CAPITAL vs LABOR

[rffrydr]

Of course this the oldest and fundamental cyle when it comes to econmics--and it precisely because of this that the answers to questions of it's twists and turns cannot fully or finally be answered within its confines.

The ultimate direction will come, I think, from the greater worLd of politics and culture. While, doubtless, there are times when economics has held both within it's grip, i.e. the rise of japan in the 70's or, say, the french love of "hollyvooood." Ultimately, culture will decide.

Presently, in regards to the latest newsletter, we have the GM Chairman and his open "letter" to america. This may be dismissed as a Chrysler-like appeal for Washington to bail GM's fast ailing ass out (I, incidently bought their bonds a few weeks back) but it is framed in cultural terms, what we want as a society and how those values will (or can) be expressed our society's companies.

I would agree with you, Henry, that the american autos mark an ending in the cycle of cap vs labor. But I would say just the opposite. The Unions have been running GM for a long time: production has been set for at least these last years on employment balance rather to any regard for efficiency or profitability. GM and the american autos represent union power in its deaththroes. GM, for instance, allows for smoking on assembly lines and "ghost-workers." For christ's sake! the same company responsible for these guy's long-term (spiraling) health care!! The notion of an "economy" of the american auto has long-since collapsed under the weight of its own bloated worker. No amount of "offshore outsourcing" will save the Corvette (unlike the "american flyer" red wagon), captial and labor are bound by time, geography and scale. All things that "market-economies" don't handle well, if at all.

But yes, the cycle is turning, it is turning back in the direction of labor and it is turning exactly at the lowest rung in labor, where you would expect it to begin. The pinnacle of captial power is not GM but WalMart/Microsoft. The change is well underway. You mention the movies, the PR (Walmart now HAS to sponsor NPR, Katrina etc) on our side. But labor is reasserting itself where it wasn't supposed to exist: China.

Walmart doesn't site new manufacturing in coastal china anymore: good help is hard to find and even the assemblylines are not only not cheap anymore; they are beginning to cost. Agricultural reform, ironically price liberalization, is keeping more peasants on the farm and off the streets in Gunangzhou.

The first hint of this change was there for those who wanted to look 5 years ago when the 1billion plus dreamt cellphone distribution topped out at 250 million and China Mobile, the "darling" of "class A" shares went flatline. China now, as always, is bifurcated place, a land of those who can and those who will never be allowed to try. Those chinese who can make it work, make China the factory to the world, are in shorter supply than we imagine, and it's now becoming clear that limits are being pressed and costs going higher.

"Environmentalism" has come late and come by necessity in china. But it is now becoming a badge of western standards--a cultural marker. The proof is in the money: they are now hiring Vancouver companies to clean their water, for example. The most powerful symbol of all now driving China, the 2008 Olympics, is really all about acceptence, admittance, as western power--albeit a la japan! Can the transformation of labor from the country writing the greatest transformation of labor in the modern world be far behind?

It was in the concept of "shareholder" that chinese communism and western capitalism were united. Is there a more "communist" idea than this??? As capital has now found its resurgent power through this concept it has also, I think we are beginning to see, opened the door to its complement and opposite, labor.

And what of the "market," the ultimate driver of this capital investment. It takes more than a belief to fully exploit the labor/capital dynamic. It takes a complete infrastructure, all the little things that we in thw west now take for granted: the ability and right of transfer for real property, stable and fair legal framework for righting economic wrongs, a neighbor who wnats what you understand he wants etc. etc. etc. IN RE: Sachs vs. Soviet Empire

Take advertising (please!), the mother's milk of captialism, how much can you sell to those who can't read or write, what does "deoderant and tampons" mean to household without hot water?

It hasn't taken long for a generation of "little emporers" to appear in China. How much longer for a "fair and decent living."? Having a lot of poeple doesn't necessarily mean having and endless supply of labor. A means of production matching the modern needs of consumption I think will be self-limiting. --And come sooner than labor.

