time. The Chinese didn't use safety harnesses and looked like acrobats.

2. The political project of a united Germany had incurred costs that led to higher taxes, which slowed the economy at an already critical time, the late 90s.

3. The Germans were willing to sell the steel plant for its scrap value, because the market for that commodity was in a slump in 2000. But the Chinese man (Shen Wenrong) who bought it could see several things: the slump would eventually come to an end; the plant produced high-quality steel that emerging Chinese car factories would need; buying a second-hand factory meant he could get into production faster and more cheaply.

The writer points out that if the Germans had waited until 2004, the market in steel would have recovered so far that the plant would have been profitable again, in Dortmund, where iron had been made for nearly 200 years.

Doubtless Kynge intends us to see this as a symbolic example: a Europe more concerned with unification and workers' rights, than with global competitiveness; regulation and taxation hobbling the economy; stupid, short-sighted management. (This, by the way, is the Europe that my country seems determined to marry, sans pre-nuptial contract.)

Shen not only foresaw the resurgence of steel, but expects it to collapse again. In 2004 he said:

When the next crash in world steel prices comes, and it will certainly come in the next few years, a lot of our competitors who have bought expensive new equipment from abroad will go bust or be so weighed down by debt that they will not be able to move. At that time you will see that this purchase was good.

Industry and thrift, as per Benjamin Franklin (or indeed any late eighteenth-century enterpreneur). And long-sighted strategy, without the benefit of an MBA. Shen has a tiny desk, takes information by word of mouth and on A4 paper (not plasma screens), and makes fast, one-man decisions all day.

Yet what he does, is no more than what our people once did here.

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