Johann Hari…..yes, it\’s an economics fail again

Even as their work has propelled China towards being a super-power, these workers got less and less. Wages as a proportion of GDP fell in China every single year from 1983 to 2005.

Facepalm.

Getting a smaller portion of something that is growing does not mean that you are getting less. It might, but it doesn\’t mean you are.

So, taking real numbers (ie, accounting for inflation) let us say that Chinese GDP is growing by 10% a year. Let us also say that all Chinese wages are growing by 5% a year. Just to make the math easier, we\’ll also say that wages in year 0 are 50% of Chinese GDP.

So in year 0 wages are 50 (units, $, £, whatever) and GDP is 100. In year 1 GDP is 110 and wages are 52.5.

Sure, the percentage of GDP going in wages has fallen but wages have not fallen: workers are not getting less and less, they are getting more.

Now. Let us step outside of examples and ask ourselves, what has actually been happening to Chinese wages (we\’ll take manufacturing ones as those are what Hari is talking about)?

Umm:

Last year salaries surged 40%, to an average of $160 a month, and Yongjin still can\’t find enough workers…..Some 1,500 miles northeast, in the city of Suzhou, Emerson Climate Technologies Co. is facing similar woes. The maker of air conditioner compressors has seen turnover for some jobs hit 20% annually, and Emerson General Manager David Warth says it\’s all he can do to keep his 800 employees from jumping ship to Samsung, Siemens (SI ), Nokia (NOK ), and other multinationals that are now operating in the tech manufacturing hub. \”It has gotten to the point that we are just swapping folks and raising salaries,\” says Warth……Reports of labor shortages first cropped up in late 2004, but companies thought the phenomenon was temporary. Now a surge in both turnover and wage costs is convincing multinationals and their suppliers that the China game is changing permanently……Michael Barbalas, general manager at the Suzhou plant of Andrew Corp. (ANDW ), a Westchester (Ill.) maker of wireless networking gear. At his factory, he says, wages have been rising by 10% annually…..

Indeed one estimate I recall from a couple of years back (the above is from 2006, just to show that rising wages is not a new thing) was that Chinese manufacturing wages had been rising at 14% per year for a decade….and with compounding that means that they\’re near 4 times higher than they were at the start of that decade.

And if Hari had actually bothered to pay attention during his introduction to Marxism classes he\’d know why too: as Marx pointed out, once the reserve army of the unemployed is brought into use competing capitalists will compete with each other for access to the profits to be made by employing labour and wages will thus rise. Which is why, in Marx\’s view, capitalists would combine in order to increase the reserve army of the unemployed and thus stop wages rising.

So Hari\’s not just wrong in empirical fact, not just wrong in his logic (that a falling share of GDP to wages means falling wages) but even he\’s wrong in Marxist theory let alone any sensible system of economics.

Pretty good going that really, don\’t you think?

After slavery was abolished in 1833, Britain\’s GDP fell by 10 percent

No it fucking didn\’t.

Year Nominal GDP
(million of pounds)
Real GDP

(millions of 2003 pounds)

GDP Deflator

(index 2003=100%)

Population

(in thousands)

Nominal GDP per capita
(current pounds)
Real GDP per capita
(year 2003 pounds)
Plot Series
Plot Log of Series
Plot Series
Plot Log of Series
Plot Series
Plot Log of Series
Plot Series
Plot Log of Series
Plot Series
Plot Log of Series
Plot Series
Plot Log of Series
1830 483 41,373 1.17 23,815.00 20.29 1,737.29
1831 480 43,222 1.11 24,135.00 19.90 1,790.85
1832 459 42,606 1.08 24,373.00 18.83 1,748.08
1833 453 43,222 1.05 24,602.00 18.42 1,756.85
1834 481 45,071 1.07 24,862.00 19.35 1,812.83
1835 508 47,359 1.07 25,134.00 20.22 1,884.28

Now of course I really shouldn\’t impute motives to this sort of silliness but it\’s clear enough to me what he\’s doing.

There is indeed industrial unrest in China at the moment, there really are strikes for higher pay and better conditions. And good luck to all who sail in her and yes, freedom of association is a basic human right and one of the two great signifiers of a free society (freedom of speech being the other).

But Hari\’s aim, at least I think Hari\’s aim, for whatever little my opinion is worth, is to show that without the struggle, without the unions, the strikes, the solidarity, then nothing can get better. That the free market, unadorned, cannot improve the lot of the workers. And to do so he has to invent cackhanded statistics, invalid ones, to show that things were not improving before these strikes, this solidarity.

I really cannot think of any other reason why he would not note that Chinese wages were rising before \”the struggle\”.

Unless, of course, he\’s simply deeply ignorant.

8 comments on “Johann Hari…..yes, it\’s an economics fail again

  1. Is it possible that when Hari writes “After slavery was abolished in 1833, Britain’s GDP fell by 10 percent” he means “After slavery was abolished in 1833, Britain’s GNP fell by 10 percent”, or is that also false?

  2. I cannot be bothered to look it up (I do not suffer from white guilt), but a rough timetable goes:

    17th or 18th Century, slavery declared illegal in England, possibly earlier in Scotland, simply confirming established practice and law.

    Early 19th Century, slave trade declared illegal, and Royal Navy tasked with stamping out the sea trade.

    1833, slavery declared illegal in British colonies/empire.

    Several US States declared slavery illegal at least decades prior to the Civil War.

    Those States, and Britain, remained among the richest in the world.

  3. Yes, as Jeff points out, it is hardly likely that the 1833 act affected Britain’s economy significantly, since slavery was already illegal here. Abolition might have affected the Empire’s economic output, but (a) that’s not what Hari is claiming, (b) I haven’t a foggiest where to find the figures, (c) again as Jeff points out, abolition appears not to have done too much damage in other places where it happened, and (d) is Hari really suggesting that slavery is good for GDP?

    With Johann Hari, deep ignorance of economics is a given.

  4. Here’s a paper (from ’72) which suggests that British Guianese GDP went sideways between 1832 and 1838, then fell 10% in 1838-9 (coinciding with the implementation of abolition), then *grew* afterwards. Broadly supportive, I think, of the thesis that abolition is in the longer-term good for an economy, if slightly painful in the immediate aftermath.

    http://www.jstor.org/pss/2593950

  5. I think it is all part of the conceit of the “struggle” by the proletariat as the only way forwards against the evil Capitalist Roaders* and that this is all part of the build-up to a new wave of “struggle” in the UK to “defend jobs and pubberlik services”.

    * and their running dogs, I suspect.

  6. It is really amazing that idiots like Hari who would struggle to pass O Level economics even when it was worth passing ( before 1997) are considered worth publishing in a “so called” heavy-weight mainstream newspaper

  7. Pingback: The Fall of Johann Hari | GAMES MOVIE

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