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I think the concept, as noble as it sounds, is never what economists claim it is. Much of the production moved to developing nations is labor-intensive, where productivity gains are very insignificant. Furthermore, companies are under constant pressure to keep their labor costs down. Hence we witnessed companies like Nike and Rebook move their facilities from Korea to China several years ago, and now we are seeing more and more shoes made in Vietnam, Laos, and other even poorer countries. For all the talk of higher productivity resulting in higher wages, companies would just much rather keep the costs down by moving to a lower-cost country.

Additionally, there is an issue of a broader context. What is the point of making the global economy more efficient if you are one of the people in Germany who just lost the job to China? Do you really share the sentiment of those few elite economists that this process is good overall for the world economy? Economic efficiency is great, but we do not live in an economic vacuum, and governments must walk a fine line between economic dogma and doing what's best for the people of their respective countries. Sometimes, it is worth paying 2 bucks for a piece of tupperwear instead of 50 cents, if it means it will be produced by someone with a higher wage.

Mikhail from SF

by Tsarrio (dj_tsar@yahoo.com) on Mon Apr 17th, 2006 at 02:09:30 PM EST
[ Parent ]
Overall productivity gains comes in many, small steps, and leads to greater overall wealth in society.  For illustration, look at the industrial world's standard of living compared to 200 years ago, before the industrial revolution.  Heck, just compare it to the 50's, before the last half-century's worth of accumulated productivity gains.

Now in your post, you mix up the concept of overall productivity with productivity per man-hour.  These are two entirely different things.  If 10 employees' worth of work is moved to a place with 50% lower hiring costs, overall productivity in both of the two places increases (though the productivity per man-hour stays the same, unless the work itself is also altered).

Of course the person being laid off is mad and/or frustrated by this.  But just as it is natural for companies to hire lots of workers when they do well, it is natural for them to shed workers when they do less well, or are able to do things more efficiently.  The latter frees up labor for the companies that are hiring, and such shifts are what enables the work force to, over time, go from good overall productivity, to better, and even better.

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Ideals are the ultimate motivators. But also the greatest causes of destruction.

A tip: Don't get too high on your ideals.

by cge on Mon Apr 17th, 2006 at 03:04:32 PM EST
[ Parent ]
Again, you are not seeing the world outside of the economic vacuum. Companies are not shedding workers because they are not doing well. In fact, corporate earnings and profitability continue to increase to record levels. Companies are shedding workers in higher-labor cost countries, because they want to make even more money than they are already. Even those companies that are having tough times and are having to lay people off sometimes look at lay-offs as their main option to shed costs. It is not true, and it is not right as evident by the thousands of companies in Japan that have done their best to provide employment for life.

Mikhail from SF
by Tsarrio (dj_tsar@yahoo.com) on Mon Apr 17th, 2006 at 04:00:13 PM EST
[ Parent ]
"Outside the Economic vacuum" - as if economics somehow represented empty space?

Terminology aside, I am very much considering the whole picture.  Productivity gains are easiest to measure economically, but what it boils down to is quality of life, just as I mentioned in my post (and you failed to address in your argument).

That companies are reaching record profits is a good sign.  It means productivity is making big gains.  It also means there is an increasing space for competitors to move in and compete on price, to the benefit of consumers.  In part, but far from only, these profits are achieved through a shift of manual labor to developing nations.  This shift also brings with it a tremendous opportunity for these developing nations, their unemployment is lowered and their economies (and by extension their quality of life) grow.

Wealth is not merely being shared across the world due to globalization, it grand total is increased.  Trade is not a zero-sum game.

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Ideals are the ultimate motivators. But also the greatest causes of destruction.

A tip: Don't get too high on your ideals.

by cge on Mon Apr 17th, 2006 at 07:57:56 PM EST
[ Parent ]

Wealth is not merely being shared across the world due to globalization, it grand total is increased.  Trade is not a zero-sum game.

True - the problem is that it is being increased without being shared. Using average GDP numbers is becoming increasingly misleading in a number of countries as the increase seems to benefit only a happy few. Case in point the USA where median wages have been, at best, stagnant in the past 5 years - and have increased little in the past 30.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Tue Apr 18th, 2006 at 04:40:53 AM EST
[ Parent ]
No - the wealth increase is actually shared through globalization, one example of which was the labor shift process I mentioned in this thread.

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Ideals are the ultimate motivators. But also the greatest causes of destruction.

A tip: Don't get too high on your ideals.

by cge on Tue Apr 18th, 2006 at 08:51:10 AM EST
[ Parent ]

  Exactly.

  P.

"In such an environment it is not surprising that the ills of technology should seem curable only through the application of more technology..." John W Aldridge

by proximity1 on Fri Apr 21st, 2006 at 09:01:52 AM EST
[ Parent ]
Additionally, there is an issue of a broader context. What is the point of making the global economy more efficient if you are one of the people in Germany who just lost the job to China?
First, let me acknowledge that losing a job is not a wonderful thing.  The whole issue of economic dislocation,,,losing jobs to other countries, retraining and finding another job, is incredibly stressful for the loser of the job.  But shouldn't we sometimes take a step up, and recognize that person in China is getting a job, able to better support him/herself and a family?  

In reality, how are we really going to help Africa long term?  Yes, raising the level of funding for AIDS, and donating money for food are incredibly important efforts right now--stopping the wars, the slaughter, etc.  But at the end of the day, we're going to have to help them develop economies, so they can not only support themselves, but have the pride of supporting themselves.  And that too will cause the same economic dislocations of which you speak.

it's sad at times, always challenging, but do you see a better way forward to help the billions of people that are truly at poverty levels in the world--$1 per day kind of poverty.

by wchurchill on Tue Apr 18th, 2006 at 02:51:07 AM EST
[ Parent ]
So let me get this straight..as long as we can pay someone in China just enough to where they are not considered as living in extreme poverty, we have done our due diligence in terms of lifting people up? True, the wages in China have been increasing over the past years, and there are record numbers being lifted out of extreme poverty, but anybody will tell you this process has been grossly uneven. Again, we have to look at various specific earnings classes to determine if the spread has been fair. Even the Chinese government has acknowledged their current system is generating a very uneven society.
As for African and other countries, I believe lifting them out of poverty includes empowering them not through low-paying labor-intensive jobs but through living wages, microlending, sustainable energy base, and other meaningful and creative ways. Solving AIDS, hunger, and other problems, albeit extremely necessary, will not help these countries in the long run, because we are not tackling their root-cause.

Mikhail from SF
by Tsarrio (dj_tsar@yahoo.com) on Tue Apr 18th, 2006 at 03:03:10 PM EST
[ Parent ]
we have done our due diligence in terms of lifting people up?
What are you saying here?  American and European companies are susposed to go into China, a sovereign nation, and do what as due diligence?  Find out who is going to get the jobs, how much money they are paid?  And then assess if China is lifting their people far enough out of poverty?  How much out of poverty would qualify for you?  And are you the judge of that, or who would it be?  The American company?

There are proven models as to how countries come out of poverty around the world.  I would suggest we follow them, and allow the markets to work--not saying no controls are needed, but what you are describing would slow the progress, and the lifting of living standards around the world to a crawl.  

by wchurchill on Wed Apr 19th, 2006 at 07:49:22 PM EST
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