David Seaton's News LinksGee granddad, is this what Marx called, the "contradictions of capitalism"? What does that mean, exactly pops? Well sonny let's' look at this workmanlike definition from the Online Dictionary of Social Science:
CONTRADICTIONS OF CAPITALISM
The term is associated with Karl Marx (1818-1883) who claimed that capitalist societies suffered from two unresolvable problems that would prevent both social harmony and a stable economic life. First, Marx assumed that the competitive processes of a capitalist market society would lead to a concentration of capital ownership in fewer and fewer hands. Marx built this claim on the assumption, which he holds in common with laissez faire economics, that a competitive economy must lead inevitably to the elimination of some producers by others, there must be winners and losers and the winners would grow increasingly large. Capitalism, Marx argued, contrary to the general assumption of laissez faire economics, had an inherent tendency towards concentration of capital in oligopolies and monopolies. The concentration of capital involved, first of all, the displacement of the handworker and the craftsworker and increasing domination of factory-based technology. An industrial proletariat of wage workers emerged, and grew larger, as independent producers were eliminated by factory-based competition. Capitalist corporations grew more concentrated and larger, the number of individuals owning the means of production became fewer. The class structure becomes polarized and the economic and social conditions of the two opposed main classes more strongly contrasted, leading to political activation of the working class and prolonged conflict with the dominant bourgeois class through political and industrial organization. It is this development of social polarization that provides the unsolveable social or relational contradiction of capitalist society. The social organization of a capitalist society also presented an inherent structural contradiction in the economic dynamics of capitalism. While capitalism revolutionized the means of production by promoting the greatest economic development in human history, its class structure focused the capacity to consume in a tiny minority of the population. The mass social scale of production could not remain compatible with the concentration of wealth in fewer and fewer hands. As a result, there must be inherent instability, or anarchy, in the whole capitalist system of production. The social effects of such instability in turn must intensify the political struggle of social classes hastening the event of socialist revolution.
You'll notice that it all pretty much makes sense until you get to end bit about, "its class structure focused the capacity to consume in a tiny minority of the population." If you live in a developed country this sounds very strange because the great triumph of the system after WWII was to include ever greater numbers of heretofore working class people into a new, property owning middle class. Probably if you have access to the Internet, you feel yourself a member of this class by 'birthright', don't kid yourself, in the USA it took rivers of blood, but that is another story. I also say "if you live in a developed country". Because if you live in a underdeveloped country, the text makes sense as read.... up till "day before yesterday" and maybe still.
Now, however, this phenomenon of the "new" middle class is hitting China and India and may even be timidly approaching parts of Africa... And that is where the system seems to heading into a brick wall.
On one hand we have global warming... Imagine what we'll have to do for air and water if every Chinese and Indian aspires to the life style of the "average American" and if the Africans even dream of making it to the lifestyle of the average Chinese, they better wake up and apologize because otherwise we go directly to "Soylent Green".
And on the other hand, as this article from the Wall Street Journal shows, "Chinese, Indian Labor Long Damped Prices, But Effect Is Reversing."... They are demanding and getting better wages in order to consume, are consuming and inflation is rising. We are just a hop, skip and a jump away from Marx making sense once more. DS
Years of Global Growth Raise Inflation Worries - Wall Street Journal
Chinese, Indian Labor Long Damped Prices, But Effect Is Reversing
By MARCUS WALKER in Berlin, GREG IP in Washington and ANDREW BATSON in Beijing
June 6, 2007; Page A1
For the past decade, low-priced labor from China, India and Eastern Europe has helped much of the world enjoy economic growth without the sting of inflation. Now that damper on prices is beginning to reverse -- and global inflation pressure is starting to build.
Companies in many countries are operating at close to full capacity, facing shortages of everything from land to equipment. Western workers and their low-cost rivals both are winning higher pay, thanks to rising demand. In some cases, the global links of the economy are increasing costs rather than lowering them, as far-flung businesses compete for the same resources.
Central banks are increasingly worried about spare production capacity running out -- which could force them to raise rates to their highest level in years to stave off inflation. That could puncture the ebullience of stock and bond markets, which have become accustomed to a rare combination of fast growth, low inflation and low interest rates.
