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Wolf Richter: The Stunning Differences In European Costs Of Labor – Or Why “Competitiveness” Is A Beggar-Thy-Neighbor Strategy

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By Wolf Richter, San Francisco based executive, entrepreneur, start up specialist, and author, with extensive international work experience. Cross posted from Testosterone Pit.

The ominous term, “competitiveness” has been bandied about as the real issue, the one that causes European countries, in particular some of those stuck in the Eurozone, to sink ever deeper into their fiasco. To fix that issue, “structural reforms,” or austerity, have been invoked regardless of how much blood might stain the streets. And a core element of these structural reforms is bringing down the cost of labor.

In Europe’s private-sector, the cost of labor—gross earnings plus employer-paid social contributions, pensions, disability, etc.—is marked by stunning differences.

At the bottom of the spectrum is Bulgaria: the average private sector employee costs a company €3.70 per hour worked; in manufacturing even less, €2.90. Romania is right there at €4.50 and €3.80 respectively.

Near the top of the spectrum is Belgium at €40.40 and €41.90 per hour worked. But no one beats the Swedes: €41.90 and €43.80. Per hour worked, the average Swedish employee costs a manufacturer over 15 times more than an employee in Bulgaria.

So, relocate all manufacturing plants from Sweden to Bulgaria? Or Romania? Even Greece would be a great place. The cost of labor there is only €14.70 per hour worked, about a third of what it costs up north. It’s the only country in the EU where the average cost of labor actually fell in 2012—and by 6.8%!

In Spain, which struggles with a similar unemployment problem, cost of labor rose by 1.1% to €20.90, in Italy by 1.7% to €21.90, in Germany by 2.8% to €31, in France by 1.9% to €34.90. The biggest gainers in percentage terms were at the bottom: in Bulgaria, cost of labor rose 6.4%, a whopping €0.24 per hour! In euro terms, the biggest gainers were at the top: cost of labor in Sweden rose 3.5%, or about €1.50 per hour! The cost of labor at the top is running away.

Based on data from the German statistical agency Destatis, this is what it looked like in 2012:

But if enough Swedish companies—and not just manufacturers but all kinds of companies—packed up their machines and robots and cubicles and headed south, unemployment would rise in Sweden. Once unemployment pushes deeply into the double digits, executives will defend their delocalization decisions by lamenting the cost of labor, and soon the government will be talking feverishly about “structural reforms,” without meaning it, and that’s where France is right now. But eventually the situation might deteriorate and pressure wages and associated costs. This has happened in Greece. And they’re all competing with the US, China, Mexico, Bangladesh…. Because competitiveness is not just a beggar-thy-neighbor system.

Alas, the rejuvenated “sick man of Europe,” Germany, isn’t surviving just by cutting its cost of labor. At €31 per hour, it was 32% higher than the EU average, though 11% lower than in France. In manufacturing, it was even more striking: Germany’s cost of labor of €35.20 per hour was 47% higher than the EU average, but still 3% lower than in France. Productivity, infrastructure, transportation costs, corruption, training and education, etc. all figure prominently into this equation. Cost of labor is not the only factor.

Yet German workers have been hit hard: between 2001 and 2010, the cost of labor grew 16%, less than the rate of inflation, while in France, for example, it grew 35%, and in southern countries it jumped far more. In 2011 and 2012, Germany’s cost of labor began to rise with renewed vigor, up 5.9%, but so did France’s at 5.4%.

Much of this money was absorbed by the costs of social contributions, pensions, etc. And they can be breathtaking. The graph below shows these additional costs to the employer per €100 in gross wages paid.

So an average worker in Sweden who earns €100 for a certain number of hours in gross wages costs his employer an additional €51, for a total cost of €151. A Maltese worker, who’d work about three times as long for the same pay, would cost the employer only an additional €10, so €110. And a Bulgarian worker who’d work about 15 times as long for the same pay would cost an additional €18, so €118. This is a conundrum looking for a solution.

Over time, “competitiveness” hollows out the middle and lower classes in some “rich” countries—this has been happening in the US and Germany for years—balloon the middle class in other countries, and make the top in all countries immensely rich. For many people, it’s nothing to look forward to.

