Message-ID: <3384C18D.2885@squirrel.com.au> Date: Fri, 23 May 1997 08:58:37 +1100 From: resolve <mailto:resolve@squirrel.com.au> Subject: Re: Rhetorical questions To: mailto:DEVEL-L@AMERICAN.EDU
> These are interesting questions and no one else seems to be addressing
> them so here goes from a non-economist:
Tom, I took question 1 to be rhetorical. I'm sure it's fairly clear to most people that businesses will pay as little in wages as they can get away with. They pay more than the local companies, attract the "best" people, as you say, and it is thus unlikely that many local companies will develop to the extent that they are able to compete with foreign owned companies. They won't have the quality labour or the same access to world markets as the multi-nationals. How are local companies to get ahead under these conditions?
Question 2... now that's something else. I'll have to look at it again, but I'm not sure how your answer relates the the question, or to Jurcovici Florin's theory.
Lee
> Mostly wages are based on supply and demand. If there is lots of
> unemployment, people will take jobs at low wages - with little
> unemployment, management has to bid a lot to get good workers so
> wages will be higher. So foreign companies coming into Rumania are
> willing to pay quite a bit more than local firms to get really good
> people but they don't NEED to pay as much as in Germany or Korea. I
> am not saying this is good or bad, just how it works. Wages used to
> be lower in Korea and Japan but now they are higher, at least partly
> for these reasons. If more companies are established in Rumania
> and they grow then wages will rise.
>
> Also the ability to hire skilled, industrious people for low wages
> makes Rumania very attractive to foreign companies. But there are
> disadvantages. Risk. They will feel that their investment is at
> more risk in Rumania than in Germany because the political structure
> is more likely to change in such a way that their investment might
> lose much of its value. If they feel the risk is 0.01% in
> Germany but feel it is 10.0% in Rumania then they will want a much
> higher return in Rumania before they invest 1 billion dollars in a
> new facility.
>
> >
> > 2. I figured out that the economy of several western european states has difficulties.
> > I have a theory about this. I think the western european workers gained through time
> > a better average sallary level because in earlier times only western Europe produced
> > several high quality products, having something like a monopol on some classes of
> > products. for instance, if you buy a Mercedes, several years earlier it might have been
> > a better car than those fabricated in Japan, for instance, so during time this sort of
> > products came to be over-evaluated. Now, however, more and more producers do the same things
> > at the same quality level as western european producers, but at lower prices, so western
> > european producers cannot get the same prices anymore. As a consequence, workers cannot get
> > the same high sallaries. from here, in my opinion, some of the economical problems of
> > the developed states derive. Am I right or wrong?
>
> These economies also sometimes had protected markets. It was hard for
> a foreign company to sell a competing product in some countries
> regardless of the quality of their product because that country set up
> barriers to foreign products that competed with domestic companies.
> Of course that is still the case to some extent. I understand that
> the EC has a lot of restrictions on import of farm and manufactured
> goods from the Eastern European countries now. If so this is very
> shortsighted - the EC will benefit over the years from strong economies
> in their neighbors to the east. But some powerful interest groups in
> the Western European countries will be hurt in the short term by freer
> trade with countries like Rumania. These political issues affecting
> trade are hard to deal with - lots of negotiating between governments
> and regional associations.
>
> >
> > Romanian popular wisdom says that if a fool throughs a stone into the water,
> > 10 clever people won't be able to get it out. I allready said, I might be considered a fool
> > regarding the sort of questions I asked.
> > --
>
> Like I said interesting questions. Neat proverb!
>
> Tom Hodges
>
> > Jurcovici Florin
> > mailto:fljurcovici@mb.sorostm.ro
> >
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