reducing the cost of labor

I was replying specifically to your comment "the only ones who benefit are the company management and stockholders" and trying to point out that in many cases the "stockholders" may well be the working man, not some invisible entity. Harley Davidson is a better example - owned by the employees.

This Management versus workers is too easy an argument. In my experience "Management" is always on th lookout for "workers" who can be promoted, or upgraded.

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

snipped

Not in the case of Zestril that I quoted. See the following:

AstraZeneca is one of the world's leading pharmaceutical companies, with a broad range of medicines designed to fight disease in important areas of healthcare.

Active in over 100 countries with growing presence in important emerging markets; corporate office in London UK; major R&D sites in Sweden, the UK and the US.

In nearly all cases, I can buy a medicine cheaper here in Thailand then in the U.S. and these are imported medicines. If they are made locally it is about 1/10th the price.

I realize that I'm using an example of an item where the price IS controlled by the Government and I think it is a valid example of why the U.S. prices are so much higher then other countries.

All pharmaceutical companies protect their developments by patent or copyright and there is no reason for government price controls on medicine except to ensure that pharmaceutical companies make a killing. I heard the other day that the patents/copyright finally ran out for Fosamax, a medicine used to treat osteoporosis. The made (I forgot how many) billion dollars during the period the drug was protected. .

Re: you AIDs comment, I don't know whether the Thai government subsidizes the AIDS program here or not but the cost to a Thai is just at $1.00 a month under the 30-baht medical scheme. But, as I say I don't know where the medicines come from except that they are legally made.

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

Oh so you are saying the NEA has improved education?

rotflmao

Wes

================= It all depends on what you mean by "works" and for who.

If you mean a better standard of living for the population in the aggregate, then not only no -- but HELL NO.

If you mean a huge increase in the absolute and relative wealth of the richest 1% then "comparative advantage" has been an outstanding success over the last 20 years right here in the USA.

It is exactly here that "the wheels come off." We are attempting to operate one country containing two separate worlds.

Unka' George [George McDuffee]

------------------------------------------- He that will not apply new remedies, must expect new evils: for Time is the greatest innovator: and if Time, of course, alter things to the worse, and wisdom and counsel shall not alter them to the better, what shall be the end?

Francis Bacon (1561-1626), English philosopher, essayist, statesman. Essays, "Of Innovations" (1597-1625).

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Bruce, I worked in pharmaceutical marketing for four years and A-Z was one of my clients, fer chrissake. Believe me, your costs have nothing to do with manufacturing costs. Neither do ours. Yours are based on price controls and accounting that covers only the marketing and distribution costs in Thailand. Ours are based on everything they can get out of the market, with no holds barred. Period.

Of course. You're larded with "compulsory licensing." That is, the Thai government gives your pharma industry a license for pirating. d8-)

Why, because you have price controls and we don't? Sure, that's a good reason why prices are higher here. It's also the reason we have the really good jobs in pharma.

Huh? You have that backwards. The price controls keep prices *down*, not up.

Of course. That's what the pharma business is all about. Big money on some drugs, losses on many others. In the end, it's a highly profitable industry. Or it was. Things are looking pretty iffy for Big Pharma right now.

Bruce, you started with an interesting point about manufacturing costs, but you're barking up the wrong tree to use pharma as an example. There are no conclusions that can be drawn about relative competitiveness from drug pricing -- except that it's screwed up so deeply that every country is different, and even every drug is different.

Why don't you try something else, like machinery or something?

-- Ed-in-New Jersey

No, by "works" I mean that trade actually is done the way Ricardo's theory of comparative advantage says it should be done. I've never heard of one, and I've asked some economists about it over the years. They never gave me a convincing answer.

-- Ed Huntress

Nonsense.

Which one?

The end in sight is their real underlying value. I doubt if we'll come anywhere close to that.

broke at this time and is selling assets to maintain the cash flow.

There is no such thing as being "technically broke" when your debts are denominated in your own currency, if it's not backed by anything tangible.

-- Ed Huntress

=========== The main reason is because there are no such examples/answers.

A few of the reasons that the theory doesn't work are:

#1 -- countries don't trade, people and companies do. In many cases the people/companies doing the trading are not "citizens" of the country, and the "profits" are exported.