Italy has Beppe Grillo, but with European governments reeling from self-inflicted crises, and the euro debacle descending into a tragi-comic farce, one wonders who the real clowns are – especially here in Spain, where ministers gorge themselves on the public purse, leaving behind a trail of evidence so obvious that even the mainstream media can’t ignore it. Read…. Will the Real Clowns Please Stand Up?

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45 comments

  1. Hugh

    Competitiveness and productivity have both become code words for beggar the worker. Perhaps the most pernicious feature of modern economics as kleptocratic propaganda is how it divorces all of its terminology from any social purpose. The terms become ends in themselves and then are used to destroy the very social purposes which could give them any meaning. Some competitiveness in a society is no doubt beneficial, but as many have pointed out here, cooperation is far more important in accomplishing social and economic goals. If competitiveness leads to lower standards of living and a lower quality of life for us, then it is harmful, not helpful.

    Further, there are all kinds of jobs in the areas of education, caregiving, and the environment where the related concepts of competitiveness and productivity are meaningless. Yet for a decent and humane society, they are crucial.

    1. from Mexico

      Hugh said:

      If competitiveness leads to lower standards of living and a lower quality of life for us, then it is harmful, not helpful.

      I began reading Hannah Arendt’s The Life of the Mind a couple of days ago, and in the introduction is something that very much reminds me of the ongoing battle nominalists or empiricists like yourself have with those who believe theory alone provides a window onto reality:

      Thus, all the elaborate modern arguments against positivism are anticipated by the unsurpassed simplicity of Democritus’ little dialogue between the mind, the organ for the suprasensory, and the senses. Sense perceptions are illusions, says the mind; they change according to the conditions of our body; sweet, bitter, color, and so on exist only nomo, by convention among men, and not physei, according to true nature behind appearances. Whereupon the senses answer: “Wretched mind! Do you overthrow us while you can take from us your evidence [pisteis, everything you can trust?] Our overthrow will be your downfall.” In other words, once the always precarious balance between the two worlds is lost, no matter whether the “true world” abolishes the “apparent one” or vice versa, the whole framework of reference in which our thinking was accustomed to orient itself breaks down. In these terms, nothing seems to make much sense any more.

      Michael Parenti says something very similar here, which may be easier to understand:

      http://www.youtube.com/watch?v=jKhRE61VE0E&feature=player_detailpage#t=1422s

    1. Ruben

      I guess it is claiming that the Spanish electoral system is not proportional -it’s a winner take all in each circumscription – and therefore it is more difficult for a newcomer to get seats at the Parliament.

      There are several major issues with the electoral system in Spain, that have contributed to the the overwhelming degree of corruption and incompetence that is emerging. Mostly, by far the central problem is the enormous power of parties.

      Regarding the linked article -”Will the real clowns please stand up?” – it shows an accurate picture of the current Spanish boss: a slow, corrupt, mediocre, embarrassing non-entity that if there was effective meritocracy should be running a notary not a country.

  2. Knut

    ‘Beggar thy neighbour’ internal devaluations is exactly the correct term to describe the policies being advocated and implemented by the European policy elite. In terms of the simple macroecomics that we have understood since Keynes’ essays in the 1920s, they are the painfful and less efficient equivalent of currency devaluation.

  3. tom

    I am sorry, as interesting as the article is it isn´t really well thought out. Here one particular paragraph:

    But if enough Swedish companies—and not just manufacturers but all kinds of companies—packed up their machines and robots and cubicles and headed south, unemployment would rise in Sweden. Once unemployment pushes deeply into the double digits, executives will defend their delocalization decisions by lamenting the cost of labor, and soon the government will be talking feverishly about “structural reforms,” without meaning it, and that’s where France is right now. But eventually the situation might deteriorate and pressure wages and associated costs. This has happened in Greece.

