I'm always bemused by globalisation doomsday scenarios in which all of our jobs move to China (or India) in order to take advantage of low-wage workers. If we really do lose all of our high-productivity jobs, and no longer make anything worth having, why would the Indians and Chinese continue to ship us software programs and flat screen televisions? Obviously, for individuals this may be traumatic, but in aggregate, if our economy really gets less productive, we won't have to worry about a flood of cheap Chinese goods. Although if the Chinese and Indians do want to ship us their products in exchange for absolutely nothing, I'm willing to talk.
The other reason this doesn't work, of course, is that as these economies expand, demand for workers pushes up their wages. That's why we no longer buy cheap gimcrackery from Japan. According to the New York Times today, this is already happening:
For decades, many labor economists said that China’s vast population would supply a nearly bottomless pool of workers. So many people would be seeking jobs at any given time, this reasoning went, that wages in this country would be stuck just above subsistence levels. As recently as four years ago, some experts estimated that most of the perhaps 150 million underemployed workers in the countryside would be heading to cities.Instead, sporadic labor shortages started to appear in 2003 at factories in the Pearl River delta of southeastern China. Now those shortages have spread to factories up and down the Chinese coast, specialists say.
This summer, Mary Gallagher, a Chinese labor specialist at the University of Michigan, visited five sportswear factories near Shanghai and Guangzhou. She found them all struggling to hire and retain workers. One had shut one of its two main production lines because it had nobody to sew shirts and other garments.
“Basically half the factory was shut down and one dormitory was empty,” Ms. Gallagher said.
In interviews, factory executives across the country complained of being forced to give double-digit raises in order to find and keep young workers at all skill levels. Three or four years ago, said Zhong Yi, vice general manager of a leather-jacket manufacturer in Hangzhou in east-central China, 800 to 1,100 yuan a month ($105 to $145) “was a good salary.”
“Now,” he said, “1,500 is the bottom” ($198).
Chinese officials are quick to say that there is no overall shortage of labor — rather, there is a shortage of young workers willing to accept the low wages that prevailed in the 1990s. Factories in cities like Guangzhou advertise heavily for young workers, even while employment offices consider it a success if someone over 40 can find any job in less than a year.
“Now they’re taking workers into their early 30s,” said Jonathan Unger, director of the Contemporary China Center at Australian National University in Canberra, “but anything older than that and they think they can’t take the conditions, the 11-hour days,” as well as work on weekends, and a tedious life in factory-owned dormitories.
Plant owners’ refusal to hire blue-collar workers over 35 or 40 is colliding with the demographic reality of China’s one-child policy. The number of workers in the 20-to-24-year-old range is already shrinking as more of them go to universities instead of entering the work force after high school, and the International Labor Organization projects that workers in this age range will edge slowly downward through at least 2020.
Stand by for Chinese politicians complaining that America is exporting its high wages and labor standards to countries that don't want them.
One wants to know, of course, how much this is affected by inflation in China. The Chinese government has not been able to perfectly sterilize its interventions in the global currency markets. All else equal, buying foreign currency in order to push down the relative value of your money should translate into domestic inflation; so in order to un-paribus the ceteris, the Chinese government has been taking a number of measures to soak up the extra liquidity, notably selling bonds. But there is a limit to the effectiveness of these techniques, not least because the fragile banking system cannot absorb an infinite supply of government bonds. As it is, the government has jammed more bonds into the system than the bankers want. Moreover, its rather primitive financial system makes monetary intervention less effective than it might be. The result of the currency interventions, and China's rocketing growth rate, has been steadily rising prices. The government is now exploring alternative anti-inflation measures, like price controls, to battle it.
Since China has chosen to employ aggressive industrialization to supply the west, they have opened the middle class genie out of the bottle. The stages of industrial development in the US would be a good model to use to predict what China will be doing in the future. We have yet to see the cost impacts to growing worker safety and environmental expenditures that will be demanded by the growing middle class.
Our global dependence on China and India is an economic form of the MAD nuke standoff that was successful in getting the world through the cold war.
As the NYT article states, Southern Chinese cities are facing local inflationary pressure that drives down the supply of low-wage workers. Wages are higher in the south but if the living costs are too high, there's less incentive for workers to relocate to Shanghai, Shenzhen, Guangzhou, and other cities for work.
