Manufacturing and the law of comparative advantage

[Ziggurat]

Originally Posted by Muldur

The only thing you "explained" is that you don't understand the basic concept that without demand, you can flog supply all you want and it won't do you a bit of good.

You can't generate your own demand. That's the economic equivalent of perpetual motion. Look, it's quite simple. Salaries are only part of the expense of a business. For every additional dollar in sales you make, it's not even possible to increase salaries by a dollar. Furthermore, employees simply are not going to spend every additional dollar you give them on your own product. So if you're hoping to generate more sales by paying your employees more, you're just going to lose money twice. They won't spend it all on you, and you can't use all of what they do spend on those salary increases. It's a money losing proposition. This is basic arithmetic, which evidently you flunked.

Ford didn't pay his workers more in order to get them to buy his cars. That would be stupid, and Ford wasn't stupid. He paid them more so that worker turnover would decrease and productivity would increase. If that allowed them to buy Ford cars, well, that doesn't hurt, but it sure as hell isn't enough of a reason to do it. That can at best return a small fraction of the cost of the salary increase.

Quote:

A billion Chinese peasants working 'till they drop to produce widgets is nothing but a labor expense if they can't BUY widgets, or if someone else cannot buy them.

Well, it sure as hell had better be someone else, because a factory full of workers who only supply themselves cannot last. This should be obvious. Why are you unable to do the arithmetic?

[Igopogo]

The future belongs to the manufacturers. Once a manufacturing sector shuts down, it's incredibly difficult to get back in the game again, as progress marches on. Today's low-level grunt work is the foundation for tomorrow's industry leaders - it's happened time after time in world history.

[Muldur]

Originally Posted by Ziggurat

You can't generate your own demand.

It isn't going to generate itself. Demand requires the ability to satisfy that demand or it's pointless.

I can want a LCD tv from here until Doomsday, but w/o 1) a job that pays 2) sufficient wages that I have the ability to either save up for or make payments on that TV it doesn't matter how bad I want it or how bad the maker of the TV wants to sell it. I get no TV and the seller gets no sale.

It's that simple. It is always in the best real interest of business to provide local jobs at good wages. US businesses, yeilding to the demands of the parasitic investor class for immediate profits have tried to override that basic truth, and our economy is in the crapper because of it.

Real life trumps your theories and "math" every time.

[Ziggurat]

Originally Posted by Muldur

Real life trumps your theories and "math" every time.

And real life is that Ford paid his workers more to reduce worker turnover and thus increase productivity, not increase demand. It's an urban myth, and a myth which doesn't even make sense, that he did it to increase demand. Hell, the simple discrepancy between the number of cars sold and the number of workers in his factory makes that blindingly obvious.

Oh, and real life is very much constrained by math. It's fools who think that they can ignore math who get us into economic death spirals. The refusal to deal with math is the sine qua non of the internet crank.

[respect]

Originally Posted by Ziggurat

And real life is that Ford paid his workers more to reduce worker turnover and thus increase productivity, not increase demand. It's an urban myth, and a myth which doesn't even make sense, that he did it to increase demand. Hell, the simple discrepancy between the number of cars sold and the number of workers in his factory makes that blindingly obvious.

Oh, and real life is very much constrained by math. It's fools who think that they can ignore math who get us into economic death spirals. The refusal to deal with math is the sine qua non of the internet crank.

Don't be silly, Boeing destroyed the world economy by making air craft that its janitors cannot afford.

[WildCat]

Originally Posted by Muldur

Any nation that spends (imports) more than it earns (exports) inevitably WILL have to sell off equity/capital in order to finance the imports.

Uh, no. You're ignoring the wealth produced within the nation. A nation that produces a lot of wealth can have an enormous trade imbalance and still sustain itself indefinitely, indeed even grow wealthier.

[Francesca R]

Not quite correct. A country can run a balanced current account even with a trade (exports less imports) deficit if it earns sufficient investment income from abroad, but that comes by definition from wealth produced outside the nation.