    What the author unfortunately doesn´t get is that in real life you can´t relocate all but the most standardised of operations as you don´t have the people with skills in these places. To develop these skills you need a minimum of three years vocational training and a further few years of practise. Plus decades of institutional memory. The skills of running an assembly line are getting more complex all the time. Capital costs are huge and any stoppage ruinous. That is why seemingly simple things like low voltage circuit breakers are still being manufactured in Germany. The biggest factory in the world is in Mannheim and a subsidiary of ABB. All employees are paid by union contract and make on average 6000€ before taxes. They are even getting work back from China and will again increase employment this year. Why? Shanghai got the last assembly line from Mannheim. Now supposedly the low labour costs should kick in and make Shanghai more profitable. Surely a US company would have been happy to close Mannheim and cash in. That is not how things work in Europe. There they gave Mannheim funds for a new generation assembly line. It is in many parts custom made and relying on supplies of a whole network of machine tool shops in Southern Germany. It is an incredibly complex mega machine that started up last year. Now production costs in Germany are again lower than in Shanghai and there is less wastage and the circuit breakers are more reliable. Unless and until ABB Shanghai has the skills the institutional memory and the supplier network of
    Mannheim there will be no relocation. No matter the labour cost.

    About Greece the author writes: “But eventually the situation might deteriorate and pressure wages and associated costs. This has happened in Greece.”
    This is plainly nonsensical. Greece has never had any manufacturing. The reasons are mainly but not only historical. A very big factor has always been that there´s a much easier life to be had by making it into goverment employment.

    1. p78

      The luck of German workers so far was that their govt. preferred to *uck foreigners than to attack, Reagan-style, the German industial unions. Not all German industries are reverent with the unions, if they can, as the following example will show.

      Some German slaughterhouses employ East European citizens during nightshifts, which they pay much much less than what they pay a German worker in the day shift, for a specific operation with the meat (I can’t recall exactly the name). Belgian TV, which reported this, has shown that Belgian meat producers were sending over the border Belgian meat to the Germany for that specific operation, then reimporting it, – all this to avoid paying Belgian butchers their price and obtaining a hefty profit by sheer exploitation of non-unionized workers.

      If the corporations would like skilled workers, why aren’t they training/schooling them, like in Germany? Because the corporations would prefer to come as guests to a dinner already served. People in Southern Europe are not less skilled, if they are trained at the workplace.
      Look, there are “Job Fairs” all over SE Europe for doctors and nurses who are the product of the SE Europe state-paid educational system (Medical Universities etc.) and who are invited to move their families to Germany, UK, Swiss, France, Belgium, Norway and Denmark, for salaries and social integration assistance which they could only dream to have in their only countries. Is this hijacking of medical specialists or nurses from the poor to the rich fair? ( And what about the discourse about non-existant skills in the SE?!)

    2. from Mexico

      Lordy, lordy, tom!

      Do you ever tire of making the case for the German oligarchs?

      I notice how your arguments almost invariably entail taking some exceptional case and portraying it as if it were the rule. MIA, of course, is any sort of macro-economic study, such as this:

      Net real wages in Germany have hardly risen since the beginning of the 1990s. Between 2004 and 2008 they even declined. This is a unique development in Germany—never before has a period of rather strong economic growth been accompanied by a decline in net real wages over a period of several years. The key reason for this decline is not higher taxes and social-insurance contributions, as many would hold, but rather extremely slow wage growth, both in absolute terms and from an international perspective. This finding is all the more striking in light of the fact that average employee education levels have risen, which would on its face lead one to expect higher wage levels. In contrast to the prevailing wage trend, income from self-employment and investment assets has risen sharply in recent years, such that compensation of employees makes up an ever shrinking percentage of national income. Inflation-adjusted compensation of employees as a share of national income reached a historic low of 61% in 2007 and 2008.

      http://www.diw.de/sixcms/media.php/73/diw_wr_2009-28.pdf

    3. Claudius

      An isolated view on Ikea’s labor cost does not tell us a lot.

      The more I read Wolf’s articles the more frequently I sulk at the banner headline as set against the articles content. These articles always seem like a failed soufflé; I know it should be a soufflé but, nevertheless, it presents itself like a lava cake.