Things are cheaper in the north, which, along with political considerations, is driving the development of the Binhai Region of Tianjin as a manufacturing and trade hub to compete with Shanghai. Tianjin factory workers in the development areas make around 30-50% less than their southern counterparts, and southern-based manufacturers are bound to take note of this. In the long run, of course, inflationary pressures will kick in on the northern coast as well, but I'd still expect to see a geographic shift in production centers within China before we see a geographic shift of production away from China.
I don't get too excited at this point regarding wages in China. China is still a very poor country. According to the latest World Bank numbers, China's per capita GNI is $1740 (compared to Mexico's per capita GNI of $7310).
Further, China has lots of poorer neighbors with lots of people. I think a more likely scenario is that immigration will become a much more important part of the country's labor force over the coming decade, rather than the large scale emergence of a Chinese middle class of consumers. It is, after all, much easier to bring the workers to the factories than the factories to the workers.
Actually, szr, China's population dwarfs all of its neighbors save for India, so drawing on their populations for labor is probably a policy of last resort. Instead, China can rely on a labor pool from the Western provinces, but the problem here is that these workers -- who are lucky to make a few hundred RMB a month in their hometowns -- are actually vastly underskilled compared to the low-skilled workers most factories are hiring in the cities. It's one thing for subsidiaries from MNCs to hire high school graduates to work in factories, and quite another to hire functionally illiterate migrants. Unfortunately, because there are few programs to retrain these workers or expand education in the countryside, Chinese firms use them for basic manual labor (construction projects, mostly), then send them back to the countryside after paying them (if they get paid at all).
As prices rise, wages have to rise. As wages rise, prices rise. Inflation is an inevitable consequence of the capitalist system. China is learning that.
One of the things that has fascinated me about capitalist theory is its reliance on the ever-growing economy. It's "grow or die" but really how long can that be sustained? The $60k salary I earn today is comparable in purchasing power to the $21k my father made in 1979; so the obvious question is, if that's the case, why am I not making $21k? How long until, through the slow and gradual but relentless inflation that is the hallmark of a "healthy economy," we reach the oft-cited state of depression-era Germany where it takes a wheelbarrow of currency (or a ten-million-dollar bill) to buy a loaf of bread?
At some point it just seems inevitable that there has to be some sort of wrenching revaluation of the currency, so the cycle can start all over again.
liberalrob:
It's "grow or die" but really how long can that be sustained?
Until the heat death of the universe.
The $60k salary I earn today is comparable in purchasing power to the $21k my father made in 1979; so the obvious question is, if that's the case, why am I not making $21k?
Because of inflation.
How long until, through the slow and gradual but relentless inflation that is the hallmark of a "healthy economy," we reach the oft-cited state of depression-era Germany where it takes a wheelbarrow of currency (or a ten-million-dollar bill) to buy a loaf of bread?
Taking ~$1 as the price of a (low-grade) loaf of bread today, and a 3% annual inflation rate, it will take about 550 years for it to cost $10,000,000.
Any other questions?
it will take about 550 years for it to cost $10,000,000
So, 64-bit integers will keep accountants happy for a long time to come! :-) We just need to finally adopt the chip cards and after that, who cares how many zeroes fit in a wheelbarrow of cash?
Until the heat death of the universe.
That's very flip. Nice. Do you have a REAL answer to my question? Resources are not infinite; I think there has to be a point at which growth is no longer possible. What happens then?
Taking ~$1 as the price of a (low-grade) loaf of bread today, and a 3% annual inflation rate, it will take about 550 years for it to cost $10,000,000.
So what happens in 550 years? And where do you get that cheap bread (the cheapest I can find is $2).
Resources are not infinite; I think there has to be a point at which growth is no longer possible. What happens then?
The sun will give out in a few billion years. Our solar-powered diets will become untenable. But trying to adjust our diet based on this fact would be folly.
In any case, the free market system is not based on the assumption that our resource base is ever-expanding. The free market system is instead based on the idea that in conditions of scarcity of goods, dirigisme is an inefficient way of distributing them. If resources are in fact finite, all the more need for the free market.
