Transcript Effects of low employment on wages

A Country is not a Company
No, it is not
1. Knowledge from the classroom cannot be
implemented in a firm
2. Correct!
3. Why?
Two examples
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2.
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Export creates new jobs
FDIs cannot create deficit
Is that true
No!!!!
Why export does not create employment
Free trade opens new jobs : the more a county exports – the
larger employment, the more we import – we lose jobs
• Correct?
• No!!!!
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Autsorsing
Greg Mankiw
moreovde
CEA ekonomski savet
Was he fired? dao ostavku
NO predsednika Buša
Why exports does not increase
employment?
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Creates jobs in export sector
But destroys other jobs
How
Overheated demand, interest rate rises.
Total is zero
• Sectors gain, but the economy does not
Why imports do not lower
employment
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It really can decrease emp in a sector
 Like technical progress
 No more typists
 Cash machines
 “popravka čarapa”, “vunovlačar”
But rises employment in other sectors
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Radiologists, voice services
Sectors lose
Mankiw - an anemy
• Senator Schumer 27.5% custom tariff on
Chiese goods svu robu iz Kine.
• But he did not convince them
• why?
Why does not anyone see that?
• Gains from esxports are visible
– We see people
– We see products
• And we see closed factories
• Other effectsw are not visible the same
moment
comment:
• Statements like this one (exorts do not create
new jobs) best represent why people HATE
ECONOMISTS!
• At the NAFTA meeeting, Krugman
It happens in every country
In the US interest rate risesž
Growth of r
Decrease in employment in construction, for
example
Also, decrease in employment in worse paid
sector
FDIs and balance of payments
• Investors bring money.
• What happens to BOP?
• We get a surplus
• But we dont
We must have a deficit
• Economists claim
• But bysinessman do not trust them, starting
from themeselves
• If all firms do like his firm, we must have a
surplus
• Economists know that we will have an
opposite situation.
• Why?
Mechanism
• Inflow on capital account must equal the
outflow on current account
• That is accounting – and economics will tell
you HOW IT HAPPENS
• Mechanism: capital inflow – appreciation –
import demand grows – export falls – deficit.
But businessman do not believe
that
• Arguable, they say
• Will fdis import really that much?
• How do we know that currency is going to
appreciate
• Is exports really going to fall
• it is obligatory
• Everyone who knows accounting knows it
must happen
• Not maybe but certainly
• Deficit cannot be escaped
Let us repeat
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What was our first fallacy
Exports make new jobs
explanation
Second fallacy
Fdis improve ballance of payments
Why not
What creates these fallacies
– No businessman explains his work in his memoirs
– Nor they could, since there was no theory
– But they implement strategies
– Many people say that Warren Buffet does not invest the way he wrote
that he did
• They cannot transfer their knowledge
• Centralized centipode
Important differences between a
company and a country
1. complexity
2. How we run it
• indirectly
• Firm by firm
“hands-off” role in state
management
• Syndrom of importance
• Thinks he can run every job
• But they must learn a new language.
• They think it is just a jargon
Closed system
1. Deponia
2. Garage
3. Milan Panić
Feedback in business
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Only positiver
Mostly negative in the country
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Fall in empl in other sectors
Or the rise in aggregate demand
Rise in inflation
Rise of r
layoffs
Businessman do not realize
• Effects of low employment on wages
• Growth of investments on the exchange rate
Next time you hear a businessman talking about the
economy, ask yourself
1has he studied this subject
2. Does he know what experts think of this
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• If the answer is – “no”, you should better
forget what he said
• Because he probably does not know what he
is talking abouti