#2 -- All the text-book examples involve bilateral trade. As soon as you have 3 or more trading partners, the problem becomes indeterminate from a math standpoint, like a 3 body gravitational problem.

#3 -- all the examples use counter-trade, i.e. goods for goods. In the real world this is miniscule, and as soon as money is introduced [as opposed to gold which is another commodity] exchange rates, etc. come into play, totally obscuring the dynamics.

#4 -- There are many other considerations besides "trade," from a "national preservation" perspective, for example having a secure food supply. The UK came within a hair's breadth of defeat in both world wars because they ignored this basic requirement.

#5 -- It is increasingly apparent that Ricardo was a propagandist for the UK during the Napoleonic wars. Because Napoleon was imposing an early version of the EEC to promote trade and industry within French Europe [the Continental system], the UK naturally was all for free trade. If Napoleon had been for free trade, I am sure Ricardo (or another flak) would have touted "Imperial Preference" or some such. What is not clear is if Ricardo actually believed his thesis, and was picked because this was what the establishment wanted to hear, or if he determined what the establishment wanted to hear, and wrote accordingly. (Sound familiar?)

that the country that Ricardo used as an example [Portugal to export wine and import wool] is specifically mentioned as a holdout against the Continental system.

#6 -- FWIW Economics and Astrology appear to be very similar. They have an arcane vocabulary, bewildering mathematics, offer convoluted explanations for past and future events, and are worthless as a guide to practical actions. The practitioners are highly paid and appear to have undue and unjustified influence in society and government.

Unka' George [George McDuffee]

------------------------------------------- He that will not apply new remedies, must expect new evils: for Time is the greatest innovator: and if Time, of course, alter things to the worse, and wisdom and counsel shall not alter them to the better, what shall be the end?

Francis Bacon (1561-1626), English philosopher, essayist, statesman. Essays, "Of Innovations" (1597-1625).

I agree. They are especially on the lookout for workers who will do the job for less money. Which, after all is why all the jobs are going to third world countries. The problem it seems is that the US no longer holds any comparative advantage over the poorer countries. Too bad no one told us what to do when we are disadvantaged in the global competition. Other countries can now make everything we used to for a lot less due to cheap labor costs so we therefore have to decline economically? That would be the case if it weren't for governments getting involved to protect their markets. We aren't protecting ours but they are. We're losing and they are winning. If I was in charge I'd do what they are doing.

Hawke

On Wed, 12 Mar 2008 13:54:21 -0600, with neither quill nor qualm, F. George McDuffee quickly quoth:

I was researching a book and came across Schumacher's _Small is Beautiful_. Ever heard of it/him? What's you guys' take on it?

-- Shake off all the fears of servile prejudices, under which weak minds are servilely crouched. Fix reason firmly in her seat, and call on her tribunal for every fact, every opinion. Question with boldness even the existence of a God; because, if there be one, he must more approve of the homage of reason than that of blindfolded fear. -- Thomas Jefferson

Sorry, incorrect. the Thai government is discussing the CL question with one or two drug companies but there has been no decision. According to the pharmaceutical department of Chulalongkorn University (the most prestigious school in the country) all current drugs covered by copyright or patent are imported from the makers, or their licensed representatives. (they operate a extremely well stocked pharmacy in the heart of Bangkok so they are easy to talk to).

But the point of the discussion was my trying to illustrate my assertion that costs in the U.S. are too high. I used the example of Zestril simply to point out that

More snipped.

I think I used the wrong example :-) as I had no intention of discussing the pharmaceutical industry. My point was, simply, that costs in the U.S. are too high. Perhaps I should have said something like "Why, even my medicine for high blood pressure costs less then a quarter of the U.S. price".

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

He went the way of "appropriate technology." Kaput.

However, I saw his spectre raised recently in Bill McKibben's recent book, _Deep Economy: The Wealth of Communities and the Durable Future_. I was surprised anyone remembered him.