So what happens in 550 years?
The currency is renamed or something. This is not a big deal. The govt. could anounce tomorrow that $1 US is equal to 100000000000000000000 schmuckaroos and it would cause no real difference.
Bread is $2 there? And I thought Walmart was meant to be cheap!
Can always just do what the Turks did and wait til it reaches 1,000,000 for either bread/baked beans/pint of milk/all three before loping 6 zeros off. If everyone is told that in advance, it won't be such a shock.
All things remain equal, resources are finite. But surely the issue is that science means resources keep going further. Whether that's a switch from fossil fuels to nuclear/renewable or from rubbi.. ahem, natural crops to GM crops or whatever they come up with in the future.
It appears liberalrob might be suffering from what a lot of liberals suffer from. Faith.
Faith that things will largely work out, like they have for generations. And just pray you're not the unlucky generation that has to fight a bloody world war/revolution/civil war in order to bring society back to the point of normalcy where the most we get to complain over is how dumb bush is and how bad clinton was.
liberalrob:
That's very flip. Nice. Do you have a REAL answer to my question? Resources are not infinite; I think there has to be a point at which growth is no longer possible.
That *was* a real answer. You can always sustain a human as long as you can feed it energy in the right form. Currently, we are constrained in what those forms are, but as technology improves, more and more kinds will become compatible. (That is, it will be possible to convert more kinds of energy into things useful to the human body.) So the only ultimate limit is the ability to extract energy from the universe, which will be possible until its heat death. (look it up on wikipedia)
What happens then?
Moot point. The universe is irreversibly over.
So what happens in 550 years?
You make at least 2 x 10^11 dollars per year, so you shrug it off, and pay the 1 x 10^7 dollars for the loaf of bread. I doubt that using numbers that big will be much of a problem by then.
And where do you get that cheap bread (the cheapest I can find is $2).
Wal-mart, but again, this is stuff I'd only feed to birds.
Addendum: In my previous post, I just grabbed an arbitrary low salary because I forgot you listed yours earlier. So, to be more precise, after nanobots repair your cells so as to sustain your existence for 550 more years, and your salary keeps up with inflation, you won't mind paying ten million dollars for a loaf of bread, because you make 6 x 10^11 (six hundred billion) dollars per year.
And just pray you're not the unlucky generation that has to fight a bloody world war/revolution/civil war in order to bring society back to the point of normalcy
That's some argument in favor of faith...just go ahead and play Russian Roulette, and hope you don't win. Yikes. Think I'll pass on that faith, thanks...I prefer trying to look down the road and see if I can't avoid the potholes, than just fly along hoping I don't hit any.
So, to be more precise, after nanobots repair your cells so as to sustain your existence for 550 more years, and your salary keeps up with inflation
My salary hasn't kept up with inflation for the past 6 years. I have zero faith that it will begin to do so in the future.
I do hope the nanobot thing happens pretty soon though. I'm getting old...
If we really do lose all of our high-productivity jobs, and no longer make anything worth having, why would the Indians and Chinese continue to ship us software programs and flat screen televisions? Obviously, for individuals this may be traumatic, but in aggregate, if our economy really gets less productive, we won't have to worry about a flood of cheap Chinese goods. Although if the Chinese and Indians do want to ship us their products in exchange for absolutely nothing, I'm willing to talk
Well if current trends continue you could end up with a a lose lose scenario for Americans. Wages in India and China go up as their middle class expands while in the US the middle class continues to fall while the top 10% take more of the income distribution. In essense a role reversal the US gets a third world income distribution and the new nations get a first world income distribution. India and China trade with each other to offset the fall in US middle class demand, while the american top percentile keeps the demand curve from fallign too far. So everyone is happy except for the average American.
Would Americans accept this as the will of God?
My salary hasn't kept up with inflation for the past 6 years.
If you regard that as a problem then YOU sir, have the responsbility to deal with it.
My comp increases have exceeded inflation since the day I started working back in 1977. It's MY monkey - not anyone else's.
Taking ~$1 as the price of a (low-grade) loaf of bread today, and a 3% annual inflation rate, it will take about 550 years for it to cost $10,000,000.
