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This is preposterous. Labor cost and demand are the same thing because it is the wages that ultimately allow people to buy the products that companies make. They are just the same number in different parts of the equation. If you crush wages then demand crashes too and companies have no market to sell to.
How is it preposterous?
For example, if a Mexican worker wants to buy a chair, he can buy an American excellent chair for $700 or a similar Mexican chair for $100. He will, most likely, give his money to the Mexican carpenter. The American carpenter will get $0.
The Mexican carpenter who sells chairs for $100 can live pretty well in Mexico. If the American carpenter has no business, how can he live well?
For example, if a Mexican worker wants to buy a chair, he can buy an American excellent chair for $700 or a similar Mexican chair for $100. He will, most likely, give his money to the Mexican carpenter. The American carpenter will get $0.
The Mexican carpenter who sells chairs for $100 can live pretty well in Mexico. If the American carpenter has no business, how can he live well?
Labor is a small piece of the cost of production but in aggregate it represents all of the demand. In most businesses labor costs are 10% to 30% of overhead. If labor costs are 10% of your overhead and you cut it in half you can only reduce your price by 5%, but if every business does this then demand drops by half. It is basic math applied to price, supply and demand. Labor cost and consumer spending are the same number. If you cut labor costs then you cut demand and you sell fewer products, you can't cut the price of the products enough to make up for the fall in demand because labor is only a small part of the price of production. Workers somewhere need to make good enough wages to buy products or capitalism collapses because it is the wages of workers that ultimately drives demand.
Interesting article from CNBC. Which brings up the question I have been asking-what is Putin's end game? Where does he stop, what is he looking to gain?
From all I've read, the folks who study Russia as their life's work agree that Putin's goal is to re-establish the old empire of the Czars as a Cristian Russian-Orthodox empire, without any of the Communist trappings.
Putin doesn't want to be the Czar, but he wants the Czar's power and to re-fashion the Russian government along the Czarist lines without the nobles and lesser royalties of the old court.
Apparently, he's been obsessed with this notion ever since he was still a teen. He joins the KGB because it still was similar to the Czar's old Secret Police.
He can't do it. All those Communist semi-autonomous republics Lenin created became fully independent once the Soviet empire collapsed over 30 years ago, and only a few of them chose to stay allied closely to Russia. All the others are like Ukraine; they have adopted their own forms of democracy, mostly based on their own ethnic and tribal traditions, and won't ever go back to the subservience of Russian leadership.
Ukraine is the biggest nation of all of them, and has always been the biggest prize for both the Czars and the Communists. It's grain fields have always fed the Russian empire, and its people have the closest culture to the Russians.
But Ukraine is still very proudly Ukrainian. They have been independent off and on for centuries, and have sometimes allied with Russia when it suited them, while other times they fought the Russians just as hard as they are fighting now, when Russia tried to take the country.
Ukraine really suffered under the Communists. Stalin once needed their grain so much to keep the rest of the empire fed he created a false famine in Ukraine by taking all the food they produced away from them by force and left the people to starve.
Starve they did. There were many instances of cannibalism that were photographed by the Communists, just to show how bad the famine was there. This roused the world's sympathy, and food supplies rushed in. Stalin took them and sent it all to other parts of the empire.
During the Nazi invasion of WWII, Stalin allowed the Germans to play merry hell in Ukraine, while he used the time to pull his army together.
These are part of the reasons why Ukraine is fighting so hard to stay independent now. And part of why Ukraine has tried to ally itself to the west.
The Ukrainians have always seen themselves as being the easternmost part of Western Europe, not the westernmost part of Russia.
So- I think Putin can overtake the Ukrainian resistance, but he isn't able to hold Ukraine for very long.
Once it happens, if it does, Putin won't last very long. Win or lose, the Russian people will revolt and kick him out of the country.
Revolt is an old Russian tradition. Russian peasant revolts against the Czars and the Communists happened regularly, but as long as their leaders won the war they dragged the peasants into, and kept them fed afterwards, and mostly ignored, the peasants were happy to go along with whoever was in charge.
But when the peasants became angry enough to revolt, they fought like the Ukrainians are fighting now. Sometimes a revolt was crushed, and sometimes the peasants succeeded.
I think the Russian people have become a lot more westernized over the past 30 years than Putin realizes. Once the Iron Curtain came down, Russia benefited greatly from all the open trade that flooded in, and the Russian people's lives really changed.
But they still want Russia to be Russian. Their lifestyle is the Russian version of Western Europe's lifestyle, with a dash of American thrown in.
They don't want to give that life up. They liked the idea of a strong President, so Putin was OK, as long as he was acting like Russia was a democracy and everything was stable.
Now that he's just another weakling, not a heroic Russian, I don't think he's admired so much any more.
His talk about Ukraine being Nazi-fascist rings a bell with the old people who were alive in WWII or were born shortly afterwards, but the younger people aren't buying it.
Those born after the Soviets downfall are the angriest. Their parents are almost as angry with Putin.
... and some of the countries that had failed revolts against Putin will see this war as their chance to get even with him.
With those economic sanctions taking away all his money, Putin has no way to appease their anger. The longer the war goes on, the madder the Russian people will get.
Workers somewhere need to make good enough wages to buy products or capitalism collapses because it is the wages of workers that ultimately drives demand.
So, the West banned sales of all Western products to Russia.
Russian workers can make these products without much competition now. Other Russian workers will prefer to buy Russian products because whey will be 5 times cheaper than the ones with the label Made in Europe.
