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Berkshire Hathaway Inc. Message Board

  • ventura_in_2004 ventura_in_2004 Jan 12, 2004 12:28 PM Flag

    Labor unions vs. labor and capital

    Labor unions have long been trying to prevent labor (enormous surplus in the world) from moving to capital (concentrated in a few rich countries) through immigration restrictions and wage controls.

    Now we see a reverse trend: globalization is bringing capital to labor, and away from labor unions and closed markets.
    The outcome will be overall increase in output and standard of living in the entire world through better efficiencies, but average decline of nominal wages in rich countries and increase in nominal wages in poor countries.

    I say nominal because real wages in terms of cheaper and better products your money can buy will grow across the board (in both rich and poor countries).

    Think of the results of outsourcing of jobs to Asia from computer and networking companies throughout 1980s and 1990s.
    Average wages of workers in Asia grew, while wages of assembly workers in America have been stale or declined. This is nominal wages.

    Real wages SOARED, because the price of PCs, servers, cell phones, videocameras, and networking equipment fell sharply while quality improved dramatically. Americans don't have to pay $1,000,000 for a personal computer that occupies the whole room, or $1,000,000 for a 1-byte per second internet connection, affordable only to big universities.

    Labor unions and their restrictions on movements of capital and labor screw consumers and the poor majority.

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    • I'm uncertain that "Capital" means anything in its old economic sense of the word.

      JC sort of caught my drift and objected to it the other day. He was calling Wealth, money saved or not spent.

      I give JC credit that he's not a complete hoarder. He probably sees the ideal forms of "wealth" as investments that yield an income.

      That is a good definition of Material (hey let stipulate that health and family is true wealth and stick to the material) wealth for a "INDIVIDUAL. When you're talking about the wealth of an individual its generally considered relative to other individuals.

      Yet it seems to me, that a countries capital base might have huge element of which were not owned for profit, but through of a *Stream of utility* each year. Romes aqueducts were one of its biggest sources of wealth, allowing fewer farmers to support more mouths, in turn throwing off a "stream" of free efforts of men to work as skilled artisans or conquer other countries.

      Ventura brings up the notion (like I was stressing while talking about inflation) that with every new innovation in methods manufacturing, with improvement of quality of goods due to technology etc, well we all tend to get "wealthier" in that we can buy more stuff, wear warmer clothes
      (polypropylene and gortex have sure made being out doors easier...I marvel at the physical strength it must have taken for Fremont, Lewis and Clark and others to explore the west and climb mountains and stuff it their Oiled leather coats and stuff)

      A pair of the modern snow shoes is a sort of wealth...that costs little in dolars and won't bring much in exchange, but the donner party probably could have walked out to saftey if they had them?

      • 1 Reply to sometomfool
      • Are we exporting capital to China.

        I think we are helping them build capital certainly. But they aren�t taking our capital, and that they might be more well off isn�t coming at a penalty to our future assets a country on a per person basis.

        China has had little ability, using a command economy and seizing assets from folks that would serve as end demand that would allow capital assets to be built. And command economies showed to be incredibly wasteful in their production ....missing the feedback loops of consumers (making what people want more out of necessity of not losing sales to a competitor, makes one incredibly inclined to give consumers what they want...and for a huge number of products, what they want it something that works better and costs less (well we'll stay away from women�s fashion, but of course women�s fashion has a utility too, often stirring the hearts and other parts of men!)

        I suppose an argument might be made that because we are no longer building enough new steel plants and manufacturing facilities to meet our own needs we are letting capital slip away.

        I'd like to see that quantified though, I�m not sure that we have a net loss of capacity, just shifts in types of facilities�biotech labs instead of blast furnaces or something. And I'd think capital would be our roads, our buildings, our electrical, sewage, gas and water grids, airports, stadiums, etc and while some parts are aging I don�t think we�re buring capital. I think we�d doing pretty well in furthering the quality of shelter per captia with the issues in distribution.

    • "Real wages SOARED, because the price of PCs, servers, cell phones, videocameras, and networking equipment fell sharply while quality improved dramatically."

      on the other hand, hedonic index adjustments are what's keeping 'reported' inflation at bay.

    • That worn-out old argument again? We're richer than King Henry VI because he couldn't afford a walkman?

      How many consumers paid $1M for a PC in the '60s? (Your technology and timescales are way off but never mind.) Ans: None.

      So how does the option to buy this plastic transistorized crap make us wealthier? Unless we're benefitting from selling it, it is merely discretionary consumption. The reverse of wealth is extra needs. For example, if your family suddenly felt that they needed to eat 50% more calories*: everything else being equal, you would be poorer, not richer.

      *which also happens to be the case for the average US family; I wonder why?

      • 2 Replies to astral_tsar
      • If I wanted to compare the prices of, say, a peck of peaches from 1904 to now, wouldn't I have to compare them with an organic peach now to have the same quality? And if so, how much has the price really deflated?

        Reminds me of an argument that when you factored in the total amount of cost shifting, none of the S&P 500 were actually profitable. The only reason they could show some profit on paper was because they shifted one of their costs onto the government or their customers. (Here's your TV; it's your responsibility to dispose of the cadmium and lead inside.)

      • <<That worn-out old argument again? We're richer than King Henry VI because he couldn't afford a walkman?
        So how does the option to buy this plastic transistorized crap make us wealthier? >>

        I think its clear that the issue is Material wealth not spirtitual wealth.

        And even if you had higher ideals of wealth the walkman might work.

        If wealth were being able to listen to fine music, the walman would allow you to hear the best string quartet play what you wanted to whenever you wanted. In terms of performances of BAch you might be wealthier that Kin Henry?

        Material wealth is the abilty to have things that you'd seek to have and compare them I'd guess.

        There are things like servants the king had. Many of them were essentially consorts and its true that highering a harem would be tremdouesly unaffordable (espcially with costs of the following child support, workers comp, and work place explotiation laws thrown in)

        Some of servants were replacable . Having 3 servants washing clothes replaced with one part time servant witha a maytag could do that for us today and have them "fresher, softer and cleaner" due to new societal wealth created by proctor gamble, I think that puts us ahead of King Henry in the clean clothes wealth department.

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