Surprise! Greek Bailout Didn't Work

Surprise! Greek Bailout Didn't Work

Helen Whalen Cohen
Townhall.com
May 10, 2011

Surprise! 110 billion Euros later, Greece still can't sustain itself and wants more money.

The eurozone's first ever bailout of a debt-laden member country is failing and will need to be renegotiated exactly a year after the €110bn (£96bn) rescue package was agreed for Greece.

Following secret talks in Luxembourg on Friday between Athens and some of the key EU players, it emerged that Greece will not be able to meet the terms of last year's rescue and is hoping to ask the eurozone for more funds.

England and Germany are tired of providing Greece's allowance. Can't imagine why.

As Britain made clear it did not want to offer any more support for Greece as part of an EU package or a bilateral loan, investors remain unconvinced of the ability of Athens to sustain its €340bn debt load.

...

EU finance ministers will debate the topic next week and the Germans, in particular, are digging in their heels.

Greece has a relatively small private sector propping up a bloated bureaucracy and ridiculous pensions that begin after retirement at age 63. Until the Greek government stops spending more than it take in, no amount of another country's money will save it.

*COMMENT DELETED*

I fear Greece is going to have to go under before their people finally get the message.

There is a number of problems with Greece as a country that has led to the economic collapse there.

Firstly, they have become heavily reliant on tourism. If people are not holidaying there, they lose a vital contribution to their economy.

Secondly, most of Greece is made up of many islands that have poor soils that can grow only olives. With a global market for olives (which also includes Spain, Mexico and Israel - countries that have large areas that can produce other crops). In the summer, many of these islands simply close. Larger islands such as Rhodes and Kos have a principle town to which everybody retreats to chase a handful of jobs. Otherwise they simply sit it out and survive on what they made in the summer.

On top of this, many richer Europeans are buying retirement homes or holiday villas, forcing up prices across the board and pricing out Greeks.

Third, Greek people have a great aversion to paying tax and have become rather adept at finding loopholes to avoid paying it. They are also adept at hiding money under mattresses instead of putting it in banks.

These are the issues facing Greece, some of them are avoidable, others are not. To blame 'liberalism' or the other demon of anarcho-capitalists 'green industry' is disingenuous.

That said, because Greece has such a fragile economy it should never have been allowed into the Eurozone.

dblboggie wrote:*COMMENT DELETED*

I fear Greece is going to have to go under before their people finally get the message.

Do you really believe that was out of line? You think that is baseless? Have you seen which parties have power in Greece?

Here... let me name them. We have the Panhellenic Socialist Movement – 43.92%; New Democracy – 33.48%; Communist Party – 7.54%; Popular Orthodox Rally – 5.63%; Coalition of the Radical Left – 4.60%; Ecologist Greens – 2.53%.

The rest of the parties – with names like “Anticapitalist Left Cooperation for the Overthrow,” “Communist Party (Marxist-Leninist),” “Marxist-Leninist Communist Party,” “Workers Revolutionary Party,” and other colorful and descriptive parties – have less than 1%.

I would hardly call Greek politics the very model of classical liberalism (what we call conservative here in the states). The closest thing to conservative Greece has (and it’s not conservative in the slightest – not as anyone here would understand it) is the New Democracy (ND) party which is described as “liberal-conservative” – whatever that means. According to ND, the party's ideology was defined as "radical liberalism," a term defined as "the prevalence of free market rules with the decisive intervention of the state in favour of social justice."

Not what I would call a “conservative” party in the slightest.

I stand by my, now deleted, comment - it was anything but "baseless" and if you found it offensive, I'm sorry. But the truth is the truth. Paying for all that "social justice" is driving Greece to brink of collapse.

The_Amber_Spyglass wrote:There is a number of problems with Greece as a country that has led to the economic collapse there.

Firstly, they have become heavily reliant on tourism. If people are not holidaying there, they lose a vital contribution to their economy.

Tourism contributes only 15% of Greece's GDP.

The_Amber_Spyglass wrote:Secondly, most of Greece is made up of many islands that have poor soils that can grow only olives. With a global market for olives (which also includes Spain, Mexico and Israel - countries that have large areas that can produce other crops). In the summer, many of these islands simply close. Larger islands such as Rhodes and Kos have a principle town to which everybody retreats to chase a handful of jobs. Otherwise they simply sit it out and survive on what they made in the summer.

