Imhotep Evil

More like pension funds, hedge funds, private equity than moguls and tycoons.

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Beemer B773ER

I agree with that sentiment whole-heartedly. The media - and more importantly, the tree-hugging hippies of the western world - continue to criticise corporations for 'exploiting' cheap labour in developing countries, but working in a factory where you're earning a constant stream of income is definately preferred over working in the farming industry (as 450SEL6.9 stated). These multinational organisations are being portrayed as the route of all evil when it comes to the rise of globalisation, when in fact they are helping these developing countries by setting up factories which employ thousands of workers. Ofcourse these corporations are not doing this out of the kindness of their own heart, but regardless of the motives which led these firms to set up factories in poorer countries, it cannot be argued that the workers are not benefit from actually having a job to feed their families.


This I also agree with. These business operate in a highly competitive environment -- pretty much a dog eat dog world where the weakest will not survive. As a business student myself, I can tell you that many of the business models and theories developed have stemmed from the military. For businesses, it's all about trying to create profits and become more competitive in the market. There should be no expectation or no duty for these organisations to try and achieve equality in a nation. If the company performs better the economy performs better.. and if the economy performs better, the workers gain the benefits.


How many everyday goods/services have price inelasticity? Maybe alcohol, tobacco.. and even gas/fuel, but the vast majority of products we buy as consumers are price elastic, and therefore follow the demand & supply curve. If prices go too high then demand drops, companies realise 'oh sh*t, sales dropping, profits decreasing', so then prices come down to a more sensible level and demand moves right back up. If the company is not willing to lower prices, well then they'll get undercut by a competitor who will take market share from them, thereby leaving them in an even more vulnerable position. Pricing is the quickest way to control fluctuations in demand. More medium-term strategies such a product differentiation to charge price premiums, or moving to a cost-based structure take time and a lot of effort. Reduce the dollar-figure, make the demand bigger. Ofcourse reducing prices should only be a temporary strategy, otherwise profits margins will begin to erode.


Actually Australia has a social security and public health system that is nationwide, and I can tell you the Government has announced tax cuts (only minor, but cuts nonetheless), and has been able to very effectively control the issue of inflation within the 2-3% margin while actually being able to lower unemployment to record lows. It has also been able to string together a few federal budget surplus', which is a reflection of the country's strong economy.
But going back to your theory of higher taxes -> higher prices.... well the fact that consumers are being taxes more means they have less disposable income -> an inclination to save rather than spend -> decrease in demand -> decrease in price until demand picks up again.

Also, as more people start saving instead of spending -> lower interest rates -> increase in disposable incomes (since less spent on paying interest on mortgage and other loans) -> increase spending.


The world has continually been moving to more expensive living costs, but standards of living have also been increasing, even for the poorest people of society... so I don't accept your thinking that standards of living will drop.


Obviously not all these 2.5 billion people will move up to the middle-class. There still needs to be a significant number of people in the lower-class to do the jobs that current lower-class people do (no disrespect to them though). Some of that 2.5 billion will strike it rich, others will adjust into the middle class but many will still be in the lower class as Western nations continue to improve their class standards (that is: the standard of living of middle class China in 5 years might equate to a middle-class standard of living that Western countries have now). Also, as these countries/economies continue to grow, their level of growth will begin to level out and become more reasonable (as opposed to the double digit growth their experiencing at the moment).. and these economies will be subject to the same fluctuations and cycles that balance out Western economies. Because not all of the 2.5 billion people in the China-India region will instantly become part of the middle-class there won't be an explosion in demand like you suggest there will be. These people may have the potential to become part of the middle-class, but that's not going to happen over night or within a handful of years.. it is going to take time. Also, the companies investing in China and India are foreign companies (Western companies), so profits they make go back to their home market, which then improves the economy of Western countries, thereby increasing our standards of living. Ofcourse there are certain resources which are have a finite supply, and therefore any increase in demand will see an increase in price.. but I doubt we'll see an explosion in demand, but rather just the continual gradual increase in demands we're seeing at present time. .. Then ofcourse a global recession hits, things go from flower to sour (ie: good to bad), these 'booming' economies slow down, and eventually things get back to normal and lessons are learnt by these high-growth economies about managing a sustainable level of growth.

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Come on Rob, let loose with your opinions. I'd sure like to read what your take on the issue is

450SEL6.9

It's not a fact because demand always fluctuates. Many commodities have lost value in real terms, when you adjust them for inflation. Gold was $850 per oz. in the 1980s. It is $650 today. Oil was about $40 per barrel in '79. Today, they are in the mid-$60s, but you need to factor in general inflation. Up until 2005, oil prices were lower than what they were in '79 in inflation-adjusted terms.

I did not claim that capital is everything, but let's just say that many workers need companies more than vice-versa. If companies have no workers, they'll innovate and build better machines or go somewhere they can get workers for one red cent per day.

Harry Plopper

I'm still sticking with my theory:

due limited supply we will see price increases of certain goods. And this will be direct result of globalization (= industrialization / economic development of 3rd World countries - especially the big ones like China & India).

PS: I've never claimed all 2.5 billion people in China & India will be a part of middle class, yet majority of them will be when those two countries become more & more developed.