Already long-term interest rates are on the rise, in anticipation: U.S. 10-year Treasury bonds hit a nine-month high of nearly 5% yesterday. "Markets have gotten used to the idea that the global economy will keep producing downward pressure on prices," says Ken Rogoff, a Harvard economics professor and former chief economist at the International Monetary Fund. "But that phase may be ending."
In remarks to a bankers conference in South Africa yesterday, U.S. Federal Reserve Chairman Ben Bernanke said rising Chinese domestic costs could eventually feed through to U.S. imports, but likely would only have "modest" effect. Still, he reiterated that risks to moderating inflation "remain to the upside" in the U.S. because demand is high relative to capacity.
European Central Bank president Jean-Claude Trichet has warned that European industries have little scope left to raise production, and has asked unions to show restraint in seeking wage increases for the overall health of the economy. The bank is expected to raise rates when it meets today.
Germany's engineering sector, the mainstay of its export-led revival, is operating at 93% of capacity, leaving the lowest amount of slack since the 1960s. Amid falling unemployment, Germany's most powerful union, IG Metall, recently pushed through a pay raise of 4.1% to cover much of the manufacturing sector this year.
The Bank of England raised interest rates last month in part because "there might be less disinflationary pressure in the global economy," according to the minutes of the meeting. The cost of consumer goods in the United Kingdom has stabilized after falling persistently for many years under pressure from imports, and more U.K. manufacturers plan to raise prices than at any time since the mid-1990s, according to the Confederation of British Industry.
Even the price of Chinese exports such as furniture and clothing is rising, and provincial authorities there raised long-stagnant -- and still tiny -- minimum wages by an average of 21% last year. Indian outsourcing giant Infosys Technologies recently raised entry-level wages 10% and expects to do so again amid increasing competition for its workers.
To be sure, globalization still is helping contain some price pressures, and growth is still strong. Inflation remains moderate, at around 2% in industrialized countries and not much above 5% in many developing countries. The lack of price pressure has allowed central banks to leave their short-term interest rates 1.25 percentage points lower, on average, than at the peak of the world's 1990s economic boom, J.P. Morgan says -- even though the world economy is growing even faster now.
The flood of cheap imports into the U.S. has benefited consumers there and subtracted about one percentage point a year from U.S. inflation for the past decade, says the International Monetary Fund. Goldman Sachs economists said in a report last week, "There are pockets where inflation has risen more than expected, but the most recent evidence ... is that inflation is receding," especially in the U.S. and Japan.
Still, signs are now multiplying that global growth is fueling inflation rather than restraining it, says Richard Fisher, president of the Federal Reserve Bank of Dallas and a nonvoting member of the Fed's policy committee. "More and more, I hear people complain about the rising costs of [hiring] Indian M.B.A.s or the wages paid to Chinese workers," he says. As an inflation-damper, he adds, global capacity has gone from "tailwind to a headwind."
Bruce Kasman, chief economist at J.P. Morgan Chase, warns investors world-wide have been underestimating central banks' willingness to raise rates to avoid a repeat of the spiraling inflation of the 1970s, the last time the world economy grew as strongly as today. It won't require much higher rates, he says, to "cause significant damage in the markets."
Federal Reserve Bank of Dallas President Richard Fisher, who has long championed globalization's influence on U.S. inflation, says that influence has gone from good to bad. "There is a sense things are more expensive," he said in an interview with The Wall Street Journal.
Global crosscurrents from China and India and other fast-growing developing nations are raising some costs in the developed world. U.S. farmers, for instance, are paying more to export grain because the large ships they use are busy serving China's booming domestic market. The price to use the ships has risen to almost $50,000 a day from $17,000 last year, says Oivind Lorentzen III, president Northern Navigation America Inc., a Stamford, Conn.-based shipping company.
The collision between rising demand and tight supply is evident in Germany, which is leading the 13-nation euro currency area to its fastest growth since the tech boom. Hanover-based tire manufacturer Continental AG says it's struggling to meet extra orders of tires from makers of trucks and cargo trailers, many of whom underestimated the surging demand for commercial transport.
