World and Chinese Labor

I agree with Dean Baker that the Keith Bradsher article in the NYTimes generates some pain, We joined by PGL at Angry Bear. Baker assumes, though, that there will not be a shortage of Chinese Workers because over half of Chinese Workers are still in Agriculture. Inherent in this assessment stands the belief Chinese Agriculture can acquire the degree of mechanization achieved in American Agriculture. There are several reasons why this will not occur.

The foremost factor forestalling mass mechanization of Chinese Agriculture resides in the sheer mass of Capital equipment which is needed to spread across the entire growing area of Chinese Food production. The Agriculture Implement industry would have to rival the American and European industries--with a corresponding rise in Chinese Steel production. The second factor inhibiting the American model adoption sits within the Energy requirements for the adoption to take place, it eventually demanding an Energy consumption by China almost equalling current American consumption of Energy. The third factor remains the low level of Education of Chinese Agricultural labor. Massive inputs of mechanization into Chinese Agriculture would require advanced education to train proper Operation and Maintenance of the Equipment.

It is doubtful China can pull more than 15% more of its labor force from Agriculture, not now or ever. China faces another massive labor drain in the form of adequate Health Care provision for a definitely Ageing population. Their Health Care industry will never equal the percentage useage of American health care, but it is hard to visualize them utilizing less than half the American percentage use. Business invasion of China for cheaper Production Costs will eventually realize a decade brings vast changes to Chinese labor availability. Bradsher is right about that, though I wonder if Investors are that perceptive as yet.

Other News bring a Reuter's article which states both the PMI and ISM are falling, but still safely above 50, at 55.1 for PMI and 54.5 for the ISM. These means both the American and World economies are still growing, but cooling off. Another article provided a Statement that the ISM was expected to drop below 50 by Q1 2007. I would not lay Bets, but expect to see this by Q4 2006. We are in a Contraction, but not necessarily a Recession. lgl