Friday, December 03, 2004

Schwinns, Treks, and other bikes

Below, I've put a link to an article in today's Washington Post giving a small lesson in global economics, using bicycle manufacturing as example.

My experience with American-made bikes has been good. Thirty years ago everyone wanted Italian frames and components, but my favorite bike of the time was one made by Albert Eisentraut, a custom builder in Oakland. Back then, I also owned a frame made by Rob Horowitz, a student of his. More recently, I've bought a second-hand made-in-US Cannondale which is currently the best bicycle I own -- really nice.

However, I also like bikes from the made-in-Japan era of the 80's. I currently ride a Centurion Facet bike made about 1986. The frame was made in Japan as were most of the components. I also sometimes ride a made-in-Japan Schwinn Paramount from the same decade. I also used to own a Japanese SOMA. The Paramounts are still available from time to time on ebay, but the Facet and SOMA aren't to be found. The Japanese workmanship was very good; unfortunately, so far as I know, you can't buy a new bike made in Japan any more. I suppose they'd be too expensive.

My second-favorite bike is a Cannondale, made in the USA about five years ago. You can still buy Cannondales made in the US; they are wonderful -- better than the Centurion despite my current preference. As the article in the Post says, you can also buy TREK bikes that are made here; as a matter of fact you can buy the exact same TREK that Lance Armstrong and his team-mates ride if you have the money. The Cannondales and the competition TREKs are expensive. Two years ago I sold my made-in-the-US Schwinn Paramount (manufactured ca. 1979) because I wasn't riding it. The Waterford bike, made in Wisconsin, are successors to the Paramounts of this time and still are made the same way, but in very small quantities.

The lesson for me: as the article says, at the high-end, American manufacturing is competitive, but in the mid- and low-range, there is no way that U.S. can compete with China and other low-wage Asian countries. Is this the way things should be? And if not, what's the solution? Maybe if we wait long enough, China will develop a consumer economy as Japan and Taiwan have done. With rising standards of living in China (already evident in its cities), there may come a rebalancing, but this wouldn't be a huge benefit for the US.

I perceive the underlying problem to be US and global economic policies that have kept interest rates artificially low in the the US. Low interest rates, along with a culture of spending-not-saving (along with a bunch of other factors) have produced a world economy driven by hugely-in-debt US consumers. (Low mortgage rates have been a big factor since refinancing morgages has had the secondary effect to permitting Americans to expand their consumer debt.)

The Federal Reserved and many others are expecting (hoping for) a dwindling and gradual extinction of this amazing spending spree. Others say it may end with a crash. They all agree that it has reached its limits, maily because the US government has become over-dependent on foreigners for funding our national debt; somehow or other Americans are going to have to assume a greater responsibility for this debt.

Well, anyway, here's the reference to the article in the Post:
A Rough Ride for Schwinn Bicycle
As the World Economy Shifted, So Did the Fortunes of an American Classic

By Griff Witte
Washington Post Staff Writer
Friday, December 3, 2004; Page A01


MADISON, Wis. -- In the glass atrium that marks the entrance to the Pacific Cycle company, the old and the new of the bicycle business are displayed side by side. Each is called the Schwinn Sting Ray, and each in its time has been a bestseller.

But the similarities end there. In the space of a generation, everything about the process of designing, producing and selling a Schwinn has changed.

The old Sting Ray broke the conventions of bicycle design, boasting a banana seat, high handlebars and extra-wide tires. In the 1960s and early '70s it became not only a symbol of middle-class aspirations, but also a provider of thousands of jobs that paid good wages with health and retirement benefits.

Today's model, which projects the rough look of a motorcycle, comes from China, where the average factory worker makes less than a dollar an hour. It is a symbol of a different sort -- an illustration of how global economic forces and the sometimes clumsy responses of U.S. companies transformed middle-class jobs into low-wage work both at home and abroad.

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