"We're basically sold out," says managing director Hans-Joachim Nikolin. This month, Continental raised its tire prices by up to 5%, partly passing on the cost of natural rubber, which has soared amid high demand from Asia.
The shortage of tires poses a problem in turn for companies like Schmitz Cargobull AG, Europe's largest maker of cargo trailers. The company had planned to make around 44,000 trailers in the year through March, up 30% from the previous year. Instead, it ended up making 52,000 as demand for transporting goods and materials around Europe soared, notably in the fast-growing economies of Europe's ex-communist east. Europe's tire makers didn't have enough tires available to cover the extra production, so Schmitz's purchasing manager Josef Buddenkotte flew to China to buy more tires there to hold down the surge in costs. Schmitz expects to make 65,000 trailers in the year ahead, and has just raised its prices by 3.5%.
Schmitz added a third production shift to cover demand, but with Germany's labor market tightening, has had to pay bonuses to attract enough staff. Schmitz also will have to digest a 4.1% rise in wages this year, under German industry's deal with the IG Metall union.
Demand for wood is booming too, including for the specially treated plywood that Schmitz uses in its trailers. Finnish forestry-products company UPM can't get enough birch timber from Russia at the moment: Mild weather and muddy ground impeded logging this winter, and Russian authorities are planning to raise export duties. "We can serve long-time partners, but new customers can't be served at all at the moment," says Joachim Stinsky, German sales manager at UPM. The price of some of UPM's wood products has risen 20% in the past year, he says.
The rising production costs are passed on to logistics companies that buy or hire trucks and trailers. They too are struggling to meet demand. "The cargo space that's available simply isn't enough," says Heiko Gnam, head of purchasing at Stuttgart-based logistics firm Diehl Spedition. The daily price for chartering a truck has gone up by 10% to 15% in the past year, he says.
In the U.S., central bankers are paying closer attention to the short supply of goods and services around the world. As trade swells, the prices of goods and services are increasingly determined in world markets rather than simply in the U.S. market.
U.S. import prices excluding oil rose 2.9% in the year through April, the fastest clip in 18 months. Employers are boosting wages because despite a slowdown in economic growth, unemployment hovers near a six-year low of 4.5% overall and just 1.9% for professionals. Doug Pruitt, chief executive of Sundt Companies Inc., a Tempe, Ariz., commercial builder, says the long slump following the 2001 recession masked a shortage of skilled professionals that has turned more acute as demand rebounded. He often pays signing bonuses of $10,000 to $20,000 for engineers, project managers, superintendents and estimators.
Labor shortages have constrained Sundt's ability to grow. The company, with annual sales of about $850 million, has turned down $150 million to $200 million of work in the past two years. "I ran this office for 11 years, and we never turned down anything," Mr. Pruitt says. He says he's been charging 12% more than he would have for the same project a year ago.
In China, heavy investment in new factories and infrastructure means the economy is still gaining plenty of new production capacity for the future, a trend that hasn't been stopped by the central bank's modest recent interest-rate increases. Domestic consumer-price inflation there remains low. But labor costs for exporters on the booming coast, who expected to benefit indefinitely from cheap migrant labor to migrate from inland, are going up.
China's export prices rose by 5.3% on average in the year to March, according to China's customs agency, a sharp pickup from a 2.9% gain in the year to last December. Gains are coming both from labor-intensive goods such as textiles and energy-intensive produce like steel. Surveys regularly show that a majority of employers can't fill all of their available jobs, from textile workers in the south to software programmers in the northeast.
At the same time, several hundred million Chinese are still scraping out a living on farms. In theory, they could triple their incomes by taking a job in manufacturing or construction. But the demand for labor and its supply are often not in the same place. In practice, the rural population in the interior can't all move away at once to the coast, where industry and foreign investment are concentrated.
With China's economy looking set to grow by 10% or more for a fifth straight year, employers are aiming to expand their work force by an average of 13%, according to a survey by the labor ministry. That growth is starting to empower workers. Most measures show Chinese wages have been rising by 10% or more annually for several years straight, though rapid gains in productivity have helped contain employers' total labor costs.
