PRIME MINISTER CUTS PRICE ON GOODS
Greece’s debt crisis dragged along it giant European Union. It is a mouse that drags elephant into pit hole. Danger looms over Europe
Greece’s debt crisis dragged along it giant European Union. It is a mouse that drags elephant into pit hole. Danger looms over Europe. Furthermore it put under doubt existence of this big entity-the European Union. Greece crisis and its tremor was felt at Asian stock exchanges. If small Greece with over 10 million population quietly remained in its place the crisis would not have affected anyone else. Greece may go bankrupt, what does that matter for far away Shanghai or Tokyo stock exchanges? But they all belong to a powerful family with one currency amongst them. It means they have common kitchen. Alexander of Macedonia’s time it was, probably, possible to sit idly with the words our Greece had even conquered India. However, this time it has become habitual for those who do not produce much to insist on receiving equal wages with hard working Germans and Frenchmen. The state addicted to be caring and concerned about its citizens after every demonstration continued to raise wages and salaries accordingly but suddenly it faced default. Who are going pay the debt? Of course, those who work. Angela Merkel was furious. But what one can do, to fend off the Greece default Euro-zone members agreed to contribute usd 490 billion. Angela drew Greece’s attention to the fact that it was a loan to be paid back with interests. Germans angry for giving away their hard earned money to indolent Greeks dumped Merkel’s party in local elections. Czech President Klaus gave the following advice to the Greeks “You have three options. The first is to cut wages and pension by 30 percent and balance income and expenditure. The next is you should European Union and stop using euro as national currency. The last is to declare bankruptcy.”
Greece has no illusions that with 400 billion euro it can recover. Heart of the problem is not the money but they themselves. They want higher wages than what they produce. They organize demonstrations more often, at the end they burnt down the country’s central bank. If Greece was not a member of European Union, it would have printed more paper money, inflation would rise dramatically and it would suffer and go bankrupt. But since the currency they use is euro, its exchange rate will not plummet, this means that it will consume itself from inside. Portugal and Spain are likely to follow Greece. So those who, by nature, are inclined towards working less and receive more are going to cause Europe’s failure. Recently Romanian pensioners demonstrated and attacked the government house. They have an average pension of usd190, public servants receive on average a salary of usd350. This means how much you work, as much is the pay. Though an European country it is roughly at the same level with Mongolia. Romania is standing in line to get into the European Union, this is the difference. They are going to work in their today’s usual manner but will demand German wages. So is there any chance for European Union to survive?
Money is the most important quotient in relations of a society. Money is not only a instrument of exchange, it is a value of labor, a price setter, a quotient of trust among members of society, between the state and its citizens. They say printing cost of usd100 bill is 20 cents. The cost of our 20 000 banknote is, perhaps, less than 100 tugrug. But you can buy 6-7 kg meat or 3-4 bottles of vodka. So, apparently, that banknote in economic context has different value than its actual cost. Goods and services, labor and wealth produced in a given country should be equal to the volume of banknotes in circulation at the market. Share of unit good, service unit, unit labor is relative to unit currency. If supply of paper money increases when wealth and labor have not increased the ratio will be distorted. This is called inflation. Recently on demands of group of patriots a decision to increase wages by 30 percent was made. Finance Minister stated during the given period wealth of society, volume of labor will increase only by 4 percent, thus inflation will reach 26 percent. That is to say even supply of paper money will increase, accordingly there will be almost no increase in volume of goods and services and labor to buy by the given banknote. If in Mongolia commercial transactions were carried out in euro then it is reasonably to expect increase wages, disparity can be settled by snatching from hard working Germans.
After cold war world economy has become far more interdependent, in other words, the world is globalized. This means value of goods and services, value of labor, on the whole, has become almost the same. Then while value of labor of Romanians and Mongols are similar why it is ten times lower than those hard working Germans? Valuation is determined by market. German labor, goods and services produced by their labor is valued highly on market. In the background there are brands, resources and labor spent on creation of the brand, trustworthiness, quality, experience, entrepreneurship and many other qualities. Briefly, it is too early for Mongolian and Romanian labors to get as high value as that of Germans on market. That is the reason why price (of goods) is determined by market forces not on orders of certain authority, on demands of demonstrators or on the basis of complaints of citizens.
A decision was taken to raise wages on the demands of demonstrators, to fulfill election commitments of political parties 70 thousand tugrug were distributed to every single citizen. No additional goods and services, labor value or wealth were produced to support the currency. This will decrease volume of wealth behind per unit of national currency. Then the Prime Minister who took this step personally visited market instructing traders to lower consumer good prices, to put mildly this was a comical move. Mongol bank has to raise its policy interest rate because large flow of unguaranteed national currency was poured into market by the decision of the State Great Hural. But when members of parliament who passed the resolution began to criticize the bank for taking this step what can one do except to exclaim “silly asses”.
