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THE GREAT BIG CHINA THREAD


winkie
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those poor exploited slaves.

to think of all the great times they could be having eking out an existence by scratching the earth and praying for good weather.

Their increased wages and better standard of living will be cold comfort when they think they could be working longer hours for lower pay out in the boiling heat of the equatorial sun.

Now they might be able to save some money, stop working before they die, or (god forbid) be able to afford to send their children to school so they can learn to read and write.

You really cant imagine how the market revolution ever caught on, can you?

Similar arguments could be made to justify sending kids up chimneys in victorian london- they were so much 'better off''.

Foxconn has nets inside it's factories to prevent employees throwing themselves off the stairwells- hardly evidence of a happy workforce is it?

The claims of the Globalists were that 'a rising tide lifts all boats' but in reality we see the long term trend is for a small number of people to end up sitting on luxury yachts while the rest of us paddle desperately to keep from drowning.

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Foxconn has nets inside it's factories to prevent employees throwing themselves off the stairwells- hardly evidence of a happy workforce is it?

From what I've read, Foxconn's suicide rate is lower than the Chinese average. And you'll be glad to hear that suicide won't be such a problem in future because they're starting replacing their expensive human workers with robots so the ex-workers will be free to live on the streets or drag a plough through the fields instead.

Which leads to the important question: if China is now too expensive for manufacturing, what are all those unskilled workers going to do now they're being freed from the EVIL OPPRESSORS who forced them to work in factories? My guess is that they're not going to start cutting each others' hair and buying BMWs.

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From what I've read, Foxconn's suicide rate is lower than the Chinese average. And you'll be glad to hear that suicide won't be such a problem in future because they're starting replacing their expensive human workers with robots so the ex-workers will be free to live on the streets or drag a plough through the fields instead.

Which leads to the important question: if China is now too expensive for manufacturing, what are all those unskilled workers going to do now they're being freed from the EVIL OPPRESSORS who forced them to work in factories? My guess is that they're not going to start cutting each others' hair and buying BMWs.

Robots for goal posts?!

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From what I've read, Foxconn's suicide rate is lower than the Chinese average.

When was the last time you heard about a spate of German car workers jumping off the factory roof?

And you'll be glad to hear that suicide won't be such a problem in future because they're starting replacing their expensive human workers with robots so the ex-workers will be free to live on the streets or drag a plough through the fields instead.

Exactly my point- as soon as the slaves try to get a slice of all that profit they become too expensive and get discarded.

Which leads to the important question: if China is now too expensive for manufacturing, what are all those unskilled workers going to do now they're being freed from the EVIL OPPRESSORS who forced them to work in factories? My guess is that they're not going to start cutting each others' hair and buying BMWs.

So your solution is what- remain slaves for ever? You can't have it both ways- if they are to remain employed they must not demand decent wages- is that the deal?

I know you think you are disagreeing with me but you actually make my point for me here. The nature of capitalism is not to share the wealth but to hoard it- so that 'rising tide' will not lift all boats- it will just drown more people while elevating a few into luxury.

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Exactly my point- as soon as the slaves try to get a slice of all that profit they become too expensive and get discarded.

How about services/products of corporation becomes too expensive, workers refuse to buy them and buy something cheaper?

Many startups owners take zero pay but continue to pay their workers. Many of these startups failed and the 'capitalist' is left with nothing.

So your solution is what- remain slaves for ever? You can't have it both ways- if they are to remain employed they must not demand decent wages- is that the deal?

I know you think you are disagreeing with me but you actually make my point for me here. The nature of capitalism is not to share the wealth but to hoard it- so that 'rising tide' will not lift all boats- it will just drown more people while elevating a few into luxury.

In China, UK or in most places, you are free to go self employ or become a factory owner if you wish. No one is forcing you to be employed, be employed with certain employer or a place.

China is now facing serious worker shortages in many areas and they are pretty much free to demand much higher wages.