And yet in spite of that loaf of bread costing $10,000,000 in 550 years I'm sure the government will still be minting pennies.
My first job after my Bach. Sci degree was for $37K, in 1995. I went back to get a Full-time MBA. After that, got a $95K job in 2002. I make about $200K now.
So I am even happy with by 2002-2007 rate of increase. I do work longer hours than I did in by old $37K job in 1995, but so be it.
As prices rise, wages have to rise. As wages rise, prices rise. Inflation is an inevitable consequence of the capitalist system.
Not one of those statements is correct. No wonder you are called liberalrob.
Liberalrob,
"Resources are not infinite"
Not too much into basic Physics, are ya? Nothing, by and large, has left the planet. It is all still here, in one form or another.
There is no law in science that we all can not be richer and better off. I don't know of any law limiting wealth, save a leftist with an umba gomba piece of paper and a couple of gun toters to enforce the latest fashion in thieving.
As prices rise, wages have to rise. As wages rise, prices rise. Inflation is an inevitable consequence of the capitalist system.
Not one of those statements is correct. No wonder you are called liberalrob.
Mrs. Davis as much as it leaves a bad taste in my mouth to defend a guy calling himself "liberalrob," I have to admit I was under the impression that "As wages rise, prices rise" was pretty solid. Pricing is derived from what the market will bear, so if wages increase, more people will have more money, and will thus be willing to pay more to buy things. That means that retailers will be able to charge higher prices than before, because people are willing to pay them.
Price don't inexorably rise across the board, of course; lots of technology (TVs, DVD players, air conditioning, etc.)is cheaper than it used to be (even after inflation adjusting), for assorted reasons of scale and availability of parts and so on. But in general, for the vast majority of goods, I had thought that prices tend to rise as wages do.
Of course, correct me if I'm wrong, please. :) Economics has always been tricky for me, and I'd love to improve my understanding whenever I can.
Well if current trends continue..
Current trends never continue indefinitely, especially if you take into account technological change.
Reminds me of Disco Stu from the Simpsons.. "Did you know that disco record sales were up 400% for the year ending 1976? If these trends continue... AAY!"
Prices don't necessarily have to rise with wages, prices depend on many more factors. For example, wages have risen but the price of home computers has fallen dramatically. Who knows what may happen if some bioengineered cellular life can be created which will cheaply convert CO2 into ethanol? Would the price of silk rise or fall if you could graft the ability to produce silk into a goat? What if you could fabricate ground beef from cloned Kobe cattle in a vat? Or the choicest tuna for sushi?
Pricing may not be decoupled from wages, but the association is not as strong as some 19th century zero-sum-gamers would have you believe.
Not to pile on or anything, but saying that 60k 2007$ = 21k 1979$ ignores the considerable increases in quality and diversity of what can be bought with that money, thanks to 28 years of breakneck technological advance. Does anyone have data on how much time it takes to earn the money to purchase a truly comparable market basket of goods and services today vs that of three decades ago? I suspect that in those terms, inflation is vastly overreported.
Chinese wages are increasing because increased demand and inflation are benefiting the farmers in the West. Only 5 years ago, farmers were fleeing the countryside for construction and service jobs in the cities. Now these men are staying behind, and they still represent a huge percentage of the total workforce, considering that agriculture is very labor intensive.
Additionally, the one-child policy began in the early 1980's. At the university I taught at, the students in the class of 2004 (roughly born in 1980-82) often had a sibling, sometimes two. My last year there I taught the class of 2007. Almost none of them had siblings. Their non-college bound peers entered the workforce around 2004 and 2005. If you go back and check the archives of various news sources, you'll find many stories from that time period describing the labor shortage in the Guangdong are and discussing how the flow of young female workers from the west was slowing and factories had to raise wages to keep their workers.
Of course, the obvious solution is that the U.S. should be shipping illegal Mexicans to China, in order to keep both countries wages as low as possible.
Laura --
If wages rise independently of productivity, prices rise along with them; demand (denominated in dollars) goes up, supply doesn't, so prices rise, and people pay more but just get the same goods.
If wages rise in sync with increased productivity, however, we don't have that happen. The increased productivity increases supply. So demand (denominated in dollars) goes up, but as so does supply, prices stay even, and people pay more but get more goods.
