Third World Sweatshops

[bfp]

T. Sowell

"Low-Wage Costa Ricans Make Baseballs for Millionaires."

That was the headline on one of those New York Times "news" stories that continued its recent tradition of disguised editorials. The headline said it all but the story ran on and on anyway, with details and quotes that added nothing to the familiar story that Third World workers don't earn nearly as much money as most Americans, even when they work for rich American companies.

Perhaps the best refutation of the implied message of this "news" story also appeared in the New York Times, in a frankly labeled op-ed piece by the paper's own Nicholas D. Kristof. Writing from Cambodia, Kristof reported: "Here in Cambodia factory jobs are in such demand that workers usually have to bribe a factory insider with a month's salary just to get hired."

The workers in Cambodia receive even lower wages than those in Costa Rica. But the difference is that the report from Cambodia spelled out what the local workers' alternatives were and how anxious they are to get the jobs denounced by intellectuals and politicians in affluent countries.

"Nhep Chanda averages 75 cents a day for her efforts. For her, the idea of being exploited in a garment factory — working only six days a week, inside instead of in the broiling sun, for up to $2 a day — is a dream."

By and large, multinational companies pay about double the local wages in Third World countries. As for "exploitation," the vast majority of American investment overseas goes to high-wage countries, not low-wage countries.

Why are these international capitalists passing up supposedly golden opportunities for exploitation? Because they understand economics better than most intellectuals and politicians, who are content to score cheap points, without worrying about the logic or the consequences.

If outsiders succeed in pressuring or forcing multinational companies to pay higher wages, that will make it more economical for those companies to relocate many of their operations to more affluent countries, where the higher productivity of the workers there will cover the higher wage rates.

Net result: Third World workers will be worse off for having lost better jobs than most of them can find locally. Meanwhile, Western intellectuals and politicians will be congratulating themselves for having ended exploitation.

At the heart of all this is a confusion between the vagaries of fate and the sins of man. All of us wish that workers in Costa Rica and Cambodia, not to mention other poor countries, were able to earn higher pay and live better lives. But wishing will not make it so and causing them to lose their jobs will not help.

It is tragic that people in some societies simply have not had the same opportunities to develop more valuable skills and that those societies have not had economic and political systems that promote economic progress comparable to that in most Western countries.

Low pay is one symptom of that fact — and changing the symptom will not change the underlying problem, which is that the people in such countries got a raw deal from fate, history, geography or culture. But the left attempts to blame Western employers who are providing these workers with better options than they had before.

The left-wing spin is that the poor are poor because the rich are rich. That opens the door for a big power-grab by the left in the name of "fairness" or "social justice" or whatever other rhetoric resonates with the unwary and the ill-informed.

Unfortunately, this theory does not also resonate with the facts. Whether domestically or internationally, investors looking for the highest rates of return usually steer clear of poor areas and put their money where there are people with more advanced skills, living in more prosperous countries, even if they have to pay much higher salaries in such countries.

The United States, for example, has long invested more in Canada than in all of poverty-stricken sub-Saharan Africa, where wage rates are a fraction of Canadian wage rates. If the facts mattered — and if the poor really mattered to their supposed saviors — the implications of that would have been understood long ago.

[Adam D]

I guess people should be thankful for US corporations who drive out local business in the third world, leaving them no choice but to work in underpaying jobs where they can never improve their living conditions or build a domestic economy.

If you question that happens, look at mid-1990's Mexico post-NAFTA.

As far as his argument about corporate investment in Canada vs. sub-Sarahan Africa, that may be true. Corporations invest a lot more in Canada than Antartica, but that doesn't prove anything. If you turn that around to Canada vs. Latin America you have a very different equation. And as far as his argument that corporations invest more in wealthier countries than poor ones, look around at the "Made In ______" print on objects around you. Yeah, Taiwan and Indonesia are banking.

[bfp]

As far as his argument about corporate investment in Canada vs. sub-Sarahan Africa, that may be true. Corporations invest a lot more in Canada than Antartica, but that doesn't prove anything. If you turn that around to Canada vs. Latin America you have a very different equation. And as far as his argument that corporations invest more in wealthier countries than poor ones, look around at the "Made In ______" print on objects around you. Yeah, Taiwan and Indonesia are banking.

I wonder what the difference is (in numbers) between the more wealthier nations that produce more expensive technical products compared to the nations that corporations invest in that produce products such as underwear, shirts & socks? The latter products which are made by Taiwan and Indonesia.

[randyc]

Liberal white guilt..... That's what will be the downfall of our country.

Do you think those people would give a fuck about you if the role was reversed?

Stop kidding yourselves people.

[Adam D]

Originally posted by bfp
I wonder what the difference is (in numbers) between the more wealthier nations that produce more expensive technical products compared to the nations that corporations invest in that produce products such as underwear, shirts & socks? The latter products which are made by Taiwan and Indonesia.