Indian call center have been hoping jobs for many years, each time bagging double digit increment and sometimes double their pay in a year.

The nature of capitalism (with some caveat) is that you are free to go out there to make the best use of your talent and get better standard of living for yourself and your family.

Just a proposal - shall we agree a system where you are require to buy any product that I make at fair price and then I will pay you a fair wage ( I am sure you will agree that a 10% profit margin is fair, so I will sell to you the stuff that you make for me at cost (including taxes and your wages) + 10% ?)

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Similar arguments could be made to justify sending kids up chimneys in victorian london- they were so much 'better off''.

and they were. Nobody enslaved them and forced them to go up chimneys. they chose to go for the money that was offered. Boys had many different occupations open to them in Victorian England. The fact that they no longer need to do so is a mark of how far we have come, but to pretend that we didn't need to go through that stage is to delude yourself.

It took the western world 100 years like that to get through it, Taiwan, Singapore, Hong Kong did it in less than two generations because there is more capital in the world now. There is more capital because people made a profit, saved it and invested it again.

Have you seen interviews with people who actually work in sweatshops and these factories, they want more work, they want jobs for their family members to be created because the jobs make them better off, richer and are physically easier than what they had to do before.

We don't have to make those choices because our great grandfathers and great grandmothers did, but they had to make them so that things were better for us.

Chinese workers are now higher skilled, have higher aspirations and demand higher wages, GOOD others can now benefit from the work that the Chinese no longer wish to do.

Foxconn has nets inside it's factories to prevent employees throwing themselves off the stairwells- hardly evidence of a happy workforce is it?
already dealt with I think.
The claims of the Globalists were that 'a rising tide lifts all boats' but in reality we see the long term trend is for a small number of people to end up sitting on luxury yachts while the rest of us paddle desperately to keep from drowning.

Actually it isnt. Look at history, the long term trend is for the ordinary man to benefit more than the wealthiest. This is because in a free market you have to persuade people to give you money, but when you hold political power, you can simply take it when you want it.

The most unequal societies have been those in which there is a great centralised power (eg monarchies of old and more recently the communist countries and the coutries of Africa with rampant corruption).

Free markets and free enterprise have lifted more people out of poverty than anything else in the history of mankind, that is a simple fact.

For most of recorded history nearly everyone has lived in grinding poverty, requiring hard work from dawn until dusk, from the moment you can walk and talk to the day you die. We have got away from that because of individual freedom, and individual choices without it we would still be scratching the earth for a living.

The market revolution in the 19th century allowed children to have a childhood for the first time in history, they could now go to school instead of work on the farm the whole time.

The investment of capital brought about jobs that could be productive without requiring great physical strength and so women were finally able to be independent of a man to support them.

open your eyes to what is really happening, and what happened. Ask yourself if working in these places is so bad, why do so many people keep doing it again and again and again? They do it without being forced, sometimes they walk great distances to get the work on offer, are they all just amazingly stupid and deluded?

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The nature of capitalism (with some caveat) is that you are free to go out there to make the best use of your talent and get better standard of living for yourself and your family.

Up to a point. But the freedom you cite here is subject to many variables- for example the life chances of someone born in a third world slum and someone born to a first world billionaire are not entirely equal are they?

But the real point I was making is that the much vaunted benefits of the capitalist system- which are real enough- are not it's driver. People do not start up companies to create jobs- they set up companies to make money. Employing people is just an unavoidable inconvenience of that process.

So most of the benefits of capitalism for most people are the result of a happy accident- capital needs labour to grow more capital and normally must pay labour for it's input. So long as these two forces are roughly in equilibrium it is more or less a win/win.

But what happens if this equilibrium fails- what if the 'market value' of labour falls below the cost of survival for the average person?- or what if the ROI on automation begins to exceed the ROI on employing people?

