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Author Topic:   Austerity measures have they ever saved an economy?
Perdition
Member (Idle past 3238 days)
Posts: 1593
From: Wisconsin
Joined: 05-15-2003


Message 151 of 168 (649555)
01-24-2012 10:15 AM
Reply to: Message 145 by Jon
01-23-2012 8:31 PM


Re: Service Jobs
What the hell is this, then?
I never said we didn't have a trade imbalance. I was merely pointing out that the global economy is a bit more complicated than that. For example, I drive a Honda Accord and my wife drives a Chevy Malibu. One of those is considered a domestic car, the other an import. One was built in Maryland, the other in Mexico. The strange thing is, the "domestic" car was the one built in Mexico, the "import" was created in Maryland.
The definitions are becoming blurred as companies that are nominally in one country actually do most of their work in another country or countries.
When Apple sells an iPhone, it's considered a domestic product because Apple is an American company, despite the fact that it's being built in China. The money for every one sold ultimately ends up back in the hands of the owners and shareholders, who are largely in America, and who then buy the services that are all we produce anymore.
In fact, the glass used in the iPhone screen is also produced in China, but again, the major company that produces it, Corning, is another American company.

This message is a reply to:
 Message 145 by Jon, posted 01-23-2012 8:31 PM Jon has replied

Replies to this message:
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Jon
Inactive Member


Message 152 of 168 (649556)
01-24-2012 10:15 AM
Reply to: Message 148 by NoNukes
01-24-2012 7:41 AM


Re: Service Jobs
What I am questioning is your analysis of the cause, and your nice maps and graphs don't shed any light on that.
They specifically show that the United States is suffering from a trade deficit, that the U.S.'s primary output (the thing that contributes most to its GDP) is 'services', and that the production of services is also what the majority of labor in the U.S. is used for.
I don't think it makes sense to blame jobs that inherently cannot produce anything exportable, yet must be done. The blame lies elsewhere.
I am not sure where you got this notion that I am 'blaming' some set of jobs or downplaying their significance in an economy.
Yes, we have to clean our own streets, but isn't a bit silly to say that the fact that U.S. street cleaners' efforts cannot clean the streets in China is adding to the trade imbalance.
Actually, necessary service jobs contribute nothing to the problem. What is problematic is that we have decided to divert a large number of labor resources away from the production of tangible, tradable goods and into the production of unnecessary, leach services, such as business 'services', financial 'services', and, yes, legal 'services'.
Go Figure!

Love your enemies!

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Jon
Inactive Member


Message 153 of 168 (649558)
01-24-2012 10:24 AM
Reply to: Message 151 by Perdition
01-24-2012 10:15 AM


Re: Service Jobs
Even when produced overseas by an American company, it still affects the trade deficit.
Part of the money you spend on a pair of fluffy handcuffs goes to Sam Billionaire, the all-American jerkoff who fired 100 hard-working Americans just to save five cents a day making sex toys in India instead of Oregon. But plenty of it goes to the workers in India who assembled the stuff, and the workers in India who mined the metal, and the workers in India who cleared the forest where the metal was to be mined... and so on.
As is the case with imports, when you buy the product, no matter who owns the company.
I never said we didn't have a trade imbalance. I was merely pointing out that the global economy is a bit more complicated than that. For example, I drive a Honda Accord and my wife drives a Chevy Malibu. One of those is considered a domestic car, the other an import. One was built in Maryland, the other in Mexico. The strange thing is, the "domestic" car was the one built in Mexico, the "import" was created in Maryland.
And that's something worth looking into. But I don't think we'll find that our trade deficit is just a matter of funny definitions that disappears once we go the way of Webster. There really is a deficit because we really are importing more than we're exporting.
Jon
Edited by Jon, : , → .

Love your enemies!

