Engineering has a long, impressive history in Russia. Are they throwing it away?
Episode Summary:
There are standard metrics that economists use to gauge the health of a nation. GDP, median income and balance of trade are common. To measure the health of a manufacturing economy, production of semi-finished goods like steel and aluminum are a common measurement. Today, software is an important factor as well, but consumption of a few key inputs is a good proxy for the economic health of a modern nation. Semiconductors are one of those key inputs, and a recent, low-key statement from the Semiconductor Industry Association about Russia revealed something important about that nation’s economy. Jim Anderton explains.
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Transcript of this week’s show:
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We live in strange times. A global pandemic is just starting to abate, and now we have war in Eastern Europe. One consequence of that war is economic sanctions against Russia, and the potential for even more disruption to global supply chains. Making things today, from jet planes to Jell-O, requires multiple inputs. Manufacturers source those inputs at the lowest possible cost, from vendors all over the world. There are some inputs, however, that represent chokepoints for global manufacturing.
Semiconductor consumption is an excellent proxy metric for a nation’s output of advanced goods. According to the Semiconductor Industry Association, Russia consumes 1/10 of one percent of the world’s semiconductors. The small size of that metric surprised me. Russia is clearly not short of critical semiconductors for military purposes, but when I travel in the Americas, Europe or Asia, there is one thing missing everywhere: Russian consumer goods.
Three decades after the fall of Communism, I expected to see Russian smart phones, flatscreen TVs, cars, airliners, appliances and other mass production goods everywhere. I’m still waiting. I have a German and a Japanese car in my driveway. My laptop was made in Taiwan, my washer and dryer in Korea and my TV in China. There is one Russian product in my home, and that’s a bottle of vodka.
This pattern is common over the world. To be a true world power today, it is necessary to have an engineering-led, manufacturing-driven mass production economy.
That is the secret to the rapid rise of China, and it turned Germany and Japan from two disgraced and burnt-out disasters in 1945 into the important, respected and admired nations that they are today. It is not about war anymore; it’s about Walmart. Amazon. Alibaba. Russia has two major advantages: a literate, educated population and the biggest natural resource base in the world. And just as important, it has a century of popular support and admiration for science and engineering.
With these attributes, I would have expected that Russia would be where China is today. Manufacturing matters, especially of consumer goods. My Honda has been trouble-free for a long time. This reflects not only on the company, but on the intelligence and work ethic of Japan as a whole. Germany dominates Europe for the same reason. The Koreans are following suit. No propaganda, and no military threat, can deliver the soft power impact of widely exported high-quality manufactured goods. Low-cost, durable consumer goods make people happy. They make people’s lives easier, and they say something about the cultures that create them. The only examples of quality Russian goods that I can name off the top of my head are Kalashnikov and Stolichnaya.
Change that, and in my opinion Russia could have the global impact and importance of China, Japan or the U.S., and they could have that impact where it matters: in everyone’s living room and back pocket.