The interesting thing to note about this is that Capitalism has no mechanism for dealing with this disequilibrium- it's logic is remorseless; to succeed you must lower costs and maximise profits- if this means replacing your human workforce with automation you must do this- if you don't do it, your competition will and you will fail.

So I incline to the view that the very dynamic that makes a capital system so successful also leads to it's destruction- the constant drive to maximise returns at all costs.

There is something essentially mindless about Capitalism- it's not really an ideology, or even a model of social order-it's really just a simple mechanism. A company or corporation is at heart a simple creature- all it wants to do is grow and if possible procreate- it gives no real thought to the resource limitations of it's environment nor to the sustainability of that environment- these lay beyond it's concerns- not because the people involved are stupid but because they are paid to make money, not to hug trees or be social workers.

That is also why- if a smart humanoid robot became available tomorrow that could replace 80% of the workforce at a cheap price it would sell in the millions- every company would dump it's human employees in favour of the robots.

Of course the end result would be the destruction of those same companies as demand collapsed and society was thrown into chaos.

The point being that they would have no choice but to destroy themselves- because if they chose not employ robots but their competition did employ them, they would go bust.

So capitalism is great right up to the point where the power equilibrium between Capital and Labour is lost. But once lost there is no mechanism inherent in Capitalism itself that can restore or compensate for it's loss- and that is why it will fail.

We are not at that point quite yet- but the trend is now visible I think- and accelerating.

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Free markets and free enterprise have lifted more people out of poverty than anything else in the history of mankind, that is a simple fact.

I agree with this but would ask the question- because this was true in the past, does this mean it must be true in the future?

What happens when (if) the market value of the labour of the ordinary person falls below the income level required to survive?

To this question it seems to me that Capitalism has no real response.

You think of Capitalism as operating in a constant unchanging society- but what if that's not true. What if Globalisation and Automation do conspire to destroy the market value of the labour of huge numbers of people- is this sustainable in a capitalist system?

The mostly unrecognised stabilizer of the Capitalist model is that labour will always be in a position to extract value from production- this is the balance of power that makes the whole thing work.

What does Capitalism have to say if that balance is tipped and fails?

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and they were. Nobody enslaved them and forced them to go up chimneys. they chose to go for the money that was offered. Boys had many different occupations open to them in Victorian England. The fact that they no longer need to do so is a mark of how far we have come, but to pretend that we didn't need to go through that stage is to delude yourself.

It took the western world 100 years like that to get through it, Taiwan, Singapore, Hong Kong did it in less than two generations because there is more capital in the world now. There is more capital because people made a profit, saved it and invested it again.

Have you seen interviews with people who actually work in sweatshops and these factories, they want more work, they want jobs for their family members to be created because the jobs make them better off, richer and are physically easier than what they had to do before.

We don't have to make those choices because our great grandfathers and great grandmothers did, but they had to make them so that things were better for us.

Chinese workers are now higher skilled, have higher aspirations and demand higher wages, GOOD others can now benefit from the work that the Chinese no longer wish to do.

already dealt with I think.

Actually it isnt. Look at history, the long term trend is for the ordinary man to benefit more than the wealthiest. This is because in a free market you have to persuade people to give you money, but when you hold political power, you can simply take it when you want it.

The most unequal societies have been those in which there is a great centralised power (eg monarchies of old and more recently the communist countries and the coutries of Africa with rampant corruption).

Free markets and free enterprise have lifted more people out of poverty than anything else in the history of mankind, that is a simple fact.

For most of recorded history nearly everyone has lived in grinding poverty, requiring hard work from dawn until dusk, from the moment you can walk and talk to the day you die. We have got away from that because of individual freedom, and individual choices without it we would still be scratching the earth for a living.

The market revolution in the 19th century allowed children to have a childhood for the first time in history, they could now go to school instead of work on the farm the whole time.