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Perdition
Member (Idle past 3238 days)
Posts: 1593
From: Wisconsin
Joined: 05-15-2003


(1)
Message 154 of 168 (649561)
01-24-2012 10:50 AM
Reply to: Message 153 by Jon
01-24-2012 10:24 AM


Re: Service Jobs
And that's something worth looking into. But I don't think we'll find that our trade deficit is just a matter of funny definitions that disappears once we go the way of Webster. There really is a deficit because we really are importing more than we're exporting.
Very true. I never intended to disagree with you. There very definitely is a trade deficit, and the exporting of our manufacturing base is a very large part of it. I was merely pointing out that it's not quite as black and white as it may have seemed you were indicating.
But plenty of it goes to the workers in India who assembled the stuff, and the workers in India who mined the metal, and the workers in India who cleared the forest where the metal was to be mined... and so on.
True, but the major reason jobs get exported in the first place si that the workers get paid relatively little compared to a similar worker in America. So the vast majority of the money you spend on goods made by "American" companies in overseas plants does end up back in America in the hands of Sam Billionaire.
Of course, having it in the hands of Sammy Bigbucks does nothing to help those laid-off employees in Oregon.

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crashfrog
Member (Idle past 1467 days)
Posts: 19762
From: Silver Spring, MD
Joined: 03-20-2003


Message 155 of 168 (649570)
01-24-2012 12:26 PM


Yglesias on China
Matt Yglesias has been my go-to econoblogger for some time now, and I've been struck by how this thread has paralleled much of what he has to say. Today:
quote:
Via Guan Yang, comes the point that an iPhone assembly job isn't really a job you'd want to have and that the high-value elements of the iPhone process are firmly housed here in the United States. This is true, but it's one reason I think it's interesting to ask what happens if you move the workers along with the factory. Even if precisely zero native-born Americans were employed in the iPhone assembly plant, this would have other implications along the supply chain. Consider, for example, the case of Corning's Gorilla Glass. This is something the company invented decades ago, but there was little demand for until Steve Jobs decided he wanted it for iPhones. Since that time, global demand for Gorilla Glass has expanded enormously thanks to the popularity of touchscreen glass and there are currently more Americans employed producing it than ever before. But even though some Gorilla Glass is made in America, most of it is made in Asia, primarily because that saves on transportation costs. If the assembly is done in Sheboygan rather than Shenzhen, then this is more glass-making for the USA and apparently conditions and pay in Corning's factories are such that Americans do in fact want those jobs.
Now there are a lot of points you can make about this ranging from China's lack of labor law protections to their exchange rate manipulation and all the rest. But if you take the long view of world history you'll see that the question that needs explaining isn't "why is so much stuff happening in Asia" but rather "why is so little stuff happening in Asia." For most of human history, Asia is where all the action is since Asian is where all the people are. For stuff to happen you need people to do the stuff. And once stuff starts happening, there are all kinds of spillovers and agglomeration effects and more and more stuff is happening. Various sad occurences in Asian (and especially Chinese) history in the 19th and 20th century created a temporally localized situation in which Asia became a bit of a backwater despite everyone living there. But for decades now, dating back to long before smartphones or the personal computer, the hub of human existence has been catching up. That was post-war Japan and then South Korea. It was the "Asian Tigers" of the 1990s. The biggest city in the world has been Tokyo for a long time now. The GDP per capita of Singapore now exceeds that of San Francisco. This is more or less the natural fallout of Asia, where all the people live, not being conqured by foreigners or attempting to implement Maoist economics.
There's no getting around the fact that in the long term most of the good new ideas will be thought up where most of the people are or that there will be an advantage to locating production where most of the customers are. You can buck these trends with better public policy, but "better" public policy is a relative concept and you can't guarantee that other countries will implement terrible policies simply because it's convenient for you. Now this can be fine. New Zealand is, by all accounts, an extremely pleasant place to live. You don't exactly "win the future" with an economy oriented around the export of dairy products, meat, wood, and fish but New Zealand's population is really rich. Much richer than China's. And as long as New Zealand stays well-governed, New Zealand will stay pleasant and prosperous. But over the whole long arc of the past 100 years it's never been possible for New Zealand to "out-compete" the United States as a center of innovation for the simple reason that nobody lives in New Zealand.
http://www.slate.com/...you_might_want_your_neighbor_to.html
Interesting stuff. To roll it into the discussion, I guess I'd ask: why do Americans think that they deserve to be the manufacturing center of the world? To get to Jon's point, why do we think that Americans deserve not to have a trade deficit? Isn't that just a natural consequence of being a rich country of only 375 million people in a world of 7 billion?

