It's Ireland.
Where, incidentally, average labour costs are still higher than those of the UK, Italy and Spain - see the Eurostat data here.
Growth without competitiveness ? Good luck with that. Hard to avoid the conclusion that reality is going to be very painful all round.
15 comments:
It seems to me that until we can find a way of stopping our TBTF banks from soaking up all the financing to shore up their balance sheets.
There is going to be no spare cash to fuel any growth for a very long time to come.
If you have a single currency, and single trade rules, and capital that moves in nano-seconds for a micro-percentage - why make an issue of a single wage rate.
Another blindingly obvious statement that its a race to the bottom on wage rates.
We are the new serfs to the money men - or perhaps we have always been!
The Irish were doing the jobs now done by the Chinese using now defunct EU subsidies to offset their ridiculously high wage claims.
They've screwed themselves with their own greed and their only saving grace is that most of them know it and are taking the inevitable pain without too much fuss, in complete contrast to the Greeks who are blaming everyone but themselves.
Austerity can only work with monetary easing and devaluation - the UK way. Even this is a terrible path to a hollow victory as we are discovering on this side of the pond.
Austerity by itself in a single currency which remains strong is just national economic suicide. it will get messier and messier until an inglorious finale.
ND,
Your reference to competitiveness is interesting.
When corporate executive salaries are described as "competitive" that word means very, very, very large and growing at least an order of magnitude faster than the inflation rate.
When applied to everyone else, it means low, and falling in real terms.
There may be a clue there as to why CU sees hatred for "the rich".
Does the West basically have to ground this out until Chinese wages have risen to near ours (or they have shot themselves in the foot with socialism)? Or can we get some competitive advantage another way (such as being ahead of whatever the Next Big technological Thing might be?
One thing which is never debated in politics is where productivity actually comes from.
"Does the West basically have to ground this out until Chinese wages have risen to near ours"
They only get paid £1 an hour so we'll have a long wait!
200million Chinese working in "western" factories at £1 an hour. Not normally a recipe for economic success so how are the Chinese getting away with it? Because it is a giant Ponzi scheme that just happened to have blown up in time to replace the dot.com bubble. When those growth figures turn negative for a year or two all the hot money will flow out of China pretty damn fast. We just hope they don't get mad when they realise all their hopes and dreams have dissappeared in front of their eyes.
You say that, but I read recently that the Chinese company that owns Volvo is building its new plants in random out of the way places because in the main cities it has stopped making sense to build new factories because of the labour costs.
I thought it was Chinese govt policy to build factories away from the coastal belt, to bring on development throughout the country. Trying to overcome the globalisation problem, that it only brings development within 100 km or so of a major port. (And reduces the risks of major social tension.) Not just driven by lower labour costs - a govt regional policy.
I keep reading that China's passed the Lewis point - i.e. the country has moved to the city, there's no longer a bottomless pool of cheap labour, so wages must rise.
http://ukcommentators.blogspot.co.uk/2012/02/mass-immigration-and-lewis-turning.html
Alas in the UK, the peasantry of half the world is available to employers. We had one Lewis point in the nineteenth century, but may have to wait a long time for another.
Laban
PS - should I be looking at a retirement place on the Cork coast, or have prices still a way to go?
Laban - try Spain in about a year.
sorry not to be responding individually, am v. busy - in Ireland !
of course
"You say that, but I read recently that the Chinese company that owns Volvo is building its new plants in random out of the way places because in the main cities it has stopped making sense to build new factories because of the labour costs."
Its not so much that labour costs have gone up. Problem is you just can't get labour into the cities anymore. "poaching" acts to push wages up but US companies just start looking to expand in Mexico.
They have run into another problem because all the farming and power stations are run by old guys now retiring - no new blood coming in because they are all in US/European factories.
It's all coming to an end and the Chinese have realised that if growth just flatlines or even comes close to it then the hot money will be looking to blow up yet another investment bubble.
The best way to get rich now would be to guess where the hot money might pour after the China bubble collapses.
"The best way to get rich now would be to guess where the hot money might pour after the China bubble collapses." Rebuilding Buenos Aires after the war?
... asteroid mining with the titanic director I expect.
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