If it has a trade deficit and no foreign investment income surplus, then it has a current account deficit as well, and the only ways to settle that are a capital account surplus or a depletion in FX reserves. The capital account surplus is indeed "selling off equity/capital" (including borrowing from abroad).

http://en.wikipedia.org/wiki/Balance_of_payments

[Roboramma]

Originally Posted by Ziggurat

And real life is that Ford paid his workers more to reduce worker turnover and thus increase productivity, not increase demand. It's an urban myth, and a myth which doesn't even make sense, that he did it to increase demand. Hell, the simple discrepancy between the number of cars sold and the number of workers in his factory makes that blindingly obvious.

Oh, and real life is very much constrained by math. It's fools who think that they can ignore math who get us into economic death spirals. The refusal to deal with math is the sine qua non of the internet crank.

I'm honestly amazed that you even had to write this.

I mean, what if instead of increasing worker salaries and then waiting for them to buy his cars, Ford had instead cut out one step and just given them cars. For instance, salaries remain fixed but every 5 years each worker gets a car! It's pretty damn obvious that he isn't making money by doing this, in fact since the parts and time still cost money, he's losing money. Yet I can't see any fundamental difference between giving someone more money and then that person using that money to buy a car and simply giving him a car.

The only real difference of course is that, as you said, the workers are likely to spend the money on other things as well, so it's like he gives them each a car and some extra spending money.

The only way I can see this working is if the workers invest this money better than ford can, and thus a $100 pay raise gives them $1000 extra spending money, $500 of which is used to buy a car. (or whatever).

But I find that rather unlikely.

[Muldur]

Originally Posted by WildCat

Uh, no. You're ignoring the wealth produced within the nation. A nation that produces a lot of wealth can have an enormous trade imbalance and still sustain itself indefinitely, indeed even grow wealthier.

I didn't say what you attributed to me...please correct.

[Muldur]

Originally Posted by Roboramma

I'm honestly amazed that you even had to write this.

I mean, what if instead of increasing worker salaries and then waiting for them to buy his cars, Ford had instead cut out one step and just given them cars. For instance, salaries remain fixed but every 5 years each worker gets a car! It's pretty damn obvious that he isn't making money by doing this, in fact since the parts and time still cost money, he's losing money. Yet I can't see any fundamental difference between giving someone more money and then that person using that money to buy a car and simply giving him a car.

The only real difference of course is that, as you said, the workers are likely to spend the money on other things as well, so it's like he gives them each a car and some extra spending money.

The only way I can see this working is if the workers invest this money better than ford can, and thus a $100 pay raise gives them $1000 extra spending money, $500 of which is used to buy a car. (or whatever).

But I find that rather unlikely.

I'm still waiting for any of you to explain how there can be demand without well-paid workers with the ability to buy stuff.

[Ziggurat]

Originally Posted by Muldur

I'm still waiting for any of you to explain how there can be demand without well-paid workers with the ability to buy stuff.

You have moved your goalpost, I see. Remember, this is what you said:

Originally Posted by Muldur

Henry Ford once said: "If I want to sell cars in the US, I have to have a pool of people with the money to buy them, and the leisure to enjoy them." He understood you can't have a customer base without good employment to empower it.

That's why he INCREASED worker pay and time off in a day when the trend among industrialists was to do the exact opposite.

The existence of well-paid jobs may indeed have been a requirement for Ford to sell a lot of cars. But the point which you failed to grasp is that Ford couldn't supply these jobs himself. He couldn't succeed by paying his own workers to buy his own cars. He didn't succeed by doing so, as simple arithmetic proves. Paying them more helps other manufacturers whose goods they buy, but the only benefit he saw was the lowered turnover and increased productivity. That's why he did it. Not because of your myth of economic perpetual motion.

[theprestige]

Originally Posted by Muldur

His doing so was solely motivated by his need for a market.

So Boeing could grow its market, and its revenues, by paying each of its line workers enough for them to buy a new 787 Dreamliner every year?

