Re: [gang8] Dollar Hegemony Revisited

["Barkley Rosser" <rosserjb@xxxxxxx>]

John,
     So, how have France and Germany kept their
high-end C-sector jobs while the US has not?
Are they more protectionist of their auto industries?
I am not aware that they all that much so, and we
have subjected the Japanese to numerous rounds
of "voluntary export quotas."  Furthermore, the
less liberal labor markets of France and Germany
involve much higher social insurance payments for
workers than are experienced in the US.  I know
that Detroit is saddled with high pension payments,
but so are the Europeans, and Germany has the
world's highest wages.  What is the deal here?
     There are a rather large amount of studies out
there that lead to the conclusion that rising wages
in high tech industries are the main culprit in the
increasing inequality of wages (let us put aside the
wild overcompensaton of US CEOs), far more
than international trade.  Blaming international
trade for increasing income inequality is a delusion.
Barkley Rosser
----- Original Message -----
From: "John M. Legge" <jlegge@xxxxxxxxxxxxxx>
To: <pkt@xxxxxxxxxxxxxxxx>
Sent: Tuesday, July 08, 2003 7:41 PM
Subject: Was: [gang8] Dollar Hegemony Revisited


> Barkley,
>
> There are two aspects to the growing inequality in the US.  One is the
> success of a small gang of a thousand or so corporate crooks (some
indicted,
> most not) in diverting about ten per cent of the US economy into their own
> pockets under the rubric of "delivering shareholder value".
>
> The other is a change in the balance of the division of income earners
along
> the line that James Galbraith describes: the K, C and S sectors. In the
> K-sector (capital goods and capital pseudo goods such as basic software)
> wages are high because of the high value added per worker, the high degree
> of individual responsibility, and the high cost to the employer of errors
> and under-performance.
>
> At the top of the C-sector Galbraith found defense and auto manufacturing
> with wages close to the K-sector because of the high degree of
inter-worker
> cooperation required. (You will never hear auto executives denigrating
> Japanese management, since they have largely adopted it: Ford, GM and
> Chrysler all are trying to cut down employee turnover in order to maintain
> high quality and productivity, and relatively generous UAW contracts are
an
> accepted part of this.)  The "sunbelt" motor manufacturers have kept the
UAW
> out, but they pay similar wages because they are just as vulnerable to
poor
> employee morale and high turnover.  Firestone may have receded from the
> headlines, but it is clearly a case where substituting docile but
> inexperienced new hires for experienced, unionized employees led to a
> devastating loss of quality, much loss of life, and the eventual
extinction
> of the company.
>
> The bottom of the C-sector (textiles, clothing and footwear) merges with
the
> S-sector (low skilled services such as fast food and hospitality) where
> wages sit on the minimum except in periods of very low unemployment.
>
> The major cause of growing income inequality in the USA is the loss of top
> C-sector (and a few K-sector) jobs to imports, and the substitution of
> S-sector jobs.  When $25 per hour auto workers become $5 per hour
hamburger
> flippers income inequality necessarily rises. Japan (and Germany and
France)
> have maintained their top C-sector jobs and therefore a relatively equal
> income distribution: the un-liberalised labour markets so hated by the WSJ
> and its clique make the wholesale shift of western European auto
> manufacturing to China and Eastern Europe uneconomic. (New investment may
go
> to Eastern Europe and China, but the established plants in Western Europe
> and Japan stay open.)
>
> Of course, in China and Eastern Europe a manufacturing job can put its
> holder into the elite end of the proletariat for a much lower absolute
cost
> than in the developed countries: a Chinese car worker on $2.50 per hour,
or
> a Slovakian on $8 per hour, have the same relative position vis a vis
> minimum wage workers as a Detroit worker on a UAW contract has to the
local
> hamburger flippers.
>
> Japan's bilateral trade surplus with the USA is not solely explained by
> motor vehicle exports, but I think that they are the largest single
> component of it. Every six Japanese cars imported to the USA mean one less
> auto worker and one more hamburger flipper in the USA, and the reverse in
> Japan.  Not all Japanese cars on sale in the US are imports, of course,
but
> not all American cars are American either. Chrysler in particular drops an
> American box on a Mitsubishi drive train and calls the result an American
> car.
>
> Economists, orthodox or not, pay far too little attention to the actual
> drivers of wage setting, probably because the neoclassical axioms are too
> deeply ingrained to ever get properly away from. The axiom of gross
> substitution and the single production function seem to be part of most
> economists' DNA, asserting themselves whenever they are not consciously
> rejected.  Motor cars are not hamburgers, and the employment conditions at
> an auto plant are not the same as those at McDonald's, and neither are the
> wages offered.
>
> JML
>
> > -----Original Message-----
> > From: pkt-owner@xxxxxxxxxxxxxxxx [mailto:pkt-owner@xxxxxxxxxxxxxxxx]On
> > Behalf Of Barkley Rosser
> > Sent: Wednesday, 9 July 2003 2:18 AM
> >
> >      I would say that the greater income equality
> > in Japan reflects its much more egalitarian
> > wage and salary structure within firms than
> > we find in the US, which in turn reflects the nature
> > of its once-praised Japanese management system
> > and related socio-cultural-economic approaches
> > compared with the US.  I would remind that the
> > ratio of the "salary" of a US CEO to that of an average
> > assembly line worker in a US company has risen
> > by something like tenfold in the last 15 years or so.
> > I don't think Japan's bilateral trade surplus with the
> > US has very much to do with this development.
> >      Of course for much of the 1990s people in the
> > US were praising our management system compared
> > to the Japanese.  This praise looks a lot more hollow
> > since the Enron and related corporate scandals.
> > Barkley Rosser
> > ----- Original Message -----
> >
>
>