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Danfoss.com Thermostat production moves to Slovakia(27 May 2005)

Tough competition in the refrigeration and freezing appliances market is forcing Danfoss to move its production of refrigerator and freezer thermostats from Nordborg to Danfoss' factory in Slovakia. The relocation, which is expected to be completed by the end of 2005, will affect around 77 employees.

...

Today, Danfoss Appliance Controls is the world's leading manufacturer of thermostats for refrigeration and freezing appliances and has production facilities in Mexico, Brazil, China and Italy, in addition to the factory in Denmark.

...

"We will of course do whatever possible to help people find new jobs, and that is why a job office will be established in cooperation with the personnel function (IS-H). The office will be set up shortly after the summer holiday," says Mr Søholm.

This event cannot be accommodated within Ricardo's theory. Under Ricardo's theory, Danfoss would use its capital and labour in Denmark to produce something else which can be exported to Slovakia, and some Slovak company would export thermostats to Denmark. Instead, what is happening is that Danfoss moves its capital to Slovakia, and its employees have to look for other jobs in Denmark without the benefit of Danfoss' capital also staying in Denmark chasing after labour. I suppose Danfoss' 77 employees could move to Slovakia to work for Danfoss there. I wonder how many of them would relocate to slovakia with a Slovak salary and benefits, if offered the chance. And this is within the European Union. There is no free movement of persons from Europe to China.

Bush is a symptom, not the disease.
by Carrie (migeru at eurotrib dot com) on Sun May 13th, 2007 at 08:46:19 AM EST
[ Parent ]
Oh. I think I get it now.

Feels a bit like when I saw the graph with stagnating median incomes the first time.

...

So, absolute advantage it is. And the only way to do that while avoiding a race to the bottom (by competing with lower taxes or wages) is to have world class education, world class investment climate, world class regulation, world class infrastructure, world class work ethic and world class dead cheap energy.

So industrial policy it is.

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Sun May 13th, 2007 at 10:01:29 AM EST
[ Parent ]
That's the only way if you're a nationalist. If you're a humanist, the way is to raise standards, and redistribute, worldwide.

By the way, you're conceding that with free movement of capital what matters is absolute advantage, not comparative advantage.

Bush is a symptom, not the disease.

by Carrie (migeru at eurotrib dot com) on Sun May 13th, 2007 at 10:17:46 AM EST
[ Parent ]
Well, the gist of this entire argument is that it's the absolute advantage that counts, due to the free flow of capital. We might have made some crucial error in getting to this conclusion, but I can't find it.

And I don't think striving, as a state, to be the best you can be should be considered nationalist, at least as long nationalist has a negative connotation. I'd rather use a more positive word, like patriotic. Working for your country without kicking the shit out of other countries.

And this quest of absolute advantage, aren't corporations doing that all the time? Didn't they do it even before capital started to flow freely? Isn't globalization just another structural change to which we'll successfully adapt, just as we did all those other times?

And from a humanist point of view, if you would like to call it that, doesn't the people in Slovakia and China deserve those high value-added jobs just as much as we do? And won't their wages constantly rise as their productivity rise, hence reducing their competitivness (that is, absolute advantage) and making it easier for us to oppose lower wages at home?

Af course, this would all happen in a dynamic way and in the long run, and in the long run we are all dead.

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Sun May 13th, 2007 at 10:40:15 AM EST
[ Parent ]
Now, within Sweden why do you have a welfare state instead of just letting everyone chase absolute advantage?

Bush is a symptom, not the disease.
by Carrie (migeru at eurotrib dot com) on Sun May 13th, 2007 at 10:48:39 AM EST
[ Parent ]
Because we feel solidarity with each other but don't feel like being the social office of the entire planet?

Personally I have no problem with more European social and economic integration, but most Swedes would disagree with me. Especially those on the left.

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Sun May 13th, 2007 at 11:03:14 AM EST
[ Parent ]
That's because the Swedish left doesn't want to give up what they perceive as their absolute advantage vis-a-vis the rest of the EU. And the neoliberals don't feel any solidarity with anyone, that's the point of Free Trade™.

Bush is a symptom, not the disease.
by Carrie (migeru at eurotrib dot com) on Sun May 13th, 2007 at 11:16:27 AM EST
[ Parent ]
No, it's because the Swedish left is full of insular people playing sillybuggers. Or rather, living it.