And what sort of government assistance do these people get? And how much is it costing Greece to have people just sitting around doing nothing? And why are there so few jobs for these people to chase? And what is Greece doing to encourage investment in its country? It would seem the unions have made it pretty much untenable to do business in Greece - quite apart from whatever tax structure they have on businesses.

South Korea is smaller than even Greece, and they seem to be doing pretty well for themselves. Why couldn't Greece do the same thing?

I would submit that liberal policies are source of their high unemployment and lack of economic growth.

The_Amber_Spyglass wrote:On top of this, many richer Europeans are buying retirement homes or holiday villas, forcing up prices across the board and pricing out Greeks.

So? What does that have to do with the sorry state of the Greek economy? Nothing. Hell, I'd be shocked if there were all that many Greeks in the retirement home/holiday villa market in the first place.

The_Amber_Spyglass wrote:Third, Greek people have a great aversion to paying tax and have become rather adept at finding loopholes to avoid paying it. They are also adept at hiding money under mattresses instead of putting it in banks.

I wonder why that is? I mean, no one is a huge fan of paying taxes anywhere in the world; but as long as they are not overly high or oppressive, most people will largely comply with tax laws. And why do they not trust their banks enough to put their money in them?

Your post raises many, many more questions than it answers.

The_Amber_Spyglass wrote:These are the issues facing Greece, some of them are avoidable, others are not. To blame 'liberalism' or the other demon of anarcho-capitalists 'green industry' is disingenuous.

First, that was a cheap shot. I am not an "anarcho-capitalist" but I am a capitalist to be sure and I do not apologize for it. I believe that free-market capitalism has been a force for more good than any creation of mankind. And if the "green industry" was such a panacea, why can it not survive without government subsidy?

Second, this is a rather defeatist take. There are no issues that cannot be dealt with - no matter how "unavoidable" they may seem. It's called turning a lemon into lemonade! I blame liberalism because one can only spend other peoples money irresponsibly for so long. The policy of "decisive intervention of the state in favour of social justice" (and that's from the so-called conservative side of Greek politics) can only go so far. Soon, you have people living as slaves to the state, expecting their handouts and goodies instead of standing on their own two feet and fending for themselves. It is those sorts of policies that inculcate an entitlement mentality that has a corrosive effect on society and the economy.

The problem might well be that Greece's taxes are just too damn high. Your post raised so many questions I decided to go on the hunt for some basic information. Here's some of what I found. The top individual tax rate (which kicks in at just 75,001 euros) is 40 percent, their corporate tax rate is 25 percent (still lower than ours...), their capital gains tax on businesses is 25 percent on individuals between 0-20 percent, and on top of this Greece has a 23 percent VAT tax and various and sundry other taxes like an inheritance tax, a real estate transfer tax, a real estate tax, excise taxes on alcohol, tobacco and fuel, and so on (I have no idea what other local taxes, sales taxes and so on, might also be present).

And when you couple that with allowing public and private sector unions to run roughshod over taxpayers, you make it even more difficult for those who would love to stand on their own two feet to do so! You drive away businesses and ensure that those who do stay, stay small.

Now there are those who are saying that Greece doesn’t have a government revenue problem, they have a government spending problem. According to data from the Organisation for Economic Co-operation and Development (OECD), Greece’s revenue has been fairly consistent over the last several years, but government spending has been on a real tear (see graph below).



Now that’s what “decisive intervention of the state in favour of social justice” will do to an economy.

The_Amber_Spyglass wrote:That said, because Greece has such a fragile economy it should never have been allowed into the Eurozone.

I would not disagree with you here.

My objection and reason for moderating your post was that you - yet again - made a sweeping generalisation against the left and left policies. And also yet again, you offer no evidence beyond your own prejudices against anyone who professes views that are even slightly further to the left than yours.

Proving that Greece has a leftist government does not prove that that is the cause of its economic collapse.

I do not want to get into an argument about the merits or failings of any political system as my objection was to your prejudicial remarks. That your political views are similar to the admin does not give you a free pass in the same way that ILM did not get one because kronos and I generally share his political slant.

If you look at Tex's banner you will read 'Right wing, left wing and anything in between'. Clearly he wants a forum where everybody is welcome to discuss their views on these highly contentious issues. It is not conducive to constructive discussion, nor is it particularly welcoming for one member to continually blame all of the world's social ills on those who do not accept his approach not just to capitalism, but to government and society in general.