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Straggler
Member
Posts: 10333
From: London England
Joined: 09-30-2006


Message 156 of 168 (649571)
01-24-2012 12:39 PM
Reply to: Message 155 by crashfrog
01-24-2012 12:26 PM


Re: Yglesias on China
A left-leaning British economics commentator who considers himself something of an expert on China has serious misgivings about the ability of China to compete with democratic nations on the "knowledge economy" front.
I'd like to think he is right.......
Will Hutton writes:
China, as I once was memorably told by a group of lawyers in Beijing, is a volcano waiting to explode. It is difficult for those not familiar with the country to comprehend the scale of corruption, the waste of capital, the sheer inefficiency, the ubiquity of the party and the obeisance to hierarchy that is today's China. The mass of Chinese are proud and pleased with what has been achieved since Deng Xiaoping began the era of the "socialist market economy". But there is a widespread and growing recognition that the authoritarian model has to change, a fact that every disaster dramatises.
The railway ministry is a classic example. It is a state within a state, making its own rules and with its own well-honed, corrupt hierarchy commanding unquestioning obedience. Charged with building 9,000 miles of high-speed rail by 2020, as well as developing an allegedly indigenous high-speed rail capability better than Japan's or Europe's, it has pulled all the familiar levers to achieve its task. Huge loans from state-owned banks, directed to lend to the ministry in effect for free, have been thrown at the project. Technology has been purloined and stolen from abroad. Productivity, efficiency and safety are secondary to two overwhelming needs: to complete the network fast, so creating crucially needed jobs, and to be able to boast that China's capability is cheaper than anybody else's.
To win the lush contracts, officials' palms have to be liberally greased. Rail minister Liu Zhijun, architect of the high-speed rail plan, was suspended pending a corruption investigation in February. Nor is there is any open system to see whether the technologies actually function properly. There is no back-up for any systems failures, because there is no structure of accountability or any penalties if there are mistakes. The only excuse has been that until now the system has delivered. But Japan's bullet train has been operating for nearly 50 years without a single death. Now China has 39 on its hands with a system only four years old.
It also has 10,000 kms of high-speed rail already built whose economics depends on the trains being full. But nobody trusts the technology or the integrity of the officials running the system. The government promises a full inquiry, but nobody has any faith it will be anything else than a fix. China is discovering that a sophisticated knowledge economy operating at the frontiers of technology is incompatible with an authoritarian one-party state.
China, we are endlessly told by its apologists, is different. The values of the European Enlightenment — tolerance, the health of dissent, the rule of law, freedom of expression, pluralism — are not needed here. Wenzhou is one more bitter reminder; human pain and human instincts for accountability are universal. Moreover, they are the essential underpinnings of the good economy and society. There will be a Chinese Spring. And sooner than anyone expects.
Link

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Perdition
Member (Idle past 3238 days)
Posts: 1593
From: Wisconsin
Joined: 05-15-2003


Message 157 of 168 (649573)
01-24-2012 12:44 PM
Reply to: Message 155 by crashfrog
01-24-2012 12:26 PM


Re: Yglesias on China
Interesting stuff. To roll it into the discussion, I guess I'd ask: why do Americans think that they deserve to be the manufacturing center of the world? To get to Jon's point, why do we think that Americans deserve not to have a trade deficit? Isn't that just a natural consequence of being a rich country of only 375 million people in a world of 7 billion?
I'd say part of it is the myth of American exceptionalism. But a much larger part of it is that America always hhas been the center of manufacturing and innovation. The fact that the rest of the world, particularly China is catching up, is great from a global perspective, but from a local one, all we see is the standard of living going down.
It's like with my dog. She goes into her kennel at night, and I give her a treat. She doesn't really deserve the treat any more, I'm no longer training her, but if she doesn't get it, she feels slighted. So, as Americans, we've been trained to expect these jobs and this standard of living, that, perhaps, we don't deserve.

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Jon
Inactive Member


Message 158 of 168 (649587)
01-24-2012 1:49 PM
Reply to: Message 155 by crashfrog
01-24-2012 12:26 PM


Re: Yglesias on China
To get to Jon's point, why do we think that Americans deserve not to have a trade deficit? Isn't that just a natural consequence of being a rich country of only 375 million people in a world of 7 billion?
We should be able to manufacture everything we need right here, with some exceptions. For those things that we simply have to import, it is not unreasonable to come up with some things that we can also export.
I don't see why we, as a people, need to just bend over and take it in the ass just because it's cheaper for some companies to manufacture things in another country.
Do we really want Sam Billionaire deciding our fate?
Jon

Love your enemies!