That's highly simplified, of course.
Laura: The essence of the quantity theory of money is that the OVERALL price level is proportional to to the amount of money in circulation divided by the amount of good and services produced. So long as the quantity of money grows at more or less the same rate as the production of the economy, there is no built-in reason for a market economy to have either inflation or deflation. It's all about how much money is chasing how many goods. (Over the full range of data, monetary growth and inflation are pretty well correlated in the data.)
Back when the only real money was gold-backed, the amount of gold in circulation was usually pretty stable over the short run, so increasing production (econmic growth) tended to lead to DEflation over time. Sudden upsurges in the amount of gold available, on the other hand, tended to generate inflation (as the Spanish Empire discovered after its New World gold-mining bonanza).
Today we have fiat money whose quantity is not limited by physical constraints like gold mining. Instead, governments decide (indirectly) how much money to create. When they create too much, you get situations of hyperinflation like what is happening now in Zimbabwe or what happened for a while in Germany between the World Wars.
Obviously, this basic story gets complicated in its details because of conceptual and practical difficulties in measuring the amount of money and the amount of goods and services, because of the role of money as an intertemporal store of value as well as a transaction medium, etc. I leave such things to the monetary economists, who know a lot more about it than I do.
I wouldn't describe price controls as an "alternative anti-inflation measure." Perhaps as an "anti-sanity" or "anti-rationality" measure. We have the literal entirety of human history, going back to the Code of Hammurabi, as an example that price controls Do Not Work. Why we even continue to give lip service to the idea that they do is a mystery of incalculable proportions.
Also, it is nonsense to suggest that wages and prices push each other up in a never-ending spiral, and that this has anything to do with inflation. Inflation comes from the money supply, and nowhere else.
For all the "my salary doesn't keep up with inflation" folks, neither did mine. I got ahead by working harder, not complaining, nevernevernever turning down extra hours and as a result getting promoted. When I got to senior positions I promoted subordinates who did the same.Try it, it really works.
I like that Person!
This blog is turning into a 101 on economics and I like that too...
Does the economy depend on finite "resources"? Yes and no...
Eg 6 billion people on the planet could not be sustained with current land, water and technology reserves - if they started consuming as much meat as the West does today.. We would need 2 more planets here and now..
http://www.sciam.com/article.cfm?articleID=000E5878-3E45-1CC6-B4A8809EC588EEDF
It is called the ecological footprint...
But provided there are clean technologies in place (PV energy) and less meat consumption and a sustainable footprint - there is no reason why the economy could not prosper infinitely based on creativity and intellectual capital like science movies, music, software, video games, etc.
Ignoring these natural laws in both extremes is foolish (by pretending we do not depend on nature's laws of sustainability or by ignoring that the real resource and value creation is based on intellectual and creative capital well)
There are only positives from China's opening up so far for everybody on this planet. The risk is more with their natural resources and the ecology than the short-term challenges (inflation).
Ecological costs are not to be underestimated. Have you heard the Chinese ambassador to the US speak? Not a single speech where he does not mention water shortages?
Economically speaking both nations have found the common values that Kissinger was referring to? And I believe the Chinese - even more so than Putin & CO - understand the value of workers and thinkers rather than the "oil"...
the "oil" and "gas" will be gone soon... what will happen to the middle-east? what to Russia? I feel much better about China!
PS: all this talk about energy, wages, china, immigrants.. The richest man in China is a Chinese-Australian citizen, educated in London, who moved to China less than 10 years ago and started a PV solar plant with Chinese government money as VC... Mr Shi... In 2008 - all Olympic stadiums will be covered in his creation..
Laura: "Inflation is always and everywhere a monetary phenomenon." :-)
Or to look at a really really simplified model, if you've got a system where 1000 people work 2000 hours a year each to produce a total of 5 million widgets, then widgets will cost X/5mil and the hourly wage X/2mil where X is the money supply. If there's ten million dollars in circulation, and the velocity of money (the number of times a dollar changes hands in a year) is 1, then widgets will cost $2 each, you'll earn $5 per hour, and you'll have to work 24 minutes to buy a widget.
