Amazing VW Factory

Take a gander at this series of photos showing the VW Phaeton Factory in Dresden.

Then consider for a moment why Germany is the worldâs numberone exporting nation, and weâre just digging up coal to flog to China.

(Via Jwalk)

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Yobbo
Yobbo
14 years ago

Yeah, if only our economy was going as well as Germany’s.

Patrick
Patrick(@patrick)
14 years ago

I have looked, and considered. So what are you talking about after all? We would be better off if we built fantastically expensive and oversized cars so that the richest half-a-percent of us could swan around in even greater luxury?

Typical lefty dross: cultural cringe and barely-concealed awe of money rolled into one.

Tony Healy
Tony Healy
14 years ago

Rex, that’s a beautiful facility. It also featured in a list of 10 cool workplaces, along with Google and Pixar.

As to the wider implications in your observation, I think there’s no getting away from the distorting effect of our agriculture and natural resources wealth.

Steve Edney
14 years ago

Why waste our time competing with Germany at what they are good at, when we have an advantage at digging stuff up and selling it? Its not like its about to run out.

Rob Geoffrey
Rob Geoffrey
14 years ago

How about we use the USA as a comparison point with Australia instead of Germany. The US is also a country endowed with a remarkable richness of natural resources. Yet it is also a highly innovative economy with major investments in design, research and commercialisation of new ideas or technologies, and has major strengths in well-developed first world industries such as ICT and high-end manufacturing (including automobiles).

Yobbo
Yobbo
14 years ago

Someone help Rex out and buy him an economics textbook please.

Erin
Erin
14 years ago

I don’t think this is an economic left/right question at all, it’s about different cultural responses to beauty as a value.

Consider also, that any German city with the same size and population of Melbourne would also have three (3) self-supporting and profitable opera companies. Aesthetics is not something that is valued by mainstream Australia, it really isn’t. There is no reason (and this factory shows us) that modern buildings and workplaces have to be ugly, but one has to regard beauty as a value in itself in order to achieve beautiful buildings and factories.

Australia is highly suspicious of beauty (as Patrick’s comment reveals). In our culture we tend to be ambiguous about aesthetics and dismiss considerations of beauty as either “lefty” or “elitist”.

Other cultures see beauty as a good thing in and of itself and produce beautiful things that are useful and profitable also.

MikeM
MikeM
14 years ago

The only effect of our advantage in digging stuff up and selling it has been to generate a case of Dutch Disease, which has crippled other sectors of the economy with export potential.

It seems, worryingly, if Yobbo’s posts are any indication, that Dutch Disease can also cripple minds.

Rich deposits of extractable minerals are not necessarily an economic blessing, as Singapore, Japan and South Korea demonstrate.

digiwigi
digiwigi
14 years ago

I was more impressed by the central location and access to the plant, unlike OZ where we site even the most innocuous industrial activity in distant, incovenient areas. The Milton XXXX brewery is an example of central location but other conveniently situated plants have been outlawed by zoning. Then they complain about the number of vehicle commuters and air quality.

Patrick
Patrick(@patrick)
14 years ago

I think you meant

Rich deposits of extractable minerals are not necessarily anto economic blessings, as Singapore, Japan and South Korea demonstrate.

Although coal did play a major part in Germany’s success.

MikeM
MikeM
14 years ago

Jacques,

I am well aware of the theory of comparative advantage, although as Obstfeld and Krugman have pointed out, it is a simplistic basis on which to erect international trade theory.

You neglect the question of how a nation gets to be good at something. Yes, the Germans have become good at building Volkswagens. So have the Mexicans:

VOLKSWAGEN TO MANUFACTURE THE NEW GOLF IN MEXICO AS OF 2005

As of 2005, Volkswagen will manufacture the fifth generation Golf at the Puebla factory in Mexico.

The Golf GTI and 4-door Golf will be built here for the North American market.

The investments for manufacturing the new model in Mexico total 100 million US dollars and are part of Volkswagen de M

Scott Wickstein
14 years ago

Wow, I wonder what the labour costs in Mexico are like?

James Waterton
14 years ago

Rich deposits of extractable minerals are not necessarily an economic blessing, as Singapore, Japan and South Korea demonstrate.

Non sequitur alert! Non sequitur alert! The existence of South Korea, Japan and Singapore demonstrates that a large reserve of extractable minerals is not indivisible with national economic success, rather than whatever silliness you came out with. And I might be stating the bleeding obvious here – but it appears to be lost on some – rich mineral deposits are demonstrably an economic blessing; especially in the case of Australia.

When did Australians build Volkswagens, by the way?

