Sunday, August 1, 2010

Jobs: What Comes Around Goes Around

“The misery of being exploited by capitalists is nothing compared to the misery of not being exploited at all”. -- Joan Robinson, Cambridge Economist
“Are the American People Obsolete?”
Michael Lind in Salon Magazine asks, “Are the American People Obsolete?” It’s an interesting question.
The offshoring of industrial production means that many American investors and corporate managers no longer need an American workforce in order to prosper. They can enjoy their stream of profits from factories in China while shutting down factories in the U.S.
He raises some legitimate concerns about globalism, but he comes unglued talking about “privatized armies” and America’s elite “shutting down every factory in the United States.” Despite such broad brush hysterics, I still recommend my conservative and libertarian friends read it all to see the world through the eyes of the fevered left. 

As a bonus, this economic naif unwittingly answered his own worries about labor, wages, and worker displacing worker:
"And if Chinese workers have the impertinence to demand higher wages, American corporations can find low-wage labor in other countries."
Precisely! Well, almost... Supply and demand works in the job market as well. But low wages isn’t the whole story. There are other factors like productivity, technical skills of the workforce, infrastructure and taxes and regulations.  If wages were the only factor, unemployment would be over 60% in the developed world as every last shred of production moved to China and Bangladesh. .

China has problems of its own
"They seem less willing to “eat bitterness”, as the Chinese put it, without complaint."
Suicides, pollution, ageing workforce, social unrest, and workers demanding a bigger share of the economic pie are bringing changes to China, reports The Economist. As the workforce become more efficient and skilled, wages must rise, turning the Chinese into a consumer economy achieving par with the “developed” world, and that’s a good thing all around.

Bye Bye Cheap Chinese Labor

As China advances, the global economy will benefit:
Higher Chinese wages will have a similar effect to the stronger exchange rate that America has been calling for, shrinking China’s trade surplus and boosting its spending. This will help foreign companies and the workers they have idled. A 20% rise in Chinese consumption might well lead to an extra $25 billion of American exports. That could create over 200,000 American jobs.

China will have to increase its supply of skilled workers. That will require a stable workforce, which stays with its employers long enough to be worth investing in.(The Economist)
Put another way, employers cannot exploit their workers if they want to reap profits. By the same token, nations cannot exploit their companies; CEOs will simply pack up and head for greener pastures. Progressive dreams of punishing outsourcing corporations or holding them down and making them submit to burdensome taxes and regulations are a fervid mirage. Just ask California or Michigan.


Bastiatarian said...

>employers cannot exploit their workers if they want to reap profits

Very true. And in general, the companies that really do prosper over the long term don't exploit their workers. One of the things that handicaps so-called liberals is a complete lack of understanding of business and economics in general, and the type of people that run businesses in particular. With all the spectacular news about corporate executives that engage in spectacular crimes, it's easy to overlook the reality that most people who run companies (large or small) are regular people who are basically decent and hard-working and aren't out to exploit anyone. They want to make a good profit, of course, but they also want to make sure that their employees are happy.

If nothing else, they know that happy, motivated employees are much more likely to benefit the company than unhappy, unmotivated employees. Companies that don't try to take care of their employees may prosper for a while, but it will always end.

Basically, most "liberals" get their ideas about corporate execs from highly skewed and inaccurate TV shows and movies rather than from actual experience with or as corporate execs.

Silverfiddle said...

Indeed. There's some wild capitalism bashing going on over at Sue's Place

Bush's tax cuts account for 14% of new debt since 2002, with new spending accounting for the rest. But they have concluded that Bush's tax cuts wrecked everything.

As I understand it, they are advocating taxing the rich to make them bring the jobs back because capitalism has failed...

Mustang said...

Capitalism rewards thoughtful risk. It is supposed to punish stupidity. We seem to have forgotten that in the age of accommodation. GM should be out of business right now. Yeah, it would have hurt for a while, but what re-emerged would be better. Now what we have is a permanent time out for ... a generation of girlie-boys.

What we must do is get back to being American. Equal opportunity and social Darwinism anyone?

Silverfiddle said...

You're right Mustang. You get more of whatever you reward, and we are rewarding stupidity.

It's a race to the bottom...

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