The_Amber_Spyglass wrote:My objection and reason for moderating your post was that you - yet again - made a sweeping generalisation against the left and left policies. And also yet again, you offer no evidence beyond your own prejudices against anyone who professes views that are even slightly further to the left than yours.

I understand your objection, and you are right that my initial post was a generalization deficient in corroborating evidence - so you were right to mod it as you did. However, my subsequent posts offered substantial corroboration of my initial post. I provided evidence of just why Greece is in the trouble it is by providing cold, hard numbers. You provided generalizations (without corroboration I might add) as to why Greece might be in the position it is in. I responded to that post with a number of factual counterpoints that would explain in economic terms just why Greece is in the position it is in. But this was not responded to.

The_Amber_Spyglass wrote:Proving that Greece has a leftist government does not prove that that is the cause of its economic collapse.

This is quite true. It is entirely possible that a leftist government could yet resist normative economic pressures (when in a crisis) and take positive economic steps to end that crisis. However, we see that Greek politicians have not enacted sufficient positive economic measures to forestall the impending collapse of their economy - and this is due to their liberal policies (raising taxes while failing to cut where they need to cut as deeply as they need to in order to remain true to "decisive intervention of the state in favour of social justice."). The graph I provided is proof of the truth of my statement. The graph is positive economic reality, the ND mission statement ("decisive intervention of the state in favour of social justice") is a normative economic statement.

The_Amber_Spyglass wrote:I do not want to get into an argument about the merits or failings of any political system as my objection was to your prejudicial remarks. That your political views are similar to the admin does not give you a free pass in the same way that ILM did not get one because kronos and I generally share his political slant.

I can understand that, but my remarks were not prejudicial, they were based on factual reality. I simply failed, in my initial post, to enumerate those facts. I compensated for that in my subsequent posts.

And I should add that I do not expect to be treated any differently than anyone else here. And I do not expect a pass just because I share some of the same views with the Admin. That would be unfair to everyone here.

The_Amber_Spyglass wrote:If you look at Tex's banner you will read 'Right wing, left wing and anything in between'. Clearly he wants a forum where everybody is welcome to discuss their views on these highly contentious issues. It is not conducive to constructive discussion, nor is it particularly welcoming for one member to continually blame all of the world's social ills on those who do not accept his approach not just to capitalism, but to government and society in general.

I am quite willing to debate anyone on the big issues of the day. But when it comes to economics (and let's face it, this is a central reality to just about everything), all anyone wants to do is debate normative economics while completely ignoring positive economic realities.

This is extremely frustrating for me because normative economics is not economics at all! Normative economics completely ignores the real world consequences of normative economic policies. It seems it's fine here to say "society should provide x, y and z to it's citizens" (a normative economic statement), but then countering with the positive economic reality of those normative economic policies is deemed being "right-wing" or "anarcho-capitalist" or some other obligatory slam against conservatives, classical liberals, or pro-free market capitalists.

To ignore positive economic realities or, as happens more frequently, to demonize statements of positive economic realities (which seems to be the norm in all economic debate) while extolling the "virtues" of normative economic policy seems to be the standard operating procedure here.

All I ask is that someone, anyone, please debate with me on positive economics! I am quite open to discuss the relative virtues of normative economic policies - but I would love to be able to point out the positive economic realities of those policies without being blasted as a "neo-con" or an "anarcho-capitalist" or a "far-right nut case" or any of the other labels that get attached to people who believe that positive economic realities are, in fact, reality!

I'm not trying to be provocative here, I'm just saying that any discussion of government policies must, of necessity, involve not only the normative economic objectives, but the positive economic impacts of those policies.

I hope and pray that is not too much to ask. And I say this in all sincerity. I don't want to be seen as the bad guy here. It's true, I have some very deeply held political and economic positions, and I can at times be a little too casual at tossing them off uncorroborated, assuming others understand the differences between normative and positive economics. But I believe that I have come by my positions after a thorough study of the issues and from a lifetime of experience.

I think I've done a pretty good job of moderating my more abrasive side (with occasional, but not extremely egregious slips). I just want to be able to discuss positive economics without drawing the ire of everyone else here.

dblboggie wrote:

The_Amber_Spyglass wrote:My objection and reason for moderating your post was that you - yet again - made a sweeping generalisation against the left and left policies. And also yet again, you offer no evidence beyond your own prejudices against anyone who professes views that are even slightly further to the left than yours.