Here's an angular take on his ideas, which I've thought about in recent years because I'm interested in both subjects: "Small is beautiful" ran up against two things. The first was the New Trade Theory developed in the '70s, which is based on economies of scale. The second is that the Japanese proved New Trade Theory by flipping the idea that had been growing in the US in the early-to-mid '70s, that computers and NC were going to produce highly customized products and replace conventional mass production with "one-at-a-time" mass production. The Japanese, in other words, killed "small is beautiful." R.I.P.

It's still a valid idea. Along with appropriate technology, it could be revived in competition with the capitalization ideas pushed by the IMF and by theories of efficiency through globalization.

-- Ed Huntress

Bruce, I don't know what kind of smoke the Thai government is blowing your way, but they granted compulsory licenses in the last year or so for anivirals efavirenz and lopinavir+ritonavir, and for clopidogrel, a heart medication sold by Bristol Myers Squibb. There were four more in the works but Abbott Labs responded to the CL for lopinavir+ritonavir (Kaletra) by announcing they wouldn't register any more drugs in Thailand. The US put Thailand on its 301 Priority Watch List, citing " further indications of a weakening of respect for patents, as the Thai Government announced decisions to issue compulsory licenses for several patented pharmaceutical products."

NOW the Thai government is re-thinking the CLs, and may pull back on the ones they've already granted -- after they faced the probability that other pharma companies would just stop doing business there. If they can't make money there they aren't going to play.

My response was no, it gives no hint. Because that wasn't the issue. If the Zestril was made in the US (it probably was made by A-Z's "licensed representative" in Puerto Rico), we'd sell it to you in Thailand for $12.90/30, too. That's the way the business works. It has nothing to do with costs within the US. It has everything to do with price controls and what the local market will bear. That's the way it is on virtually *all* pharmaceuticals, everywhere in the world.

The US market, as of now, will bear the costs, and there are no price controls. So A-Z sells Zestril for $48.00/30 *here*. Not there. They can get away with it in the US, but not anywhere else. That's what I was trying to tell you earlier.

Now, for future reference, you can buy the generic of Zestril at Wal-Mart for $4.00/30. And there are plenty of other ACE inhibitors to choose from if you don't like generic Zestril. That's an important thing that you're missing. FWIW, I can buy branded Zestril for $5.50/30 days, or $5.50/90 days if I order it by mail. That's because I have good pharma coverage. I'm the kind of person who might buy branded ACE inhibitors in the US. If you don't have the insurance coverage, you buy generics.

OK, back on track. It's true that costs in the US are high. For comparison, the USA's GDP is around $44,000 per capita, while Thailand's is around $8,000. Thailand's average income is under $4,000/year (much higher in Bangkok); the US runs around $37,000. The Gini index for the US is 40.8; for Thailand, 43.5.

So income distribution for both countries is rather widely split -- somewhat wider in Thailand -- while the US has a GDP running more than five times greater. One would expect costs to be MUCH lower in Thailand, as they are. It isn't just incomes in manufacturing that matter. It's the entire supply chain of embedded incomes, which means that practically all manufactured goods will cost much less to produce in Thailand.

Now, given all that, what is it you're saying, or prescribing, for the US? Our numbers are similar to those of Europe and Japan, and they're typical for highly developed economies -- the ones at the top, in terms of income and GDP. In direct competition, for anything that can be made in Thailand, we're going to get creamed. What would you suggest?

-- Ed Huntress

More snipped

Well, the box is marked "manufactured in the United Kingdom" so I assume that it is.

As I say in another post, the Thai's don;t have any "price controls" on drugs, or anything else that I know of. what they do have is import duties.

Certainly. the Thai Pharma controls basically control only the sale of narcotics or other drugs of that type, but that is more of a police matter then anything else.

remaining pharmaceutical conversation deleted

The problem isn't wages as such. It is that the "standard of living" in the U.S. is far higher then in other countries and thus wages must match. You MUST have air conditioning, MUST have a dishwasher, MUST have a car, MUST have this or that, this or that your parents did perfectly well without, and of course to pay for these things you need to make more money.

Of course, in some cases, the fact that everyone owns a car (for example) means that cities, mainly west of the Mississippi, don;t need public transportation, thus in the 1970's the voters voted down a bond issue in Los Angeles two years in a row.

