Posts by Matthew Poole
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What do you think would happen, out of curiosity, if all of a sudden US sneaker companies who wanted to sell shoes in the US at abominable mark-ups were forced to quadruple their wages to continue manufacturing in China? Do you think they'd stop making shoes? Do you think they'd keep operating in China, and eat the lower margins? Do you think they'd keep operating in China, and raise the price of their shoes? Do you think they would bring manufacturing back to the US? And which of these scenarios would make beggars of the developed world, any more than they are now?
If the requisite increase in wages brought the cost of manufacturing to roughly equal to the cost of manufacturing the States (and isn't that really the aim of your proposal?), the obvious answer is d: bring manufacturing back to the US. Why? Because once you save on shipping, and when you can stick a "Made in the USA" label on the product, you're probably going to have more margin in the RRP. Especially if you convince your purchas^Wlocal legislative representative to cut you some tax breaks in the next round of statutory pork distribution.
How would it beggar the developing world? When you can offer consumers a locally-made product at roughly the same cost as a foreign-made one, probably with tax incentives to encourage you to bring the production back on-shore, you'll take it. So the developing economy loses jobs that pay more than the national median (even those "exploitative" firms like Nike are paying more than the national median in the economies in which they operate), and tosses a bunch more people back into a job market that's already over-supplied. Those people lose their incomes, and their confidence.
The longer-term picture is that manufacturing stays on-shore in the developed world, because you're going to end up paying at least the minimum wage for your local economy anyway so you may as well get the benefits of a "Made in XYZ" campaign and probably the tax benefits as well, plus in developed nations you get the extra plus of not having to pay bribes to all the local officials in order to stay in business. That "Buy local" campaign probably gets you extra unit sales over what you'd have got if you were selling the same shoes for the same price but imported, because consumers generally will buy a locally-produced product if there's no qualitative or economic difference to favour the imported one. And the "I'll buy local at any price" crowd will also love you. Hell, you may even be able to up the price slightly and still move more units because of that "buy local" cachet.
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*takes a bow*
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gio, you realise that you've just demolished the aspirations of the entire developing world, reducing them to beggars at the doorstep of the developed world, and ensured that global poverty will remain? Right?
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I see no problem with introducing a law that says you need to pay the minimum wage of the country in which you're selling your products
It's difficult to see how that would work in practice. What if my factory exports to 20 different countries, all with wildly different wage structures? Do I pick the top one? Won't I suddenly decide to stop selling to that country to reduce my wage bill?
And what if you're selling a product that's competing against a unionised industry, like cars into the US? Suddenly the minimum wage looks really, really mean, and you're still under-cutting significantly on labour costs. What then? Do you pay on the graduated union award scale for the appropriate industry? For a particular member of the industry? What about benefits packages? Do you have to account for their 401(k) schemes too?
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after all, the big attraction for so-called "runaway productions" to places like Wellywood and the slave school of West Auckland is the access to high skill, relatively low-cost labour without having to deal with the US trade guilds.
Exactly. Our competitive advantage in that market (as with most others) is the cost of labour. But now we've got gio and RoO wanting to take that away. Except they probably don't see it that way, and will doubtless trot out the "But that's different" defence.
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Well, Peter Tashkoff is certainly making a name for himself. He wants to challenge Rodders for the right to stand for Epsom.
Good luck to him, and may Act's demise be swift and absolute.
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I haven't checked in with any political economic theories on the matter, but I'd struggle to call tarriffs left-wing these days. In NZ tarriffs protected farmers and working class manufacturing employees (and their bosses).
Generally, tariffs are considered to be a left-wing action because they're about job protection. The right-wing action would be to remove the tariffs and say "Let the market sort it out." Obviously the benefit accrues across class boundaries, but the rationales involved do fit roughly into the left-right paradigm.
Protectionist measures as a whole are completely contrary to classical right-wing economics, because they're an interference in the sanctity of the market. They prop-up inefficient producers and shelter them from competition at the hands of more-efficient producers. -
I see fair trade as the way to go. Not the tokenist fairt rade where the wealthy, liberal minority-in-a-minority buy fancy chocolate and hessian bags, but an actual level playing field for workers.
If a country uses cheap labour to produce goods or services, its products get taxed by the difference.
That's not fair trade, that's protectionism.
"Oh look, your competitive advantage comes from cheap labour. Can't be having that. Here, have a hefty tariff to make up the difference. What's that? Our customers won't buy your products because they'd rather buy local stuff if it's the same price? How very sad."If it isn't applying decent environmental standards, it gets taxed by the notional cost of those standards.
And who determines that notional cost? Oh, that'd be the importing, developed economy that's got to a point where it can be all high-and-mighty about the environment. Why do you think China and India have been kicking up such a stink about Kyoto? It's not that they don't care about the environment (at least not in so many words), but that they really object to being told by a bunch of countries that already went through their dirty-polluting-industrial-growth-economy stage that, no, they're not allowed to grow their economies through dirty, polluting industrial means. Hypocritical much?
That way, providers have to compete on quality, not on exploitation and pollution.
And although I agree with you on the pollution thing (but not your "solution"), I don't agree about "exploitation". When your national median wage is USD0.50/day, is it exploitative that you're being paid USD2/day? Fuck no! Would it be exploitative in a country where the median wage is USD10/day? Absolutely. Exploitation is mostly relative, and if you support real fair trade you'll understand that and allow for it. If you insist on levelling the playing field such that the only competitive advantage available to any player is capital intensiveness, you destroy any chance for developing economies to grow under their own steam. You ensure that the only way they can possibly play the game is for big-money multi-nats to come in with all the high-cost equipment required to produce high-quality goods, employ a handful of (probably expat) workers to oversee the production line, and do nothing to help the local economy grow. Is that really what you want?
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On another note, Russell confirms my growing feeling that he's superbly liberal on what might be called 'moral' or 'identity' issues, but tends toward the slightly Right of Centre on Economics. Or is that too simplistic, Russell?
Probably a bit simplistic. Russell's definitely of the lefty "tax and spend" persuasion, but also of the righty "free trade is good" persuasion. And moderately far from centre on both counts, from what I've seen.
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And speaking of roads uber alles on National's part, this article has a great "money quote" from the National MP for Tukituki, Craig Foss, about how putting increased logging freight onto rail is really just a slippery slope to mass unemployment in the road freight industry. Shows whose pockets National are in.
There's also some seriously disturbing "logic" from the Mayor of Gisborne, with an implication that it's worth sacrificing a few lives at the hands of more crashes - if KiwiRail doesn't get the logging contract it's going to mean an extra 50-80 return trips a day by logging trucks on SH2 - in order to get SH2 upgraded. That's scary thinking.