Aristocracy in the making, or free market at work?

[engclue]

MY PREAMBLE:
Like very many engineers I am very concerned at the large-scale divvying-up and exportation of engineering and other white-collar tasks (mostly these are not even really reliable long-term jobs commitments for the foreign workers) on an as-needed basis to low near-term-cost development centers in the likes of India, China, Former USSR.

I understand, and I support, the trickle-down of wealth and I am happy for the new opportunities that such exported work opportunities give to developing nations. However, I suspect this trend has gone way, way overboard, like much else in USA* in the past couple of years. I supspect the bigger motivation is "trickle-up". I am not sure of the reasons, but have some ideas...What do you think?

MY QUESTION:
How much of this short-sighted movement is motivated by the "trickle-up" greed of the "new-aristocrats", the corporate insiders that became used to easy and corrupt riches in the late 90's? Is this more about making the super-rich even more obscenely rich at the cost of the entire middle-class of western nations where possible? Why do we hear about a shortage(!) of engineers in USA, and western Europe? Is that another example of media-spin regarding legislation for sale to the highest bidder?

* (politicization of media, wall-st & corporate corruption, political heists, lawsuit abuse, obesity, fixation on and obscene rewards for celebrity, price of a concert ticket, price of insurance, etc, etc)

 

[GregLocock]

I recently read an article whose main point was that the US$ is overpriced against other currency by about 30%. In my opinion (and I know very little, admittedly) this implies that real wages will have to fall by 30% before there will be a substantial negation of the trend for work to flow out of the country.

As an example - the standard of living in Australia is roughly comparable with that of the USA, in economic terms. Yet Australian engineers are paid in Australian dollars the same numerical value as American engineers are in American dollars. Since the exchange rate is around 0.65 $A/$US, this implies a 50% error in exchange rates. PPP comparisons and the Big Mac index suggest a similar level of inequity.

Other countries actively manage their exchange rates in order to prevent this. This is unacceptable to the average USAn, since the consequences would be a lower standard of living and higher interest rates (try repaying a mortgage with a Federal rate of 4.6% instead of 1.7% - and then think about your margin loans for your shares).

I don't think it is necessary to invent new-aristocrats to explain this, particulary since for example the auto makers are leading exponents of overseas sourcing. The auto industry is rather divorced from get-rich-quick, it is more like get-broke-slowly.



Cheers

Greg Locock

 

[rhodie]

In the words of Gordon Gecko, "Greed is GOOD."

Unfortunately for us, that fictional movie script mantra has been elevated to a creed among non-fictional, real life executive management.

I will say that the entire brunt of the blame cannot be laid on the corporate executives, but rather also on the US government as well. I wholeheartedly agree with your question; I think a rather strong case can be made for the concept that we do not live in a Democracy anymore, but rather a Plutocracy. Our US government has resisted insurrection, treason, and unrest for 200 years, but yet today it has been made slave to a much stronger empire: wealthy corporations.

 

[RDK]

I did a quick Google on the Big Mac index. I found the following web site.

http://www.economist.com/markets/bigmac/displayStory.cfm?story_id=1730909

The Big Mac index compares the price of a common consumer item across various countries. It is based on the assumption that identical items should cost identical amounts in various countries once exchange rates are factored in. While the assumption has a slight flaw in that it ignores the fact that local competitive and cultural factors are not included in the price, it does serve as a good quick rough and understandable guide to relative currency exchange rate differences.

It would be interesting to track the index vs. exchange rates over time to see if there is some sort of correction mechanism.




Rick Kitson MBA P.Eng

Construction Project Management
From conception to completion

http://www.kitsonengineering.com

 

[GregLocock]

Here's a direct use of the BMI, by our local engineering union.

http://www.apesma.asn.au/students_graduates/common/big_mac_index.htm

I'd point out that the data is old, and as the other article says, our Big Macs are more like 2.5 than 3.1. I think they were using Sydney prices, convenient for them, but irrelevant to the vast majority of engineers who live elsewhere.



Cheers

Greg Locock

 

[Speedy]

I made the same point as Greg recently on what I thought was an artifically high value of the dollar. With an increasingly higher trade deficit the dollar should be decreasing.

See;
thread730-63828

This however doesn't account for the huge amount of capital flowing into the country, particularly from Japan.

If this source of capital should decrease for any reason, then we would see a more realistic value on the dollar. At the end of the day, the dollar floats freely, no one or two individuals can control it's value.