Trade from a Small State

Low population states don't get much attention paid to their exports. However, exports are critical to the millions of workers and citizens in those states. Oklahoma exports highlights...

The Next Bubble to Burst: Cheap Imports?

One thing that makes us feel like we still have a decent standard of living is the cheap imports. What happens when THAT bubble bursts? We'll finally realize just how stagnant our wages have been. Here's a provocative and quick video from Daniel Altman at the International Herald Tribune. This is the first in a new series called "Global Economic Minute"...

Quality Fade

This is an article that came out last year, but I came across it again. It touches on issues we'll be dealing with for a long time. Paul Midler gives a concise description to a phenomenon that most of us have only vaguely suspected. "Quality Fade" is the “deliberate and secret habit of widening profit margins through a reduction in the quality of materials.” This is a practice Chinese manufacturers employ in order to avoid the higher costs of production that come with the standards expected by U.S. importers.

With successive production runs, manufacturers will use materials or processes of slightly decreasing quality. This is done in a manner so gradual that the American buyers do not notice. “A supplier can bury substandard product knowing full well that warehouse workers in the U.S. do not have the time to examine each piece that comes in... so the supplier who quotes low and quietly cuts corners on quality is the one who wins.” This penalizes suppliers who quote higher prices and will maintain quality. Quality fade is incentivized by the constant pressure to source cheaper.

Midler points out that the long term success of Japan and Korea was established with very different methods. In contrast “quality fade” is a short term tactic and undermines trust in supplier relationships.

The entire article can be found on the Forbes website here