# [OPE-L] the "unequal exchange" controversy

Date: Thu Dec 29 2005 - 14:09:04 EST

```Jerry asked:

But, this still raises measurement issues for those who
want to empirically study the international transfers of value: how could
analysts --  not the market -- measure SNLTs?

Why do you want to measure it exactly? In principle, SNLT empirically
expresses a ratio between input of labour hours and output (either a
physical output or an output value). This is not measurable exactly, except
in very specific cases, in particular, because a fraction of output may not
be sold (i.e. it's socially unnecessary), or sold at a later date. You have
an average (or more usually, a modal average) labour expenditure per product
unit or per product volume, which is the norm for an industry. But as any
manager knows, measuring production time worked is something you can usually
not measure with great exactitude either. To my knowledge though,
corporations are quite well able to calculate that they have lower unit
labour-costs in country A than in country B and so on, it is one element in
a total evaluation of costs and benefits. The transfer of value you can
measure e.g. by comparing factory-gate or export prices and final consumer
prices (cost structure or cost composition showing who gets what from the
product value).

I am a bit too tired to do math, and I got to cut down my hours typing this
stuff.

Here's an example from the car industry though, which I have previously
cited on Marxmail list, referring to car assembly:

Average Labor Hours per Vehicle assembled

1998        2004        % change 2003 to 2004

DCX        46.81       35.85        4.2

Ford        36.76       36.98        4.2

GM         46.52       34.33        2.5

Honda     31.90       32.02        0.2

Nissan     30.70       29.43        (-4.8)

Toyota     30.25       27.90        5.5

Source:
http://www.thecarconnection.com/Industry/Industry_News/Toyota_GM_Tops_in_05_Harbour_Report.S175.A8722.html

Of course, this refers only to the assembly of the car, it assumes there are
parts, these parts also represent labour effort. So, to get the total labour
cost of producing the car, you have to count up also the average labour
hours involved in all the parts. That's a lot more hours obviously, I don't
have that data handy at this moment. You can get an average labour-time out
of that, that it's fairly meaningless obviously for the exact topic.

Now, people may laugh at Marx's labour theory of value, but corporations
aren't. Here is an example regarding the car's components I was talking

"While the labour costs in developed countries are about 30-35% of sales, it
is just 8-9% in India. Domestic industry sources say that for global auto
components majors, the total average cost of production is cheaper by about
30% in India."
http://economictimes.indiatimes.com/articleshow/1332770.cms For the global
car market, see e.g. http://www.mpi-fg-koeln.mpg.de/~lk/netvis/globale/
which shows a diagram of the component deliveries internationally. An
ecologist might say, this is crazy, a nightmare. While one hour of labour
costs 12.9 \$ in South Korea, 29 \$ in Japan and 33.8 \$ in the US, the EU-15
average is at 32.7 \$, with Germany topping the list with 36.8 \$.
http://europa.eu.int/rapid/pressReleasesAction.do?reference=SPEECH/05/11&format=HTML&aged=0&language=EN&guiLanguage=frCurrency conversions are a separate problem. India's GDP at ppp becomes five
times larger.

Of course, this illustration does not tell you the average hours of Indian
labour, versus the hours of US or EU labour, per component. In reality,
there is a broad average labour input per component, which normally doesn't
change a lot wherever you produce it, but obviously Indian wages are much
lower, and nimble Chinese fingers can sometimes produce product much faster
than anywhere else. In particular cases, it doesn't even matter if they take
a bit longer to make a component, e.g. if the labour is somewhat less
productive or less intense, it's still cheaper, that's the point.

So now the famous "law of value" expresses itself in an international
Ricardian "bidding down of labour-costs" based to some extent on
international production prices, and what counteracts that, is the Marxian
struggles of Indian, Chinese etc. workers for higher wages and struggles by
US, EU workers etc. to keep their jobs, plus, Keynesian protectionist
cars, resulting in excess capacity, but what matters for car sales, is the
evolving proportions of unemployed to employed workers at a car-buying level
of wages (emerging markets). If somehow we can modify social relations, and
get more people to "trade up", we can fit more people into new cars over
time (purple politics). Whether that's good or bad, is another story. I
think there is nothing particular wrong with cars per se, but engineers say
we can build them even more cost-efficiently then we do, consuming vastly
less resources and vastly less polluting. Indeed, BBC "global business"
programme recently advocated "the engineer as hero" model, deploring an
apparent lack of interest among young people in "hard" sciences.

Equal economic exchange is unlikely to become a general moral norm or
distributive principle in society, but obviously you can introduce all kinds
of egalitarian institutional norms that moderate market forces, the
subsidiary principle and so on, or direct allocation according to need; and,
when markets start to disintegrate, you get counter-trade (barter) of
various kinds (in Marxian notation, C-C').

Jurriaan

I told that girl I can start right away
And she said listen babe, I got something to say
I got no car, and it's breaking my heart
But I've found a driver, and that's a start
```

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