"All the complaints about third world sweatshops are true and then some: factories sometimes dump effluent into rivers or otherwise ravage the environment. But they have raised the standard of living in Singapore, South Korea and southern China, and they offer a leg up for people in countries like Cambodia."

"For the fundamental problem in the poor countries of Africa and Asia is not that sweatshops exploit too many workers; it's that they don't exploit enough."

http://www.nytimes.com/2004/01/14/opinion/14KRIS.html

quote:

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We're giving the forces of evil, the forces of the antichrist, room in our government. That's the ANC [African National Congress].
-- Dominee (Reverend) Pieter Nel, an Afrikaner minister 1992

MR. PRESIDENT, the times call for candor. The Philippines are ours forever, 'territory belonging to the United States,' as the Constitution calls them. And just beyond the Philippines are China's illimitable markets....We will not renounce our part in the mission of our race, trustee, under God, of the civilization of the world. And we will move forward to our work with gratitude for a task worthy of our strength and thanksgiving to Almighty God that He has marked us as His chosen people, henceforth to lead in the regeneration of the world.
...
The Declaration [of Independence] applies only to people capable of self-government. How dare any man prostitute this expression of the very elect of self-governing peoples to a race of Malay children of barbarism, schooled in Spanish methods and ideas? And you who say the Declaration applies to all men, how dare you deny its application to the American Indian? And if you deny it to the Indian at home, how dare you grant it to the Malay abroad?
-- Senator Albert J. Beveridge, in the U.S. Senate, January 9, 1900

The Structure of Global Apartheid and the Struggle for Global Democracy

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The Institute for Energy and Environmental Research is an awesome site. I get their "Science for Democratic Action" newsletter regularly.

I first learned about them when I was trying to create awareness concerning changes made to the Canadian Nuclear Safety Commission and Uranium Exploration in Canada.

[ 14 January 2004: Message edited by: Heather ]

(Context: The quote below is from an interview in which Norberg criticisizes the kind of rapacious, protectionist globalisation being promoted by corporations.)

"Controversial writer Johan Norberg champions globalization as the best hope for the developing world."

quote:

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Norberg: Sweatshops are a natural stage of development. We had sweatshops in Sweden in the late 19th century. We complained about Japanese sweatshops 40 years ago. You had them here. In fact, you still do in some places. One mistake that Western critics of globalization make is that they compare their current working standards to those in the developing world: "Look, I’m sitting in a nice, air-conditioned office. Why should people in Vietnam really have to work in those terrible factories?" But you’ve got to compare things with the alternatives that people actually have in their own countries. The reason why their workplace standards and wages are generally lower is the lack of productivity, the lack of infrastructure, the lack of machinery, and so on. If workers were paid U.S. wages in Vietnam, employers wouldn’t be able to hire them. The alternative for most workers would be to go back to agriculture, where they could work longer hours and get irregular and much lower wages.

Sweatshops are the way poor countries tap into their competitive advantage, which is cheap labor. Multinational corporations bring in more modern technology, including things like training and management systems, that actually increase productivity. When workers are more productive, they tend to earn more. That’s why in a typical developing nation, if you’re able to work for an American multinational, you make eight times the average wage. That’s why people are lining up to get these jobs. When I was in Vietnam, I interviewed workers about their dreams and aspirations. The most common wish was that Nike, one of the major targets of the anti-globalization movement, would expand so that a worker’s relatives could get a job with the company.

When unions, when protectionists, when uncompetitive corporations in the U.S. say that we shouldn’t buy from countries like Vietnam because of its labor standards, they’ve got it all wrong. They’re saying: "Look, you are too poor to trade with us. And that means that we won’t trade with you. We won’t buy your goods until you’re as rich as we are." That’s totally backwards. These countries won’t get rich without being able to export goods.

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[ 21 October 2005: Message edited by: Stephen Gordon ]

[ 21 October 2005: Message edited by: Stephen Gordon ]

[ 21 October 2005: Message edited by: Stephen Gordon ]

quote:

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Originally posted by Oliver Cromwell:
The first identity to consider is that in a closed economy, investment is equal to savings minus the government deficit.

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This, by the way, is only true under conditions of full utilization of all resources (ie. in perfect Say's Law conditions).

If there is significant underutilization of resources, then the budget deficit will not "crowd out" loanable funds, but can actually "crowd in" loanable funds by increasing the amount of total production, which then increases wage incomes, which increases demand, and allows for further increases of supply to occur without further intervention.

(loanable funds, presumably, being available for investment as opposed to current consumption)

[ 14 January 2004: Message edited by: DrConway ]

[ 21 October 2005: Message edited by: Stephen Gordon ]

[ 21 October 2005: Message edited by: Stephen Gordon ]

[ 21 October 2005: Message edited by: Stephen Gordon ]

[ 21 October 2005: Message edited by: Stephen Gordon ]

[ 21 October 2005: Message edited by: Stephen Gordon ]

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Yes, Oliver Cromwell, life outside the sweatshop can be just as horrible and brutal as life outside the sweatshop. It's called CAPITALISM, and it is the main (but not the only) reason why there exists so much poverty, unemployment and inequality in the world today.

