Cheap Labor

U.S. companies are no longer investing in much new capacity at home, and the ranks of U.S. engineers are thinning. In contrast, China is emerging as the most competitive manufacturing platform ever. Chief among its formidable assets is its cheap labor, from $120-a-month production workers to $2,000-a-month chip designers. Even in sophisticated electronics industries, where direct labor is less than

10% of costs, China's low wages are reflected in the entire supply chain -- components, office workers, cargo handling -- you name it. Millwright Ron
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Reply to
Millwright Ron
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For sure and there are only three things that make "wealth" in this world and those are...

a) mining b) manufacturing c) agriculture

Your neighbors (not in MY back yard!) and gov't busy-bodies have done their best to screw up all three!

You younguns out there... have fun in the future, you here? ;)

Alvin in AZ

Reply to
alvinj

You forgot one.

d) Recreation. People always have "spare" money for fun.

Regards Charles

Reply to
Chilla

The "family farm" was on its way out from the first day the first subsidy check was cashed.

Just wish Neil Young would sing about that instead of blaming the bankers.

No, I sure as heck didn't. ;)

That-does-not-make-wealth! :/ Only moves it from one pocket to another.

Mining, manufacturing and agriculture... three things and only three things...

Got it, CA? :)

"it's only worth what someone is willing to pay for it"

Alvin in AZ (libertarian)

Reply to
alvinj

Hi Alvin.

There are even those who would limit the creation of "new" wealth to mining and agriculture ONLY.

Manufacturing companies must first "purchase" the raw materials they use, from agricultural or mining sources, using money already "created"; this does not "make-wealth" and instead is merely "value added."

dennis in nca p.s. Love that ZDP-189 blade.

Reply to
dgrup

That doesn't make much sense as your description describes mining well enough. Kind of hard to dig all that ore and smelt it without an investment of money already created, don't you think?

And if it isn't "created money" what you call value added? If you add value, that value must have been created or you couldn't have added it.....

Bruce-in-Bangkok (correct email address for reply)

Reply to
Bruce in Bangkok

No one would deny people will pay money for "value added" but, again, this is only a matter of moving money and re- sources around and not the creation of "new" wealth. The companies which produce autos or t-shirts must rely on the efforts of miners and farmers for their raw product.

Farmers and miners who supply the new product will use money for gasoline, seed, fertilizer, etc. (money from previous product created) but, watch closehere, they are "not" supplying reworked products but new product taken from the earth through labor. These products are new, not previously available for the use of man, created through the efforts of miner or farmer.

Nothing wrong with "value added" as without this we'd all be eating bark but this does not create "new" wealth.

dennis in nca

Reply to
dgrup

I have been following this OT discussion and have been waiting for someone to correct the basic assumption about new wealth being discussed, but so far no one has hit upon it yet, so I will try to shed some light on it.

Mining, and mining only, used to be the only way to create "new wealth," but no longer, nor does agriculture, or any other non mining economic activity. The important word being "create." New wealth is created today by the Fed to bolster or slow the economy by adjusting the Federal discount rate up or down. When we were on the gold standard, and there was $1 of gold backing each dollar in the money supply, in paper or on paper, it required new gold to be added to the Nation's treasury to allow more money to be added to the Nation's money supply, and therefore "create new wealth," and expand the economy. At that time banks could not lend money they did not physically have in their assets, but all that has changed.

It used to be a one to one relationship, gold to dollars, and it hamstrung the economy. Fortunately, just when the American economy most needed to expand its available capital, the gold rush in the Western U.S. and Alaska occurred providing the needed new wealth to fund the developing industrial revolution. But once we went off the metal standards, both gold and silver, and the money supply could be adjusted at will by the Fed, the "new wealth" concept no longer applied. Wealth became nothing but numbers in ledgers, and later on hard drives, that could be manipulated at will by the Fed. But always keep in mind that underpinning the standard of living is more than simple numbers...there must be material resources available to make the necessities and luxuries of life. If the Fed were to suddenly double the money supply, it would not result in an increase in our standard of living, but instead, runaway inflation and a reduction in our standard of living would occur.

Today, the most important industry for almost any nation is manufacturing and export. I said "almost" because some nations are living off the sale of their raw natural resources, especially oil, and that is non sustainable over time if they don't invest the income in sustainable industry for the future.

Export brings us wealth from other countries that is multiplied within our own economy. Without export being greater than import, the economy of a country has to decline over time, and we are now experiencing just the tip of that iceberg. Service industries gain us little or nothing, only manufacturing and export gain us an increase in our true cumulative wealth and standard of living. A country can increase its wealth more quickly if its industry can be supplied by its own raw materials resources, but that isn't necessary to sustain economic growth....the possible exception being energy. Cheap energy is critical, and without it the system may come to a grinding halt no matter how well capitalized. It is possible that the anti-nuclear movement that killed all new nuclear reactor production may have killed a lot more than that...time will tell. BTW, the standard of living in the U.S. has declined for the last four consecutive years, and I doubt that overall trend will be reversed in my lifetime.

