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View Diary: Where Adam Smith Was Wrong (121 comments)

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  •  You are wrong about "one cost of production" (6+ / 0-)

    Labor costs are not that different between the U.S. and China now, according to reports I saw last year. I think that is true almost the entire world except the most impoverished countries. The real difference in costs of producing in different countries comes from differences in regulatory regimes and social safety nets. Countries like China that have minimal or non-existent regulations protecting the environment, the workers in the workplace, and the consumer, have a significant - and I would argue, unfair - cost advantage. Also, countries that have minimal social safety net costs, such as unemployment, retirement and medical benefits. This latter is what drives the cost difference between the U.S. and northern European countries.

    And this latter consideration - social safety net costs - has an interesting counter-intuitive effect in making countries with more of a social safety net, more entrepreneurial:

    Labor Market Flexibility. When people feel confident that they and their families won't end up on the streets -- they know that their children will have health care, education, a measure of economic security, and a decent safety net if the worst happens -- they feel free to move to a different job that better fits their talents -- better allocating labor resources. "Labor market flexibility" often suggests the freedom (of employers) to hire and fire, but the freedom of hundreds of millions of employees is far more profound, economically.

    Freedom to Innovate. Individuals who are standing on the social springboard that Democratic policies provide -- who have that stable platform beneath them -- have the economic freedom and security to strike out on their own and develop the kind of innovative, entrepreneurial ventures that are the true engine of long-term growth and prosperity (and personal freedom and satisfaction) -- without worrying that their children will suffer terribly if the risk goes wrong. Give twenty, forty, or a hundred million more Americans a place to stand, and they'll move the world.

    - Nine Reasons that Progressive Policies Deliver Prosperity and Freedom, by Steve Roth | 12/15/2011

    A conservative is a scab for the oligarchy.

    by NBBooks on Wed Jan 11, 2012 at 10:10:54 AM PST

    •  Where were you seeing that? (0+ / 0-)
      Labor costs are not that different between the U.S. and China now, according to reports I saw last year
      Everything I've seen/heard is that the labor costs are still dramatically different, but there are rising wages in China which may drive some manufacturing to even lower cost countries (or lead to an increase in the costs for the goods we buy)
      The salaries of factory workers in China are still low compared to those in the United States and Europe: the hourly wage in southern China is only about 75 cents an hour. But economists say wage increases here will eventually ripple through the global economy, driving up the prices of goods as diverse as T-shirts, sneakers, computer servers and smartphones.
      The shift was illustrated Sunday, when Foxconn Technology, one of the world’s largest contract electronics manufacturers and the maker of well-known products that include Apple iPhones and Dell computer parts, said that it was planning to double the salaries of many of its 800,000 workers in China, beginning in October. The new monthly average would be 2,000 renminbi — about $300, at current exchange rates.
      http://www.nytimes.com/...
      Labor shortages are forcing the company to boost wages. Last year salaries surged 40%, to an average of $160 a month, and Yongjin still can't find enough workers. "This business needs a lot of labor," says President Sam Lin. "This is a very tough challenge."
      The wage issue has started to affect how companies operate in China. U.S. corporations and their suppliers are starting to rethink where to locate facilities, whether deeper into the interior (where salaries and land values are smaller), or even farther afield, to lower-cost countries such as Vietnam or Indonesia.
      http://www.businessweek.com/...

      from a bright young conservative: “I’m watching my first GOP debate…and WE SOUND LIKE CRAZY PEOPLE!!!!”

      by Catte Nappe on Wed Jan 11, 2012 at 10:25:46 AM PST

      [ Parent ]

      •  Oct 2010 in Industry Week (3+ / 0-)

        Labor costs are only 10% of U.S.-China price differential.
        The other 90% is subsidy, currency manipulation, environmental practices run amok and labor practices that are simply deplorable," Leo Hindery Jr., chairman of the U.S. Economy/Smart Globalization Initiative, told the Conference on the Renaissance of American Manufacturing held on Sept. 28 in Washington, D.C., according to Industry Week.

        I think Hindery comes up with numbers so at variance from the common wisdom by breaking out the actual causal factors behind lower labor costs. The BLS, for example, continues to show that China per hour compensation is only four percent of the U.S. The link has an interesting graphic which shows the U.S. is lower in labor costs than most of Europe.

        A conservative is a scab for the oligarchy.

        by NBBooks on Wed Jan 11, 2012 at 11:02:58 AM PST

        [ Parent ]

        •  The former explains the latter (2+ / 0-)
          Recommended by:
          offgrid, raincrow

          As in Hindery's suggested minimal differential between China and the US; US labor costs are lower than much of Europe because we exclude many of the safety net costs and environmental protection costs.

          from a bright young conservative: “I’m watching my first GOP debate…and WE SOUND LIKE CRAZY PEOPLE!!!!”

          by Catte Nappe on Wed Jan 11, 2012 at 11:17:12 AM PST

          [ Parent ]

    •  Exactly, on all counts. (0+ / 0-)

      Of the dozens of companies I consulted with, not once were labor costs the major issue, this is just the result of the Big Lie campaign, now entering its third generation.

      When people feel secure in their basic needs they are far more amenable to risk taking, driving innovation which drives small businesses, etc.

      "Those who can make you believe absurdities can make you commit atrocities." - Voltaire

      by Greyhound on Thu Jan 12, 2012 at 06:44:12 AM PST

      [ Parent ]

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