Wednesday, June 9, 2010

My Letter to the NY Times re: Shallow Economic Reporting

Subject: Shallow Economic Reporting by the NY Times
Date: Wed, 9 Jun 2010 10:32:34 -0400

Re: US. Presses the Airlines to Satisfy the Traveler


Re: As China's Wages Rise, Export Prices Could Follow

Dear Sirs:
For some time now I have been frustrated at the shallowness of your economic and business reporting. Two recent articles illustrate my point.

The very title of your June 2nd report of new airline regulations--U.S. Presses the Airlines to Satisfy the Traveler--displays your perspective that some businesses do not care about their customers and that the public must rely upon the noble bureaucrat to remedy the situation. What nonsense! Although Secretary of Transportation Ray LaHood is an honest man, what does he really know about the airline industry? Mr. LaHood is a career bureaucrat/politician. He hasn't held a real job in decades, if ever. He was chief of staff for Republican Congressman Bob Michael for many years and succeeded to the safe Republican seat when Mr. Michael was ousted from his minority leadership position by Newt Gingrich. Now he is Secretary of Transportation, with vast powers to make or break entire industries. But where is his transportation background that would make him anything more than just a nuisance to the people who are trying to deliver transportation services every day? I really doubt that Mr. LaHood has ever had any contact with airline operations other than sipping his drink in first class. In a competitive airline business, or any other business for that matter, those who serve the public at the best price and with the best service will be rewarded with the consumers' patronage. Nothing else is required.

Your June 8th report on rising wages in China--As China's Wages Rise, Export Prices Could Follow--is not really a report at all. It is pure speculation and not very good speculation at that. There is a very sound economic reason that rising wages in China probably will NOT cause export prices to rise. Rising labor productivity is very likely the reason that Chinese business owners can afford pay increases, not their benevolence, as your report suggests. In fact rising labor productivity is the ONLY way that labor can be paid more. Undoubtedly Chinese businesses are investing in more capital equipment, and it is rising capital investment per worker that underlies all worker wage gains. To pay workers more out of a sense of benevolence would lead to a lack of competitiveness and would bankrupt any firm in a very short time. Undoubtedly the beneficial effects of globalization, which is just another word for increasing the specialization of labor, is driving low wage jobs out of China and into other developing countries, just as happened with Japan after World War II. At one time the label "Made in Japan" held connotations of inexpensive, poor quality trifles. Not any more. Did Japan attain its economic eminence by paying its workers more out of the goodness of its capitalists' hearts? Of course not. Japan pays higher wages because its workers produce more and better goods that can be sold at a profit even at low prices.

More capital per worker, flexible labor rules, and sound business management are the keys to higher wages--always have been and always will be.

Patrick Barron

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