The neoliberals are pretty much the way you say, though the number of anti-EU libertarians (or libertarians at all) in Sweden can probably be counted on your fingers and toes.

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Sun May 13th, 2007 at 11:53:20 AM EST
[ Parent ]
And I don't think striving, as a state, to be the best you can be should be considered nationalist, at least as long nationalist has a negative connotation. I'd rather use a more positive word, like patriotic. Working for your country without kicking the shit out of other countries.

Under absolute advantage that's not good enough, you have to kick the shit out of your competitors because only being first in absolute terms works.

Bush is a symptom, not the disease.

by Carrie (migeru at eurotrib dot com) on Sun May 13th, 2007 at 01:37:20 PM EST
[ Parent ]
Just like running a company then?

And you don't have to best at everything. Find your niche where you are the best, and keep it. That's what companies do anyway, so maybe this won't be that much of a change.

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Sun May 13th, 2007 at 03:57:06 PM EST
[ Parent ]
Anyway, I think this is one of the most interesting discussions I have had at the ET. Thanks for that Migeru.

Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Sun May 13th, 2007 at 03:58:54 PM EST
[ Parent ]
Likewise. Probing questions help me sharpen my ideas.

Bush is a symptom, not the disease.
by Carrie (migeru at eurotrib dot com) on Sun May 13th, 2007 at 05:52:43 PM EST
[ Parent ]
I'll drink to that!

"The future is already here -- it's just not very evenly distributed" William Gibson
by ChrisCook (cojockathotmaildotcom) on Sun May 13th, 2007 at 06:30:57 PM EST
[ Parent ]
I'm still no closer to a model of division of labour with unemployment. Maybe I need a drink, too.

Bush is a symptom, not the disease.
by Carrie (migeru at eurotrib dot com) on Sun May 13th, 2007 at 06:36:36 PM EST
[ Parent ]
I think the key to this lies in the concept of "Intellectual Property" and the growing role of services based upon it.

"Knowledge-based Value" is at the heart of it.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Sun May 13th, 2007 at 06:45:56 PM EST
[ Parent ]
Well, you clearly need a drink, but can you explain what you mean by:

I'm still no closer to a model of division of labour with unemployment.

?

(Thankyou for this thread BTW, you managed to express very well what I was too incoherent to be able to explain/persuade anyone of in the modeling thread all those months ago.)

by Metatone (metatone [a|t] gmail (dot) com) on Mon May 14th, 2007 at 03:26:40 PM EST
[ Parent ]
It is very easy to make a (mathematically) neat model of division of labour, which generalises to a model of comparative advantage, if you assume full employment. But a model that incorporates unemployment is a harder nut to crack.

Bush is a symptom, not the disease.
by Carrie (migeru at eurotrib dot com) on Mon May 14th, 2007 at 05:51:28 PM EST
[ Parent ]
Don't they usually just assume unemployment as a sort of "reserve function" like the setup for gas dynamics in the presence of a liquid?

Molecules (people) are absorbed and released by the reservoir according to the pressure in the chamber and the size of the reservoir (amount of economic activity and number of unemployed) along with an assumed NAIRU?

by Metatone (metatone [a|t] gmail (dot) com) on Tue May 15th, 2007 at 03:33:40 AM EST
[ Parent ]
I see I am not going to be able to avoid lots of variables and equations.

Bush is a symptom, not the disease.
by Carrie (migeru at eurotrib dot com) on Tue May 15th, 2007 at 03:39:20 AM EST
[ Parent ]
I think it is unavoidable, because if you are using division of labour to generalize towards comparative advantage, then you are basically describing interactions between (at least two [wool? wine?] different "employments." In that case at minimum, unemployment is another (third) "employment" kind that needs another variable to represent it.
by Metatone (metatone [a|t] gmail (dot) com) on Tue May 15th, 2007 at 05:50:37 AM EST
[ Parent ]
Going from 2 to 3 employments actually complicates matters a lot, mathematically.

Bush is a symptom, not the disease.
by Carrie (migeru at eurotrib dot com) on Tue May 15th, 2007 at 06:09:05 AM EST
[ Parent ]
Right, but I can't see a way to avoid it and retain any meaningful statements about comparative advantage. If we include only "unemployment" and "employment" as just the 2 kinds, I think we lose the ability to say meaningful things about "advantage."
by Metatone (metatone [a|t] gmail (dot) com) on Tue May 15th, 2007 at 06:20:31 AM EST
[ Parent ]

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