Harry Pollard wrote:
> I'll take the time to nobble it if you like, but just
> remember the object is not to work, but to receive. Wages
> are more important than the expenditure of exertion.
And the wages of those who have been fired due to outsourcing to China
are .......... zero.
> If other people are supplying us with things - who is better
> off? Those who work in the factories, or those who enjoy the
> fruits of that exertion?
The shareholders are better off. Those who got fired cannot buy
that fancy consumerist stuff.
----
Keith Hudson wrote:
> The comparative advantage of capital is no different from the comparative
> advantage of traded goods. It's a two-way traffic. The Chinese are now
> beginning to invest directly in America in just the same way as American
> firms have been investing in China. The investments will go to the firms
> and sectors in America which offer opportunities for the most efficient
> methods (as devised by the Chinese management). For example, Hyundai Motors
> are investing over $1 billion in Alabama (and, of course, offering new jobs
> for Alabamans) because the Koreans feel that they can produce a better car,
> and more cheaply, than General Motors.
Obviously, there is a big imbalance: many more jobs are outsourced to
low-wage countries than the other way round. With increased mobility
of workers and goods, the jobs will logically accumulate in the countries
with the lowest wages and the least enviro and labor regulations.
This can even be observed inside the EU.
Yes, there's an imbalance at the present time. Yes, jobs in many sectors are tending to go to low-wage countries at the present time. But in due course (and rapidly in some sectors) direct labour costs in all forms of production become less important (15% in the case of cars and declining, 5% already in the case of most electronic goods, etc) In due course, as automation proceeds, back-investments will occur into originating countries as other factors besides direct labour costs become increasingly important. In this country today, all our cars are now made by South Korean and Japanese firms which formerly started by "cheap labour". But it's not cheap labour over here. Hundreds of Chinese firms are now investing in America (compared with tens of thousands of American firms in China). In due course (maybe 15-20 years time) I've no doubt that China will be investing as much in America and Europe as our firms are over there. (And there will still be a Third World, unfortunately.) Your view about the importance of labour costs is highly simplistic. As I wrote to Ed Weick just now, if cheap labour costs were the most important reason for firms locating abroad then why are American firms not investing in Africa? There are probably no more than 1,000 production investments there (I'm only guessing) but, in China, American firms are the largest proportion of the 350,000 foreign firms investing there. Labour costs are only fundamentally important in the personal services sector (the proportion of which is increasing all the time) and these are jobs that depend on customers at home -- they cannot be exported.
Keith
Chris
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Keith Hudson, Bath, England, <www.evolutionary-economics.org>
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