[Roger Ramjets]

Originally Posted by Roboramma

I mean, what if instead of increasing worker salaries and then waiting for them to buy his cars, Ford had instead cut out one step and just given them cars. For instance, salaries remain fixed but every 5 years each worker gets a car! It's pretty damn obvious that he isn't making money by doing this

He can money, so long as each worker can make more than one car every 5 years.

In 1914 Ford produced 300,000 cars with just 13,000 employees. If he had promised each worker a new car every 5 years, he would have been giving away less than 9% of his production. Or to put it another way, he could have given his workers 6 months to make all their own cars, then the next 4-1/2 years worth of production would be free to sell for profit (to workers in other industries - assuming that they were being paid enough to afford a car!).

The fact is that Ford could afford to pay his workers more because his factories were more efficient. Besides increasing mechanization and streamlining production lines, he also paid his employees more and reduced their working hours. Whatever philosophy might have been behind this decision, his strategy was most certainly successful. And Ford is on record saying that he wanted to pay his workers enough that they could afford to buy his cars.

"I will build a car for the great multitude. It will be large enough for the family, but small enough for the individual to run and care for. It will be constructed of the best materials, by the best men to be hired, after the simplest designs that modern engineering can devise. But it will be so low in price that no man making a good salary will be unable to own one" - Henry Ford

[theprestige]

Originally Posted by Roger Ramjets

And Ford is on record saying that he wanted to pay his workers enough that they could afford to buy his cars.

He is?

Quote:

"I will build a car for the great multitude. It will be large enough for the family, but small enough for the individual to run and care for. It will be constructed of the best materials, by the best men to be hired, after the simplest designs that modern engineering can devise. But it will be so low in price that no man making a good salary will be unable to own one" - Henry Ford

And Boeing wants the price of its 787 Dreamliner to be so low that nobody with a decent profit:loss ratio and a good line of credit will be unable to own one. But that doesn't mean Boeing wants to pay its workers enough that they could afford to buy its jets.

Also: Were Ford's workers paid an annual salary, or an hourly wage? Given the historical context, I'm pretty sure that when Ford talks about a "man making a good salary", he's talking about a man with a middle-class white-collar job, earning something more than the entry-level base pay for his profession.

To me, that statement reads as Ford being on record that he wants to bring the automobile from the white tie set to the white collar set. At best, he wants to pay blue collar workers enough to build those automobiles.

But, as always, I'm open to any evidence that what supposedly worked for Ford would work equally well for Boeing.

[Roger Ramjets]

Originally Posted by Muldur

It is always in the best real interest of business to provide local jobs at good wages.

No, no, no. We have capitalist system. It's in the best interest of every business owner to divert as much capital to himself as possible!

Originally Posted by Ziggurat

You can't generate your own demand.

Ford did. He paid his workers more so that they would do a better job. He reduced working hours and increased mechanization so that their workload was less, which increased their productivity. As a result he was able to produce cars at a lower price, thus increasing demand!

The workers in Ford's factory were producing wealth. Ford could have kept all that wealth, but it would have done him no good. After all, he wasn't intending to drive those 300,000 cars around by himself. Instead, he gave almost all his cars to other people, in return for promises to give him some of their wealth. If nobody else had any wealth, those 300,000 cars would have been virtually useless to him. Ford was interested in everybody earning more, because then they could afford to buy his stuff, and he could afford to buy their stuff.

Imagine that Ford Motor Company is the only business in the whole world, and cars are the only thing that people need. The only way it can work is if every employee is paid enough to buy a car. Of course a real economy involves many businesses and even more products and services, requiring a correspondingly complex web of financial transactions, but in the end it works out the same.

Money is just a method of streamlining complex barter arrangements. If capitalists keep all the money and don't pay their workers, they end up with no customers and the economy collapses. In the US, the top 1% has 37% of the wealth. And they wonder why people don't have enough money to buy their stuff!