The pinacle for Capital in this cycle may have been marked by Microsoft and Yahoo selling out its represented western value of "free spreech" opening the door to cold Chinese cellblock for a few of its "customers." The reaction is already here (rembering Dow 1968-1982).

Next up: ROBOTS.
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Today is the Tomorrow you worried about Yesterday!

[HenryTo]

rffrydr,

Very nice take on capital vs. labor and how this latest cycle is playing out today!

In our commentaries, we try to simplify our analysis as much as possible. i.e. Have one simply, underlying model which would help spit out the probability of such-and-such a scenario happening and what investments to make under each scenarios. However, many folks out there take it too far. That is, they oversimplify.

One such example is the "limitless" labor pool available to the world because of the so-called integration of China and India into the world labor force. First of all, many of the same analysts know little about the culture in China and India - let alone how local laws and practices are enacted. That is, not everyone is unlike in China and India. India has the most numerous dialects for a single country while China is definitely in the top three. Culture-wise and "work-ethic wise," Americans probably have much more in common with each other than the Chinese - even though Americans represent many kinds of different races, cultures, and religions.

Assuming such a perfect integration can exist, it is still not so simple. e.g. Electronic manufacturers tend to hire girls in their late teens to late 20s - and because of China's one-child policy enacted nearly 30 years ago, China is literally running short of workers in that category. To assimilate other workers into call centers in China will also require many years of training, for example. India is already experiencing a labor shortage in teh tech sector. Another example: Toyota just implemented a lockdown at a manufacturing plant just outside Bangalore. If labor was so plentiful or if labor was so flexible in India, why doesn't Toyota fire all these workers and bring in replacements? Humans need to be raised, educated, and fed - and this takes time. We are a finite resource. We are not robots or inter-changable parts.

The cycle is turning, but this cycle will be more apparent in countries where labor are undereducated, overpaid, and own no property. Witness the strike of the dockworkers in Western Europe, lockdown in India, and so forth. At some point, there could be an ugly backlash in China as well - but so far, the fear of the police state in China is still ver prevalent, and thus it will take more to see a labor backlash. We are also seeing this in the U.S., but given that 70% of all households own homes, and given that more than 50% of the population own common stocks (that is, most workers have now also become owners of capital), the U.S. will be less affected than other countries - unless unemployment rockets to 10% or higher in any upcoming recession.

[nodoodahs]

I just wanted to be the only one on this thread that doesn't buy into the Marxist dialectic.

Cheers!


_________________
He was wearing my Harvard tie. Can you believe it? My Harvard tie. Like oh, sure, HE went to Harvard.

[rffrydr]

....within cycles--spinning like windmills in our minds. Marx thought it was THE cycle. He was wrong. But here, on this board, it's the cycle that matters.

And it's been that way since slavery was abolished--not because it was bad, but because it was uneconomic! Some say that makes a market economy "good."

The invisible hand.
_________________
Today is the Tomorrow you worried about Yesterday!

[rffrydr]

Outsourcing is Insourcing:

http://www.businessweek.com/magazine/content/06_03/b3967085.htm
_________________
Today is the Tomorrow you worried about Yesterday!

[rffrydr]

Also out of this weeks free Barrons:

On the one hand its understated because much production outsourced from Taiwan and Hong Kong has an American market target. Also much of that FDI is chinese money itself recirculating for Yuan adjustment. But the point on profitibilty is well-taken:

China Imports Have Asian-Fusion Flavor

Bank of America
Investment Strategies Group
40 West 57th St., 33rd Floor
New York, N.Y. 10019
(Tel) (646) 313-8791

ALMOST EVERY DAY there seems to be another report about another American company decamping the U.S. for low-cost China. The more capital U.S. firms plough into China, according to conventional wisdom, the greater the competitive threat to corporate America and American workers. By increasing their presence in the Chinese economy, U.S. firms, in effect, are exporting American jobs to Shanghai, Tianjin, Wuhan and other burgeoning areas in China.