Inflation will occur (indeed, must occur) if the money supply increases, but without such an increase, you aren't going to have inflation. How could you?
(The quantity theory of money isn't the final word of course, but it's certainly a useful tool with a wealth of empirical data to back up it's general applicability.)
Inflation is a monetary phenomenon.
Here is some technology that may solve our need for low cost energy in 10 years (as opposed to the 50 years the Tokamak/ITER folks are promising):
Bussard Fusion Reactor
Easy Low Cost No Radiation Fusion
It has been funded:
Bussard Reactor Funded?
I have inside info that is very reliable and multiply confirmed that validates the above story. I am not at liberty to say more. Expect a public announcement from the Navy in the coming weeks.
The above reactor can burn Deuterium which is very abundant and produces lots of neutrons or it can burn a mixture of Hydrogen and Boron 11 which does not
The implication of it is that we will know in 6 to 9 months if the small reactors of that design are feasible.
If they are we could have fusion plants generating electricity in 10 years or less depending on how much we want to spend to compress the time frame.
Funny, I was in Korea on business a few months ago, a primary concern there is that they are going to loose their jobs to (lower paid) Chinese - it wasn't too long ago that Americans had that same worry with regard to Korea. A pretty basic economic theory says that production will move to where it's most efficient (i.e. cheapest).
Inflation is not a given (although it does tend to follow economic growth). Right now, the DEFLATION of housing prices is considered by many to be an economic disaster - but if you're in the market for a new house it's a god send.
If there is economic growth (greater than the rate of population growth), the average person will benifit. Not all are average.
Capitalism makes a point of rewarding the individual who 'does better'. What most seem to miss is that socialism and communism do the same - they just try to hide it. Capitalism is just a little more honest about it.
TD
That's some argument in favor of faith...just go ahead and play Russian Roulette, and hope you don't win. Yikes. Think I'll pass on that faith, thanks...I prefer trying to look down the road and see if I can't avoid the potholes, than just fly along hoping I don't hit any.
You don't even have to depend on technology. As any good environmentalist knows, renewables such as solar, geothermal, and wind energy are more than sufficient to provide people with the energy that they need. Furthermore, as any good environmentalist knows, there are many ways in which energy efficiency can be enhanced.
So, why don't people switch to renewables and improve energy efficiency? Because the current forms of energy are cheap. Unsurprisingly, people prefer to do things the cheapest way. When they no longer can, they usually adjust and move to more expensive means.
It is poor thinking to assume that the way things are currently done are the only available way of doing them.
"Inflation is an inevitable consequence of the capitalist system."
It's an inevitable consequence of expanding the money supply faster than the goods and services available for purchase in an economy. When the Conquistadors brought back New World gold in great quantities, it was one of the few times it did NOT happen as a result of a government creating too much money.
The Great Depression, which conventional wisdom holds is a failure of laissez-faire capitalism, was in fact caused by the Federal Reserve doing the opposite, and actually contracting the money supply massively.
Read Milton and Rose Friedman's Free to Choose for the details
"Until the heat death of the universe.
"That's very flip. Nice. Do you have a REAL answer to my question? Resources are not infinite; I think there has to be a point at which growth is no longer possible. What happens then?"
It's an entirely serious answer. Here's from an interview with the noted growth economist Paul Romer:
~~
Q: You often cite the combinatorial explosion of ideas as the source of economic growth. What do you mean by that?
Romer: On any conceivable horizon -- I'll say until about 5 billion years from now, when the sun explodes -- we're not going to run out of discoveries. Just ask how many things we could make by taking the elements from the periodic table and mixing them together. There's a simple mathematical calculation: It's 10 followed by 30 zeros....
http://www.reason.com/news/show/28243.html
~~~
The resource that matters is increasing knowledge. After all, there are no more physical resources today than there were during the last 30,000 years. So where do you imagine that your luxurious living standards and life expectancy of 70+ very suddenly came from over the last 150 years, when you ancestors for 30,000 years before that were literally dirt-poor with a life expectancy of 20?
They came entirely from increases in knowledge, with no increase in material goods at all (only increasing knowledge of how to use them for human benefit). Are you saying there's a limit to the increase of useful knowledge? And that you see us suddenly running into it?
