Good lecture (although I found the pace somewhat slow). Thanks for giving it and putting it up.
As a non-economist who had to listen while working on other things, I found the pace just right. Thanks for putting it up, and here’s hoping there’s more to come.
do you think the federal minimum wage is currently too low?
if i remember right the states of oregon, washington and california have made their state minimums higher than the federal and have pegged them to inflation.
if we are in a deflationary economy will they have to reduce their minimums to match?
on a somewhat personal note, i know a man who owns a single sight fast food restaurant in oregon.
he complains bitterly about each increase in that state’s minimum wage and so far as i can tell has done nothing to inovate his way out of any difficulties he has had becuase of this.
it appears that he has only increased his price of product,
and perhaps taken on more of the labor for himself.
Quite a number of Chinese economists have pushed for a higher minimum wage , or yuan revaluation, for similar reasons. Hoping it will force innovation, a move up the (already internationally crowded) value chain, and increase domestic consumption. The problem is a lot of businesses just can’t innovate, they already being undercut by Bangladesh or Vietnam, and increasing the minimum wage would lead to an employment crisis in and of itself. This debate seems like a dispute between capitalist factions more than anything.
You’re absolutely correct that China seems to be increasing wages to stimulate innovation and move up the value chain. Higher wages are also important because too many Chinese presently are being left behind in the Chinese economy, including a troubling share of the young people. That situation is a recipe for instability.
I would modify what you said in one respect: China was already losing business to lower wage competitors, such as Vietnam.
Although I’m wondering about your definition of capital goods? All your examples are consumer products? Living in Germany I can only say there’s no deflationary pressure stemming from producing capital products like robots and sophisticated machinery.
This business is not about economies of scale but constant engineering innovation. And most of these products are not protected by patents. I know firms who avoid patents like the devil the holy water. Way too much disclosure.
I plead guilty about the rubble in my office. You are right about Germany. German industry has been able to avoid getting into commodity-like business, especially the middle size businesses. If you want to teach me more about it, I would appreciate it.
Another remark. I’m assuming you are recording these streams in your office. You are lucky to have your tenure in the US! Looks rather messy 😉 German universities would not tolerate such clutter. Everything has to be proper otherwise the sky will fall.
I don’t think I can teach you something 😉
One difference between Germany and the US is economics. The academia in Germany is surely in the grip of neo-classical ideologues. But they’ve a much harder time to disseminate their propaganda to the broad public.
Ludwig Erhard simply won’t go away. His economic thinking and the post WW2 economic miracle are deeply ingrained in the memory of German society. In other words: neo-liberals must always watch their back because in popular debate an argument “but Ludwig Erhard said …” makes you look like a fool.
You can download his book here: http://mises.org/resources/4333/Prosperity-Through-Competition
I’m Austrian (by passport not persuasion) and it’s always funny to see how US Austrian economists appropriate ideas for their mindless purpose. The original title of Erhard’s book is “Prosperity for All”. They retitled the book to “Prosperity through Competition”. It’s also amusing to see what they underlined in the book and what not. I was surprised that they did not delete the chapter “market economy and wages”.
Other important differences to the US: a more egalitarian society (basically 75% are socialists regardless what party they belong to); a different approach to labor organization and unions (participation, …); an obsessive thrift society (its hobby to collect IOU from the rest of the world); focus of mid-size enterprise is not so much profit but to have the best product, …
That said if the whole world wants to emulate the German economic model it would be the end of capitalism because everybody wants to export capital goods and no one wants to consume final output but rather save for the future.
Thanks. What I was trying to say was that the market for specific specialized capital goods is to small to turn them into generic commodities. Consequently, destructive competition is avoided. You could have also added the excellent technical education given to working class youth.
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