Industrial Insight

WILL WE BE SINO-FORMED? | August 18, 2020

Raymond Monroe shares an important article by Law & Liberty (lawliberty.org), with David P. Golman, hosted by Richard M Reinsch II, retrieved, August 18th, 2020. Read the entire article HERE, or preview the excerpt below:

"It mentioned that the US government, specifically Larry Kudlow, the head of the President’s Economic Council, had gone to Chuck Robbins, the CEO of Cisco, and said, “Well, why don’t you go and buy another big telecommunications equipment manufacturer? Go buy Ericsson so we would have a national champion to compete with Huawei.” And Robbins told him, “Cisco’s not in the business of buying low-margin companies.” In fact, Ericsson’s return on equity is a fraction of that of Cisco. So if they did that, Cisco’s stock price might go down. The problem is not so much that we don’t have smart people. It’s that the US tech sector made a conscious decision to become dependent on China for the production of hardware. And of course, the Chinese, who excluded Google and other US companies from the Chinese market, has spent vast amounts of money developing their own software, their own computation, and are now in position to compete with us in the software field, as well. I think this was terribly short-sighted. But I don’t want to entirely put the blame on the tech companies because in Asia, capital-intensive businesses are subsidized the way we subsidize sports stadiums. We don’t have that kind of subsidy in the United States. So to some extent, we are running according to an industrial policy which steers people into that kind of choice. The problems is it’s not our policy. It’s China’s industrial policy which is guiding our investment decisions."


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About author

Raymond Monroe is the Executive Vice President for the steel industry trade Association, Steel Founders’ Society of America. He enjoys his crazy family including his wife, five children and their spouses, and many fun and lively grandchildren. Raymond brings more than 40 years in the industry here to share his ‘Industrial Insight’ and other current topics affecting the economic picture of our world today.

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