Re: [gang8] Dollar Hegemony Revisited

["Barkley Rosser" <rosserjb@xxxxxxx>]

John,
     How do the European automakers stay in business?
     I would say that I respectfully disagree with Jamie
Galbraith on this matter, and those who were at last
summer's PK Workshop saw part of our disagreement
aired at the banquet at which he spoke.
      Let me remind you of a point I have already made
to which you made no comment, and which Jamie
also conveniently ignores.  This is the matter of the
internal distribution of wages and salaries within firms
in Japan versus Europe versus the US.  They are far
more egalitarian in Japan than in the latter two and
substantially more egalitarian throughout Europe than
in the US, although there are noticeable variations within
Europe. These variations, including the massive increase
in this particular inequality in the US, have little-to-nothing
to do with international trade policies of the respective
countries and everything to do with respective corporate
cultures, not to mention such non-trivial addenda as tax
policies, which have recently become even more anti-
egalitarian here in the US.
      So, please do not just cite Jamie Galbraith on this
matter.  He does a good job of pointing out the role of
monetary policy in the matter, especially that a more
expansionary policy tends to increase equality.  I think
he is partly right about the tech issue, but I also do not
think he has successfully offset the large number of studies
that show tech to be more important than international
trade policies in this matter.  Indeed, Jamie's argument
has to do with sectors, which I have less disagreement
with.  But you are not going to be very able to tie these
sectoral survivals to trade policy very well, I would suggest.
Simply engaging in vague Japan-bashing is not sufficient.
Barkley Rosser
----- Original Message -----
From: "John M. Legge" <jlegge@xxxxxxxxxxxxxx>
To: <pkt@xxxxxxxxxxxxxxxx>
Cc: "J Barkley Rosser Jr. (E-mail)" <rosserjb@xxxxxxx>
Sent: Wednesday, July 09, 2003 7:01 PM
Subject: RE: [gang8] Dollar Hegemony Revisited


> Barkley,
>
> James Galbraith nails the high technology argument convincingly in
"Created
> Unequal" and elsewhere, and I was summarising his argument.
>
> Because Germany and France have "rigid" labour markets the European auto
> manufacturers have to keep their workers on the payroll whether they are
> making cars or not, so they go on making cars.
>
> Dot com absurdities aside, there is plenty of high technology activity in
> France and Germany, and it hasn't caused galloping inequality in those
> countries,
>
> JML
>
> > -----Original Message-----
> > From: pkt-owner@xxxxxxxxxxxxxxxx [mailto:pkt-owner@xxxxxxxxxxxxxxxx]On
> > Behalf Of Barkley Rosser
> > Sent: Thursday, 10 July 2003 4:28 AM
> > To: John M. Legge; pkt@xxxxxxxxxxxxxxxx
> > Subject: Re: [gang8] Dollar Hegemony Revisited
> >
> >
> > 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 -----
> > > >
> > >
> > >
> >
> >
>
>