Arun Mehta wrote:
Bart Croughs wrote: I don't assume that the *total amount* of capital will be lowered in the US when US capital moves abroad. I assume that the amount of capital in the US will be *relatively lower*. So the wages will be *relatively* lower (lower than when the capital wouldn't have left the US), but not necessarily lower in any absolute sense. I thought this was obvious, but since Arun Mehta also misunderstood me, maybe I should have been more explicit here.
Henry Hazlitt in 'economics in one lesson' (p. 139): "The best way to raise wages, therefore, is to raise marginal labor productivity. This can be done by many methods: by an increase in capital accumulation - i.e. by an increase in the machines with which the workers are aided..."
Pardon me, but I'm still confused. When Hazlitt talks about how many machines are employed, surely that's "absolute" capital, not relative. If US capital is invested abroad sensibly, such that it enriches the investors, they have more money to invest in machines at home and thereby increase local productivity (and wages). << If investors use their capital to invest abroad, this capital cannot at the same time be used to invest at home. Only after the investors decide not to invest abroad any more, they can invest it at home. But I was not talking about investors who decide to stop investing abroad and start investing at home. I was talking about investors who decide to invest abroad instead of at home, and the effect of such a decision on the wages in the US. Maybe in the future these investors will have more money, and will decide to stop investing abroad and start investing at home. But in the mean time, all the capital that's invested abroad diminishes the amount of capital invested at home, and so causes the wages at home to be less than they otherwise would have been (but not necessarily less in any absolute sense). Bart Croughs