      Standard (even MMT) microeconomic theories correlate wages, productivity and for employment outcomes very clearly (so doesn’t need repeating). And, arguably, the proper measure is not wage inflation per se the relationship between wages and productivity (or more specifically, the relationship between wage (or more realistically, total labor compensation growth and productivity growth).

      ‘From Mexico’ points out that: ‘Net real wages in Germany have hardly risen since the beginning of the 1990s. Between 2004 and 2008 they even declined….; and, I don’t disagree. But, it should also be recognized that Public social expenditure (total worker compensation benefit) as a percentage of GDP had risen to 26% by 2009 from 21% in 1990 (fifth behind, Austria, Sweden, Denmark, Belgium and France). Now equating real increase in social benefit to real increase in wages (total worker compensation benefit) is, maybe another topic; but the comparative measures of real wage increases and productivity gains as they relate to devaluation isn’t unrelated.

      Bulgaria, Czech Republic, Sweden Poland, Hungary, Romania still have their own sovereign currencies; so, as comparative wage inflation measure is as much function productivity growth as it is currency devaluation (e.g., Bulgaria’s fixed exchange rate meant that it had to undergo a process of ‘internal devaluation [instead}, whereby competitiveness is restored with falls in wages and prices. As things stand, despite several years of austerity this process still has further to run,” Shearing and Ermolenko). So, Bulgaria (and Czech Republic, and Poland and Hungary and Romania) are, perhaps, not so competitive at Wolf suggests (at least, not in the way he suggests).

      For good or bad, Sweden’s (Ikea’s) wage increases (remained below productivity growth since the mid-1990s. The relatively more dynamic growth of the Swedish economy after the recent recession suggests that wage restraint may have helped to increase Sweden’s relative competitiveness (despite that ‘real’ wages for Sweden’s employees were were/are higher due to higher total labor compensation compared with e.g. the southern EU member states and Eurozone non-euro countries) and that public policy facilitated this through far-reaching institutional reforms, e.g. of nonworking benefits and increased employment flexibility. For the southern European countries real wages (comparative total compensation) have not increased as much, but neither have productivity gains – to which they can, rightly, claim benefit.

      I suspect, Ikea isn’t going to move to Bulgaria any time soon.

      1. p78

        “e.g., Bulgaria’s fixed exchange rate…”
        I don’t know about Bulgaria, but the other countries you mentioned have own currencies which are floating, not pegged to the euro or dollar. (Czech Rep., Poland, Romania, etc.)

        1. Claudius

          Thanks. Should read:

          ‘Though, Bulgaria’s fixed exchange rate…..”

          (an, implicit, distinction from the Czech Republic’s, Sweden’s, Poland’s, Hungary’s and Romania’s floating currency).

  4. coobek

    I work in manufacturing company and I almost fully support that statement by tom.

    The investment in Human Capital in Asia & still the high levels of it in EE countries really is the backbone behind the success of the regions. Having said that there are still lagging the likes of Sweden & Germany in TOTAL EFFICIENCY. You really cannot move anythig to a place without the institutional memory & human capital investment.

    Unless you are Boeing of course and want to pay finally more for the Dreamliner and have your reputation going south.

    1. from Mexico

      coobek says:

      The investment in Human Capital in Asia & still the high levels of it in EE countries really is the backbone behind the success of the regions.

      Nah. Those 300 million workers toiling away in China for $1 a day are the real engine that drives China’s economic miracle.

      There are people who do not live in a defactualized world as you and tom do, such as the filmakers who made these documentaries:

      101 East: China’s labour pains
      http://www.youtube.com/watch?v=BqGmCq0hUBk

  5. coobek

    p78

    Your point of riding free lunch of Human investment by corporation and not wanting to develop the workers themselves is of course true and a shame. But than again its just plain fact how they operate and think and the likes of EE & Asia gave it to them while other regions diod less in this respect.

  6. upstater

    IIRC, when GM was going belly-up in 2008-2009, I read labor cost content in a new car was 10%. In any capital intensive or automated industry, labor content is likely to be similar.

    Moving to Bulgaria might save on labor, but the cost of moving and loss of technical staff (engineers) that doesn’t want to move has to be considered.