That's the consensus view among many constituents in the U.S., although, not for the first time, we feel the consensus is wide off the mark.

Granted, American firms have raised their stakes in China over the past decade, with cumulative U.S. foreign direct investment (FDI) in the first half of this decade rising significantly over the amount invested over the second half of the 1990s. That said, two points are worth highlighting:

First, as a percent of total U.S. FDI outflows, China accounted for just 1.4% of the global total in the first half of this decade (2000-04) -- a pittance, in other words, relative to total U.S. FDI overseas.

Data from the Bureau of Economic Analysis show that, after hitting a record high of $4.2 billion in 2004, one measure of U.S. foreign investment to China dropped sharply last year, to roughly $1.8 billion by our estimate. Declining profit margins among U.S. affiliates in China, coupled with excess capacity in various Chinese industries, were among the chief reasons behind the slowdown in U.S. investment to China last year.

Second, as it relates to China's FDI inflows, Corporate America accounts for only a small slice of the pie. Since 2000, U.S. firms have accounted for just 10% of total FDI inflows to China, a much smaller percentage than commonly recognized.

Japan's share was slightly larger, at 11.1%. Germany's relative presence in China (accounting for just 2.6% of total inflows this decade) has been rather limited, as was the presence of the British, the Dutch and the French. In general, European firms have stepped rather cautiously into China.

At the other end of the spectrum are companies from Hong Kong, South Korea, Taiwan and Singapore, who have been at the forefront of investing in China, collectively accounting for over 60% of China's FDI inflows this decade.

In other words, it's not the developed nations that are driving China's investment-led growth and industrialization. Rather, the rise of China has a significant "Made in Asia" quality to it; the Middle Kingdom, along with Hong Kong, South Korea, Taiwan and Singapore have never before been joined at the hip as they are now.

Accordingly, in terms of production shifting to China, the burden of adjustment has fallen disproportionately on workers in Taiwan, South Korea, Singapore and Hong Kong as opposed to Germany, Japan or the U.S. That's a fact lost on many policy makers and legislators here in the U.S.

Also lost on many folks in the U.S. is this: While U.S. imports from China have soared over the past decade, much of what the U.S. now imports from China used to come from Hong Kong, Taiwan and other Asian nations. Over half of China's total exports are attributable to foreign-owned affiliate operations, thereby obscuring the true meaning of "Made in China."

-- Joseph Quinlan, chief market strategist

[HenryTo]

Great observation. Such an understanding becomes very obvious if one takes the time to go on to the streets, offices, and universities of Hong Kong and start comparing today's times to the days before the Asian Crisis - when wages were three to four times higher and when high-paying jobs were very easy to find (and when taxi cabs were hard to find). Today, that relationship (jobs-to-taxi ratio) has been inversed.

[rffrydr]

Even the richest don't want it anymore. Strike another blow to the American iron ricebowl:

http://biz.yahoo.com/fool/060602/114926029304.html?.v=1

[HenryTo]

That number from Motley Fool is misleading. Following is a note from the 10-K:

"The amount by which accumulated benefit obligations (ABOs) exceeded the fair value of fund assets for certain U.S. and non-U.S. plans at year end. For funded pension plans, this difference was $2.8 billion at December 31, 2005 (U.S. $1.2 billion, non-U.S. $1.6 billion). For unfunded plans, this was the ABO amount of $5.3 billion (U.S. $1.1 billion, non-U.S. $4.2 billion). The payments by period include expected contributions to funded pension plans in 2006 and estimated benefit payments for unfunded plans in all years."

On a PBO basis, the number from Motley Fool is certainly correct, but this includes the deficit from unfunded plans as well. Unfunded plans are plans whose contributions do not qualify for a tax deduction under ERISA - and thus they are left unfunded. These "non-qualified" plans benefit executives and high-paid employees - and I am guessing no one will feel sorry for these folks if XOM is to go bankrupt and leave these plans unpaid. These plans are also not guaranteed by the PBGC so tax payers should not feel worried about the liabilities from XOM's non-qualified pension plans.