[Roger Ramjets]

Originally Posted by theprestige

Were Ford's workers paid an annual salary, or an hourly wage? Given the historical context, I'm pretty sure that when Ford talks about a "man making a good salary", he's talking about a man with a middle-class white-collar job, earning something more than the entry-level base pay for his profession.

He paid his workers $5 per day (more than double the going rate). I don't know if that indicates a salary or a wage, but I bet he thought it was a good income. Ford's stated mission was to make cars for 'the great multitude' and described his workers as 'the best men to be hired'. Do you really think he didn't consider his own employees worthy?

In 1925 the Model T sold for $240. In order to afford a new car every 5 years, a Ford worker only needed to put aside $1 per week, 4% of his gross income. A frugal worker might have managed to save $5 per week, enough to buy a shiny new Model T in less than a year!

"An idealist is a person who helps other people to be prosperous" - Henry Ford.

"A business that makes nothing but money is a poor business" - Henry Ford.

[Ziggurat]

Originally Posted by Roger Ramjets

Ford did. He paid his workers more so that they would do a better job.

Those two sentences are completely different claims. And only the latter is correct.

Quote:

He reduced working hours and increased mechanization so that their workload was less, which increased their productivity.

That's exactly what I claimed. Well, I didn't explicitly mention the mechanization, since that can be done independently of salary, but my point was precisely that increased pay led to increased productivity.

Quote:

As a result he was able to produce cars at a lower price, thus increasing demand!

That's a semantic argument, but this definition of increasing demand is completely at odds with what Mulder claimed. Mulder was claiming that paying Ford workers more meant that Ford workers could start buying Ford cars, and that this increased his profits. As I already explained, that is nonsense. And your own argument matches mine in everything except your definition of "increase demand". You are arguing that increased productivity led to lowered prices, and lowered prices increase demand (even though demand at a static price would be unaffected). Fine, but that's not what either I or Mulder meant by the term.

Quote:

Ford was interested in everybody earning more

Whether or not that's true, for wasn't paying the salaries of everybody. He was paying the salaries of his own workers. And he increased their pay in order to increase their productivity, NOT to increase the demand that they had for his cars.

Quote:

Imagine that Ford Motor Company is the only business in the whole world, and cars are the only thing that people need.

Why? That scenario has no connection to reality. And it is precisely the differences between that scenario and reality which make Muldur's argument complete garbage.

Quote:

Of course a real economy involves many businesses and even more products and services, requiring a correspondingly complex web of financial transactions, but in the end it works out the same.

No, actually, it doesn't. Relative salaries matter, because they determine the allocation of labor resources, which in turn has a major impact on the productivity of the economy. All of which is lost under your one-business hypothetical.

Quote:

Money is just a method of streamlining complex barter arrangements. If capitalists keep all the money and don't pay their workers, they end up with no customers and the economy collapses.

If capitalists keep all the money and don't pay their workers, they end up with no workers. That's a rather more immediate consequence.

Quote:

In the US, the top 1% has 37% of the wealth. And they wonder why people don't have enough money to buy their stuff!

You mistake wealth for income.

[Muldur]

Originally Posted by Ziggurat

You have moved your goalpost, I see. Remember, this is what you said:

No goalpost moved...just a request for your data to show how markets spontaneously generate themselves w/o well-paid workers.

Even Ford Motors to this day admits that he was motivated in large part by the need for a market. And the historical fact is that Ford workers bought Ford cars in large numbers.

http://corporate.ford.com/news-cente...5-dollar-a-day

Quote:

Henry Ford had reasoned that since it was now possible to build inexpensive cars in volume, more of them could be sold if employees could afford to buy them.

Quote:

The existence of well-paid jobs may indeed have been a requirement for Ford to sell a lot of cars. But the point which you failed to grasp is that Ford couldn't supply these jobs himself. He couldn't succeed by paying his own workers to buy his own cars. He didn't succeed by doing so, as simple arithmetic proves. Paying them more helps other manufacturers whose goods they buy, but the only benefit he saw was the lowered turnover and increased productivity. That's why he did it. Not because of your myth of economic perpetual motion.