Is it better that quality and volume of the goods you buy gradually but continuously increase or is it gratifying to buy the same amount of goods for many banknotes? If one receives high wages but buys meat and flour at relatively high price this means that wages will be increased barely two times. In that case isn’t it better increase the salary ten folds. Wouldn’t it then be very satisfying to buy one kg meat for 40 thousand instead of a mere four thousand? If price of meat remains at four thousand yet there will be a ten folds increase in salary then wealth we produce and our labor value should grow ten folds. This is the law of market, it is impossible to break it. The state may, possibly, regulate many things, but as for language and price it’s simply helpless. We may enjoy Hollywood films and Korean serials on life of wealthy and mighty but no matter how much we enjoy them, we can’t live like them. It is simply impossible. There is a law which is out of our control! When in 2007 world market price on copper suddenly sky-rocketed we raised wages by 80 percent. But soon afterward there was a crisis.
America’s labor productivity follows the following pattern. Let’s look at research findings. For the first 25 years a person studies, gets education, and lives on the support of others. During the next 25 years earns money in society. During the period of third 25 year, that person enjoys fruits of wealth accumulated for the second 25 years. In America a person with Master’s degree during one’s productive years produces wealth worth of usd2.5 to 3.5 million, person with Doctor’s degree produces usd7.5 to 11 million worth of wealth. This is a statistical average. Overall sum of Michael Jordan’s earnings reached usd65 billion. An actor of Korean serials, it is said, created a turnover of usd40 billion. This does not mean that Jordan earned that huge sum for himself, it represents the turnover of money related to sale of his photos, ads and competitions he participated. Accordingly money turnover around an American Doctor in 25 years will be usd8 to 9 million. So every possible market opportunities to earn good salary are available to that person. Romanian or Mongolian Doctors do not create wealth for the society yet they demand for more and more increases of their salaries for this reason it is clear what their market value will be.
Today about 40 percent of goods and services’ value are absorbed in their production cost. PR, quality, brand, copy right, experience, tradition, reputation of country which produce the goods make up almost 60 percent of value. That 60 percent is completely absent in products made by Romanian and Mongolian producers, in other words, there is no brand whatsoever, it could be pirated and has no copy right, name of producing country almost frighten away potential buyers. No matter how many times you see wonderful Hollywood films, your goods or yourself will never be valued as high as shown on those films. This is a very simple but ugly truth.
Japanese products though inferior in quality were cheap, and were sold at western markets after World War II. Today Japan means quality. Both Taiwan and Korea traversed this path. At present China is in hot pursuit behind them. However, Philippines and Indonesia remained where they were originally. Japan, Korea and Taiwan took 50 years to cover this distance, their entrepreneurship, industriousness played a major role. Well Romanians as well as we are also industrious but a lot of time and patience is required.
We receive wages corresponding to work we performed. I don’t take into account 70 thousand which comes as a sudden rain or child allowance, proceeds from corruption and bribe but simply refer to statistical average. Most of graduates with Master’s degree trained by Mongolian professors sell vegetable at food markets, average longevity of Mongols does not reach 70, high incidence of contagious diseases, above world average infant mortality are all indicators of productivity of Mongolian medical doctors. That is the reason why our salaries are low. That is why Mongolian patients travel, at least, to Ereen (Erlian), go after lamas or diviners with the money they’ve earned in pockets. Settlement of claim by an average judge, on most occasions, did not satisfy the claimant. It is because 999 Mongolian businessmen joins hands, each contributes usd700 and launch an offensive with shovels in hands to get ownership over a deposit, development of which requires usd11 billion in investment. It is because local hit songs of Mongolian singers are shameless pirating of foreign music. It is because Mongols planted by subbotnik (voluntary work) for 70 long years enough trees to make a dense forest but only one percent of the trees survive. It is because Mongolian engineers spend on maintenance and repair of a power station sufficient money to build two new such power stations. It is because Mongolian scientists absurdly argue that they will devote their “new inventions” to Mongolia, to their motherland only, not to foreigners and refuse marketing it. It is because the only subject which Mongolian parliamentarians take seriously is horse racing. It is because Mongolian president makes sacrifice to mountains and asks for the key of development from mountain gods. It is because Mongolian Prime Minister visits market and orders to cut the prices of consumer goods… That is why we receive this kind of salaries. I think there is not much difference in Romania. No matter what lamas, clairvoyant, shamans, illusionists or cursers say or see, world moves forward along its natural course.
There is a maxim: Don’t feel miserable for what you don’t have, be content with what you have. One can describe a half-filled glass, it is almost empty, likewise it is almost full. 100th anniversary of Mongolia’s independence will come soon. In past century not so many nations, except Mongolia, came forward so forcefully and achieved great progress. In the past 20 years we have become acquainted with world order and customs and our speed acquired turbojet propulsion. It is awfully `sad to spend man’s short life wailing we are finished, we are doomed. Except technical progress for last 100 years almost no changes have taken place among generations of Americans and Europeans. As for Mongols, not to mention a generation but in five, ten years we have been through great whirlwinds of changes. Dear reader you can ask your father, grandfather, if he is still there your great grand father about these changes. We are moving ahead with great speed, but reaching living standard portrayed in Hollywood films is a distant future.
May 17, 2010