There is a new wrinkle now that is totally changing, or has changed, the world. Despite NAFTA, and other free trade agreements, which are often blamed for our troubles, those changes would almost certainly all have happened on their own due to the medium you are using to receive this email. The Internet has created a "flat" world without boarders so far as the economy is concerned. It, and not NAFTA, is the cause of a developing one world economy. NAFTA just speeded it up. And because of the Internet, and other factors, our unions have now become their own worst enemies.

You can't expect a company to use union labor at $25 an hour to manufacture widgets when it can simply make an order for those same widgets from India or China, via the Internet, and have them made using labor at $5 a day. The Internet, and not NAFTA, or the government, has created a flat playing field for all countries, like it or not. That is good for the third world countries, but for countries like the U.S., it is a huge problem.

The Internet has leveled the playing field, which means the world will theoretically move toward an economic balance, the poor countries gaining in their standard of living, and the wealthy countries decreasing in theirs. There are only so many widgets to go around, no matter how many dollars there are in the money supply. It is easy to blame our companies for going outside the U.S. to buy, or to manufacture goods, but they are not responsible to their employees, only to their stock holders. Liberals, and unions, like to think that a company is ultimately responsible to its employees. That is only true if the employees own the company. A company has to be profitable to exist long term, so it has to do whatever is required of it to insure its profitability and return to investors. If this bothers you, become an investor and get your piece of the pie.

So how will it play out in the long term, I don't know, and neither does anyone else. Not only is the playing field now becoming level, it is a totally new playing field that no one on earth has previous experience with. The new laws of economics are only now being discovered. There is one thing I think that can be said with some assurance of being correct, if you are a younger generation American, you better get a lot of education because you won't be making a living in the blue collar industries we used to depend on. A high school diploma isn't even a beginning. A four year degree, or equivalent in a trade school, is only a starting point. The blue collar jobs are fading from the scene, and with them will go the unions....unless unions are able to adapt as the economic environment they work within changes.

For more information I suggest you investigate the free economic presentations available on the MIT server in its free public education series. They have had some wonderful video presentations in the past, and will again in the future.

Ron

Reply to
Ronald Reil

Hi Ron,

Yeah it is a little OT isn't it, but its an unmoderated group, so all's fair... I guess.

I think I can back you up a little here, new wealth can be created electronically also, a decimal point typed in incorrectly can change $29.95 to $2995 (yes this did happen to me once, and I picked it up 6 months later, by that time there was noting to be done and the error had to stand).

Regards Charles

R> I have been following this OT discussion and have been waiting for someone...

Reply to
Chilla

Nah. You're off base. Oh, don't get me wrong, your political agenda certainly has value, and in an OT subject you don't have to follow any set form, but this isn't what we were talking about. If you'd like to respond to the subject at hand I'd like to discuss it with you, but if you'd rather talk politics, kindly leave me out. Thanks.

dennis in nca

Reply to
dgrup

Yep. :)

Sorry, Ron, that's just "playing with numbers" not "weatlh creation". :/

Take me for an example, I was a dumb railroader. At any given time there were cars full of stuff being shipped. Mining products, Manufatured products, Agricultural products, Yep CA, even finished films inside the UPS "piggybacks" no doubt. :)

Everybody can attempt to argue this out, I'm not smart enough to defend it... all I know is, those three are the results of others arguing it out in details we can't begin to type out here.

See them as the "answer to the question" and see "why they are the only ones" as opposed to going at it the other way.

It'll soon be clear to you why those three are "the only ones". :)

"no need for a railroad without those three" "no need for a Walmart without those three"

Even tho I was directly involved in moving that "crap;)" from point A to point B the railroad ain't part of "the three".

See "why" that is... on your own... and you'll understand it.

Value added during "manufacture/processing" creates "wealth" (or could call it... an increase in real value).

That's why manufacturing is included.

When you see this in your head, fitting-together, you'll see the Union's role in certain problems... fixed and/or worsened... but many times you'll read/hear the news and go "bullshit :/".

Alvin in AZ ps- "a blacksmithing NG" is for "blacksmiths" to talk pps- if other blacksmiths don't like the topic... just say so :) ppps- we'll take it as a suggestion ;) pppps- the new IRS "money back" thing is the same sort of crap FDR did that prolonged and worsened the depression! :( ppppps- be ready to have yourselves some fun out there, hear? ;)

Reply to
alvinj

No, not correct. It isn't just playing with numbers. No matter how much gold we pull out of the ground today it doesn't create new wealth, it only accumulates it for those mining the gold, and there is a very big difference. When you pull a lump of gold out of the ground worth $200, there isn't 200 new dollars suddenly added to the money supply...."new wealth." If the miners took out a loan to help them finance the mining operation, a portion of that loan will be new wealth due to the discount rate the bank uses when making the loan, if the bank is making loans beyond the capital resources they have, which is what the discount rate allows and regulates.

You could make the same argument that mining oil creates new wealth, but it doesn't, it just moves wealth from those countries without oil to those that produce it....redistribution. The money supply doesn't increase because of new oil in the system unless there is financing involved, and of course there is. The same can be said for new homes. The creation of wealth by mining was true in the classic economic system when we had gold backing the money supply. Any 100 level economics class covers that in the opening quarter when they discuss classical economics of the 1800's. It is funny how many people know how the classic system worked but have no idea how things work today. Perhaps that is why we are in such a pickle today.

Ron

Reply to
Ronald Reil

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