As opposed to your myth of "spontaneous market generation"?

Your reasoning flaw is in taking any one company in isolation (micro-scaling). Workers w/o decent wages cannot afford to consume.

It is therefore in the long-term best interests of ALL businesses to pay the highest possible wage to all workers to allow them to consume.

Modern corporations have forgotten that, focusing on minimizing labor costs not understanding what I reiterated above: workers w/o good wages cannot be prolific consumers.

Wages permit demand, which drives sales (and therefore profits).

[Muldur]

Originally Posted by theprestige

So Boeing could grow its market, and its revenues, by paying each of its line workers enough for them to buy a new 787 Dreamliner every year?

Not directly, but Boeing paying it's workers well allows them to buy other businesses' goods and services, allowing those businesses to pay their employees well, which allows those employees (along with those of Boeing) to travel which stimulates demand for airliners which in turn grows Boeing's market.

It is always in the best interests of the broad economy (and the survival interests of individual businesses) to pay good wages. It is possible to get by on paying crappy wages for awhile, especially if you can outsource your demand as well as your labor.

But sooner or later, the "race to the bottom" on wages must bring the system to a crashing halt as workers can no longer consume, which collapses demand.

[Ziggurat]

Originally Posted by Muldur

No goalpost moved...just a request for your data to show how markets spontaneously generate themselves w/o well-paid workers.

Oh, so you didn't move your goalpost, you simply abandoned it. Got it.

Quote:

Even Ford Motors to this day admits that he was motivated in large part by the need for a market. And the historical fact is that Ford workers bought Ford cars in large numbers.

Well, let's see what they admit:
"While Henry's primary objective was to reduce worker attrition—labor turnover from monotonous assembly line work was high—newspapers from all over the world reported the story as an extraordinary gesture of goodwill."
So the very first claim about motivation backs what I said. As for this later bit:
"Henry Ford had reasoned that since it was now possible to build inexpensive cars in volume, more of them could be sold if employees could afford to buy them."
That might be true, but again, the arithmetic indicates that it cannot have been a large effect on Ford's sales volume or profitability, which was your claim. And your "large numbers" are missing from the article. At no point does it give any indication as to how many Ford employees bought ford cars, but even if it was every single one (not likely), I guarantee you that this would still be a small fraction of Ford's output. The math simply won't work any other way. Oh, but that's right: you don't believe in math.

Quote:

As opposed to your myth of "spontaneous market generation"?

You mean your straw man.

Quote:

Your reasoning flaw is in taking any one company in isolation (micro-scaling).

Actually, no. You are the one who is doing that. Recall your attempt to argue what would happen if Ford was the only manufacturer on the planet.

Quote:

It is therefore in the long-term best interests of ALL businesses to pay the highest possible wage to all workers to allow them to consume.

This claim doesn't even make sense. There is no single "highest possible wage". There are different wages possible under different circumstances. A very high wage for a small workforce might be possible, but a lower wage might be possible for a larger workforce. Which is better? The highest possible wage, which leaves more workers without jobs at all? I don't see why you'd prefer this.

Your thinking on economic issues has been incoherent from the start.

[theprestige]

Originally Posted by theprestige

So Boeing could grow its market, and its revenues, by paying each of its line workers enough for them to buy a new 787 Dreamliner every year?

Originally Posted by Muldur

Not directly, but Boeing paying it's workers well allows them to buy other businesses' goods and services, allowing those businesses to pay their employees well, which allows those employees (along with those of Boeing) to travel which stimulates demand for airliners which in turn grows Boeing's market.

So Boeing could indirectly grow its market, and its revenues, by paying each of its line workers enough for them to buy a new 787 Dreamliner every year?

ETA: Really? Really? If Boeing could grow its market and its revenues by paying its line workers enough to buy a new 787 Dreamliner every year... what can we conclude from the fact that Boeing clearly does not pay its line workers anything close to that amount?