I understand your objection, and you are right that my initial post was a generalization deficient in corroborating evidence - so you were right to mod it as you did. However, my subsequent posts offered substantial corroboration of my initial post. I provided evidence of just why Greece is in the trouble it is by providing cold, hard numbers. You provided generalizations (without corroboration I might add) as to why Greece might be in the position it is in.

Again, my objection was to your strong implication (not the first time) that nothing good can ever come of left policies. It seems you want the world to do everything your way and you are disparaging toward anything other than your narrow view of the world. Great, let's all be the same! When I was young we used to call that 'communism'. And when left policies are shown to be effective over your proposed system (such as the healthcare report I posted) you justify it by banging on about UN conspiracies.

You may very well be right about Greek spending vs revenue but this is not indicative of left policies, but of poor economics in Greece and not realising that their reach exceeds their grasp. Greece IS beset by problems other than your presumptions of dangerous leftist ideology. Correlation does not imply causation and I get frustrated that you constantly cling to this fallacy when you disagree with something, such as the ridiculous notion you suggested some time ago that the cause of Spain's problems was due to Green investment.

Few other countries are as dispersed as Greece. In the summer there is often a labour shortage, in winter a jobs shortage and the travel companies have too much of a stranglehold on the islands. Sorry about this cheap shot but it must be said: I'm surprised you say that tourism is 'only' 15%. You ought to find that 15% overwhelming considering you seem to think that 3% of active climate researchers disagreeing with the notion of a human cause is significant.

But anyway, 15% might apply to the country as a whole but if you travel some of the islands you will see that outside of the principle town you will find nothing but tourism. Few people live in these places that are constituted of pools, bars, apartments, hotels and beaches. Rhodes is the perfect example of this. There isn't much of that island I haven't seen. In winter the people retreat to Rhodes Town to sit out four months of rain that practically floods the rest of the island. Thera is an extinct volcano with no access to fresh water. Even its principle town is geared toward tourism. I can't imagine there are many jobs in winter on most of the islands which means that people must either make enough money in summer or seek work on the mainland. Zakynthos practically shuts down, as does Mykonos and some others. I'm not saying the problems you suggested do not exist, or are irrelevant, but on the islands less than on the mainland are heavily affected by tourism.

I feel that some people who might disagree with your economics approach simply cannot be bothered because you are so dismissive and (sometimes) condescending toward differing views. Also, you ignore at your peril just why we Europeans abandoned the Adam Smith approach to economics and why social liberalism rose in the first place. Contrary to what you might think, it wasn't for the handouts. Please, just wind your neck in. It isn't helpful when you are so damned dismissive of everything that doesn't fit with your view of the world.

Please, just wind your neck in.

Never heard that phrase before.

First of all, dblboggie is absolutely right. Most of these economic policies that are dragging down greece, and the United States, come from the liberal side of the debate. Since Obama has taken office our national spending has gone way above our annual tax revenue, even though people like my dad, a lawyer for 35 years, have about 40-50 percent of their money given to the government. Liberals never seem to come to grips with the devestation that these policies engender, always passing the buck with vague, unsubstantiated, emotionally laden pleas defending their bull. I love liberals. They are often the kindest, most idealistic people, but they are just as often naive about the results of these destructive policies, policies that seek to "fix" the problems of the world only end up making them worse, look at the state of the US school system after 40 years of liberal control. Let me tell you what we should all come to know fervently, "POLITICIANS CANNOT BE TRUSTED."

Neither you nor he have addressed the issues I raised. How can you build and industry on an island that is flooded 4 months of the year? How can you build heavy industry on islands no more than a mile or two across? How you do build a commercial network on groups of islands that have no source of fresh water? I agree entirely that Greece has problems of corruption and tax collection issues but we cannot ignore problems on a lot of islands that the rest of us take for granted.

I also know what your replies will be to this, a cocked eyebrow an a dismissive, "oh, and the private sector can be trusted?" Well the truth is no, but this is made so much worse by the parasitic relationship between government and big business. My father, a lawyer as previously mentioned, just attended a North Carolina congressional assembly. He was shocked to find that for the few attending politicians, less than 100 senators and congressman, there were an overwhelming 900 lobbyists. The lobbyists are the ones who write the laws in this country now not the politicians, who are basically just whores advertising for the next election. Obama, for example, the shining light of hope, only attended his position about 50 percent of the time, while most of the times he did vote was "present but not voting" a way for him to avoid any type of controversy or political enmity, standing for himself and his future not for this country. So yes, private corporations are not to be trusted but that is because they are intimately and irrevocably connected to the political world. Also, the absurd polarity of this country, I.E. every republican calling every democrat an evil socialist, and vice-versa disables any real progress, as it has become more important to "paint" the other party than create a proficient beneficial government. Well, look at England and Japan, both of these are island countries that are maintaining, Japan is definitely struggling now, but perhaps Greece's only hope lies in technology and education, very few countries in the world support themselves through agricultural means alone, so the flooding shouldn't be such a big deal, especially in a country surrounded by the bounty of mainland europe.