    1. William C

      It is a few years since I visited Bulgaria on business. The question then came up why is so little manufacturing for EU markets being relocated there to take advantage of the low labour costs? The answer? Transport. The roads were not good enough to get goods out, only factories next to the port were feasible. Railways likewise were deficient.

      Money had been provided by the EU to improve transport links but it either had been or was feared it would be stolen by the politicians and the local mafia.

      I was astonished by the poverty, had not realised that anywhere in Europe could be so backward. The farmers were still using horses because they could not afford tractors. I realised afterwards that not only had the Bulgarians been held back by the Communists for decades but by the Turks for five hundred years or so previously. Poland was much more advanced by comparison.

      I hope Bulgaria has changed but am not confident.

  7. Paul O.

    I´m sorry, but what m I missing here? Shouldn´t by the logic advanced in this article Sweden and Germany be currently facing high unemployment, current account deficits and serious problems? What about Switzerland, which suffered a serious revalution of it´s currency against the Euro? Surely they should be suffering real dispair right now?
    What point is the author trying to make?

    1. from Mexico

      Have you ever heard of global wage arbitrage? Here’s how wiki describes it:

      Global labor arbitrage is an economic phenomenon where, as a result of the removal of or disintegration of barriers to international trade, jobs move to nations where labor and the cost of doing business (such as environmental regulations) is inexpensive and/or impoverished labor moves to nations with higher paying jobs.[1][2]

      Two common barriers to international trade are tariffs (politically imposed) and the costs of transporting goods across oceans. With the advent of the Internet, the decrease of the costs of telecommunications, and the possibility of near-instantaneous document transfer, the barriers to the trade of intellectual work product, which is essentially, any kind of work that can be performed on a computer (such as computer programming) or that makes use of a college education, have been greatly reduced.

      Often, a prosperous nation (such as the United States) will remove its barriers to international trade, integrating its labor market with those of nations with a lower cost of labor (such as India, China, and Mexico), resulting in a shifting of jobs from the prosperous nation to the developing one. The end result is an increase in the supply of labor relative to the demand for labor, which means a decrease in costs.

      Then wiki goes on to repeat the BIG LIE, which has become a tautology for liberal imperialists, even though it has almost no empirical valididty:

      Workers in the lower cost of labor country integrate into the global economy and their wages and standard of living rise. Workers in the prosperous nation develop new products, services, and markets due to the freeing of their time from previous activities, and they create new opportunities for wealth creation.

      1. Paul O.

        Hi Mexiko,

        I know the definition and have also read the quote, thank you very much for refreshing my memory.
        So let me maybe rephrase my question: What point are both you and Richter trying to make? You don´t seem to say anything at all, you just quote, Richter has a headline about competitiveness but his explanation of how things should be given the differences in compensation are in direct contrast to the current situation.
        Maybe I´m a bit thick, but what point are you guys trying to make?

    2. J Sterling

      I think you’re misreading Richter, and he’s ultimately rejecting the logic of “move capital to low-wage countries and low-wage workers to high-wage countries” as a route to national prosperity for high-wage countries.

      He’s saying it’s a false claim and that trying to act on it will not help any country, only the labor-employing international rich minority class.

      1. Paul O.

        Interesting, if I understood you right, you believe he´s saying: Learn from Switzerland, Finnland,… ; the whole reltive consumption story is straw man argument?

  8. coobek

    dear ‘from Mexico’

    Hmmm. I am not disputing that the Chineese improvement did not have the anyone to sacrifice, not to mention environment. I am also very sympathetic to the notion that since in Germany efficiency has risen and general level of Education as well then the wage inflation should have been far higher. Ethicaly you are 100% correct. I am not disputing that.

    What I am saying is that there is a pool of 2Bil poor workers that were made available due to all the free trade agreements and at least partialy are able to absorb some of the simple and more complex mfg jobs + due to advent of internet and telecons a lot of other clerical work. I am also symphathetic to those that previously earned 100$ and now can earn maybe $300 or $700. And this advent of middle class elswehere is having a pressure both on wages and inflation as they consume more. Hey they saw the lifestyle of US in the movies. Therefore some part of developed world will suffer the stagnation or decline. The issue here is that the free trade agreements and free movement of capital was not done slower/democraticly and in fair way (like not allowing for environmental arbitrage).