The $11.2 billion deficit that the Motley Fool mentions is actually more like a $6.1 billion number. Of course, this is still high but the company is expected to contribute $700 million to $1.2 billion to its pension fund in 2006.

Look at the last table under Note 15:

http://yahoo.brand.edgar-online.com/fetchFilingFrameset.aspx?dcn=0001193125-06-040951&Type=HTML

[rffrydr]

"Six-years, Six-figures." And with this carrot dangling before your nose you're outta college and on a 60+ hr/week, $31000/year career track to something nebulously called "management."

Watching one of my relations caught up in this Capitalistic version if the Bagwan Rajneesh was painful; its lessons on what can be exploited from labor right here and now in the good ol' USofA, revealing.

"We Pick You Up," is the motto. Now the customer is confronted with a jr. Donald Trump, upgrading, bait-and-switching and generally doing anything possible to "pad" your rental experience. For this you get "service." Intelligent recent graduates washing your car in their power suits and ferrying you to and fro. They can communicate on your level and deliver on all your needs. "Step into our Trap" is the translation.

Since it all gets chalked up on expense, who really cares? A twenty-five dollar rental becomes a thirty-five dollar rental, so what? --it's only 40%. Meanwhile our budding exec has earned another feather in his cap.


"Feathers" and that's about all. 6AND6--after which the accounting begins: "points-for-performance" and performance continually judged. By what standard? (Here is the crafty part) your "team" of merry players. Like many organizations, Enterprise, does not have "workers," "employees,"... labor. Not even the spirited "game" metaphor will suit: Enterprise is a "family." --A family of crocodiles all trying to chew through each other only to find the reward on the other side is just the rump of your sister or brother. "Totally Awesome" "unbelievable" "tight" are "evaluations" tossed around like salad. You are "graded" on a monthly "matrix" (just long enough to strive for and short enough to forget) which gets filed away in some managerial netherland. Company cellphones are promised, you'll use your own on off (all extra) hours; every extra day worked is credited back, except on holidays, weekends, when you have open accounts, or any day that ends in "day." $1000 back on a new old car. Dare you object?

Objections are detrimental to your fellow workers who, after all, aren't really workers, but "family." Will you deny them that you may have your pride? Then more undeliverable, undelivered promises. 6AND6. Keep your eyes on the prize. If it takes you six years to figure this out you've found a home--beggar thy neighbor.

Benefits? Extreme co-pays with many (ambulance) exceptions. Security? No-one is ever fired from Enterprise. Like the British Empire you are sent off to some far-off dusty colony and, heavily tasked, eventually just... wither away. Enterprise doesn't pay unemployment insurance. DUI is the only way out.

This far exceeds WalMart's tricks like elevating the inventory taker to Sr. VP and locking them in the store overnight (for their own "safety"). No, it is far more, "personal."

What Enterprise does is winnow out overachieving youngsters who have lost their sense of place, of "belonging." Enterprise is there for them. Like the Krishnas in the airport, like the "Program" to recovering addicts selling papers at the ballgame as "treatment," like Jim Jones behind the punchbowl, Enterprise is there for them. The long work weeks (and happy-hour sessions) are essential to pull this off--and the hours go straight to the bottom line.

The smile on the Enterprise girl will dim but never disappear: For she is going places. SixANDsix.
_________________
Today is the Tomorrow you worried about Yesterday!