This message is a reply to:
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Replies to this message:
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Phat
Member
Posts: 18262
From: Denver,Colorado USA
Joined: 12-30-2003
Member Rating: 1.1


Message 159 of 168 (649592)
01-24-2012 2:04 PM
Reply to: Message 158 by Jon
01-24-2012 1:49 PM


Re: Yglesias on China
Thing is, our workers command higher wages. Would you be ok with that? The products would cost more, after all.

This message is a reply to:
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Jon
Inactive Member


Message 160 of 168 (649594)
01-24-2012 2:09 PM
Reply to: Message 159 by Phat
01-24-2012 2:04 PM


Re: Yglesias on China
Thing is, our workers command higher wages. Would you be ok with that? The products would cost more, after all.
What does it matter?

Love your enemies!

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crashfrog
Member (Idle past 1467 days)
Posts: 19762
From: Silver Spring, MD
Joined: 03-20-2003


Message 161 of 168 (649596)
01-24-2012 2:27 PM
Reply to: Message 158 by Jon
01-24-2012 1:49 PM


Re: Yglesias on China
We should be able to manufacture everything we need right here, with some exceptions.
Why? The vast majority of human beings live outside the borders of the United States, so just as a matter of statistics and all other things being equal, most things that Americans are going to want to buy are going to be located in the hands of people who don't live here. It's just been a matter of chance that the West in general and America in particular was so far ahead of everyone else that there was nobody else to make the things Americans wanted. But as Yglesias suggests, that's largely coming to an end not because of bad policy on our part, but because the vastly-more-populated nations of Asia have stopped shooting themselves in the foot (or being shot, by us.)
I don't see why we, as a people, need to just bend over and take it in the ass just because it's cheaper for some companies to manufacture things in another country.
China has billions of people to do labor. Just as a matter of statistics, it means that if you hire something that has to be produced by labor the odds are that a Chinese person will have done most of it even if the Chinese didn't work for so much less.
I'm never quite clear what problem trade protectionism is meant to solve. I guess I'm a "conservative" in that sense. If the problem is that a lack of a specific kind of manufacturing job is impoverishing people who have no practical likelihood of learning to do something else, then we need to just give those people money, not spend far, far more in aggregate on unsustainable distortions of the market to provide a kind of inefficient welfare system for steelworkers and auto assemblers. It hardly takes China to put people out of work. You don't see too many buggy-whip manufacturers or typists these days and its not because everybody in America is getting their buggy whips from China.
We're always going to have the problem where people will have invested, very expensively in some cases, in skill sets that become completely obviated by technologies. The problem is a society where our very survival is contingent on getting a job. That's the problem.

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xongsmith
Member
Posts: 2578
From: massachusetts US
Joined: 01-01-2009
Member Rating: 6.8


(1)
Message 162 of 168 (649598)
01-24-2012 2:31 PM
Reply to: Message 134 by Straggler
01-23-2012 8:40 AM


Re: "Knowledge Economy"
Straggler writes:
You seem to be talking about call centre staff and the like. I am talking about computer science graduates who are professional programmers.
There is much to disagree with this, although I do not have the objective scientific evidence firsthand. Outsourced programming seems to have been a travesty in the USA, for example. But I can only say that the "degrees" awarded in India are not the same as the "degrees" awarded in the USA. It has been argued that many resume's will cite Indian Universities that don't really exist, but turn out to be H1-B visa shops. It's like the learning of a language in 10 days kind of nonsense.
And let's not get into the documentation....
But how can the capitalists in the USA turn down workers willing to put in 80-hour work weeks for USA minimum wage? They come over and sleep 10-20 to the apartment and send their minimum wage money home where it is Big Upper Middle Class Money.
Perhaps the UK has a better way of screening the applicants.
We actually have programming jobs advertised here for No Money! And people take them!!

