[ExI] undercover at Walmart

[Rafal Smigrodzki]

On Sat, Feb 14, 2009 at 9:09 PM, Stathis Papaioannou <stathisp at gmail.com> wrote:
> 2009/2/15 Rafal Smigrodzki <rafal.smigrodzki at gmail.com>:
>> On Sat, Feb 14, 2009 at 4:31 AM, Stathis Papaioannou <stathisp at gmail.com> wrote:
>>> 2009/2/14 Rafal Smigrodzki <rafal.smigrodzki at gmail.com>:
>>>
>>>> ### This is indeed the case - or more precisely it takes 1.33 billion
>>>> Chinese to make 3.251 trillion worth of goods and services per year,
>>>> while it takes only 303 million Americans to make 13.84 trillion of
>>>> stuff (statistics by Google). It is absolutely true that on average
>>>> Chinese products and services are not any cheaper in terms of labor
>>>> per unit of value than American-made ones, in fact, they are much more
>>>> time-consuming to make, very roughly approximated by a factor of
>>>> (13.84 x 1.33)/(3.251/0.303), you do the math. Since they take so much
>>>> time to make stuff, they can't make as much stuff as Americans, and
>>>> therefore they earn less.
>>>
>>> In that case there would be no advantage in American companies
>>> manufacturing things in China, since they would be able to so more
>>> cheaply using the more efficient workforce in the US and saving on
>>> shipping and other costs.
>>
>> ### The workforce is not inherently that much more efficient in the
>> US, but the companies are (you understand that this is not a paradox,
>> right?). American companies are very efficient at producing whatever
>> it is that combines into the 13.8 trillion GDP figure and as per
>> Ricardo's law they can make more money on what they do (airplanes,
>> corn, movies, capital management, pharmaceuticals, software, etc.)
>> than on other products, such as low-end tools.
>
> The problem is that the implied value of what the US does still
> produce has gone up relative to the value of manufactured goods, which
> in the past few decades have come increasingly from overseas. For
> example, the cost of haircuts has increased relative to the cost of
> televisions. You might say that that's fine, televisions have become
> intrinsically cheaper to manufacture.

### Calculations using PPP do take this into account. The US
manufacturing sector is actually bigger in absolute terms than ever
before, the services sector is incredibly large (which is why in
relative terms manufacturing is smaller), the farm sector is bigger
than ever. Yes, US economic output is more valuable than ever, even
though the fraction contributed to it by the manufacturing sector is
lower than 50 years ago. So what? All this is accounted for
(indirectly) in the PPP GDP figures.

--------------------------
 But the increasing US trade
> deficit suggests that a correction is coming.

### Preoccupation with the trade deficit baffles me. Why do you think
it matters, and what kind of a "correction" are you talking about?

-----------------------------------
>>
>> BTW, I mis-wrote the ratio in my previous post ... can you find the error :)
>
> Should be (13.84*1.33)/(3.251*0.3303) = 17.14. But everyone except the
> Chinese government agrees the Yuan is undervalued.

### The PPP values do not rely on the yuan.

Rafal