The truth is, Amber, that you make a good point, the growingly socialized europe is kind of fucked right now because of these economic policies that insist on social reform and justice to the detriment of manufacturing and other forms of industry. America has the same problem, we have lost all of our manufacturing to countries willing to do the same labor for a tiny portion of the cost, and need no regulation. I mean if some kid died in a nike factory in China do you think anyone cares? No, no they dont and thats the bitch of the thing. My suggestion would be to enforce heavy tariffs on countries like china and india that are taking all our manufacturing and industry jobs, people might cry that this abuses free trade but I would answer how can we have free trade with countries that use their citizens like pack animals?

The United Kingdom and Japan are not marginal topographies, most Greek islands are. Marginal landscapes are an issue. It is the reason that there are no heavy industries on Svalbard, no big cities in Siberia or in the middle of the deep desert.

I'm saying that Greece has other problems beyond corruption, and topography is one of them and it is a bigger one than some people realise.

Also a good point, I read that 80 percent of greece is mountainous, but it is almost besides the point as i have previously mentioned high amounts of regulation and social reform have destroyed the industrial areas of much bigger and topographically diverse nations, the only answer for greece is a better education system so they can become more diversified through technology, and perhaps a more efficient use of their ports. The amount of water might be a good thing if they found a way to become essential in the transfer of goods from Africa to Europe.

I'm not disagreeing with you but I am talking about islands that have to have millions of gallons of water shipped in every day, several islands are like this. I'm talking about islands that can grow nothing but olives and herd goats.

Anybody who has been to Greece would quickly come to understand these problems.

As I said, I do not disagree with you but the problems facing Greece are not as simple as some fiscal conservatives imply.

Johnfarr wrote:The truth is, Amber, that you make a good point, the growingly socialized europe is kind of fucked right now because of these economic policies that insist on social reform and justice to the detriment of manufacturing and other forms of industry. America has the same problem, we have lost all of our manufacturing to countries willing to do the same labor for a tiny portion of the cost, and need no regulation. I mean if some kid died in a nike factory in China do you think anyone cares? No, no they dont and thats the bitch of the thing. My suggestion would be to enforce heavy tariffs on countries like china and india that are taking all our manufacturing and industry jobs, people might cry that this abuses free trade but I would answer how can we have free trade with countries that use their citizens like pack animals?

China and India aren't taking your jobs, American companies are more than happy to go over there. Heavy tariffs would only cripple the US economy even more, seeing that almost everything in the US is made in China. If tariffs were to be increased, prices would rise on pretty much every product on the market.
And I disagree with the claim that Europe is becoming more socialized.

Yeah...John, to say that China and India are "taking" our jobs from us, as though by force, rather than being given our jobs, eagerly, by American companies, is misguided.

Your position is inconsistent. You oppose "economic policies that insist on social reform and justice to the detriment of manufacturing and other forms of industry," and then you criticize India and China for lacking these policies, saying they "use their citizens like pack animals" (like it's a bad thing), while (coming full circle) opposing policies at home that prevent citizens from being used as pack animals. I can't tell whether you're against unsafe labor practices, or regulating unsafe labor practices, or what.

Smoot-Hawley taught us that tariffs are made of fail.

BubbleBliss wrote:

Johnfarr wrote:The truth is, Amber, that you make a good point, the growingly socialized europe is kind of fucked right now because of these economic policies that insist on social reform and justice to the detriment of manufacturing and other forms of industry. America has the same problem, we have lost all of our manufacturing to countries willing to do the same labor for a tiny portion of the cost, and need no regulation. I mean if some kid died in a nike factory in China do you think anyone cares? No, no they dont and thats the bitch of the thing. My suggestion would be to enforce heavy tariffs on countries like china and india that are taking all our manufacturing and industry jobs, people might cry that this abuses free trade but I would answer how can we have free trade with countries that use their citizens like pack animals?

