patrick.net

"Devaluing" won't solve anything.

Foxconn workers make $300/mo working 60-80 hrs a week for 50 weeks a year. With the recent payrise secured by their bad suicide PR this is going to be maybe $360/mo.

The equivalent floor work in the US, at $25/hr would be $8600/mo. That is a 24X devaluation against the yuan necessary to equalize our two labor systems.

And the problem with devaluation, just in the abstract, not against any specific currency, is oil prices -- we need to import around 4.5 billion barrels per year of oil, and we can't devalue our way to securing one sixth of the world's available oil exports -- we will always need to part with actual wealth (or a close facsimile) in this trade.

Are we going to devalue against the yen, too? A Y50 USD rate would be stupendously bizarre -- putting the regular price of a Japanese Biggu Makku at $6 ppp.

Seeing the race to own America's hard assets after this catastrophic devaluation would be quite entertaining.

I'm no macroeconomist, but I suspect we don't need to devalue -- we just need tariff up, maybe 100% across the board on everything coming into this country, raised in 10% increments over 10 years, until the trade deficit goes away.

Running a $40B/mo trade imbalance when there are 15 million unemployed people is nuts. F--- trade. Buy American.

As for the article, when I see http://online.wsj.com I know it's crap opinion piece from some right-wing crackpate. Luckily they've put all that behind a paywall now, as a prophylactic I guess.

Oh great, we're starting this thread all over again.

Troy says

The equivalent floor work in the US, at $25/hr would be $8600/mo. That is a 24X devaluation against the yuan necessary to equalize our two labor systems.

I get paid about twice as much as a guy doing my same Job in Texas. Are our labor systems unequal?

I should also point out that workers doing the equivalent of what the Foxconn people are doing never have nor will make $25 an hour. $10 an hour if they were really lucky, and in a more expensive region.

Only a very small number of factory jobs ever paid all that well -- the unionized ones like automobiles. The rest were a bit above minimum wage, but not that much.

And, of course, there are still plenty of factory jobs in the US (we are the largest manufacturer in the world). Most of them still pay substantially less than $25 an hour (there are exceptions, mostly for things where labor is a tiny portion of the product cost, like heavy machinery)

It's also easy to forget about all of the negative effects of "bringing the jobs back home". I've brought these up before:

1. Most products that you buy will become more expensive, but you will not make any more money than you do today (see #2)

2. a million jobs in China does not equal a million jobs in the US. Between safety and employment regulations, and the increased presence of robotics (since we're talking new factories), you'd likely get back less than half of "America's share".

3. Most leading american businesses make more money internationally than domestically. The will reduce their own workforce when they begin to lose international customers (which they will because there will be less money in those other countries).

Now, China is a very special case, and I find it ridiculous that we pretend that our dealings with China are anything close to a free market. China is, effectively, one giant corporation -- a conglomorate not unlike GE.

We should definitely have open, free trade policies with countries that are actually allowing a reasonable level of free enterprise. When you require that all companies doing business in your borders not be foreign owned, create legislation explicitly designed to protect domestic companies that steal foreign IP, and generally have no regard for human or environmental protection, you can not be considered a fair trading partner.

"Opinion is not fact" ..... is that an opinion or fact?

Troy says

Foxconn workers make $300/mo working 60-80 hrs a week for 50 weeks a year. With the recent payrise secured by their bad suicide PR this is going to be maybe $360/mo.
The equivalent floor work in the US, at $25/hr would be $8600/mo. That is a 24X devaluation against the yuan necessary to equalize our two labor systems...
I’m no macroeconomist, but I suspect we don’t need to devalue — we just need tariff up, maybe 100% across the board on everything coming into this country, raised in 10% increments over 10 years, until the trade deficit goes away.

The reason our workers make 24 times the average 3rd world laborer is largely due to the fact that the world keeps its capital invested in US assets. The natural state of affairs would be for our laborers to get paid the same as foreign laborers for the same work--(assuming we are discussing an outsourceable job that isn't specific to a geographic area--housekeepers, gardeners, and construction workers for instance will always be paid as a function of the wealth of the area in which they work).

If we chase away capital investment via tariffs, burdensome regulations, taxes, or out of control deficits we will wake up one day as a 3rd world country ourselves.

Inflation, especially hyperinflation, would accomplish this very quickly. The proletariat has the most to lose to inflation.