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Assume that the Eurozone is indeed large enough to be able to engage in internal redistribution. A plan to raise wages in the periphery would involve directing investment away from Germany and into capital formation in peripheral countries whose problem is actually low capital intensity relative to the core. But this would imply that German wages would have to stagnate. Peer Steinbrück just proposed a minimum wage of €8.50 for Germany. With a 40-hour workweek that's 340 Euros a week. Spain's minimum wage is €645, less than half of Steinbrück's proposed minimum wage.

The point being that it's extremely unlikely that Germans would accept EU-level redistribution which would entail at most stagnating real wages for them. Or would they?

Finance is the brain [tumour] of the economy

by Migeru (migeru at eurotrib dot com) on Thu Aug 29th, 2013 at 02:32:32 PM EST
Well, given that there's been a redistribution from German workers to profits, their wages could rise slowly while profits dropped to something more normal.
by Colman (colman at eurotrib.com) on Thu Aug 29th, 2013 at 02:34:49 PM EST
[ Parent ]
I'm thinking growing nominal GDP should be a constraint in designing all these scenarios...

Finance is the brain [tumour] of the economy
by Migeru (migeru at eurotrib dot com) on Thu Aug 29th, 2013 at 03:00:08 PM EST
[ Parent ]
Wages in all OECD countries could rise relative to the cost of living were we able to reduce the portion of the cost of goods and services going to the financial sector. It is the financial sector and their beneficiaries who have taken what workers have lost - and this is no accident.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Thu Aug 29th, 2013 at 09:10:30 PM EST
[ Parent ]
IOW, "Euthanize Wall Street!"

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Thu Aug 29th, 2013 at 09:11:27 PM EST
[ Parent ]
We need a new Broadway musical:  Rent II: Wall Street Crushes the World.
by rifek on Tue Sep 17th, 2013 at 04:27:37 PM EST
[ Parent ]
There are surely issues of capital density and industrial structure to keep in mind when thinking about the low returns to labor in much of the world.  But it's also critical to keep in mind that there is also a clear political component.  When the state is overtly hostile to labor's claims on profit, labor will not have much success in dragging profits away from the owners.  That is a political decision as much as anything else, and as bad as Western governments and politics are at the moment, they still look pretty damn socialist in comparison to the politics current in a lot of countries.
by Zwackus on Fri Aug 30th, 2013 at 02:35:50 AM EST
[ Parent ]
they still look pretty damn socialist in comparison to the politics current in a lot of countries China.
It may be 'glorious to be rich' but that is not an option for any but cadres, their families, some Taiwanese and Hong Kong residents and a lucky few other Chinese. Whether the average worker is better off as a wage slave than as a rural agricultural worker is hard to say, but there seems a dearth of good jobs all around. The vanguard has left the proletariat in the mud. China is extolled as a model because it has the relationship between capital and labor which our elites desire to create in 'The West'. Like Arkansans say 'thank God for Mississippi!' Chinese elites must say 'thank Heaven for North Korea!'.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Fri Aug 30th, 2013 at 08:37:05 PM EST
[ Parent ]
.. No, no it is not. The answer is "yes". Or they would not keep moving into the cities the way they are. This is not so much a statement that being a Chinese factory worker is the gravy train, more that being a peasant sucks unspeakably.
by Thomas on Sun Sep 1st, 2013 at 03:57:13 PM EST
[ Parent ]
The British industrialization (and the Danish for that matter) provides a number of examples of ways in which the answer might be "no" and migration still happen.

I don't know enough about rural China to comment intelligently, but I do know that in rural India, peasants are chased off their historical holdings by goons with guns and more or less official sanction from more or less crooked officials.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sun Sep 1st, 2013 at 04:08:05 PM EST
[ Parent ]
The answer is "yes". Or they would not keep moving into the cities the way they are.

But when a development such as Ordos or an industry such as many of the export manufacturers goes sour, very many rural immigrants return to their families where at least they can get food. Those that have no such family and cannot find other work are out of luck.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Wed Sep 4th, 2013 at 01:57:34 PM EST
[ Parent ]

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