Tony Harris
Tony Harris(@tony-harris)
14 years ago

Our cars are cheaper and better than ever before. Thank you Paul Keating. With some assistance from John Button and Nicholas Gruen. And Bert Kelly.

James Waterton
14 years ago

which has crippled other sectors of the economy with export potential.

MikeM – while you’re at it, could you please explain why, in a free(ish) market-based economy like Australia’s, a large and important primary industrial sector would preclude development of other sectors of the economy – namely those “with export potential”?

Funny how Mike makes rude comments about the crippled minds of others when it’s his own logical faculties that appear emasculated.

Jason Soon
Jason Soon
14 years ago

No need to name drop, MikeM.

Krugman derived a theoretical result that under certain conditions, an industry policy may be optimal. He has downplayed the practical import of this result ever since and has continued to be scathing of the sort of do it yourself economics of industry policy boosters.

See here for example

http://www.pkarchive.org/trade/ricardo.html

JC
JC
14 years ago

Isn’t mining one of the most highly capital intensive industries around? Isn’t it also one of the most highly paid? Average wages for the two big ones is around $US75,000. Pity we don’t have more quarries.

By the way, that “factory” is next to the Botanic gardens and is more likely to be a gimicky showpiece than anything else… more like a Disney store.

James Waterton
14 years ago

It is also worth noting that – despite the pretty factory it’s built in – the Phaeton model has been a disaster for VW. Sales of the large luxury sedan (developed at phenomenal expense) have been…well…rather slow.

Still, who cares about that boring economics stuff! What a factory! A fine model for Australian manufacturing, no? Don’t worry if your product is spurned by its market, as long as it’s built in a state-of-the-art, architecturally pleasing plant. Now that’s a manufacturing culture worth emulating!

The plant should also include a state-of-the-art, architecturally pleasing warehouse where the unwanted goods can sit and gather dust.

skepticlawyer
14 years ago

That’s a great piece on the end of that link, Jason. He’s right, too – comparative advantage is one of the most difficult ideas to get your head around when you first encounter economics. I remember sitting in the UQ Great Court in 2002 after encountering it for the first time feeling like I’d had a large night the preceding evening.

JC
JC
14 years ago

Good point, James. that vehicle has been a tragedy for VW.

Ummm let’s see how far one would get if we presented plans to set up a brake lining factory or a steel fabrication plant (state of the art and designed by IM Pei)right next to the Melbourne and Sydney Botanic gardens.

Yobbo
Yobbo
14 years ago

“comparative advantage is one of the most difficult ideas to get your head around when you first encounter economics.”

I never had any problem with it. It’s only leftists that seem to struggle.

Patrick
Patrick(@patrick)
14 years ago

I’m highly sceptical of beauty??? On the basis that I don’t think white elephants fit the bill???

No, I am highly sceptical of other people telling what I should find beautiful! As for lefties with visions of society, they make me queasy, whilst lefties who combines visions with notions of beauty send shivers down my spine.

Because, somehow, it always ends in my pocket.

Lucky Alphonse
Lucky Alphonse
14 years ago

When did Australians build Volkswagens, by the way?

VW had a factory at Clayton, Victoria, in the 1960’s.

Andrew Reynolds
14 years ago

Rex,
Perhaps you could explain in greater detail your view of trade theory. Please include concrete examples of where trade interference by government (with particular reference to large, developed economies) has brought great benefits to the nation as a whole, rather than just individual people or companies within it while bringing beggarment to the rest of the economy.
Please include a debunking of Ricardo’s theory of Comparative Advantage.
Once you have shown you understand the basics of the economics you are trying to espouse, I am sure Jason, for one, will take your opinions with greater weight.
“Rex Ringshott, Nobel Laureate” has a great ring to it.

MikeM
MikeM
14 years ago

MikeM – while you

JC
JC
14 years ago

“…..but international trade theory has advanced since Ricardo

Andrew Reynolds
14 years ago

MikeM,
It may have advanced, but it might just be that it has advanced in the same way that Napoleon advanced on Moscow.
Dutch disease is really only a problem where the impact is temporary and out of proportion to the rest of the economy – typically also it is based on a small number of commodities. It would be difficult to argue that the broad base of the current expansion shares causes shortages around our manufacturing base. We have an open capital account, a free(ish) market in both consumer and capital goods and enough land such that, if needed, it can easily be brought into use.
The only real impediments are labour availibility and government regulation. Should we open up to labour being imported and increase de-regulation to overcome the possible effects of Dutch Disease?