Imagine eg. a billion of new people who can afford a car - so there will be a demand for a billion new cars. So, where the hell in the world the industry will get enough raw material (iron, aluminium etc) to produce so many cars. Not to mention enough oil / petrol to power a billion more cars.

Again: many people are forgetting natural resources are LIMITED, and with globalization we are heading towards that limit very quickly.

I'm not talking years here rather decades.



And again: we are discussing globalization through Western point of view. I'm eager to hear some Eastern aspect.

Harry Plopper

And who will built & engineered the machines? The birds?

Btw, if globalization brings prosperity to the poor countries & their citizens, and when globalization process continues, someday we will run out of poor countries. And who will then work for a red cent per day ? You? Or the monkys perhaps?

Btw, gold is not an essential raw material like eg. other metals like iron, copper, aluminum etc. Also the oil: prices today are higher then ever before - not only due some political reasons like in 70s, but also due much higher demand. Check oil consumption in 70s, and compare it to oil consumption today. Then remember that oil supply is limited ... and natural oil reserves are shrinking rapidly. Get it?

We shouldn'zt fool ourselves that hybrid cars etc will result in decrease in petrol / oil demand - since there will still be a lot more conventional cars out there. Also oil & gas are most commonly used as heat energy for heating during cold Winter.

Regarding prices drop of certain commodities: technological progress also counts (some tech become cheaper since increased production due increased demand). I'm aware TV set is cheaper today, so is a computer ... and a cell phone etc.

My concern still derives from LIMITED natural resources. Either prices will rise or we will accommodate and stop buying "stupid" things like eg. consumer electronics - but I find that a drop in my standard of living.

Perhaps human kind will someday return back to the essence.

notic

Interesting you brought this up. You're correct to say that shrinking supply will increase the price of certain goods, but you fail to mention anything about substitutes. It was once predicted that we would run out of coal to fuel our boats and heat our homes, but substitutes came along and the price of coal plummeted. Some people are saying $5/gallon of oil is the best thing to happen for the environment. It will force society to innovate away to a cheaper, plentiful and possibly renewable substitute.



Wealth is relative. There will always be a low income country in the world willing to work at a lower price than other nations. As long as they have a proper infrastructure in place they will be able to prosper. Keep in mind that Japan and South Korea were once "poor" countries that exported low margin goods such as the ones being offered by China today. Now the relative wealth has shifted and it will continue to shift in the future. A key part of international trade is comparative advantage. If nations were able to specialize in their comparative advantage and trade on fair terms they will prosper.

450SEL6.9

There are billions and billions of reason why there will always be cheap labor or lowly paid engineers in the world to build machines. The world will never run out of poor countries. Get it?

My point is that workers can't easily have work without capital. Capital can go anywhere and be productive, especially this day in age. In my opinion, capital must be put up before workers have jobs.

You don't think there is a political reason for oil to be where it is today? There is no shortage of oil. They is a shortage of refining capacity, but that is different from a crude shortage. There is a geopolitical risk premium in oil, maybe $10-20 per barrel. In the 1990s, oil was much cheaper than they were in the late-'70s and cheaper in both real and nominal terms.

Deutsch

So much has been said, but there are so many variable you couldn't possibly cover all of them nor would you have the energy to.

I think for sure America is one of the hardest hit by the globalization, a lot of the jobs that used to be here have been shipped elsewhere over seas for cheaper. After having read many articles on the subject from different business journals I've come to find our crisis here is innovation; discovering what the next big thing is that will push our country past every other in terms of new ideas and our ability to consistently improve upon them. What that next big things is I have no idea? I believe to move in the right direction it will take a majority administration in government that will take an isolationist approach to foreign affairs- not completely- fact is we've expended our resources tremendously over the past several years on matters that do not concern our own well being, and need to refocus our energy into making this country what it 's always thought up to be, "the land of opportunity". While it very much is still that, we've lost a lot of ground in creating those new opportunities, especially for our future. As a nation we're behind in education(which is pitiful here, especially in SoCal), and the future of this country is in the hands of the developing minds of the children of today. It's quite popular here for college students to go to grad school immediately after they finish their undergrad- because it takes having a masters degree to not only get a decent job, but also to earn a decent living. Otherwise you're considered to be "behind" by employers, having a degree just means you're trainable - which is good, but not if you want to be upwardly mobile. While I think there is somewhat a false notion of instant gratification for having a masters(job market is way competitive, because you're competition is global), it most certainly helps, but my thought is what happens when everyone and their Mom has a masters? Then what? Most certainly corporations are still going to be looking for ways to cut costs, but in truth they can only take this approach so far. There are definitely jobs that can never be outsoured(especially my major- marketing).

On a personal note; I try not to worry about things that are out of my control. I strategize a plan to survive and follow it, keenly.

notic

like the - ONLY REGISTERED AND ACTIVATED USERS CAN SEE ALL LINKS - CLICK HERE TO REGISTER?

notic

don't be so sure about that. there are advertising firms here in Vancouver that have many clients from the United States. Its all about how familiar the company receiving the outsourced work is with the countries they try to get business from. The hardest jobs to outsource are the ones that require physical human interaction. But yea, marketing does seem to be an industry with a lot less outsourcing than others.

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