There has long been conflict among business and workers. Throughout history there have been conflicts among the business class and the working class.
One way that workers fight for their rights involves "labour strikes" or "strike action." Wikipedia defines "strike action" as follows: "Strike action, also called labor strike, labour strike, or simply strike, is a work stoppage, caused by the mass refusal of employees to work. A strike usually takes place in response to employee grievances. Strikes became common during the Industrial Revolution, when mass labor became important in factories and mines. In most countries, strike actions were quickly made illegal, as factory owners had far more power than workers. Most Western countries partially legalized striking in the late 19th or early 20th centuries."
Strikes have a major problem, which is somewhat addressed in the Wikipedia definition above, which is that many countries simply make striking illegal as businesses have a considerable amount of power. This is a problem in e.g. China.
Where striking is problematic, there are other options, one of which is the FIRE movement which emphasises hard work and frugal living initially with the aim of retiring early. Another is the "lying flat" movement, which doesn't focus on early retirement but focuses on doing the bare minimum. Both these movements seem to result in its adherents working less and consuming less, which deprives businesses of labour.
One of the challenges of unionisation or protesting is knowing whether your fellow workers will support you in your endeavours. You may unionise or protest or go on strike, but you may be the only one who goes on strike while your fellow workers rush to suck up to the boss. Unionisation, striking, or protesting relies on self-sacrifice.
On the other hand, lying flat or FIRE focuses not on self-sacrifice but on personal benefits e.g. escaping the rat race. By lying flat, you live a stress free life while your colleagues slave themselves away. By retiring early via FIRE, you can retire in your 30s or 40s and relax by the beach while your colleagues slave away in the office or factory. When others see that lying flat or FIRE works, they may follow you, and once more and more people lie flat or FIRE, there will be labour shortages and businesses will then need to increase wages or offer better terms.
It seems now that house prices in China are starting to decline. There are many reasons for this e.g. the Evergrande crisis, but another possibility is that it is caused by recently proposed property taxes in China. It also looks like these property taxes have been proposed due to the lying flat movement.
In China, many young people are protesting excessive consumerism, competition and high house prices by "lying flat." The lying flat movement involves doing the minimum possible, that is, working just enough to afford to lie down all day.
It should be emphasised that lying flat doesn't mean not working at all. It means working the minimum to be able to afford to lie flat. This will reduce consumption, reduce demand, reduce asset prices, reduce corporate profits and reduce government tax revenue.
Many young people have embraced the lying flat movement in China. The Chinese Communist Party (CCP) has condemned this movement, even trying to censor social media posts about it.
However, there is considerable evidence that the CCP is concerned about the lying flat movement and has been introducing policies to appease the lying flat movement.
For example, the CCP has cracked down on tech firms including crypto miners and has shifted the focus from tech to manufacturing.
The benefit of manufacturing over tech is that manufacturing is low skill and can employ much more compared to the tech sector. In the tech sector, a small proportion of the population with high education and skills are hired and paid a large salary. However, in a manufacturing economy, very large portions of the population can be hired and wages are spread out over many people. This should encourage those who would otherwise lie down into working.
Another piece of evidence that shows that the CCP is trying to appease the lying flat movement is the proposal of a new property tax. This property tax proposal has been strongly opposed by property interest groups but is likely to pass in order to appease the lying flat movement. It is believed that by taxing property, prices go down and those who would otherwise lie flat would be able to afford an apartment and feel like they have an incentive to work with the system rather than rebel against it.
The reason why, in Australia, policies are continually implemented to raise house prices is because many people own houses. The government needs to be elected and so needs to give what voters want. Voters mostly own houses and so will demand the government increase house prices. However, if young people in Australia threaten to lie down and do the minimum e.g. work for one day of the week and spend the rest of the week literally lying down, then this threatens the economy. If enough young people lie down, the demand for housing falls, labour costs go up thereby reducing profitability, which reduces corporate profits, which reduces corporate tax revenue as well as income tax revenue. Government will have an incentive to implement policies that appease those who lie flat.
GFC2 is here. The US and Europe are piling on more and more debt and many investors are skeptical about whether they can pay it off. Here in Australia, many seems to be optimistic. In The Melbourne Age, this piece Forget US Woes, China Keeps Our Economy Strong claims that the Australian economy does not rely on the US economy anymore and that the Chinese demand for our resources will keep our economy strong. According to the article, "40 per cent of China's exports went to the US in 2001. Now that figure is down about 20 per cent and falling..." This means that even if US consumers were to become too poor to afford Chinese imports, China has other countries it can export to.
But one area that bothers me is how much US debt China holds: US$1.2 trillion worth (source: NPR, China Blasts US over Credit Rating Downgrade). If the US is unable to pay off this massive debt and defaults, the US$5 trillion Chinese economy will have a substantial amount of its wealth wiped out. This would have an enormous impact on the demand for Australian resources and hence the Australian economy. Even if the US were to avoid default by printing money, the outcome would be similar. The Americans would print money and hand these dollars to the Chinese. The printing of money will cause massive inflation thereby causing the American dollar to drop in value. Even though the Chinese hold US$1.2 trillion worth of US debt, if the US dollar is worthless then that will drop demand for Australian resources.
Many newspaper economists are going on about how China is now Australia's master and not the US. Be that as it may, these newspaper economists do not seem to give much description of the linkages between the US economy and the Chinese economy.
In the blog post Strong Aussie - Time to Buy Foreign ETFs? I talk about the strong Australian dollar and the weak US dollar. One of the commenters made an interesting point that I will reproduce below:
"[W]ho knows maybe the weak dollar will help pay off the US's debt and may even increase inflation and hence spur people to work more out of desperation."
This point about the benefits of a weak US dollar is an interesting point. Some economists claim that the US's welfare system and minimum wage make it uncompetitive against countries like China. If US dollars are printed to cause inflation, this will effectively reduce the size of the welfare state assuming that the food cheques do not rise with inflation. Furthermore, if inflation increases due to money printing then this effectively reduces the minimum wage, allowing Americans to compete against low-wage countries like China.
What American politicians should learn is that wealth is created through work. You cannot legislate wealth. That is, simply increasing minimum wage does not increase wealth as the wealth increase for those who are currently working is offset by the lost wages that result when companies hire fewer workers because they cost more.
China's intentional devaluation of its currency may seem illogical to some because it reduces the wealth of its citizens. But even though the devaluation of currency hurts workers, it tends to benefit businesses, especially those that are export goods. A weak currency allows businesses to keep paying its workers the same nominal wage but effectively reduce its real wage, and do all this with stealth. Even though it is not good for the welfare of workers, reducing real wages can have some beneficial impacts. For one, the reduction in wages can actually result in greater employment as lower cost of labor means businesses can hire more labor.
This seems to be China's strategy, that is, export-led growth via low-wage labor. The Chinese government seems to be in a rush to get as many people working as possible, perhaps believing that a citizen preoccupied with work is less likely to engage in dangerous activities such as political activism. On the downside, this current export-oriented strategy (a strategy used by many Asian countries when they were developing) is that citizens work and do not consume much, leading to a situation whereby the economy is dependent on a vast pool of consumers to whom they can sell their widgets. The consumeristic and hedonistic Americans currently fulfiled this role of the consumer very well, but after the GFC and the product of GFC (inflation) it is uncertain whether this export-oriented strategy is sustainable.
