Grm

Of course businesses export for profit. But what use is a US dollar or Japanese Yen except for the things it will buy? Without the capacity to exchange it for something useful, it’s no more than a piece of paper. This view is neither unique not original (sadly - I’d like to have thought of it first).

In the dim and distant past trade was conducted in gold and silver, so foreigners’ money was perceived (wrongly) to be worth acquiring for itself, rather than the things it could buy. But this old mercantilist view is long discredited.
http://en.wikipedia.org/wiki/Mercantilism

Sorry, my mistake, on the poverty data, I left off a few zeros. The data have also been updated since I last viewed them. The latest estimates are that the number of Chinese living below the absolute poverty benchmark of $1 a day (at purchasing power parity, in “real” 1993 US dollars) decreased by 505 million people, from 634 to 138 million (or from 64% to 10% of China’s population) between 1981 and 2004, which really is quite impressive:

http://econ.worldbank.org/external/default/main?pagePK=64165259&theSitePK=469372&piPK=64165421&menuPK=64166093&entityID=000016406_20070416104010

You say that making the rich richer is “inevitably” at the expense of the poor. Overwhelmingly, the evidence points the other way. Countries that have escaped poverty for the bulk of their populations have always seen both the rich get richer and the poor get richer.

Development is not a zero sum game. I don’t give a fig for the fate of China’s wealthy compared to the fate of its poor, but I’m convinced that policies that try to make to poor richer by making the rich poorer never work, and indeed I can’t think of a single case where they have been other than counter-productive. Can you name any country that has sustainably raised the living standards of its poor by reducing the living standards of its rich?

VK3AAU. Modern economies do very well on the back of slaves. Please, don't feed me the theoretical notions of Hayekkian economics (he never did a day's toil in his life). Try working 14-16 hours a day as a child or pregnant woman (or even as a man), 7 days a week, with no sick leave and being docked pay to go to the toilet in the good old cotton mills of the UK, or down its coal-mines. OK-they got a wage. But it was about the equivalent of 50cents a day in today's money. The Vietnamese, the Chinese and Indian booms are being built on the massive labour surplus these countries have, a complete lack of provision for the futures of their workers, and wages no greater than USD $1 per day. And don't even think about health-and-safety issues in the coal mines in Vietnam or China. At least the slaves in the cotton fields of Confederate America had to be fed and housed by their owners, which was certainly not the case for the wage-slaves in the hey-day of the British industrial revolution.Many of them had to spend their minimalist wage at the company shop, and prices were no doubt inflated to maximise profit.

Rhian “Countries that have escaped poverty for the bulk of their populations have always seen both the rich get richer and the poor get richer.”

I agree with the intent behind your post.

Some folk here think that the world must be a place where every one, first and foremost “equal”, instead of taking the realistic view. We call them socialists.

They are passionate and emotional about their beliefs but, sadly, lack the pragmatism and realism to actual perform competitively in what is and always has been a “competitive world”.

My own view is we are all individuals and we perform best when left to deploy all our qualities freely, free of the socialist myth of universal equality.

One thing which is always true is all developments and innovations originate from an individual with an interest and never from some government bureaucrat or politician playing politics.

Limit the individual and you limit the potential individuals have, which will not only benefit the inventor but all those who will buy the invention.

The point with China is they have consciously turned away from the Maoist state regulatory system and discarded the eternal revolution of the gang of 4, who succeeded Mao.

China is adopting a market economic approach to manufacture and trade instead of all that communist state managed crap.

And just as everyone is not equal in the western world, so too the Chinese peasant subsistence economy has been replaced by an economy with significant urban development and social improvements, including the development of a middle class (or “kulaks” in Lenin speak).

Not every Chinese person is now equal.

Reality was they never were.

HenryVIII “wage-slaves in the hey-day of the British industrial revolution. Many of them had to spend their minimalist wage at the company shop, and prices were no doubt inflated to maximise profit.”