The investment of capital brought about jobs that could be productive without requiring great physical strength and so women were finally able to be independent of a man to support them.

open your eyes to what is really happening, and what happened. Ask yourself if working in these places is so bad, why do so many people keep doing it again and again and again? They do it without being forced, sometimes they walk great distances to get the work on offer, are they all just amazingly stupid and deluded?

I agree with most of what you posted but dont be too trusting evil exists everywhere.

BTW the free markets didn't bring about the big increases in wealth, that was down to productivity BUT you can argue that in a free market the people are generally more productive than in a non free market. that i agree on but it isn't to say you cant be productive or get more productive in a non free market. even in a fixed market i can discover a more efficient way to make tires for instance.

also you need to look at the removal of what i would consider intrinsic rights when you go from basically subsistence farmers to a capitalistic society.

for instance in many a nation the land you "own" is barely more than you claiming it and having a gun to enforce said claim

if the government then decides it is theirs and they will give it to the highest bidder in a free market then what?

well you got nothing, and you "choose" to go to a sweat shop not necessarily because you want to but you have to because alternatives were taken away

likewise, if you have tapped a spring for five generations for your water you consider that to be a legitimate right of yours. the government then takes that away and sells it to a company. you then have to pay for it, for which you must work a harder job to pay for something you got for free previously

& not to mention your ideology belong in a free market and no market is. even in the USA which is generally considered the free-ist large market you have many a barriers, licences, and conditions.for instance i reckon i would make a fine dentist, however without the appropriate government paper if i tried to file a tooth it would mean punishment

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I agree with this but would ask the question- because this was true in the past, does this mean it must be true in the future?

What happens when (if) the market value of the labour of the ordinary person falls below the income level required to survive?

To this question it seems to me that Capitalism has no real response.

You think of Capitalism as operating in a constant unchanging society- but what if that's not true. What if Globalisation and Automation do conspire to destroy the market value of the labour of huge numbers of people- is this sustainable in a capitalist system?

The mostly unrecognised stabilizer of the Capitalist model is that labour will always be in a position to extract value from production- this is the balance of power that makes the whole thing work.

What does Capitalism have to say if that balance is tipped and fails?

Excluding mass retardation how on earth would you stop labour from extracting value?

that is to say, how do you stop people building things?

you cannot in a free meer kat

As for the general statement that the price/value of labour could/may fall to below the cost of living for such people how on earth could that happen in a free meer kat?

The only way that could happen is if the capital vs labour equilibrium swings to 100% or more to capital.

but remember, labour can make capital whereas capital cannot in itself make more capital (until AI at least)

so, if say everyone who owned a house decided to tripple the rent. labour would then decide it is cheaper to build itself a house than to rent itself one.

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I agree with this but would ask the question- because this was true in the past, does this mean it must be true in the future?

What happens when (if) the market value of the labour of the ordinary person falls below the income level required to survive?

To this question it seems to me that Capitalism has no real response.

but the market value of labour keeps rising, that is why manufacturers moved there in the first place. The value of labour has risen in china now so they are moving on to somewhere else that labour is still cheap.

The more money people make, save and invest - the more capital there is in the world. More capital makes labour more productive, so labour becomes more valuable. That is why industrial production in the UK has been rising since the 1980s while the number of people employed has been going down.

You think of Capitalism as operating in a constant unchanging society- but what if that's not true. What if Globalisation and Automation do conspire to destroy the market value of the labour of huge numbers of people- is this sustainable in a capitalist system?

Capitalism is what makes society so dynamic, think about how much things have changed since 1750 and before 1750. The difference is stark. Free enterprise thrives on change.

The mostly unrecognised stabilizer of the Capitalist model is that labour will always be in a position to extract value from production- this is the balance of power that makes the whole thing work.

What does Capitalism have to say if that balance is tipped and fails?

Well labour is getting more important, and more valuable, not the other way round. Wages have been rising since the market revolution, and people continually try to master new skills and come up with more ways of increasing their productivity.

I think you have founded your question on an incorrect premise.

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I agree with most of what you posted but dont be too trusting evil exists everywhere.