Capitalism (much like totalitarian communism) is completely incapable of providing everyone with a decent standard of living, let alone justice and freedom.

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That 17-year-old girl would probably not thank us for preventing the construction of a sweatshop. She might think that it was better than scavenging a garbage dump. And who are we to contradict her?

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What's your point? Yes, a sweatshop, to many people, would in fact be better than a garbage dump - these are the choices that hundreds of millions of people around the world have to face every year. This is the kind of "freedom" that the capitalist market provides people: a sweatshop or starvation. I know this is what "freedom" means to the Fraser Institutes of the world, but it certainly doesn't sound like freedom to me.

Capitalism, not the world, needs more sweatshops. What the world needs is a massive redistribution of both power and wealth from corporations, the wealthy, and governments to working people and farmers in both the developed and the developing world.

[ 22 October 2005: Message edited by: Stephen Gordon ]

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It seems to me as though there's already a certain amount of rich-country resistance to the modest levels of capital transfer that we see now, so I don't know how successful you're going to be in persuading them to accept a marked increase in those transfers.

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[ 22 October 2005: Message edited by: Stephen Gordon ]

quote:

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but the fact that those workers are low-skilled. The remedy is to increase their skills, with perhaps some income support while this happens

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This was what the Mulroneyites promised as part of their sales job on the FTA. It never happened. In fact...the Chretien/Martin Liberals were even worse...they cut EI benefits and decreased training opportunities for displaced workers.

The Swedes have probably been the best at doing "labour adjustment" programmes...but even Swedish workers have seen their unemployment benefit system cut.

quote:

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The reason why economists keep advocating free trade is that it can generate the same outcome as that chosen by an omniscient, omnipotent and benevolent central planner

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You mean "some" economists I think??? Again, depends on who's signing their paycheques.

Back to sweatshops again...on "The National" on CBC-TV tonight they did a documentary on garment industry sweatshops right here in Canada...in Vancouver, Toronto and Montreal...who mainly employ recent Chinese immigrant workers. One woman who was interviewed was being paid the equivalent of just 40 cents an hour for doing piecework.

We've got a bit of the third world right here at home.

"Productivity" is in fact a very subjective term. Many corporate bosses argue that laying off workers by relying on automation is a good thing becasue it makes the remaining workers more productive. Similar stupid arguments are used for cheap labour.

But this type of "productivity" means nothing, since it does nothing to improve the overall economy, since people become poorer and are less able to drive the economy with consumer investment and tax revenue--and this is what meakes economies happen, not bosses and capital investment for profit.

The notion that these countries are poor because there isn't enough exploitation of workers and they need to export more cheap products to be better off is just crap.

There can be no production, whether local or for export, if there are no markets. The corporate sweatshops in the third world exist solely for exports, since the local populations, whether they work in them or not, are too poor to sustain these industries.

Instead, it is the relatively high wage markets of North America that feed these corporate businesses, with consumers paying for up to 1000 per cent marked up prices for these goods. That's why these multi-national bosses are so motivated to brutally suppress unionization and other activity that can compromise this situation. Productivity my arse.

Of course, lying is a common practice among corporate apologists. American firms pay eight times the average wage rates?! Crap. Most US firms operate in highly restrictive "free development zones" set up by the often dictatorial regimes in these countries. The ILO estimates, for example in these zones in mexico or the Phillippenes, wages rates average about half of what they do outside these zones.

The fact is the last 20 years have seen a huge capital flight to these oppressive low-wage ghettos in the world in order to set up factories to sell back goods once made here to the more affluent markets here.

But the stupidity of these econmics are catching up to them. Despite the fact that even welfare rates and minimum wages here are far higher than the standards of these countries, there is a long-term overall stagnation of North American markets, caused by the gradual loss of so many stable and decent paying jobs.

That's the biggest reason behind the 1996 Asian crash: someone figured out that consumer markets here weren't expanding anywhere near enough in proportion to the huge sums or capital investment in these sweatshops to service them.

In any case, given the fact these corporate tyrannies and the oppressive elites that govern these countries have grossly enriched themselves over this time period, while the populations have actually gotten poorer shows these arguments never wash.

[ 22 October 2005: Message edited by: Stephen Gordon ]

For three hundred years, the Third World has been rooted in squalor, while one after another
of these fairy tales has been propagated by the engines of capitalism.

Let us take a simple example. Suppose their is a country, (I will call it "Quemada", rather than "A")
whose citizens, reasoning together, say:

"We would like Quemadan industries to be controlled by people living in Quemada". "We want to control our own economy."