Still, migrants from rural areas are getting more assertive: As rising crop prices have boosted farm incomes in the past couple of years, they've also lifted people's expectations of factory life. Prospective migrants are looking for 16% higher wages than a year ago, according to a survey by the Chinese Academy of Social Sciences. "Migrant workers are getting more advanced in their thinking. They are looking at the factory's environment, living conditions, and different kinds of benefits. Now, the workers are the boss," says Hong Yong, who runs a furniture factory in Shunde, Guangdong province.
China's government, under political pressure to address rising inequality, also wants to see higher wages and better social protections for workers. Zhu Changlin, vice chairman of China's furniture makers association, says employers can no longer get away with not paying unemployment insurance and other benefits to staff.
Many furniture manufacturers estimate their labor bill will rise 20% this year, on top of higher costs for wood and other raw materials. Building new factories also is getting more expensive: Land prices are rising as the rapid growth of industrial parks in crowded coastal provinces starts to hit limits.
China also is gradually dismantling administrative practices that have kept prices for electricity, fuel and water far below market levels. In a report this month, China's central bank said the changes would lead to a "certain increase in the overall price level."
Now, however, this phenomenon of the "new" middle class is hitting China and India and may even be timidly approaching parts of Africa... And that is where the system seems to heading into a brick wall.
On one hand we have global warming... Imagine what we'll have to do for air and water if every Chinese and Indian aspires to the life style of the "average American" and if the Africans even dream of making it to the lifestyle of the average Chinese, they better wake up and apologize because otherwise we go directly to "Soylent Green".
And on the other hand, as this article from the Wall Street Journal shows, "Chinese, Indian Labor Long Damped Prices, But Effect Is Reversing."... They are demanding and getting better wages in order to consume, are consuming and inflation is rising. We are just a hop, skip and a jump away from Marx making sense once more. DS
Years of Global Growth Raise Inflation Worries - Wall Street Journal
Chinese, Indian Labor Long Damped Prices, But Effect Is Reversing
By MARCUS WALKER in Berlin, GREG IP in Washington and ANDREW BATSON in Beijing
June 6, 2007; Page A1
For the past decade, low-priced labor from China, India and Eastern Europe has helped much of the world enjoy economic growth without the sting of inflation. Now that damper on prices is beginning to reverse -- and global inflation pressure is starting to build.
Companies in many countries are operating at close to full capacity, facing shortages of everything from land to equipment. Western workers and their low-cost rivals both are winning higher pay, thanks to rising demand. In some cases, the global links of the economy are increasing costs rather than lowering them, as far-flung businesses compete for the same resources.
Central banks are increasingly worried about spare production capacity running out -- which could force them to raise rates to their highest level in years to stave off inflation. That could puncture the ebullience of stock and bond markets, which have become accustomed to a rare combination of fast growth, low inflation and low interest rates.
Already long-term interest rates are on the rise, in anticipation: U.S. 10-year Treasury bonds hit a nine-month high of nearly 5% yesterday. "Markets have gotten used to the idea that the global economy will keep producing downward pressure on prices," says Ken Rogoff, a Harvard economics professor and former chief economist at the International Monetary Fund. "But that phase may be ending."
In remarks to a bankers conference in South Africa yesterday, U.S. Federal Reserve Chairman Ben Bernanke said rising Chinese domestic costs could eventually feed through to U.S. imports, but likely would only have "modest" effect. Still, he reiterated that risks to moderating inflation "remain to the upside" in the U.S. because demand is high relative to capacity.
European Central Bank president Jean-Claude Trichet has warned that European industries have little scope left to raise production, and has asked unions to show restraint in seeking wage increases for the overall health of the economy. The bank is expected to raise rates when it meets today.
Germany's engineering sector, the mainstay of its export-led revival, is operating at 93% of capacity, leaving the lowest amount of slack since the 1960s. Amid falling unemployment, Germany's most powerful union, IG Metall, recently pushed through a pay raise of 4.1% to cover much of the manufacturing sector this year.