I know, that is why preventing the use of force is so important. and why it is an integral part of the free market.
BTW the free markets didn't bring about the big increases in wealth, that was down to productivity BUT you can argue that in a free market the people are generally more productive than in a non free market. that i agree on but it isn't to say you cant be productive or get more productive in a non free market. even in a fixed market i can discover a more efficient way to make tires for instance.
but what provided the profits and incentive to increase productivity? that was the free market and the profit motive. the USSR made some improvements to productivity, yes, but a free market economy makes them much quicker because lots more people get to have a go and there is a big reward for getting better at it.
also you need to look at the removal of what i would consider intrinsic rights when you go from basically subsistence farmers to a capitalistic society. for instance in many a nation the land you "own" is barely more than you claiming it and having a gun to enforce said claim

if the government then decides it is theirs and they will give it to the highest bidder in a free market then what?

well you got nothing, and you "choose" to go to a sweat shop not necessarily because you want to but you have to because alternatives were taken away

likewise, if you have tapped a spring for five generations for your water you consider that to be a legitimate right of yours. the government then takes that away and sells it to a company. you then have to pay for it, for which you must work a harder job to pay for something you got for free previously

Property rights are an important part of a free market, but they are more a traditional convention as opposed to a natural right of man. In the examples you have given, that is not a free market, since a free market requires that property rights be respected. You have described a despotic, tyrannical corporatist government.

& not to mention your ideology belong in a free market and no market is. even in the USA which is generally considered the free-ist large market you have many a barriers, licences, and conditions.for instance i reckon i would make a fine dentist, however without the appropriate government paper if i tried to file a tooth it would mean punishment

And I think the government punishing you for it would be wrong. We did have properly free markets for a short period in the late 19th and early 20th centuries. In that time the lot of the common man advanced faster than at any other time in history. Since the invention of the welfare state and the massive increase in government we have got less equal, not more.

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Excluding mass retardation how on earth would you stop labour from extracting value?

that is to say, how do you stop people building things?

you cannot in a free meer kat

Yes you can it's simple- you sack them. For example- lets say you work in a car factory building a specific component. Then a robot arrives to do that job and you are sacked. Can you now set up your own car factory?

If you can't then you have been stopped from building things because the things you know how to build require an infrastructure that you cannot replicate.

As for the general statement that the price/value of labour could/may fall to below the cost of living for such people how on earth could that happen in a free meer kat?

The only way that could happen is if the capital vs labour equilibrium swings to 100% or more to capital.

You ask then answer your own question- it depends on the balance of power between labour and Capital. If you accept that labour is like any other commodity in the market place you must also accept the fact that it's entirely possible for the exchange value of that commodity to fall lower than the value of other commodities, like food. After all- someone who is unable to find work has at that point a labour market value of zero.

but remember, labour can make capital whereas capital cannot in itself make more capital (until AI at least)

There is a problem with this idea that the unemployed can lift themselves up by their own bootstraps and it lies in the fact that capital is scarce. For example take an unemployed barber- he walks around all day seeing people in need of haircuts- he has the skill to cut their hair- but lacks the capital to set himself up in business. So the need is there, the ability to meet that need is there- but the capital is not there to marry the two together.

so, if say everyone who owned a house decided to tripple the rent. labour would then decide it is cheaper to build itself a house than to rent itself one.

Only if they had the capital with which to buy the land and the building materials.

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but the market value of labour keeps rising, that is why manufacturers moved there in the first place. The value of labour has risen in china now so they are moving on to somewhere else that labour is still cheap.

So the rise in labour costs in China is, from the viewpoint of the Capitalist system pathogenic- a problem to be solved, not an achivement to be celebrated. As you say- that capital will now move on to cheaper places- leaving unemployment in it's wake.

The more money people make, save and invest - the more capital there is in the world. More capital makes labour more productive, so labour becomes more valuable. That is why industrial production in the UK has been rising since the 1980s while the number of people employed has been going down.

