Re: [gang8] Dollar Hegemony Revisited

["John M. Legge" <jlegge@xxxxxxxxxxxxxx>]

Barkley,

any Japan bashing on this topic has come from you, with your account of your
public joy that Japan exports real cars to the USA in return for vague
promises of future benefits.

I think it would take a complete business strategy course to explain how
European (and Japanese) car manufacturers stay in business in spite of
paying high wages, but basically it is by focussing on highly engineered
cars that can be sold at a premium price with margins that cover high wages
as well as adequate profits. In Australia, and I think in the US, the
cost-driven segment of the market has been surrendered almost totally to the
Koreans; GM, Ford and Mitsubishi have a sufficient direct and technical hold
over the Korean industry, especially post SE Asian crisis, to discourage any
attempts to enter the large/prestige end of the market. Since Koreans are
still not affluent enough (in general) to afford SUVs or BMWs, focussing on
the economy end of the market makes sense for them, more so given the
current and prospective volume of their exports to China and SE Asia.

I cited Galbraith on two points:
a) wages in top C-sector jobs (construction, mining, defense and auto,
unionized or not) are similar to those in K-sector jobs, and both are much
higher than S-sector jobs
b) the "skill bias" explanation for rising inequality in the USA is rot.

The assertion that a policy driven change in workforce composition, reducing
relative employment in top C-sector jobs, notably auto manufacturing, and
replacing it with S-sector jobs, especially fast food and hospitality, will
increase inequality is mine.  It seems to me to be a simple matter of
mathematics that if you squeeze the middle and swell the bottom you increase
inequality.

I am well aware that inequality internal to corporations is much less in
Japan than elsewhere, and less in most of Western Europe than the US, but it
is changes in inequality over the last twenty years, not the absolute level
of it, that I was writing about.  BTW James G demonstrated that inequality
in the US fell from the end of WWII until the end of the 1970s, and has
risen, apart from a Clinton pause, since then.

I don't think and didn't claim that compositional changes in the US
workforce were the sole cause of rising inequality: greed and corruption
played a significant role as well. I did state and still believe that one of
the reasons that Japan and Germany are resisting neoliberal reform and
running large trade surpluses with the US in consequence is that they see a
robust upper manufacturing sector with its well-paid jobs for the less
qualified as delivering the social benefit of relative equality.

While James G's explanation of the difference between sectoral wage levels
is fairly cursory you may find Michael Manove interesting: Manove, M.
(1997), ?Job responsibility, pay and promotion?, Economic Journal 107(440,
January), pp. 85-103. It does fit with my very practical experience in
manufacturing industries.

I think Keynes remarked that the orthodox economists' devotion to Free Trade
had a touch of Tertullian about it ("I believe *because* it is absurd").
Like the single production function and the axiom of gross substitution,
Free Trade is in the economists' DNA,

JML

> -----Original Message-----
> From: pkt-owner@xxxxxxxxxxxxxxxx [mailto:pkt-owner@xxxxxxxxxxxxxxxx]On
> Behalf Of Barkley Rosser
>
>
> 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
>
>
> >