    The other point here is that only the capital, so the famous 1% will not suffer, since both developed and not developed world requires it. Therefore it is WRONG not to somehow tax the capital gains more in developed countries, where the capital is (owners are), to offset the stagnation and/or decline in wages in developed world, in my opinion at least. And we are doing something completely oposite the capital gains are taxed like 19%. Adding to that is the parasitic class of Bankers who just put the money from one pocket to another with a loose-loose strategy for real economy, betting on everything becasue they can.

    I will challange you that this is the issue and not the labour arbitrage. Why would you say that people in the other places in the world should not be allowed compete in that market with relative equal opportunity is in my opinion where we differ.

    Coming back to Germany, they just foresaw it and preffered lower wages to unemployment. Again they should be taxing the capital gains far more, but knowing how the system works there they share a lot more gains with the labour then say US anyway.

    1. from Mexico

      coobek says:

      I am also symphathetic to those that previously earned 100$ and now can earn maybe $300 or $700.

      Why do you continue to repeat this lie? Obviously you ignored the links I posted up thread, so let’s try this again with an article from The Guardian:

      Graduates are now competing with people made redundant. “I’ve had interviews, but they want people with experience,” said Liu Jing, who has been job-hunting for six months. “There are more graduates, so there are more competitors for every post.”

      Like Su, she hails from a farming family; she had hoped to earn 2,000-3,000 yuan (£200-£300) a month to pay off her 20,000 yuan education bill. Now the 21-year-old will settle for 1,000 yuan.

      http://www.guardian.co.uk/world/2008/dec/04/china-higher-education-graduate-jobs?INTCMP=SRCH

      And mind you, Liu is one of the 6% of China’s labor force that has a college degree. The typical Chinese factory worker makes considerably less than £100 per month, working 7 days a week, 12 hours a day.

      Then, armed with your false empirical claim, you launch an ethical argument when you assert:

      I will challange you that this is the issue and not the labour arbitrage. Why would you say that people in the other places in the world should not be allowed compete in that market with relative equal opportunity is in my opinion where we differ.

      And of course if your empirical claim were true, your ethical argument might have some validity. But your empirical claim is not true. So your entire argument is built upon falsehoods.

  9. Jim

    Labor is a commodity vs. available infrasture, security and low cost energy.

    - The capitalist system has evolved into major trading blocks where LABOR is a commodity. The only constraints on labor are political (social costs and who pays,) and Energy, (cost of moving goods and services) below the thresh hold of local/country wages. Labor completion has therefore been removed, except in the most unique of occupations where there is low supply of specifically educated labor to fill a larger demand.

    - Education/Knowledge:
    Other than language, technology has equalized this. The elite institutions have tightened their grip on education based on exclusivity, while most entry/mid level education has been “pushed out” to anyone who wants it throughout the planet, for a fee. Furthermore as education has taken on a “technical nature,” the ability to consider, think, analyze has been slowly removed from the education process. The process of acquiring education through thinking and analyzing provides little value within the current environment.

    - Guaranteed Platforms for doing business:

    1. Central Banking debt based capital systems are tied together, allowing for capital allocation anywhere on the planet.

    2. Low energy costs allow for the cheap movement of goods and workers without labor constrains from countries or economic blocks.

    3. Implied/Guaranteed military protections provided by the US military/NATO and other defense treaties. This not only helps the countries involved, but by extension all others.

    4. Multinational Corporations Business Model (processes,) has been adopted as the de facto way of doing business. Regardless of industry, governments will protect these at any cost, including shafting their own citizens. These large corporate entities, then become the template for doing business in most developed countries even for small and medium sized businesses.

  10. U.S.Grant

    Where is Norway? It must be up there with its neighbors Sweden and Denmark for my daughter, who lives in Germany, revealed to me in passing that the cost of living in Norway was higher than Germany. She also mentioned all Norwegians benifit from its oil wealth.

