So, in the current crisis, labour rates in Ireland and Greece need to fall relative to those in Germany.
The very offshoring to take advantage of low labour rates has raised labour rates to where mechanisation, even in China, is an attractive option.
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Similarly, we would assume that a factory using US labour to produce something at US labour rates would substitute capital for labour to the same extent: would, essentially, automate production.
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That is already happening in Sweden and Switzerland, which both have relatively high labour-participation rates among older people.
He cites Brazil's high labour taxes and interest rates as self-inflicted handicaps.
Most entrepreneurs of all sizes, while moaning about Italy's high tax rates and welfare and labour problems, acknowledge that the centre-left governments of the past six years, especially Mr Prodi's, did take big steps towards liberalisation, though they failed to get this across in the election.
For example, among women giving birth for the first time, there was a two-fold difference between hospitals with the highest and lowest rates of induction of labour (17% compared to 38%), emergency caesarean section after induction of labour (20% to 40%) and instrumental delivery (16% to 32%).
In the long term, though, failure to keep budget deficits under control could be costly for the American economy, forcing interest rates higher and weakening the labour market still further.
Yet free prices, free exchange rates, free trade, free labour markets and privatisation have proved a colossal success.
The often-fuzzy line between income from capital and labour means a large gap in relative tax rates breeds tax avoidance.
For the two to have similar growth rates thus requires Japan's labour productivity, measured in terms of output per head, to rise by 2% a year faster than America's.
For most of Labour's time in office, real interest rates have been around the level they were when it came to power.
Earlier in the debate, the government defeated a Labour amendment which called for the changes to business rates to be delayed until 2014.
All told, capital-tax rates as high or higher than those on labour may make sense, they think.
Thus high rates of home ownership will lead to less labour force mobility and thus a higher natural rate of unemployment.
The power of trade unions has been reduced, national pay bargaining and other labour-market rigidities scrapped, and cuts in tax rates and stricter rules for claiming unemployment benefits have improved the incentive to work.
In his Autumn Statement, the chancellor asked pay review bodies to "consider how public sector pay can be made more responsive to local labour markets", which could mean scrapping national pay rates for public sector workers and negotiating them locally.
In the euro's first decade, southern Mediterranean countries enjoyed the benefit of lower interest rates, but they failed to reform their labour and product markets to make their economies more competitive for a world in which they had lost the safety-valve of currency devaluation.
Inflation rates are modest by developing country standards, and labour markets are relatively flexible.
Labour MPs tabled an amendment which called for the changes to business rates to be delayed by a year so they would not come into effect until 2014.
Raising growth rates will require policy reforms, including privatisation and more flexible labour markets, reckons Ms Sahay.
Obesity and diabetes rates remain slightly lower in rural areas, indicating that manual labour endures as an effective way to stave off weight gain.
Furthermore, Mr Brown can argue that a tweak up in interest rates is a small price to pay for the stability that Labour's economic policies have provided.
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Labour would support the Welsh government getting the power to vary income tax rates after a referendum if the Barnett formula that decides much Welsh spending is reformed and if it can be shown that it would be good for Wales.
Edmund Phelps, winner of the 2006 Nobel prize for economics for his work on savings and labour markets, argues that the structural explanation for Europe's slower growth rates masks deeper problems with dynamism.
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There were also increases in labour-market flexibility through improving job search for those on benefits, reducing replacement rates, increasing in-work benefits and restricting union power.
However, the report's authors said the labour market recovery had lost some momentum, with only weak rises in employment and pay rates.
This rigidity means that firms cut their labour costs through hiring freezes and by sacking temporary employees, rather than by reducing pay rates.
The new coalition, led by Labour's 49-year-old Helen Clark, plans to increase the top rates of personal income tax, and assist poor families.
There is also a clear link between child labour and school attendance - students aged between 12 and 14 years who work showed lower rates of attendance than those who do not work.
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