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C: Which is code for reduce living standards to third world levels.
Dear friends, you know that I respect both of you highly, but those are just disingenuous comments. It might be that those things mean something entirely different to you than they mean in contemporary Swedish debate, like how we some months back found out that "competitiveness" meant completely different things to us. To me it meant a company that can successfully sell its products on the international markets, while to you it meant social retrenchments and neoliberal politics.
To me, cutting costs is nothing but the constant process of all businesses to lower the cost of their product through any means available, be it innovation, smarter organization, capital structure or whatever. Call it lean/kaizen or something else. It happens all the time in all companies to maintain their competitiveness. It's not about dismantling industry or introducing third world living standards. Peak oil is not an energy crisis. It is a liquid fuel crisis.
To me, cutting costs is nothing but the constant process of all businesses to lower the cost of their product through any means available, be it innovation, smarter organization, capital structure or whatever. Call it lean/kaizen or something else. It happens all the time in all companies to maintain their competitiveness. It's not about dismantling industry or introducing third world living standards.
That is because you have a protected domestic market in which the most productive Swedish industries can cannibalise the less productive Swedish industries.
Absent the protected domestic market, there is no guarantee that the dismantled industries are replaced by more productive domestic industries - they may instead be replaced by imports.
- Jake Friends come and go. Enemies accumulate.
Ironically, I once closed a debate with Starvid with just such an example.
Tough competition in the refrigeration and freezing appliances market is forcing Danfoss to move its production of refrigerator and freezer thermostats from Nordborg to Danfoss' factory in Slovakia. The relocation, which is expected to be completed by the end of 2005, will affect around 77 employees. ...This event cannot be accommodated within Ricardo's theory. Under Ricardo's theory, Danfoss would use its capital and labour in Denmark to produce something else which can be exported to Slovakia, and some Slovak company would export thermostats to Denmark. Instead, what is happening is that Danfoss moves its capital to Slovakia, and its employees have to look for other jobs in Denmark without the benefit of Danfoss' capital also staying in Denmark chasing after labour. I suppose Danfoss' 77 employees could move to Slovakia to work for Danfoss there. I wonder how many of them would relocate to slovakia with a Slovak salary and benefits, if offered the chance. And this is within the European Union. There is no free movement of persons from Europe to China.
Tough competition in the refrigeration and freezing appliances market is forcing Danfoss to move its production of refrigerator and freezer thermostats from Nordborg to Danfoss' factory in Slovakia. The relocation, which is expected to be completed by the end of 2005, will affect around 77 employees. ...
...
Sweden is one of the most forceful supporters of free trade (which is only natural when trade is 50% of your GDP), so claiming we have a protected domestic market is quite rich.
Floating currencies is a way to generate a protected domestic market.
Or, to be a bit more technical, by allowing the exchange rate to be the buffer variable that ensures balance of the foreign accounts, you obtain the Keynesian advantages of a closed economy and the Ricardian advantages of an open economy. At the same time.
(This is not a free lunch - it fucks over internationally active banks by subjecting them to exchange rate risk. But Hayek is the only one who cries for internationally active banks.)
The Chinese case is an extreme one, because they target a surplus rather than balanced foreign accounts. But the basic mechanics are not so different at all.
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