To be more accurate- capital investment in improved productivity makes some labour more valuable- at the same time as it makes other labour redundant. As you point out, the number of people employed goes down.

Capitalism is what makes society so dynamic, think about how much things have changed since 1750 and before 1750. The difference is stark. Free enterprise thrives on change.

But is the assumption that rising productivity and rising wages are in lockstep one that stands for all time?

The median hourly wage for American workers has declined 2 percent since 2003, after factoring in inflation. The drop has been especially notable, economists say, because productivity — the amount that an average worker produces in an hour and the basic wellspring of a nation’s living standards — has risen steadily over the same period.

http://www.nytimes.com/2006/08/28/business/28wages.html?pagewanted=all

So we see productivity rising but wages falling. But why would wages fall if production is going up? The answer is power. Labour is losing traction in the war for a share of the gains of production. So the trend you correctly point to in which productivity and wages are in lockstep is changing- and this has not happened before.

So maybe, just maybe, the future will be different to the past?

Well labour is getting more important, and more valuable, not the other way round. Wages have been rising since the market revolution, and people continually try to master new skills and come up with more ways of increasing their productivity.

I think you have founded your question on an incorrect premise.

But as we have seen there comes a point where increased productivity can actually damage labour's ability to gain a share of production- for the very simple reason that the value of labour is based on scarcity and highly productive workers reduce the overall need for workers which reduces their scarcity value.

Edited by wonderpup
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Up to a point. But the freedom you cite here is subject to many variables- for example the life chances of someone born in a third world slum and someone born to a first world

billionaire are not entirely equal are they?

Of course life is unfair. But those life in a market society with talents and skills will be able to make significant improvement from his very humble start. And they can do that by selling their time (working), or setup businesses. And gain, we don't have anywhere close to a free market in all sectors wherever you go. Those with talent will go and operate in the space where there is a free market, while those with connections will go to operate in the spaces which are monopolistic. When talented guy achieves much in the free market space, then he has a chance to come back to face the monopolies.

But the real point I was making is that the much vaunted benefits of the capitalist system- which are real enough- are not it's driver. People do not start up companies to create jobs- they set up companies to make money. Employing people is just an unavoidable inconvenience of that process.

Sure - most people don't go out to work because they want to work - else you won't have this wages not increasing complain. People work because they want to make a profit to pay the bills and to consume. There is no difference in motivation here - it is just what human do.

But what happens if this equilibrium fails- what if the 'market value' of labour falls below the cost of survival for the average person?- or what if the ROI on automation begins to exceed the ROI on employing people?

What if market value of product/services fall below the survival cost of a business? The business closes and the business does something else. The cost of producing a typewriter nowadays most likely exceed the market value, so typewriter making business (like Olivetti), went to do something else.

Of course, for a man/women, social safety net should kick in to give time for the person to retrain.

The interesting thing to note about this is that Capitalism has no mechanism for dealing with this disequilibrium- it's logic is remorseless; to succeed you must lower costs and maximise profits- if this means replacing your human workforce with automation you must do this- if you don't do it, your competition will and you will fail.

Only to a point where your workforce all go to work elsewhere or setup their own shop or migrate.

That is also why- if a smart humanoid robot became available tomorrow that could replace 80% of the workforce at a cheap price it would sell in the millions- every company would dump it's human employees in favour of the robots.

Of course the end result would be the destruction of those same companies as demand collapsed and society was thrown into chaos.

Think the computer age came close to this. Those employees now become office managers or computer operator and our society hasn't turn into chaos.

The point being that they would have no choice but to destroy themselves- because if they chose not employ robots but their competition did employ them, they would go bust.

Remember that 'capitalist' are themseves labour as well. If labour refuses to improve productivity to a point where a new startup company with 1 person who operates are set of machines that can outcompete the old low produtivity labour operated factory, the old factory will close. The workers and the boss will lose their job.