Patrick
Patrick(@patrick)
14 years ago

As for beauty, the Phaeton is a fat-arsed lump of ugly – compare it to these beautiful creatures that Australians make. Whilst the factory may well be less swank than VW’s white elephant, the cars are not only beautiful but actually sell for more than they cost to make – maybe the German trendsetters should head down to Melbourne for some advice on how to build cars!

The problem with your argument (apart from the non-sequiturs which reveal a lot about your level of reflection on this issue) is that Australia is as bad an example of Dutch Disease as one would like.

The Dutch disease we do have to watch for is the inverse of the one you fear – namely, silly lefties arguing that we should exploit the resources ‘windfall’ (leaving to one side the accuracy of that term) to impose structural rigidities and costs in the name of ‘redistribution’. Of course, these structural rigidies and costs actually have the effect of deepening our reliance on the ‘windfall conditions’ because they reduce our ability to adapt to changed economic conditions – which is amongst the things we are pretty good at.

Notably, N Gruen F Argy et al make a similar, but crucially different, argument from that one – they mainly want better infrastructure etc, which is leveraging the ‘windfall’ not ‘exploiting’ it (except perhaps for their soft spot for the car industry).

As for your eggs and baskets, it depends what are eggs and what are baskets. The last 15 years arguably demonstrates that we actually have our eggs (a great number of which are indeed minerals) in a sufficient number of baskets – after all, we weathered successive downturns on every major continent – thanks in large part to those pesky, unedifying, culturally insignificant and downright boring resources.

James Waterton
14 years ago

James, Dutch Disease

Right. I was hoping for a rather less flaky and more definitive explanation than that.

If there has been a decline in Australian manufacturing, I think it has considerably more to do with cheaper and better foreign imports flowing into the Australian market than a large mining sector. As for this difficult-to-quantify “Dutch Disease”, judging by the profits that are currently flowing from investment in the minerals sector (even when smoothed out in the long term), I’d say that investment was rather soundly placed indeed.

Now I

Victoria
Victoria
14 years ago

I’m no economist, so please don’t attack my argument based on those terms of reference; however, might I just say that from what I’ve seen of your debate so far, it’s all a bit antediluvian. I know Rex started the debate off with a photo of a car factory, but are you not capable of thinking outside that particular box wrt to a prospective Industry Policy which may stop us ending up on the bones of our arses again when this particular boom is constrained by the distorting effects of the fast-developing Global Warming/Carbon Trading ‘Industry’, wherein, according to the research paper which I have read from China which lays bare the notion that they will continue to push ahead forever with our coal and Uranium. Not so, they are quietly developing their Energy sector to run their Industry base on renewables ! They just haven’t made a song and dance about it yet because it suits their future positioning not to. Which is why they have done such things as procure our largest Solar panel producer and relocated him to their country. That’s not all either. One thing I can be pretty sure of though is that when they have this situation up and running and no longer need to rely on our coal as their major source of energy then they will force us to come cap in hand just to take the stuff off our hands, very cheaply. Don’t you guys have memories of what Japan did to us ? Oh well, always vote Liberal, always doomed to repeat past mistakes I guess.
Anyway, the point I was trying to get around to was that we have to expand into those areas that the Chinese have no way of getting around. We must invest in the intellectual capital of our inhabitants. We have to produce the next Electronic Arts company, not the next VW maker.

Chris
Chris
14 years ago

Yobbo,

I must say that I am surprised to see you suggesting that others need to read an economics textbook when you are under the misapprehension that the German economy is doing better than the Australian. I believe you will find that post-integration issues are still placing significant downward pressure on the unified German economy. Perhaps you can take your own advice on this one.

James Waterton
14 years ago

I

Nicholas Gruen
Admin
Nicholas Gruen(@nicholas-gruen)
14 years ago

VW’s profits rose a little over 50% this year. Must be all that good design!

For the time being, life still looks rosy. Volkswagen this week announced a 52% increase in operating profits for 2006. . . . Yet Germany’s carmakers are less well-placed for the future than are other European producers, let alone the Japanese.

The Economist

Patrick
Patrick(@patrick)
14 years ago

The same article mentioned the Phaeton, N Gruen – as part of Mr Piech’s ‘expensive sideshow’!!

The profit, apparently, was mainly attributable to being the most aggressive manufacturer in terms of using Eastern and Central European factories, and to subsidiaries such as Audi (high cost, but no stupid Phaetons) and Skoda (low cost, full stop).

Enough to please you, perhaps, but enough to make poor Rex cry fantasy tears in his fantasy world where white elephants are apparently ‘Objects of National Pride and True European Heritage Worth Emulating to Make Benefit Great ColonyNation of Australia’.