The British industrial revolution commenced in the later part of 18th century and might have had its “heyday” throughout the 19th century

You have, obviously, never heard of the "Truck Acts", which were enacted from 1464 onward.

"Of course businesses export for profit. But what use is a US dollar or Japanese Yen except for the things it will buy? Without the capacity to exchange it for something useful, it’s no more than a piece of paper."
Perhaps you should offer Messrs Howard, Costello, Rudd and Swan the benefit of your wisdom. They all seem rather fond of hanging on to those silly little pieces of paper.
Once again, I thank you kindly for the link. I was interested to learn from it that China's path to profit has largely been due to the 'long discredited' mercantilist strategy. Incidentally, you may wish to revisit your link to another link:
http://www.newsweek.com/id/34952/page/1
It mentions that nasty "M" word.
I notice you didn't actually address the problem of living in a finite world, where -for everyone to enjoy the 'average' living standards of 'average' Americans- we would need the resources of an additional 4 planets.
Can I name any countries where the rich ruling classes voluntarily took a cut in living standards, to benefit the poor?
Oh gee, let me think...
I can think of a couple of circunstances which dramatically forced wealth into a slightly more equitable distribution, though.
the great depression, and Rooseveldt's "new deal"...
And then there were World Wars 1 and 2... great levellers, -at least for the surviving cannon fodder.
I don't have to go far from home.
When I was a child in Oz, income disparity was much less than today. Doctors still made house calls, we were angry about hospital waiting lists (whole weeks), petrol was 10c a litre (45c /gallon) and an average wage for a tradesman was around $200.00 week.
At $1.40/litre, a tradesman should now make $2600./week, instead of closer to $600.
A block of land in the Blue Mountains was $4,000, or less than 6 months wages.
I know, I was there.
And I'm really sick of being told how I've never been better off.
Go on, tell me about how high the 'average ' (but never the median) wage is.

Grim

You’ll notice Samuelson is not exactly fond of mercantilism, and as he states in the article, China is looking to achieve more balanced growth.

I didn’t address your question on a “finite world” because I don’t agree with its assumptions. Economic growth is not primarily about doing more and more of the same things, but finding new and better ways to use the resources we have. So while in some important senses the world is truly “finite”, in many equally important senses the economy is not.

I’m not against redistribution policies, but I don’t think they’re the main game in poor countries, when the key issue is growing the size of the economy. As I said earlier, no country can pay its people more that the value of what they produce.

From your anecdotes I’d guess you’re remembering the late 1970s. It’s true that petrol prices have increased by more than (median and average) wages since then, but the prices of most other goods and services have risen by less. The overall CPI has risen by significantly less than either median or average earnings:

_______________________________ Aug 78 __ May 06 __ increase (%pa)
earnings:
median ________________________ $193_____ $926 _____ 5.8%
average ________________________ $210____ $1045 ____ 5.9%
Prices (index):
Vehicle fuel _____________________ 29.2 ____ 227.6 ___ 7.6%
small electrical appliances _________ 61 ______ 93.3 ____ 1.5%
poultry _________________________ 53.4 ____ 97.3 ____ 2.2%
tobacco ________________________ 27.7 ____ 412.3 ___ 10.1%
CPI ___________________________ 39.7 ____ 154.3 ___ 5.0%

Sorry - tables alway look messy
Data from ABS (yearbooks, CPI & employee hours and earnings survey)

sorry Rhian, I refuse to accept the median wage quoted as $926.
May I refer you to this article by Dr Andrew Leigh, in March 2006:
http://www.theage.com.au/news/opinion/only-rich-people-want-to-lower-the-top-tax-rate/2006/03/02/1141191789275.html
In which he quotes a median income (granted not the same thing as median wage) as only $26k. He also lists the common errors factored into calculations of median wages.
While these figures are remarkably slippery, award wages are not.
In 1975, a boilermaker was making $196.80/week, within your median figure.
The award today is $663.
In rural Australia, most workers do work for award wages.