[rffrydr]

Starbucks shows it's face re. modern labor practices.

http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2006/06/27/BUG4PJKMOI1.DTL

[rffrydr]

The wheel turns once again--once upon a time in this hollywood tale of industrialism and the human condition:

The Little Tramp's Classic Labor Lesson
Venezuela's socialist government is using a 1936 Chaplin film to educate workers about their rights. Employers are not applauding.
By Chris Kraul, Times Staff Writer
July 9, 2006

LOS TEQUES, Venezuela — In his classic 1936 film, "Modern Times," Charlie Chaplin has to work so fast tightening bolts in a steel factory that he finally goes crazy. In a memorable scene that has become a metaphor for labor exploitation, the Little Tramp is run through the factory's enormous gears.

For President Hugo Chavez's socialist government, the film is more than just entertainment: It's become a teaching tool. Since January, in a bid to expose the evils of "savage capitalism," the Labor Ministry has shown the Chaplin film to thousands of workers in places such as this rundown industrial suburb of Caracas.


When the screenings at factories or meeting halls end, Labor Ministry officials then take their cue, and use Chaplin's plight to spell out worker rights under occupational safety laws passed last year and now being applied. They are part of Chavez's sweeping reform agenda that he calls Socialism for the 21st Century.

Chaplin wanted his Depression-era movie to make a point, that "once inside the factory, workers had no meaningful rights," said Los Angeles-based film historian and Chaplin authority Richard Schickel. "It was very relevant in the moment it was released, a time of social unrest and the emerging U.S. labor movement."

Seventy years later, Chaplin's fable is all too relevant in Venezuela, said several factory workers who saw the film recently.

"The owners still value their machines more than their workers," said Roberto Maldonado, a 29-year-old minimum-wage worker at the Pollo Premium poultry plant, which processes 75,000 chickens a day. "Charlie Chaplin ends up crazy, and I feel that way too sometimes. When I go home, I'm too tired to pay attention to my wife or family."

Freddy Colmenari, a 35-year-old worker at a pasta factory here, said that just as Chaplin's bosses do in the film, his supervisors frequently speed up the assembly line to nerve-racking levels and zealously monitor workers' trips to the bathroom. "There is always pressure and stress," he said.

But the business community here is hardly applauding the film. In a formal complaint to Chavez last month, the four main employer associations in Venezuela said that showing a movie depicting the boss as a "vulgar exploiter of workers" was designed to "generate hate and resentment in the labor sector" and "demonize the employer."

An official at the Venezuelan Confederation of Industries, one of the four signatories, said that the new workplace laws were another example of Chavez punishing private industry, a process the groups say has been unrelenting since a failed 2002 coup led by businessman Pedro Carmona.

While insisting they don't oppose workplace safety improvements, business groups here say that they weren't consulted before the new laws were drafted and that now workers and their delegates have too much power to intervene in factory operations.

Jhonny Picone, a top Labor Ministry official, said employees needed all the power they could get. He noted that Venezuelan workers were more likely to describe their job as "a curse from God than as something positive."

The grim and dehumanizing factory conditions depicted in the Chaplin film are still the "norm," he said — more than 1,500 workers die and thousands are injured annually in industrial accidents.

Largely at Picone's insistence, the film has been shown 1,000 times in 14 states and has been effective in educating workers who usually have no clue about their health and safety rights. Labor Ministry officials say it's because the most recent workplace regulations, passed in 1986, were unobserved, a "dead letter."

Workers are told they have a right to demand safety and hygiene precautions, and, through an employee-elected delegate that represents each factory, even to shut down production if owners don't comply. Egregious and repeated safety violations can result in the government taking over a plant.

"With Charlie Chaplin, it's easier to catch the attention of workers who are often too tired or don't trust the government in the first place," said Picone, a doctor named by Chavez to head a new Labor Ministry agency that he compared to the U.S. Occupational Safety and Health Administration.

The workplace laws are a facet of Chavez's often-mentioned goal of installing a new socialist economic model to replace the globalized free-market version that the president says has failed.

The "popular economy" model includes a return to state-controlled central planning that reminds many of the Soviet era. Bankrolled by the country's oil wealth, Chavez has financed a number of worker-owned cooperatives that run factories and farms that the government has built or taken over.