  11. Hugh

    Countries like Germany and China can only run consistent trade surpluses if other countries are running trade deficits. This is almost always unsustainable as the Europe internal trade dominated by a mercantilist Germany and the US-China relationship illustrate.

    So the whole concept of competitiveness is irrational. All countries cannot run trade surpluses at the same time, and even those who manage to do so for a while do so at the cost of undermining their trade partners. That is the meaning of beggar thy neighbor.

    The two factors I see that tie exporting powerhouses like Germany and China together are currency manipulation and suppression of labor costs. Needless to say, these manifest in very different ways in these two countries. China starts with twenty million peasants entering the labor force each year. Wages are therefore easy to maintain at low levels. And the manipulation of the yuan we have known about for years. In Germany, wages are considerably higher but this does not mean they have not been suppressed. The Hartz reforms have, much like the Fed policies in the US, kept the wages of German workers flat to slowly falling increasing “competitiveness” but also allowing for the transfer of wealth gained from increases in “productivity” away from workers to Germany’s rich rentier class. As for currency manipulation, Germany’s adoption of the euro allowed it access to a cheaper currency than the mark, at once advantaging it and disadvantaging most of the other members of the eurozone. These other countries were saddled with a more expensive currency relative to their original national currencies, making them less competitive even as trade barriers between them and Germany were eliminated.

    We have been witnessing the unsustainability of the euro system for the last couple of years. We should recognize that competitiveness does not mean what most think it means. It has become nothing more than a cover for neoliberal policies aimed at suppressing workers’ rights and wages. Far from being a measure of economic strength of a society, competitiveness is an indicator of its weakness and the increasing subjugation of workers and theft of their labor. In exporting countries, workers are told to suck it up more to stay competitive. In importing countries, they are told they must suck it up even more so that their countries can be turned into exporting countries. But as I said, this isn’t possible or sustainable, and so beggar thy neighbor becomes everywhere beggar the worker.

    1. Rufus T. Firefly, Jr.

      You really cannot mention Germany and China in the same sentence. Germany merely profited from the EU integration, but that came to an end now. I do not see any Greek or Cypriot buying a BMW or any other “Made in Germany” product anytime in the next 5000 years. And, if Germany is deluding itself that somehow China will be its next market, well, keep dreaming, Angela. China can make its own cars and machinery – it does not need to buy them from Germany. Germany has nothing – absolutely nothing – to offer China or countries outside the EU.

      Germany is doomed. The only option it will have 5 years from now is militarism, once again. However, in a world with Russia, China, and the US, this option too is not available to Germany. So, in an EU and EuroZone teetering on the verge of a disorderly collapse, it is only a matter of time before Germany’s economy too will disintegrate.

      As such, Germany better call in the IMF to kick in the structural adjustment programs early. I say, better be proactive, Germany!…LOL

      Rufus

      1. coobek

        Mostly agree.

        Save the ‘brand image’ purchase.

        And except the machines to make the mentioned cars, whatever the brand. The Germany’s primary export I believe far harder to copy then even car production.

  12. coobek

    China increased the wages x5 in 10 years from low $0.6 per hour to about 3$ per hour currently. It seems on par with cheapest EU country Bulgaria.

    I would not say its easy to maintain low wages with such a wage increase dynamics. As we know during next 10 years China will face rather labour shortages and further wage increases than something else.

    1. from Mexico

      coobek says:

      China increased the wages x5 in 10 years from low $0.6 per hour to about 3$ per hour currently.

      You just can’t give up on the BIG LIE can you?

      The cost of employing a factor worker in China, for instance, is $1.36 per hour according to this article.

      http://www.huffingtonpost.com/2012/03/08/average-cost-factory-worker_n_1327413.html

      That means a factory worker who works 12 hours a day, 7 days a week takes home a whopping $114 per week. And this is in a country where the rent on a one-bedroom apartment will set you back $343 per month. This is completely congruent with what Chinese workers are telling the interviewers from the articles and documentaries I cited above.

      Your construction of reality is what I was referring in my first comment on this thread in response to Hugh. For the empiricist, the mind is shaped by things “out there.” For the idealist, “out there” is shaped by the mind.

