Archive for June, 2004

The outsourcing question

Friday, June 11th, 2004

Jobs lost to overseas doesn’t seem to be as bad as originally reported says a survey by the Labor Department, Highlights, of the 16,000 jobs lost to relocations 62% moved to other areas in the US and of the 240,000 jobs lost in Q1 only 4600 were relocated overseas(2%).Things to keep in mind though, the survey only tallies larger companies with layoffs of 50 or more. Smaller ones, and those with fewer layoffs, are left out of the pool.

a return

Wednesday, June 9th, 2004

after 4 months off, here we go again…

China’s growing divergence

Wednesday, June 9th, 2004

Awhile ago I got an email from a past roomate who’s been teaching in China on and off for three years. Here’s an excerpt:

“Recently a student at my university murdered his roomates and hid them in
the dormitory. He then fled, there was a manhunt and he was eventually
apprehended. Anyway it was big news all over China and especially here in
Kunming. This is one of the more interesting articles I’ve read about it
because it highlights the changes China is going through. Before 1 billion
people were living very similiarly, all with very little or nothing. Now
there are huge divides, anyway read on….

Student cracks, exposing anger of poor Chinese


KUNMING, China — What seemed to be a routine crime story — university
student buys a sledgehammer and kills four classmates — has sparked a
national discussion in China on the potentially explosive gap between the
rich and the poor.

The story of Ma Jiajue, a young man from a poor, rural family who was
convicted and sentenced to death last month, exposed the stresses of China’s
drive toward modernity. Ma’s actions seemed to sprout not only from personal
demons but also from anger over a yawning gap between rich urbanites and
poor rural dwellers in a communist country where, in theory, no one should
be either rich or poor.

The debate over Ma’s case grew so intense that authorities limited news
coverage to a handful of government media, and Communist Party leaders have
warned that the anger of rural poor people could boil over into crime and
antigovernment unrest.

“It’s very sensitive. It’s a very real case,” said Pi Yijun, an expert on

delinquency at the University of Political Science and Law in Beijing. “He
was a very promising student about to graduate.”

By most standards, Ma, 24, was a model of the steadfastness and aptitude
that could bring a humble man to Yunnan University, the largest college in
the southwestern province. He was majoring in biochemistry.

Ma’s parents earned about $60 a month ironing clothes for a laundry in a
village in the neighboring Guangxi Zhuang autonomous region. They counted on
him to get a good job and pull the family out of poverty.

Along the campus’ shady walkways, few students hold Ma solely to blame for
the murders, saying circumstances pushed him to brutality….”

I don’t want to go on with the article(see continue reading for full article) because the basic point has been made. There are a couple of misnomers that I’m going to pick at, but the idea that really bothers me is that the finger seems to be pointed at growth and China’s increasing links to the globalized markets are too blame.

First of all, China is not a country where there should be neither rich or poor as the author suggests. Since the very agressive steps in the early seventies toward trade liberalization, the notion of a communist equality has been more of a nod towards Mao and the history of the cultural revelution. Granted it wasn’t until the 90′s before business men were let into the Communist Party, but there hasn’t been a single economic class for quite some time.

Second, without seeming incensitive to Ma’s social barriers, the question the author is really begging to ask is whether this growth enhances or diminishes China’s overall poverty. So_ although no one denies the coast has seen their livlihoods increase significantly in the past decade (if in doubt just look at the rise in auto fatalities for a grim reminder) has this helped the North, or West?

The basic scientific argument is a two step, where trade enhances growth and growth reduces poverty. Outward-orientered economies (such as China) where labor-intensive goods are exported decrease unemployment and reduce poverty at a fairly brisk rate. However China being the size it is, this dispersion takes time, with the most notable changes around the point of export (the coast). Paul Samuelson laid this out clearly, that one CAN specialize and do better.

A brief intro to development economics will teach you the first ideas were to allow the poor to access growing incomes by making it easier for them to borrow and invest. But, and China is rife with these, it also lead to alot of bad debts which cause banks not to want to lend. By recognizing the poor have access to large amts. of collateral, in the form of land or other ownership, it allows them to gain a significant bargaining power to help in improving their lives. China has made steps to recognizing property rights late last year, and this is very important and should be encouraged.

***************** UPDATE***************************

Front page of the WSJ 6/9/2004

New Crop of Protestors in Tienamen Square: Restive Homeowners

“… Defying government restrictions on demonstrations, the new homeowners piled into their cars and drove noisely[honking horns] through Tiananmen Square to confront Chinese government officials. ‘ I’d never done anything like that before, ‘ said Ms Liu. ‘Owning an apartment changed me. I bought it. I must protect it.’…”

Property rights are powerful indeed.