The Bank of England raised interest rates last month in part because "there might be less disinflationary pressure in the global economy," according to the minutes of the meeting. The cost of consumer goods in the United Kingdom has stabilized after falling persistently for many years under pressure from imports, and more U.K. manufacturers plan to raise prices than at any time since the mid-1990s, according to the Confederation of British Industry.
Even the price of Chinese exports such as furniture and clothing is rising, and provincial authorities there raised long-stagnant -- and still tiny -- minimum wages by an average of 21% last year. Indian outsourcing giant Infosys Technologies recently raised entry-level wages 10% and expects to do so again amid increasing competition for its workers.
To be sure, globalization still is helping contain some price pressures, and growth is still strong. Inflation remains moderate, at around 2% in industrialized countries and not much above 5% in many developing countries. The lack of price pressure has allowed central banks to leave their short-term interest rates 1.25 percentage points lower, on average, than at the peak of the world's 1990s economic boom, J.P. Morgan says -- even though the world economy is growing even faster now.
The flood of cheap imports into the U.S. has benefited consumers there and subtracted about one percentage point a year from U.S. inflation for the past decade, says the International Monetary Fund. Goldman Sachs economists said in a report last week, "There are pockets where inflation has risen more than expected, but the most recent evidence ... is that inflation is receding," especially in the U.S. and Japan.
Still, signs are now multiplying that global growth is fueling inflation rather than restraining it, says Richard Fisher, president of the Federal Reserve Bank of Dallas and a nonvoting member of the Fed's policy committee. "More and more, I hear people complain about the rising costs of [hiring] Indian M.B.A.s or the wages paid to Chinese workers," he says. As an inflation-damper, he adds, global capacity has gone from "tailwind to a headwind."
Bruce Kasman, chief economist at J.P. Morgan Chase, warns investors world-wide have been underestimating central banks' willingness to raise rates to avoid a repeat of the spiraling inflation of the 1970s, the last time the world economy grew as strongly as today. It won't require much higher rates, he says, to "cause significant damage in the markets."
Federal Reserve Bank of Dallas President Richard Fisher, who has long championed globalization's influence on U.S. inflation, says that influence has gone from good to bad. "There is a sense things are more expensive," he said in an interview with The Wall Street Journal.
Global crosscurrents from China and India and other fast-growing developing nations are raising some costs in the developed world. U.S. farmers, for instance, are paying more to export grain because the large ships they use are busy serving China's booming domestic market. The price to use the ships has risen to almost $50,000 a day from $17,000 last year, says Oivind Lorentzen III, president Northern Navigation America Inc., a Stamford, Conn.-based shipping company.
The collision between rising demand and tight supply is evident in Germany, which is leading the 13-nation euro currency area to its fastest growth since the tech boom. Hanover-based tire manufacturer Continental AG says it's struggling to meet extra orders of tires from makers of trucks and cargo trailers, many of whom underestimated the surging demand for commercial transport.
"We're basically sold out," says managing director Hans-Joachim Nikolin. This month, Continental raised its tire prices by up to 5%, partly passing on the cost of natural rubber, which has soared amid high demand from Asia.
The shortage of tires poses a problem in turn for companies like Schmitz Cargobull AG, Europe's largest maker of cargo trailers. The company had planned to make around 44,000 trailers in the year through March, up 30% from the previous year. Instead, it ended up making 52,000 as demand for transporting goods and materials around Europe soared, notably in the fast-growing economies of Europe's ex-communist east. Europe's tire makers didn't have enough tires available to cover the extra production, so Schmitz's purchasing manager Josef Buddenkotte flew to China to buy more tires there to hold down the surge in costs. Schmitz expects to make 65,000 trailers in the year ahead, and has just raised its prices by 3.5%.
Schmitz added a third production shift to cover demand, but with Germany's labor market tightening, has had to pay bonuses to attract enough staff. Schmitz also will have to digest a 4.1% rise in wages this year, under German industry's deal with the IG Metall union.