As they say in New York, "what goes round, comes round" and as the "standard of living" goes up so do the wages you must receive to purchase these items. Of course the increased money circulating in the economy tends to drive up prices - after all now that one has more money to spend the likely result is that it will be spent.

I don;t believe it is possible. Our Comptroller used to tell the story about working as an accountant at a company that had a "cost cutting" program. He asked the comptroller "what is the cost cutting program" and was told "anything that doesn't effect this department".

No one is going to accept a voluntary cut in income. whether it is a company or a worker. It is just not human nature.

More snipped

Of course. and the guy that promoted the scheme undoubtedly got a very large bonus or a promotion for coming up with the idea.

In closing, this subject is spreading rapidly. If we don;t stop we will be into scientology or illegal immigrants if we aren't careful (probably also impossible to solve subjects). I suggest that we either end or chop it up in pieces to cover one subject each.

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

messagenews: snipped-for-privacy@4ax.com...

Much deleted

It wouldn't make any difference what party was running things the whole economy was too top heavy to last.

I read a while ago that pipeline welders could make $50.00 an hour - I can hire certified Thai pipe welders that will churn out as many x-ray welds a day as a white man for about $1,000-1500 a month, working 7 days a week/12 hours a day. You can't compete.

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

I'm retired now but I worked for the past 30 years outside the U.S. and you are correct. When I started all the supervisors were from developed countries but as time went by more and more locals became qualified. I participated in a program ARCO Indonesia had to take about 30 fresh collage graduates and try to turn some of them into managers.They treated them just like any other big company, seminars, training, promotions and terminations as merited, temporary transfers for some to other countries to gain more experience and so on. the result is that (if he hasn't retired) one of them is the President Director of ARCO Indonesia and another is the V.P. Production..

All of this took some 20 years to occur but it has occurred and no, in most cases there is no longer any reason to hire an American.

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

Ok. Here's my one subject: The idea that costs in the US are too high is a case of looking at things from the wrong end of the telescope. The fact is that our costs are based on an equilibrium established when there was little foreign competition. There is only one fundamental reason it couldn't be sustained, and that would be if there was something structurally unsustainable about isolating ourselves from low-wage competition, in a limited and selective way, and it cut us out of too many export markets as well. The only model for this in recent times is Europe, which self-destroyed its small-computer production capabilities by isolating itself through tariffs at a crucial time; but which, on the other hand, did the same thing with its car market, limiting Japanese imports to 10% market share, for example, and actually stimulated its domestic producers in the process -- producers that are now on top of the world in terms of quality of product and demand.

Now, our consumption of resources is another issue. It's unsustainable, but China's is, too, and Europe's is problematic. That's a problem we're all going to have to deal with soon but it's not the same thing as sustaining relative incomes. As the world deals with limited resources, we will, too.

The lessons drawn from Europe and Japan are quite different, but we all face similar problems. I'm not convinced that reducing our standard of living (except for energy consumption) would materially change anything. The gaps are too large. And it looks like Asia will take too long to approach our cost levels. That's a long-run prospect. Something will happen, of necessity, before they reach anything close to cost parity. In that regard, as Lord Keynes said, in the long run we're all dead.

So we're toying with the idea of selective protectionism; a dangerous idea but one that may be the only way to deal with it. A lot would depend on how Europe and Japan react to the same pressures. The idea would not be to keep our industries in a hothouse but rather to slow down the pace of change to something that we could deal with.

To me, that's the key long-term economic issue we face. Most of what's going on now in financial markets has little to do with it, and will play itself out regardless of it. The question is how much damage we can afford to sustain for the sake of an economic theory that has never, in reality, been tried before: free trade.

-- Ed Huntress

Note that the country that Ricardo used as an example [Portugal

That's good, George, and it sounds right on many counts. So the next question is, why in the hell do trade theorists still talk about it? As far as I can see, it's a textbook thing that is, as an economist once said, the one idea in economics that is both simple and profound. But it's meaningless when they talk to us non-economists.

I think it clouds understanding of real trade issues. But then, I'm assuming someone could clear them up if it weren't for these clouds. That may be a delusion on my part.

-- Ed Huntress