Obviously, the true purpose of Boeing isn't to increase its market and its revenues. Obviously, according to you, the true purpose of Boeing must be to lose money by enslaving line workers in some kind of complicated and costly brainwashing conspiracy. Because if Boeing really wanted to increase its market and its revenues, it'd pay each of its line workers enough for them to buy a new 787 Dreamliner every year. Right?

Right?

Because that's exactly what Henry Ford would have done, and it totally worked for him, right?

Right?

ETAA: In fact, why don't all employers pay a million dollars a day? Even if they have to borrow heavily to meet their payrolls, surely their profits will repay the debt a million times over, right?

Muldur, do you even have a job? Have you even tried to convince your employer to pay you more, based on this reasoning?

Obviously you want us to believe this idea of your is anything other than pure idiocy. But we're the least of your concerns: Somebody out there is paying you--or your caretaker--real money for real work. Surely it's in your best interest to marshal your best arguments, and convince them that you should receive more money for the work you do (or the work your caretaker does). So how far down the rabbit hole does your logic really go?

[respect]

Originally Posted by Muldur

I'm still waiting for any of you to explain how there can be demand without well-paid workers with the ability to buy stuff.

The product isn't marketed to them. This may shock you but construction workers rarely buy skyscrapers, they are not the expected customers.

[respect]

Originally Posted by Muldur

Not directly, but Boeing paying it's workers well allows them to buy other businesses' goods and services, allowing those businesses to pay their employees well, which allows those employees (along with those of Boeing) to travel which stimulates demand for airliners which in turn grows Boeing's market.

It is always in the best interests of the broad economy (and the survival interests of individual businesses) to pay good wages. It is possible to get by on paying crappy wages for awhile, especially if you can outsource your demand as well as your labor.

But sooner or later, the "race to the bottom" on wages must bring the system to a crashing halt as workers can no longer consume, which collapses demand.

The logical conclusion to your, and Ford's supposed, argument is not that all workers should be paid well. It is that businesses should stop paying employees based on the value of their contributions to the firm and start paying them based on the cost of final retail prices of the goods that they produce. Whereas Boeing's employees would all be billionaires t-shirt manufacturers would be in extreme poverty as they would only need to be paid enough to buy t-shirts.

[respect]

Originally Posted by theprestige

Muldur, do you even have a job?

LOL, don't be silly.

Originally Posted by theprestige

Have you even tried to convince your employer parents to pay you more raise your allowance, based on this reasoning?

Corrected so that it fits the reality of the situation.

[Beerina]

If anybody ever increases productivity enough the average person can afford a jet or a skyscraper, it won't be because of government or unions, or their collusion, sorry.

And there will be politicians and hoi polloi who listen to them whining about how the rich can afford moon bases and space ships and their own space stations in orbit around Saturn.

[respect]

Originally Posted by Muldur

It isn't going to generate itself. Demand requires the ability to satisfy that demand or it's pointless.

I can want a LCD tv from here until Doomsday, but w/o 1) a job that pays 2) sufficient wages that I have the ability to either save up for or make payments on that TV it doesn't matter how bad I want it or how bad the maker of the TV wants to sell it. I get no TV and the seller gets no sale.

It's that simple. It is always in the best real interest of business to provide local jobs at good wages. US businesses, yeilding to the demands of the parasitic investor class for immediate profits have tried to override that basic truth, and our economy is in the crapper because of it.

Real life trumps your theories and "math" every time.

Labor costs are only one input into the production of a good. It is not possible for a firm to pay its employees enough to self create its own demand, even if the firm accepts no profit.

For the labor to be able to be its own self-perpetual customers their pay would have to be at least as high as the total retail price of the goods they produce which would leave nothing left over for other input costs.

I don't expect much sense from a creationist communist with a sociopathic sense of entitlement but your claims in this thread are ridiculously obtuse even by your standards.

[3point14]

So, thought experiment...


Crate one, fictional company - GlobalCo.

GlobalCo owns everything. It sits at the top of the tree of all conglomerates. It has a nominal, single employee, it's honourary president, who draws no salary.