You just look at unionised steel industry in the past.. Even as labourers refused to improve productivities inline with world standards, they were still out of job.

So capitalism is great right up to the point where the power equilibrium between Capital and Labour is lost. But once lost there is no mechanism inherent in Capitalism itself that can restore or compensate for it's loss- and that is why it will fail.

We are not at that point quite yet- but the trend is now visible I think- and accelerating.

It is supply and demand, if we all go for one child policy, the equilibrium will change (as in now in China). If we go for 10 children policies, then it will get worse.

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Yup. Due to the tide of money that is going into web and mobile app development the annual wage for a middle weight dev in China is about £25k pa now. In the UK we'd be looking at £35k but when you factor in the logistics and the added 'being able to actually think for themself' factor that you get using a developer over here - we are pretty much approaching parity.

I notice that. Developers are paid far less in Poland than China, for instance.

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So the rise in labour costs in China is, from the viewpoint of the Capitalist system pathogenic- a problem to be solved, not an achivement to be celebrated. As you say- that capital will now move on to cheaper places- leaving unemployment in it's wake.

it isn't a problem to be solved, it is merely an inevitable development that presents challenges. The capital doesn't all leave, the factories are still there, those employees still have their training etc. but they will need to adapt and change, thy can't carry on doing the same old thing and expect the world to stand still and keep buying things from them. That attitude is a big part of what killed British manufacturing.

Freedom means you have to find things that other people want to pay you to do. You don't have the right to a job on your terms.

To be more accurate- capital investment in improved productivity makes some labour more valuable- at the same time as it makes other labour redundant. As you point out, the number of people employed goes down.
and this is the basis of prosperity. if people were not made redundant, we would still all be working the land for food. but we can produce enough food for everyone with 2% of the people. The 98% need to find other things to do for each other that so that they can afford to buy the food.

The goverment would rather a law required the producers of food to distribute their produce without taking a profit. We would all be poor then, because the farmers would produce a lot less.

But is the assumption that rising productivity and rising wages are in lockstep one that stands for all time?

http://www.nytimes.com/2006/08/28/business/28wages.html?pagewanted=all

So we see productivity rising but wages falling. But why would wages fall if production is going up? The answer is power. Labour is losing traction in the war for a share of the gains of production. So the trend you correctly point to in which productivity and wages are in lockstep is changing- and this has not happened before.

So maybe, just maybe, the future will be different to the past?

I am sure the future will be different but the data you have shown is peculiar to the USA (the UK for example has not seen this happen) and the causes of it are a whole topic in their own right. (bear in mind that while family incomes in the USA have fallen, per capita incomes have rise as the family has got smaller)

Edit -the graph also shows total compensation rising (so benefits are worth more these days) and corporate profits at their highest ever (barely) shock horror!

Corporate profits are good, to start with most public companies are held by pension funds (so ordinary people who benefit from profits) and more profits means more investment or more pay = good thing again.

But as we have seen there comes a point where increased productivity can actually damage labour's ability to gain a share of production- for the very simple reason that the value of labour is based on scarcity and highly productive workers reduce the overall need for workers which reduces their scarcity value.

the argument of the Luddite (not suggesting you are one) for ever. The fact is that rising productivity and "creative destruction" makes us all richer over time.

I don't think there comes a time when labour damages itself by increasing its own productivity - one data point does not make a trend, particularly when the statistics come from a newspaper with an axe to grind.

In the end the bast way to give labour power is to make companies compete for labour as much as possible. So we need to get rid of the taxes on job creation and disincentives to work that we have in this country and around the world.

The free market isn't fun, it says if you want to get more prosperous you have to work smarter or be more productive. We have got more productive and wealthier despite working fewer and fewer hours each week over the last 200 years. Long may it continue.

Edited by LJAR
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The free market isn't fun, it says if you want to get more prosperous you have to work smarter or be more productive.

