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Would it not work if they did what Henry Ford was doing. Price them so the workers can buy them? That way the money stays in your pockets while the workers enjo

by nkassis 15y ago

Would it not work if they did what Henry Ford was doing. Price them so the workers can buy them? That way the money stays in your pockets while the workers enjoy a better life? Win-Win.

iwwr 15y ago
The problem is the expenses in building these things are capitalized (or worse, booked at a greater value), so when they do sell at the much lower value, the developers/banks/government will need to take a loss. So long as the selling can be delayed, the losses can be hidden. If these were just private entities, they'd take the losses and go on, but the government purse is much larger.
- fleitz 15y ago
  The losses aren't hidden, it's what one would call a long term investment. Because the Chinese government isn't beholden to a two year election cycle they're able to think over a much longer term horizon. Whether this is good/bad in the long term remains to be seen, as a more dynamic business environment might threaten their long term vision. 64 million surplus homes in China could be filled in a heartbeat. China is not America where everyone for the most part already has a pretty decent home. The current US estimates are similar per capita, but the issue is that US doesn't have a massive supply of peasant farmers who would like much better houses in the city. China has started to reach the point where it is fueling the demand for it's own goods similar to what happened to the US in the 20s and continued in the 50s and 60s as a generation moved from the farm to the city. In the US the fuel was lend/lease and marshall aid, for China it's trinkets for Wal-Mart. At 100,000 USD a pop the surplus represents 6.4 trillion dollars, if you assume the units are overvalued similar to USD real estate meaning they have a 3.2 trillion dollar bubble. A 3.2 trillion dollar bubble is similar to the costs of the US bubble plus a war in Iraq and Afganistan. The only difference is the Chinese have peasants who will ostensibly drastically increase their economic output and the fact that building modest housing probably has a better ROI than war.
  - iwwr 15y ago
    For every year they sit empty, they depreciate physically and they also need regular maintenance. Those are actual resources being used. And if the buildings are in the wrong location altogether, it may be cheaper to just tear them down than try to find a market for them.
    - mousa 15y ago
      Every year they need regular maintenance is a year a few more people have jobs within their capacity. In a lot of areas I think high level decisions are made to keep people busy. I'm fairly positive they give huge subsidies for hiring employees, because if you walk in a grocery store every aisle has a couple idle employees. By our standards that can't make sense but for them right now I think the main goal is keeping unemployment low.
    - robryan 15y ago
      Regular maintenance may be a lot lower ongoing cost in China than America, maybe because of that it makes more sense to build ahead of demand.
  - ycombiefan 15y ago
    actually war is quite profitable for defense companies
fleitz 15y ago
Henry Ford did not price his automobiles so workers could afford them, he paid his workers so they could afford automobiles. The reason he could do this was because of the productivity gains incurred by assembly line techniques. Incidentally, the assembly line techniques also reduced the prices of automobiles to the point where an overpaid worker could afford them. Possibly the most overlooked aspect of what Ford did is the standardization of the 40 hour work week so that his employees would have the free time necessary to make an automobile make sense.
yummyfajitas 15y ago
Would it not work if they did what Henry Ford was doing. Price them so the workers can buy them? That way the money stays in your pockets while the workers enjoy a better life? Win-Win. This is mathematically impossible. Suppose your workers purchase everything they own from a company store with an X% profit margin. If you pay your employees $Y, the actual cost to you is $Y(1-X). Increasing employee pay (holding all else constant) always increases your costs.

by nkassis 15y ago

Would it not work if they did what Henry Ford was doing. Price them so the workers can buy them? That way the money stays in your pockets while the workers enjoy a better life? Win-Win.

iwwr 15y ago

The problem is the expenses in building these things are capitalized (or worse, booked at a greater value), so when they do sell at the much lower value, the developers/banks/government will need to take a loss. So long as the selling can be delayed, the losses can be hidden. If these were just private entities, they'd take the losses and go on, but the government purse is much larger.

fleitz 15y ago
The losses aren't hidden, it's what one would call a long term investment. Because the Chinese government isn't beholden to a two year election cycle they're able to think over a much longer term horizon. Whether this is good/bad in the long term remains to be seen, as a more dynamic business environment might threaten their long term vision. 64 million surplus homes in China could be filled in a heartbeat. China is not America where everyone for the most part already has a pretty decent home. The current US estimates are similar per capita, but the issue is that US doesn't have a massive supply of peasant farmers who would like much better houses in the city. China has started to reach the point where it is fueling the demand for it's own goods similar to what happened to the US in the 20s and continued in the 50s and 60s as a generation moved from the farm to the city. In the US the fuel was lend/lease and marshall aid, for China it's trinkets for Wal-Mart. At 100,000 USD a pop the surplus represents 6.4 trillion dollars, if you assume the units are overvalued similar to USD real estate meaning they have a 3.2 trillion dollar bubble. A 3.2 trillion dollar bubble is similar to the costs of the US bubble plus a war in Iraq and Afganistan. The only difference is the Chinese have peasants who will ostensibly drastically increase their economic output and the fact that building modest housing probably has a better ROI than war.
- iwwr 15y ago
  For every year they sit empty, they depreciate physically and they also need regular maintenance. Those are actual resources being used. And if the buildings are in the wrong location altogether, it may be cheaper to just tear them down than try to find a market for them.
  - mousa 15y ago
    Every year they need regular maintenance is a year a few more people have jobs within their capacity. In a lot of areas I think high level decisions are made to keep people busy. I'm fairly positive they give huge subsidies for hiring employees, because if you walk in a grocery store every aisle has a couple idle employees. By our standards that can't make sense but for them right now I think the main goal is keeping unemployment low.
  - robryan 15y ago
    Regular maintenance may be a lot lower ongoing cost in China than America, maybe because of that it makes more sense to build ahead of demand.
- ycombiefan 15y ago
  actually war is quite profitable for defense companies

fleitz 15y ago

Henry Ford did not price his automobiles so workers could afford them, he paid his workers so they could afford automobiles. The reason he could do this was because of the productivity gains incurred by assembly line techniques. Incidentally, the assembly line techniques also reduced the prices of automobiles to the point where an overpaid worker could afford them. Possibly the most overlooked aspect of what Ford did is the standardization of the 40 hour work week so that his employees would have the free time necessary to make an automobile make sense.

yummyfajitas 15y ago

Would it not work if they did what Henry Ford was doing. Price them so the workers can buy them? That way the money stays in your pockets while the workers enjoy a better life? Win-Win. This is mathematically impossible. Suppose your workers purchase everything they own from a company store with an X% profit margin. If you pay your employees $Y, the actual cost to you is $Y(1-X). Increasing employee pay (holding all else constant) always increases your costs.