Moreover, you seem to believe the fallacy that economic growth increases consumption of physical resources. This is false, growth *reduces* consumption of physical resources, both per dollar of GDP and in absolute terms per person.
E.g.: NYC today produces only half as much trash per resident by weight as it did in the 1950s. Advanced wealthy nations do not burn rain forests -- the US has re-established its forest coverage to 1700s levels. If you check the data, near *all* physical inputs to the US economy have declined per capita in the last 50 years (except stone for concrete, which we aren't exactly running short of).
Markets obviously have powerful incentives to reduce consumption of physical resources. The drink container contains ever less material as it moves from steel can to tin can, aluminum, plastic, etc. because everybody saves money that way -- less cost for inputs, less cost on shipping weight, more convenience and less cost for consumers, etc. All they have to do is figure out how to do it -- gain knowledge. Multiply the process by near every produce in the market. So economic growth *reduces* consumption of physical goods per capita. Look at the consumption numbers and see.
On top of that, in developed economies physical goods account for steadily less of GDP (as medicine, education, entertainment, research, etc., account for more) and of course it is the rich who have money to spend money on conservation, while the poor burn rainforests to feed their families -- conservation is very much a "luxury good".
Put it all together, and if you really want to save the physical world you'll support economic growth that is as fast as possible, and be reassured that there is no reason at all for you to fear that growth will end *if* you succeed.
It is stymied growth that will pollute and despoil the world.
Here's a recent podcast with Romer for more:
http://www.econtalk.org/archives/2007/08/romer_on_growth.html
You can't compare your salary's purchasing power today to that of your father's a generation ago. Apples and oranges. How much did your HD TV cost in 1970? Your cell? Your Netflix subscription? Your safe, legal abortion?
The past is a different country, and they don't accept our money there.
As the Chinese & Indians (together, 35% of the world's population) become more productive people, then of course their wages will go up. And so the prices of the stuff they make will have to go up. But one effect rarely mentioned is that as their wages go up their own demand for stuff is also going up. If you think about it, it is truly odd that it is cheaper to ship a Happy Meal toy across the pacific than to make it in a factory on the same side of the ocean as the McDonalds it will be sold at. There are two reasons that it happens -- #1 is that the Chinese are so poor that they work for such low wages that the toy is produced so much more cheaply in China that it makes up for the transportation costs. But #2 is just as important -- that the poor Chinese are too poor to go to McDonalds and consume all of the Happy Meal toys themselves.
As the Chinese get richer, the Happy Meal toys will get more expensive to make in China so the price will go up and all of a sudden the price of shipping is going to start to matter. They will still make Happy Meal toys in China, but most of them will get handed out at Chinese MacDonalds.
I saw a claim recently that China is two countries, a 1-billion-person desperately poor country co-located with a 200-million-strong developed country. The people in that developed China benefit even more than the denizens of other developed countries who import from the desperately-poor China -- they don't have to pay all those shipping costs. Ok, but what happens when the population ratios between those two Chinas go from 1-5 to 1-4, then 1-3? Certainly by the time you get to 50-50, the rich China will suck up virtually everything that the poor China can manage to produce. Sure, the Chinese still pretend to be communists, and they can certainly screw the place up in a multitude of ways, but if they don't, we're looking at some interesting effects.
I live next to a major cross-country rail line, which runs flat out at capacity shipping containers of Chinese-made goods across the country. These rail lines suffer constant delays and constant service breakdowns because there just isn't enough track, locomotives, train cars, and engineers to move all of the goods that they are being called upon to move. Are the railroads making the massive capital investments to increase capacity so that they can pick up the money being "left on the table" by their inability to run more trains? Nope, not at all. The railroads are betting that shipping Happy Meal toys 10,000 miles is a temporary thing -- give the Chinese another generation to become useful productive workers, and we won't be able to afford the shipping costs on their Happy Meal toys.
Hopefully I will live to see a world where a much larger proportion of the world's population is highly productive and prosperous. A world where my grandchildren won't have bins of cheap Happy Meal toys to throw away, but instead have cool more-expensive stuff made by prosperous and productive Indian and Chinese people, who can afford to buy the cool more-expensive stuff that my children will be making.
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