- xongsmith, 5.7d

This message is a reply to:
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Jon
Inactive Member


Message 163 of 168 (649616)
01-24-2012 3:46 PM
Reply to: Message 161 by crashfrog
01-24-2012 2:27 PM


Re: Yglesias on China
The vast majority of human beings live outside the borders of the United States, so just as a matter of statistics and all other things being equal, most things that Americans are going to want to buy are going to be located in the hands of people who don't live here.
I'm not sure why that's a problem. Certainly you aren't suggesting that Americans are incapable of building their own factories, right?
Just as a matter of statistics, it means that if you hire something that has to be produced by labor the odds are that a Chinese person will have done most of it even if the Chinese didn't work for so much less.
Sure, if you just blindly buy stuff. But that doesn't have to be the case. Consumers can be more conscious of where the stuff they buy gets made and by whom.
The problem is a society where our very survival is contingent on getting a job. That's the problem.
That's certainly a big problem, yes. But I don't see that changing anytime soon. We need to find ways to make the best with what we've got.
Jon

Love your enemies!

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Straggler
Member
Posts: 10333
From: London England
Joined: 09-30-2006


Message 164 of 168 (649646)
01-24-2012 5:33 PM
Reply to: Message 162 by xongsmith
01-24-2012 2:31 PM


Re: "Knowledge Economy"
I have now worked for 3 different organisations (1 charity, 1 local government body and 1 UK wing of a multinational corporation) that have outsourced the IT development team function to India.
In each case the aim has not been to employ the cheapest people possible. In each case the aim has been to achieve the same or better quality that was present when the team was UK based but for less cost. And in each case I would say that has been achieved.
The wages we have paid are considered very good in India. And there has been no problem with recruitment, retention or quality of staff. If the development guys were crap my job (infrastructure implementation and support) would be incredibly difficult. I haven't found that to be the case at all.
X writes:
Perhaps the UK has a better way of screening the applicants.
In the case of the charity the lead UK programmer was Indian and he decided to take the opportunity to go back to India. He was paid less than in the UK but this was (he told me) more than made up for by the quality of life this salary allowed in India and for the autonomy of effectively having the freedom to put together and lead his own team out there.
The other two organisations had already outsourced before I joined but they have both had equally skilled and dedicated development staff.
It sounds like you and Ramoss have very different experiences to me. Of course if the aim is to pay the absolute lowest wage possible for tick-box qualifications then it is hardly surprising that things don't work out too well. Whether that is a particularly American outsourcing issue I don't know. I have been lucky enough so far to work for IT departments that are seeking the same quality for lower cost rather than the lowest cost period.
X writes:
We actually have programming jobs advertised here for No Money! And people take them!!
In the UK it has become practically impossible to get into some areas (law, fashion etc.) without working for free as an intern for some time (months) first. Only the kids of the rich are able to work for free and thus gain the experience necessary thus excluding much potential talent from ever breaking in. In fact there are cases with the most prestigious firms of parents paying backhanders to get their kids internships (i.e work for free) because it is a necessary step to get on in that career.
It is a crazy form of social immobility.
But that is another issue......

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NoNukes
Inactive Member


Message 165 of 168 (649670)
01-24-2012 11:20 PM
Reply to: Message 163 by Jon
01-24-2012 3:46 PM


Re: Yglesias on China
Sure, if you just blindly buy stuff. But that doesn't have to be the case. Consumers can be more conscious of where the stuff they buy gets made and by whom.
I understand the appeal of this idea, but it seems incredibly naive.
Being conscious of where things come from is not all that helpful. Americans are actually incapable of making some products here. Not building products here means not participating in the innovation and process improvements that come with managing the day to day operations of a factory. As a result, nobody in the US can make memory chips that compete in density and capacity with foreign made chips. Essentially nobody outside of Korea and Japan is capable of making an LCD or Plasma screen TV that works as well as those on the market without infringing US patents. It is essentially impossible to find a US made modern coffee maker. And electing to disrespect patent law would touch off a response abroad that would kill off the few segments of US manufacturing that are currently successful at exporting stuff.
On top of that, outside of making foreign products illegal to purchase in the US, it's not realistic to ask people who are strapped for cash to stop buying foreign products. Adding tarrifs again is just going to result in reprisals against US manufacturers.

Under a government which imprisons any unjustly, the true place for a just man is also in prison. The proper place to-day, the only place which Massachusetts has provided for her freer and less desponding spirits, is in her prisons, to be put out and locked out of the State by her own act, as they have already put themselves out by their principles. Thoreau: Civil Disobedience (1846)

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