Demand for wood is booming too, including for the specially treated plywood that Schmitz uses in its trailers. Finnish forestry-products company UPM can't get enough birch timber from Russia at the moment: Mild weather and muddy ground impeded logging this winter, and Russian authorities are planning to raise export duties. "We can serve long-time partners, but new customers can't be served at all at the moment," says Joachim Stinsky, German sales manager at UPM. The price of some of UPM's wood products has risen 20% in the past year, he says.
The rising production costs are passed on to logistics companies that buy or hire trucks and trailers. They too are struggling to meet demand. "The cargo space that's available simply isn't enough," says Heiko Gnam, head of purchasing at Stuttgart-based logistics firm Diehl Spedition. The daily price for chartering a truck has gone up by 10% to 15% in the past year, he says.
In the U.S., central bankers are paying closer attention to the short supply of goods and services around the world. As trade swells, the prices of goods and services are increasingly determined in world markets rather than simply in the U.S. market.
U.S. import prices excluding oil rose 2.9% in the year through April, the fastest clip in 18 months. Employers are boosting wages because despite a slowdown in economic growth, unemployment hovers near a six-year low of 4.5% overall and just 1.9% for professionals. Doug Pruitt, chief executive of Sundt Companies Inc., a Tempe, Ariz., commercial builder, says the long slump following the 2001 recession masked a shortage of skilled professionals that has turned more acute as demand rebounded. He often pays signing bonuses of $10,000 to $20,000 for engineers, project managers, superintendents and estimators.
Labor shortages have constrained Sundt's ability to grow. The company, with annual sales of about $850 million, has turned down $150 million to $200 million of work in the past two years. "I ran this office for 11 years, and we never turned down anything," Mr. Pruitt says. He says he's been charging 12% more than he would have for the same project a year ago.
In China, heavy investment in new factories and infrastructure means the economy is still gaining plenty of new production capacity for the future, a trend that hasn't been stopped by the central bank's modest recent interest-rate increases. Domestic consumer-price inflation there remains low. But labor costs for exporters on the booming coast, who expected to benefit indefinitely from cheap migrant labor to migrate from inland, are going up.
China's export prices rose by 5.3% on average in the year to March, according to China's customs agency, a sharp pickup from a 2.9% gain in the year to last December. Gains are coming both from labor-intensive goods such as textiles and energy-intensive produce like steel. Surveys regularly show that a majority of employers can't fill all of their available jobs, from textile workers in the south to software programmers in the northeast.
At the same time, several hundred million Chinese are still scraping out a living on farms. In theory, they could triple their incomes by taking a job in manufacturing or construction. But the demand for labor and its supply are often not in the same place. In practice, the rural population in the interior can't all move away at once to the coast, where industry and foreign investment are concentrated.
With China's economy looking set to grow by 10% or more for a fifth straight year, employers are aiming to expand their work force by an average of 13%, according to a survey by the labor ministry. That growth is starting to empower workers. Most measures show Chinese wages have been rising by 10% or more annually for several years straight, though rapid gains in productivity have helped contain employers' total labor costs.
Still, migrants from rural areas are getting more assertive: As rising crop prices have boosted farm incomes in the past couple of years, they've also lifted people's expectations of factory life. Prospective migrants are looking for 16% higher wages than a year ago, according to a survey by the Chinese Academy of Social Sciences. "Migrant workers are getting more advanced in their thinking. They are looking at the factory's environment, living conditions, and different kinds of benefits. Now, the workers are the boss," says Hong Yong, who runs a furniture factory in Shunde, Guangdong province.
China's government, under political pressure to address rising inequality, also wants to see higher wages and better social protections for workers. Zhu Changlin, vice chairman of China's furniture makers association, says employers can no longer get away with not paying unemployment insurance and other benefits to staff.
Many furniture manufacturers estimate their labor bill will rise 20% this year, on top of higher costs for wood and other raw materials. Building new factories also is getting more expensive: Land prices are rising as the rapid growth of industrial parks in crowded coastal provinces starts to hit limits.
China also is gradually dismantling administrative practices that have kept prices for electricity, fuel and water far below market levels. In a report this month, China's central bank said the changes would lead to a "certain increase in the overall price level."
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