      1. coobek

        from Mexico

        Indeed, the thing is IT IS whooping $114 per month in RELATION to what they were getting 30 years ago. It is $456 per month so aprox a minimal wage in Poland, a EU-27 country. True its a minimum here but 50% of ppl get no more than $830 in Poland (certainly even less in Romania or Bulgaria). So if you say that it is not a partial success that China from complete beggar is now almost in par with one of the poorest countries in OECD and EU but still considered a ‘good’ club you are being not true to reality.

        Again all the other problems aside, which I believe are not were we differ.

  13. allcoppedout

    The OECD issues regular reports on wage levels and productivity. There’s a summary at http://www.economist.com/blogs/freeexchange/2011/09/unit-labour-costs
    that includes Norway.
    We have been urged to get more education/training and work smarter ever since I can remember. Teaching in business schools across the world, there was a time I believed in this, though I can’t remember when I went through transition to cynicism. The problem is clearly one of criminality, economic rents and lack of any scientific economics. From Mexico mentions global wage arbitrage and if one takes a selfish perspective I don’t hold with we should all train up to be bankers and get in on the bonus fest before our grandiose lifestyles collapse under free market competition and wage arbitrage.
    A farce maybe, but it’s pretty much the one we promise our university students in business schools when the reality is we are putting them $80K in debt and there are very few smart jobs they won’t get anyway because they are ‘reserved’.
    We look at nearly all these things upside down. Sweden has been one of the best places to live since WW1. If its people could live successfully in a high wage economy the question is why we all don’t. One reason is the theory of competitive advantage underlying much economics. Reinhard Schumacher – http://wer.worldeconomicsassociation.org/article/view/59 -
    gets into some deconstruction beyond Wolf.

  14. allcoppedout

    Schumacher uses the term ‘comparative’ – I just feel it’s always competitive. Quite why we are so far down the road to serfdom when at least the beginnings of robot heaven are with us suggests vile ideologies are in play.

  15. Rufus T. Firefly, Jr.

    Let us not mix the criminals of Western Europe with their victims from Eastern Europe, shall we. The East will soon leave this monstrosity called the EU. Already they have all ditched plans to join the EuroZone. The EU is a non-issue for Eastern Europeans, so such charts are meaningless for any long-term prognosis.

    In closing, I have a few words for the once proud (but currently humiliated, humbled, and dishonored) Western Europeans:

    Listen up, you fat and dumb Western Europeans: better not underestimate the Eastern Europeans. We will ditch your stupid EU, Euro, and NATO in a heartbeat when China or Russia will offer us a better deal. And they will. We’ll leave you wallowing in the ruin of your own decrepit filth and corruption which is what has defined your pathetic colonialist nations of miserable predators for the past 500 years.

    Who are you going to rip off then? You have just run out of victims to plunder. So go ahead and cannibalize one another like the rabid vermin that you have always been. Go ahead, Germany, rip off Cyprus and Greece. France, how about you invade Spain after you’re done with Mali? I say, all you Westerners better get used to joining the Third World asap, because that’s the only option you have at this point.

    All you Westerners have a shameful and disgusting history, and that history is now part of your consciousness and your genes. You are nations of degenerates, and you are devolving into hideous subhuman monsters.. Yes, you all have become the monster that you unleashed upon others. And that monster is now the Karma that is devouring you alive. It is the Nemesis that is standing ready to chop you down.

    I say, go ahead, Nemesis! Chop them all down! All of them!

    I am laughing my ass off watching this spectacle of Western humiliation. The spectacle of Western dishonor. How pathetic the proud and once arrogant West has now become.

    Ha! Ha! Ha! I laugh at you. And I spit on your so-called “civilization.”

    Serves you right!

    Rufus T. Firefly
    (the artist formerly known as Psychoanalystus)

  16. coobek

    At Rufud.

    Poland has a aproval rate of EU at 75%-80% and EU institution reputation is better than local one. Come on. Take the blinders off unless it was a parody. EE would never work with Russia even if whatever deal would pay x2 vs EU. Historical sentiments you see. There is just no trust.

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