China is on China's side. Russia has some strategic raw materials right on the other side of the Sino-Russian border. And Russia's military has just shown themselves to be, well - not exactly all that. A great power on the downslope interacting with a superpower on the upslope.
Russian workers can make these products without much competition now. Other Russian workers will prefer to buy Russian products because whey will be 5 times cheaper than the ones with the label Made in Europe.
And with the Russian reputation for workmanship, materials science and quality control on top of that... What will the iPadski look like?
There are 500 or so Boeing and Airbus aircraft inside Russia now. They can't get parts. They can't be serviced. Better get used to taking the train, Ivan.
Not that Putin will lose much sleep over his citizens standing in line for potatoes and vodka, but his hangers-on are by now quite used to their giant sailing yachts and Italian villas.
"Putin’s invasion of Ukraine will knock 30 years of progress off the Russian economy"
I do not think so. First of all The Russian Federation is the largest country in the World (Three times larger than USA ) and with the most minerals and natural resources than any other country including oil and gas. The ones who are killing America's economy are always the Communists ( Democrat Party ) in all government offices, institutions, organizations, school system but not limited to it. The sociopath Marxist avalanche everywhere with its mind control and censorship will finally sink all Americans into the same desperation for surviving in the daily basics. Thanks to the "American Marxist stupidity" the correlation of economics is moving to China-India-Russia-Iran and a group of nations that will prefer to trade with them. Sorry for being so cruel explaining the American reality. I love America, but most Americans do not want to see their reality and keep "voting" for their same socialist mentality in the infamous Capitol building while their press is demonizing Putin and accusing him of his return to the Communism. The real communism is already here in America.
From all I've read, the folks who study Russia as their life's work agree that Putin's goal is to re-establish the old empire of the Czars as a Cristian Russian-Orthodox empire, without any of the Communist trappings.
Putin doesn't want to be the Czar, but he wants the Czar's power and to re-fashion the Russian government along the Czarist lines without the nobles and lesser royalties of the old court.
Apparently, he's been obsessed with this notion ever since he was still a teen. He joins the KGB because it still was similar to the Czar's old Secret Police.
He can't do it. All those Communist semi-autonomous republics Lenin created became fully independent once the Soviet empire collapsed over 30 years ago, and only a few of them chose to stay allied closely to Russia. All the others are like Ukraine; they have adopted their own forms of democracy, mostly based on their own ethnic and tribal traditions, and won't ever go back to the subservience of Russian leadership.
Ukraine is the biggest nation of all of them, and has always been the biggest prize for both the Czars and the Communists. It's grain fields have always fed the Russian empire, and its people have the closest culture to the Russians.
But Ukraine is still very proudly Ukrainian. They have been independent off and on for centuries, and have sometimes allied with Russia when it suited them, while other times they fought the Russians just as hard as they are fighting now, when Russia tried to take the country.
Ukraine really suffered under the Communists. Stalin once needed their grain so much to keep the rest of the empire fed he created a false famine in Ukraine by taking all the food they produced away from them by force and left the people to starve.
Starve they did. There were many instances of cannibalism that were photographed by the Communists, just to show how bad the famine was there. This roused the world's sympathy, and food supplies rushed in. Stalin took them and sent it all to other parts of the empire.
During the Nazi invasion of WWII, Stalin allowed the Germans to play merry hell in Ukraine, while he used the time to pull his army together.
These are part of the reasons why Ukraine is fighting so hard to stay independent now. And part of why Ukraine has tried to ally itself to the west.
The Ukrainians have always seen themselves as being the easternmost part of Western Europe, not the westernmost part of Russia.
So- I think Putin can overtake the Ukrainian resistance, but he isn't able to hold Ukraine for very long.
Once it happens, if it does, Putin won't last very long. Win or lose, the Russian people will revolt and kick him out of the country.
Revolt is an old Russian tradition. Russian peasant revolts against the Czars and the Communists happened regularly, but as long as their leaders won the war they dragged the peasants into, and kept them fed afterwards, and mostly ignored, the peasants were happy to go along with whoever was in charge.
But when the peasants became angry enough to revolt, they fought like the Ukrainians are fighting now. Sometimes a revolt was crushed, and sometimes the peasants succeeded.
I think the Russian people have become a lot more westernized over the past 30 years than Putin realizes. Once the Iron Curtain came down, Russia benefited greatly from all the open trade that flooded in, and the Russian people's lives really changed.
But they still want Russia to be Russian. Their lifestyle is the Russian version of Western Europe's lifestyle, with a dash of American thrown in.
They don't want to give that life up. They liked the idea of a strong President, so Putin was OK, as long as he was acting like Russia was a democracy and everything was stable.
Now that he's just another weakling, not a heroic Russian, I don't think he's admired so much any more.
His talk about Ukraine being Nazi-fascist rings a bell with the old people who were alive in WWII or were born shortly afterwards, but the younger people aren't buying it.
Those born after the Soviets downfall are the angriest. Their parents are almost as angry with Putin.
... and some of the countries that had failed revolts against Putin will see this war as their chance to get even with him.
With those economic sanctions taking away all his money, Putin has no way to appease their anger. The longer the war goes on, the madder the Russian people will get.
Great post!
Yeah, people forget that there is a segment of the Russian population that
are not Putin fans, even before the invasion of Ukraine, and others that were ok
with Putin are now not exactly happy either.
Ultimately, if the Russian Army (and police) start to not back up Putin...
then it's all over for Putin...I hope that happens...I also hope the next leader
of Russia will be easier to deal with then Putin. Fingers crossed.
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