China and India aren't taking your jobs, American companies are more than happy to go over there.

And why is that? Our absurd corporate tax rate. That's why.

TexasBlue wrote:

BubbleBliss wrote:

Johnfarr wrote:The truth is, Amber, that you make a good point, the growingly socialized europe is kind of fucked right now because of these economic policies that insist on social reform and justice to the detriment of manufacturing and other forms of industry. America has the same problem, we have lost all of our manufacturing to countries willing to do the same labor for a tiny portion of the cost, and need no regulation. I mean if some kid died in a nike factory in China do you think anyone cares? No, no they dont and thats the bitch of the thing. My suggestion would be to enforce heavy tariffs on countries like china and india that are taking all our manufacturing and industry jobs, people might cry that this abuses free trade but I would answer how can we have free trade with countries that use their citizens like pack animals?

China and India aren't taking your jobs, American companies are more than happy to go over there.

And why is that? Our absurd corporate tax rate. That's why.

No, it's because Chinese labor is pennies on the dollar.

kronos wrote:

TexasBlue wrote:

BubbleBliss wrote:

Johnfarr wrote:The truth is, Amber, that you make a good point, the growingly socialized europe is kind of fucked right now because of these economic policies that insist on social reform and justice to the detriment of manufacturing and other forms of industry. America has the same problem, we have lost all of our manufacturing to countries willing to do the same labor for a tiny portion of the cost, and need no regulation. I mean if some kid died in a nike factory in China do you think anyone cares? No, no they dont and thats the bitch of the thing. My suggestion would be to enforce heavy tariffs on countries like china and india that are taking all our manufacturing and industry jobs, people might cry that this abuses free trade but I would answer how can we have free trade with countries that use their citizens like pack animals?

China and India aren't taking your jobs, American companies are more than happy to go over there.

And why is that? Our absurd corporate tax rate. That's why.

No, it's because Chinese labor is pennies on the dollar.

How about a combination of the two?

TexasBlue wrote:

kronos wrote:

TexasBlue wrote:

BubbleBliss wrote:

Johnfarr wrote:The truth is, Amber, that you make a good point, the growingly socialized europe is kind of fucked right now because of these economic policies that insist on social reform and justice to the detriment of manufacturing and other forms of industry. America has the same problem, we have lost all of our manufacturing to countries willing to do the same labor for a tiny portion of the cost, and need no regulation. I mean if some kid died in a nike factory in China do you think anyone cares? No, no they dont and thats the bitch of the thing. My suggestion would be to enforce heavy tariffs on countries like china and india that are taking all our manufacturing and industry jobs, people might cry that this abuses free trade but I would answer how can we have free trade with countries that use their citizens like pack animals?

China and India aren't taking your jobs, American companies are more than happy to go over there.

And why is that? Our absurd corporate tax rate. That's why.

No, it's because Chinese labor is pennies on the dollar.

How about a combination of the two?

It's not a combination of the two. No matter what the tax rate, paying your workers ten times more than you need to is not profit-maximizing behavior. The only reason to do a thing like that is out of the goodness of your heart.

kronos wrote:It's not a combination of the two. No matter what the tax rate, paying your workers ten times more than you need to is not profit-maximizing behavior. The only reason to do a thing like that is out of the goodness of your heart.

Then all the bluster (bitching) coming from the left and right about outsourcing is null and void.

It is a combination of the two. They're fleeing from having to pay more taxes and they're fleeing from having to pay workers more. They're also fleeing from environmental, work safety and other such regulations. Some companies also only build factories in China, Brazil, etc. in order to be closer to the market there and being able to supply customers there. It has nothing to do with taxes or wages, in some situations.

BubbleBliss wrote:
It is a combination of the two. They're fleeing from having to pay more taxes and they're fleeing from having to pay workers more. They're also fleeing from environmental, work safety and other such regulations. Some companies also only build factories in China, Brazil, etc. in order to be closer to the market there and being able to supply customers there. It has nothing to do with taxes or wages, in some situations.

I would have to agree with you here Bubbles.

I would only add that the reason they have to seek a lower tax and regulatory environment is because businesses based in the US are taxed at such high rates and have so many regulatory costs that they cannot compete with foreign competitors, whose tax and regulatory burdens are much smaller and whose governments have given their businesses other breaks on exporting. China is actually manipulating their currency to maintain a trade advantage.