Suppose further that their reason is something which is easily understood, such as:

"Americans have this power, and we are morally their equals".

or

"Foreign investors have shown little allegiance to long term Quemada interests, but rather come in for the quick buck, then leave just when we need them".

Now, where in the calculations may this democratically-expressed desire be furthered? For it seems inevitable that if jobs come from industry, and investment from foreigners, then industry will be foreign-owned.

And if industry is foreign-owned, can we have any doubt as to whether the government will be an independent one, or rather one which furthers foreign interests?

So, I think the fairy-tale above is simply a rationalization for the annexation of independent countries by the "central" states, beng the US, Germany, Britain, France, and Japan, primarily.

[ 17 January 2004: Message edited by: jeff house ]

quote:

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If the production technology displays declining marginal productivity, the gains will outweigh the losses, so total output will increase (showing that takes a bit of math, namely, knowing the properties of concave functions).

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I'd certainly be the last person (..having a few letters after my name as well) to shrink from the horrible tendency of experts and academics to wield specialised and impenetrable vocabulary like a mace, but this quote really does scare me.

[ 17 January 2004: Message edited by: Hinterland ]

[ 22 October 2005: Message edited by: Stephen Gordon ]

quote:

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But it's maybe not a bad idea for people to realise from time to time that learning economics requires a certain amount of formal training.

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[ 22 October 2005: Message edited by: Stephen Gordon ]

[ 22 October 2005: Message edited by: Stephen Gordon ]

quote:

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In any case, it's not for us to decide. If the poor country decides that it's willing to sacrifice material well-being for national pride and to shut itself to trade, I'm not advocating that we force them to do so.

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I think the doctrine of "free trade" has precisely involved the forcing of others to trade.

That is what the Opium War was about. That is why the U.S. doesn't like socialism and communism, and does what it can to overthrow any country which tries to "nationalise" industry, or God help us, national resources.

The first thing which capitalists have to understand, (and I would advocate teaching it in the basic course you mention) is that capitalism has been a disaster for the third world. It hasn't worked. If communism was discredited after 80 years in Russia, why does anyone think it's still viable in, say, Africa or Latin America?
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I think export-initiated development is yet another blind pathway. The ability to export can raise some countries out of the mire, (ie. Taiwan or Japan) ONLY if other countries are not exporting to the same markets. There is only so much purchasing power available in the First World purchasing nations; if China succeeds, Mexico will necessarily fail. And, of course, this particular strategy for the Third World makes sure that a decision to curb trade by Washington or in Europe will control the development of any single country; if you don't do what Washington wants, your people are going to suffer.

If this is all folks like Stiglitz, Krugman, Brander, etc., can muster to address these issues it's no wonder there is such a strong anti-economics sentiment among huge sections of the public, especially activists.

Simple proclamations like this just don't say much:

"A decent level of standard of living requires capital.
Poor countries have too little capital.
They can only save enough to finance a very slow rate of capital accumulation.
They can trade export goods for capital faster than they can save."

For example:

"A decent level of standard of living requires capital."

First, anyone who sits back for a second a takes a look at their life and the world around them can clearly see that capital is only one part of what it takes for a decent standard of living. Liberty, health, a strong social support of some kind, like community, etc. are just as important.

Second, capital doesn't just exist. It has to be created by an interaction of labour (the fundamental ingredient), trade (between those who labour) and the environment (which includes the natural resources and the elements of life).

So, just listing capital isn't good enough. The capital has to be created by labour in converting natural resources into useable goods and services and shared equitably among all those involved in creating it in order to create trade, which creates markets for activity.

Another example:

"Poor countries have too little capital."

Wrong. With few exceptions, it seems poor countries (Asia, South America, most of Africa)are loaded with natural resources and fertile land and populations ready and willing to work, giving them plenty of collateral to finance things with, along with some very rich cliques that usually govern them.

The problem is just that: much of these assets are frozen out of their economies by the wealthy elites, corporations or authoritarian governments that control them. These don't get used or developed unless they can return huge dividends to those who control them.

The thousand per cent mark-ups on exported goods, the sweatshops and child labour, the brutal suppression of unions and democracy and the destructive ecologial practices we constantly read about are evidence enough of this, don't you think?

One more:

"They can only save enough to finance a very slow rate of capital accumulation"

Gimmie a break. The savings and capital accumulation of the sweatshop industries in these countries seems to be just fine.

The problem is that the working populations of these countries aren't the ones doing the saving and accumulating--in fact, according to numerous NGO reports I have seen, they are, for the most part, getting poorer.

That's what happens when wages and liberties are artificailly kept down by oppressive regimes working hand in hand with corporate clubs that are doing most of the accumulating and savings.