Now there's one company. This one company pays everyone, and, ultimately is paying everyone. It's making it's own demand. It has to.

So, is there now one company creating it's own demand? I understand that the economy is not a zero sum game, so I suspect it can. Is it only the diversity of this company that means it can do so? You couldn't pull the same trick making only, say, cars.


I think a sufficiently large, diverse company could manufacture it's own demand, certainly in isolation. I really don't know though, it' just a thought experiment. I fully expect it to be ripped to shreds.

[respect]

Originally Posted by 3point14

So, thought experiment...


Crate one, fictional company - GlobalCo.

GlobalCo owns everything. It sits at the top of the tree of all conglomerates. It has a nominal, single employee, it's honourary president, who draws no salary.

Now there's one company. This one company pays everyone, and, ultimately is paying everyone. It's making it's own demand. It has to.

So, is there now one company creating it's own demand? I understand that the economy is not a zero sum game, so I suspect it can. Is it only the diversity of this company that means it can do so? You couldn't pull the same trick making only, say, cars.


I think a sufficiently large, diverse company could manufacture it's own demand, certainly in isolation. I really don't know though, it' just a thought experiment. I fully expect it to be ripped to shreds.

If it literally owns everything, yes it could, as the question is identical to asking if the entire aggregate global economy includes both its supply and demand.

[HarryHenderson]

Originally Posted by Ziggurat

Oh, so you didn't move your goalpost, you simply abandoned it. Got it...

A patented Muldur-ism. You should see how <gulp> good he is at 'convincing' the JREF masses of Bigfoot's existence. I bet you didn't know Bigfoot really exists, BUT solely to show us 'smarty pants' how stupid we are. That is to say, if Muldur 'believes' Henry Ford devised a perpetual motion manufacturing machine, Henry Ford devised a perpetual motion manufacturing machine because, well, why would he (Muldur) be wasting time commenting on anything other an absolute truth?! I mean hey, this is Muldur and he's only about truth. Ask him.

[respect]

Originally Posted by HarryHenderson

A patented Muldur-ism. You should see how <gulp> good he is at 'convincing' the JREF masses of Bigfoot's existence. I bet you didn't know Bigfoot really exists, BUT solely to show us 'smarty pants' how stupid we are. That is to say, if Muldur 'believes' Henry Ford devised a perpetual motion manufacturing machine, Henry Ford devised a perpetual motion manufacturing machine because, well, why would he (Muldur) be wasting time commenting on anything other an absolute truth?! I mean hey, this is Muldur and he's only about truth. Ask him.

LOL, a creationist communist who hates math and believes that bigfeet are running around?

[Mark6]

Originally Posted by respect

LOL, a creationist communist who hates math and believes that bigfeet are running around?

Yes. Muldur is rather unique.

[blutoski]

One of the things I've been noticing is missing from these conversations - and I have been the only person to bring this up in my own circle - is that the evolution of production to cheap labour nations may have actually slowed down technological progress and net improvements in standard of living.

Over the past 200 years of industrial production, significant gains have materialized from technological advancements. Over the last 40 years, however, I've observed that management has weighed the long term savings from capital expenditure to reduce labour cost by reducing labour hours input required per unit... vs offshoring to reduce the cost per unit while keeping the same labour input by reducing the cost of the labour hours themselves.

In some cases for my own employer, we have actually gone backwards technologically because the low overseas labour costs allows us to higher yield per labour dollar, even if it actually requires more labour. For example, shifting a call centre from a state of the art Canadian plant to a 40-year-old facility in Guatemala, where the calls take longer and sound quality is terrible, but we still come out at a quarter of the cost.

Another example is the abandonment of an expert system program for voice interpretation to assist customers' navigation through voice queue. We got halfway there, then the union collapsed and offshoring labour to navigate the calls by human is cheaper than developing and maintaining AI software.

Japan was the model for this after reconstruction - a national labour shortage led to significant automation and their intensely mechanized production lines had the dual side effects of high employee productivity and very consistent product (important observation to those six sigma black belts out there).