"It's by no means dominant yet. It's gradually being built up by a process of trial and error," said a Chavez administration official who asked not to be named. "But in the longer term, the popular economy model will be dominant."

But one industrial leader who asked not to be identified said that the business climate was abysmal, and that factory production, industrial jobs and private investment had plummeted since Chavez took power in 1999.

"How much of this policy is revolution and how much is castigation, I don't know," he said.

Critics say Chavez is merely recycling the failed protectionist economic policies that many South American nations tried to impose after World War II to keep out foreign capital and competition. The policies were largely jettisoned in the 1980s as countries began embracing free markets and foreign investment.

Business interests also cite Chavez's decision to pull Venezuela out of the Andean Community as another example of his bias against the private sector. The regional trade group, known as CAN, was too U.S.-dominated, the president said. But one member, Colombia, is Venezuela's second-largest trading partner, and businesspeople here are worried that they will lose tens of millions of dollars in trade as a result.

On Tuesday, Venezuela formally joined the Mercosur trade bloc, whose members include Brazil, Argentina, Paraguay and Uruguay. Chavez told delegates in Caracas, Venezuela's capital, that he made the switch to avoid being "devoured by imperialist strategies, as happened with CAN."

But Venezuelan producers will have a tougher time competing in the Mercosur arena, said Jose Luis Betancourt, president of Fedecamaras, Venezuela's largest business chamber.

He criticized the new workplace measures. "The law will only generate less efficiency, less [industrial] capacity and make the Venezuelan economy more dependent on high oil prices, which won't last all our lives."

Chavez's adversaries in the business sector scoff at the Chaplin film screenings as an example of the president's simplistic, outdated and decidedly business-unfriendly economic policies.

But for poultry plant worker Maldonado, Charlie Chaplin has made a difference at work.

Inspired by the film and the talk from Labor Ministry officials, he demanded gloves and soap from his employer — and got them. But the assembly line still goes too fast, he said.

Metalworker Miguel Moreno also has seen some improvement. "We have more power because we know more," he said. "They've given me earplugs for the noise, at least."

Film historian Schickel said, "Chaplin would just love that his film is still relevant to modern social conditions, that a modern-day leftist politician in Latin America would find this film to be a useful tool."

[rffrydr]

This one's for you, Bill:

"All that is solid melts into air, all that is holy is profaned, and man is at last compelled to face with his sober senses his real conditions of life and his relations with his kind. The need of a constantly expanding market for its products chases the bourgeoisie over the whole surface of the globe. It must nestle everywhere, settle everywhere, establish connections everywhere. The bourgeoisie has through its exploitation of the world market given a cosmopolitan character to production and consumption in every country.... It compels all nations, on pain of extinction, to adopt the bourgeois mode of production; it compels them to introduce what it calls civilisation into their midst, i.e., to become bourgeois themselves. In one word, it creates a world after its own image."

The Communist Manifesto, 1848

What's old is new: The businessman and the revolutionary are on the same page!... and reading from the wrong book! Both embrace technological determinism. Both discount nations, races and culture. "Friction" in the machine of global commerce. What's left out however will not be forgotten.

For the businessman and the revolutionary globalization is in the end compatible with only one economic system; that this system enables humanity to leave war, tyranny, and poverty behind.

It is an irony of history that a view of the world falsified by the Communist collapse should have been adopted, in some of its most misleading aspects, by the victors in the cold war.

We pay for this in lives.

[rffrydr]

Earnings for workers with four-year degrees fell 5.2% from 2000 to 2004 when adjusted for inflation, according to White House economists.


http://www.latimes.com/business/la-na-wages24jul24,0,2662782.story?coll=la-home-headlines

[rffrydr]

Regan Air Contrller Strike. Good reminder on the beginning of the big turn for labor:

http://www.npr.org/templates/story/story.php?storyId=5604656