Take your computer apart and look inside at where those parts are made. Look at your cell phone. Mine was made in Korea.

[Adam D]

Originally posted by randyc
Liberal white guilt..... That's what will be the downfall of our country.

Do you think those people would give a fuck about you if the role was reversed?

Stop kidding yourselves people.

Where's the "liberal white guilt"?

If anything, I am ashamed and appalled to share a nationality with people who show such little regard for life and rights.

[Dow Jones]

Originally posted by bfp
"Nhep Chanda averages 75 cents a day for her efforts. For her, the idea of being exploited in a garment factory — working only six days a week, inside instead of in the broiling sun, for up to $2 a day — is a dream."

She sounds happy.

[Krash]

Originally posted by Adam D
Where's the "liberal white guilt"?

If anything, I am ashamed and appalled to share a nationality with people who show such little regard for life and rights.

Innit.

[johnny861]

Originally posted by Adam D
Take your computer apart and look inside at where those parts are made. Look at your cell phone. Mine was made in Korea.

Mine was made in Finland... I don't remember that country being third world... ah well..

but I bet everybody has an electronic device with a chip manufactured by TI in it...

[Krash]

Originally posted by johnny861
Mine was made in Finland... I don't remember that country being third world... ah well..

but I bet everybody has an electronic device with a chip manufactured by TI in it...

Hmmmm..... was it assembled in Finland?

Because 90% of the worlds computer components are made in one place and assembled in another.

[bfp]

Those who vent their moral indignation over low pay for Third World workers employed by multinational companies ignore the plain fact that these workers' employers are usually supplying them with better opportunities than they had before, while those who are morally indignant on their behalf are providing them with nothing.

Some of the more rational among the indignant crusaders for "social justice" may concede that the employers are usually offering better pay than Third World workers would have had otherwise. But they see no reason why wealthy corporations should not pay wages more like the wages paid in affluent countries.

There are at least two reason why not — one economic and one moral.

The economic reason is that output per man-hour in Third World countries is usually some fraction of what it is in Western industrial nations such as the United States. Pay rates raised without regard to productivity are a virtual guarantee of unemployment, whether it is done in the name of ending "exploitation" in the Third World or providing "a living wage" in the United States.

Most modern industrial nations have minimum wage laws but those with higher minimum wage rates or additional workers benefits tend to have higher unemployment rates.

Germany, for example, has perhaps the most employer-provided benefits mandated by government. These benefits include such huge severance pay that firing anyone is likely to be uneconomical. The costs of these benefits have been estimated as roughly double those of employer-provided benefits in the United States.

If you think that is great for the workers, remember that there is no free lunch, for workers or anybody else. The high cost of labor and the difficulties of firing anyone mean that employers are reluctant to hire, even when times are booming.

It is often cheaper to expand output by using more labor-saving machines, or to work the existing workforce overtime, rather than hire more employees. While Americans become alarmed when unemployment reaches 6 percent, double-digit unemployment has been common in Germany.


At one time, neither Switzerland nor Hong Kong had minimum wage laws. Last year, The Economist magazine reported: "Switzerland's unemployment rate neared a five-year high of 3.9 percent in February." For most countries that have minimum wage laws, 3.9 percent would be a five-year low, if not wholly unattainable.

Back when Hong Kong was a British colony and its wage rates were set by supply and demand, the Wall Street Journal reported that its unemployment rate was less than 2 percent. Then, after China took over Hong Kong and mandated various worker benefits — which add to labor costs, the same as higher wage rates — Hong Kong's unemployment rate went over 8 percent.

This was not high by European standards but it was unprecedented for Hong Kong. There is no free lunch in any part of the world.

Why can't rich multinational corporations simply absorb the losses of paying Third World workers more than their productivity is worth? Why shouldn't they?

First of all, multi-billion-dollar corporations are seldom owned by multi-billionaires. They are usually owned by thousands, if not millions, of stockholders, most of whom are nowhere close to being billionaires. Some may be teachers, nurses, mechanics, clerks and others who own stock indirectly by paying into pension funds that buy these stocks.

Indeed, the average incomes of all the stockholders — direct and indirect — may be no greater than the average incomes of those intellectuals, politicians, and others who want them to absorb the costs of higher pay in the Third World.

But if teachers, nurses, mechanics, and clerks are supposed to accept less money to live on in their retirement years, why shouldn't similar donations to the Third World come from reporters for the New York Times or Ivy League professors, movie stars or others who are morally indignant?

Or is this just one of many things that the morally indignant think is worth having others pay for, but not worth enough to pay for themselves?

[johnny861]

Originally posted by Krash
Hmmmm..... was it assembled in Finland?

Because 90% of the worlds computer components are made in one place and assembled in another.

ah, but that is the magic of globalization!