I feel we're still years away from that a planetary nadir / inflexion point for technological advancement, after which things will have to accelerate again to generate improvements in standards of living. In the meantime, it's a long way down still - when Chinese start to expect/demand continual increases in standard of living, they will start cultivating labour exporting nations of their own... I'm thinking Africa and Indonesia off the top of my head.

In the meantime, US workers are certainly more productive than 20 years ago, but the incentive is not there for an employer to invest in physical plant to do so while overseas opportunities still exist. When I look at the patent wars making the headlines, it's about how icons display on a cellphone.

[psionl0]

Originally Posted by blutoski

US workers are certainly more productive than 20 years ago, but the incentive is not there for an employer to invest in physical plant to do so while overseas opportunities still exist. When I look at the patent wars making the headlines, it's about how icons display on a cellphone.

It's not just capital investment, training is also going by the wayside.

Since it is cheaper to import a fully trained (lowly paid) worker than to train one locally, apprenticeships are as scarce as hens' teeth (one reason why kids have to go to school longer these days).

The countries that are exporting jobs to third world countries are all debtor nations. This short sightedness is going to bite them fairly in the bum.

[Ziggurat]

Originally Posted by blutoski

One of the things I've been noticing is missing from these conversations - and I have been the only person to bring this up in my own circle - is that the evolution of production to cheap labour nations may have actually slowed down technological progress and net improvements in standard of living.

Over the past 200 years of industrial production, significant gains have materialized from technological advancements. Over the last 40 years, however, I've observed that management has weighed the long term savings from capital expenditure to reduce labour cost by reducing labour hours input required per unit... vs offshoring to reduce the cost per unit while keeping the same labour input by reducing the cost of the labour hours themselves.

Quite possibly, but I think there's a limit to that process of technological stagnation, both because you can still benefit from automation even with low labor costs, and because at a certain point, automation can beat out even lost cost labor.

[blutoski]

Originally Posted by Ziggurat

Quite possibly, but I think there's a limit to that process of technological stagnation, both because you can still benefit from automation even with low labor costs, and because at a certain point, automation can beat out even lost cost labor.

Yes, that's the inflection point I mentioned: the point where you've reached the limits of labour replacement as cost control strategy, and capex can be recovered over, say, a 5-year amortization.

However... at the risk of paraphrasing Keynes... what if that day is 100 years from now?

Just to give you a concrete example: my friend is a mining engineer. He designed a mine setup as a contractor in Zaire in the 1980s, and at that point it had some automation. Here it is almost 30 years later, and the labour costs have actually decreased inflation-adjusted, while the cost of fuel and parts for the equipment has increased. Net result: the equipment was retired and replaced by prison labour. That's a generation of decline away from capital investment with no reversal in sight.

Regarding that article: yes 'made in China' embroidery could be made obsolete by these devices... When I was a kid, everything was made in Japan... but cheap labour on the Asian mainland stalled the Japanese economy 20 years ago. Will these machines mean embroidered goods won't say 'made in DRC' in the foreseeable future? There's a reason China is investing heavily in Africa.

[daenku32]

I didn't read all the posts before this, but I was thinking about this the other day, and to me the only time you actually have an incidence of comparative advantage taking place in international trade is when it is top-down, centrally controlled. The laissez-faire method would always go by absolute advantage since it doesn't consider what is the best for the economy but what gives greatest immediate profit on the micro level. That implies absolute advantage. It would be only under command economy that you would see instances of comparative advantage.

[Francesca R]

Maybe you should learn more about it then, since nothing about the principle of comparative advantage prevents unplanned economies exploiting it.

You might as well say that evolution can't happen without an intelligent designer.

[Muldur]

Still waiting for someone to explain how markets magically and spontaneously generate themselves absent demand from well-paid workers able to consume...

[Francesca R]

If you made something up that nobody else claimed, you likely have a long wait.

[Muldur]

^Apparently they do because they still think firing workers and cutting wages is the best way to "help" the economy by putting all the generated value in the company and the stockholders' hands.