Smarter and more productive are really the same idea.

I accept everything you say regarding the success of the Capitalist system as wealth creator- at least for many. But to assume that any trend can be extrapolated to infinity can be dangerously mistaken.

There is- you must admit- a basic tension between the idea of increasing productivity and that of full employment- given that productivity is basically about doing more with less- in this case less labour and man hours.

So we can at least imagine a point somewhere on the long march of increased productivity where the need for human labour declines as that productivity increases. And this trend can already be seen in areas such motor manufacture- it takes less people to build a car than it did forty years ago.

Add to this trend the fact that the gains of increased productivity tend to accrue to those who own or control the means of production- this being their motive to improve productivity in the first place- and it seems to me that you have the recipe for a problem that the market cannot fix.

The real internal contradiction for the free market system lies in the fact that it's workforce are also it's consumers- so to the exact degree it succeeds in disenfranchising the former it undermines the viability of the latter.

So it seems an inescapable fact that sooner or later Capitalism will implode- an implosion created by the very force that makes it so dynamic and successful- the over riding drive to maximise profit at all and any cost.

If someone invented an AI system smart enough and cheap enough to replace most of the worlds working population and you were in business you would be forced to buy it, as would your competitors. In doing so you would both be destroyed as the demand destruction brought down the economy- but you had no choice-that's where the market's ability to adapt fails-it can't survive it's own success.

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the market is people, it will do exactly what the people in it want it to do.

by want I mean what they do with their actions, not what they say they want.

The verdict of history is that the free market dissipates wealth, it doesn't concentrate it. Look at inequality and the distribution of wealth from 1500 onwards. We have been in reverse only in the last 40-60 years of welfare driven big government - an interesting correlation no?

We are producing more with less labour - people choose to work less and less as the years go by, they take their payment as leisure time instead of more income.

If we could create robots that could replace everyone, then everything would be so cheap we would probably give it away and all live a life of leisure. as you point out people need to be able to buy things in order for a business to be successful.

that sort of econometric prediction is not difficult to make, so a business is unlikely to price themselves out of the market so badly.

the real question is what is the alternative?

I have more faith in the free market than any other system anyone has come up with so far.

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  • 7 months later...

http://dealbook.nytimes.com/2012/04/23/chinas-biggest-banks-are-squeezed-for-capital/?ref=business

China’s banks are among the biggest and most profitable financial institutions in the world.

But the state-backed banks are also starved for capital after an aggressive lending spree that was encouraged by the government.

Within the last year, seven of the biggest Chinese banks tapped the markets for 323.8 billion renminbi ($51.4 billion ) in new funds, according to Citigroup estimates. Several financial firms are expected to raise another $17.7 billion in the next few months, with China’s fifth-biggest lender, the Bank of Communications, accounting for $9 billion.

Banks around the world have been tapping investors for new funds as they struggle with slumping share prices and waning profits. But Chinese firms have maintained that their profit growth is strong and their balance sheets are solid, raising red flags among some analysts about the banks’ persistent capital needs.

The concerns were heightened after rare and blunt criticism by Prime Minister Wen Jiabao. In early April, he accused banks of reaping easy profits, and called for breaking up the monopoly held by the country’s biggest lenders.

“Frankly, our banks make profits far too easily. Why? Because a small number of major banks occupy a monopoly position, meaning one can only go to them for loans and capital,” Mr. Wen said, according to China National Radio. “That’s why right now, as we’re dealing with the issue of getting private capital into the finance sector, essentially, that means we have to break up their monopoly.”

Excellent so he's going to follow the Western example of ensuring the banks don't become too big to fail and ensure more market competition... :ph34r:

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i thought bank of communication is one of the best and chinese banks ( another one is china merchants bank).

it made 507b yuan ( £50b ) net profit in year 2011, year to year up 29%. i think hsbc owns 19.6% of the bank. the option will be their last year's net profit, not a big problem actually.

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