No matter how economists of various persuasions theorize and analyze, in the end it seems to come back to the same fundamental situation: in order to generate prosperity, stability and equity, you need to put as much capital wealth, and the decision-making power that goes with it, in the hands of the working, consuming, aspiring populations that create it in the first place.

Maybe the reason why it was discredited is because it wasn't as practically communistic or socialistic as its supposed proponents and convenient opponents have claimed.

I have a book on a shelf here that was written in 1919 by the one-and-only VI Lenin called State Capitalism During the Transition to Socialism. I picked it up when I was studying economics at SFU over 20 years ago.

It basically outlines the blueprint for what later became known as the "Soviet Union," even though, according to this book, the "soviets" (Russian for elected worker-manager councils in businesses) would be under the control of elite state-owned corporations headed by appointed executives and other capitalist managers.

In fact, I later read a claim from one of Trotzky's writings that the new Bolshevik government actually recruited deposed capitalists and land barons of the Czarist era to lead these new state-run corporations (and that a lot of these types backed Joseph Stalin's 1929 coup of that country).

The idea, according to Lenin, was that since the population was too disorganized, fragmented and uneducated to run the economy democratically--the key fundamental of socialism or communism--these new corporate bureaucracies would run the economy and extract capital from labour the way any other capitalist operation does.

The difference would be that a large portion of that capital would go into improving the public infrasturcture and education systems, including to teach workers and community residents to run businesses democratically.

It may have sounded like a great idea in Russia at that time. But, as Marx and others noted before, those who acheive undemocratic power over others and see that as their entitlement aren't too eager to give it up voluntarily.

So it's not surprising that these capitalist apparachicks put their muscle behind Stalin's coup, which, of course, ended any idea of a "transition to socialism."

An old book by a German economist named Eric Hass I read years ago quoted the Stalinist government boasting about its first millionaire in, if memory serves, 1938--while millions were being worked to death so the state could "accumulate more capital" to strengthen itself.

This is a book that most economists or political hacks don't seem to want to talk about. Most folks here realize the destructive results of the Cold War and all the red-baiting hysteria that went along with it. But it all that time, no one bothered, quite conveniently, to point out that the whole claim of "communism" in these countries was a big ruse.

In short, there is a huge measurable practical difference between the twisted state capitalist "transition" polices of Eastern Europe, China, etc. and cooperative, community-based economics being advocated by legions of socialists, labour unionists and non-profits across the globe.

The former was certainly a failure (especially since it was never intended to be permanent, even by its founders) and would likely be anywhere else it is tried.

The latter has been, for the most part, hugely successful where it has been applied in scores of local and regional settings around the globe (and even here in certain sectors), showing itself to be far more prosperous and inducive of liberty and sustainablility than any form of capitalism.

And yet, it took Canada over 300 years to become a first-world country and during that time, a whole host of progressive reforms were allowed to occur, such as land-reform, self-government, female emancipation, the development of a middle-class, the introduction of socialised medical care, universal literacy, etc. etc. So why the rush with the third world? Is it really that important that they have DVD players, President's Choice "Chicken Divan" and access to cable television so they can watch "Am I Hot?"

Or is this question of "time" just another snow-job?

[ 17 January 2004: Message edited by: Hinterland ]

For example, take the suggestion that the regime sought out "capitalists" to run the industries they had nationalized:

There are two dozen or so books on this topic. The basic fact is that the Soviets started out with "reds" running the nationalized industries, but that, believe it or not, being a communist did not guarantee that one had the capacity to run a large factory, say.

Then, they added "experts", who often WERE people with close connections to the old system, sometimes ex-owners.

Finally, they developed a system in which the "expert" was accompanied and checked by the "red" assigned to the plant, so that political as well as technical input was available.

You say there were "reds" and "experts" running the businesses in post-revolutionary Russia. They were obviously doing that because, at least according to Lenin's book, there wasn't sufficient organization or knowledge ("consciousness" he called it) among the working population to do so via their "soviets"--elected management councils.

It seem you are just making the same point in different terms.

It seems the problem was so bad that the "experts," and obviously a bunch of the "reds," realized they had no accountability to the public could just do whatever they liked, including putting Uncle Joe in power.

Then, as usual, a bunch of folks got filthy rich, while millions got or stayed poor, with a whole whack of them dying pre-mature, and rather grusome, deaths--a hallmark of capitalism of any kind throughout the last couple hundred years, it seems.

My main point was that the twisted state capitalism "transitions" of the 20th century that became assoicated with terms like "communism" or "socialism" have little to do with the history and successes of the social movements across the globe that came up with those names in the first place.

But, despite the fact that "free trade" agreements these days always seem to involve opening up countries to unlimited foreign investment, trade and investment are two different things. Surely I could believe in the importance of either while disagreeing with the necessity for the other. Frankly I think it's symptomatic of current mainstream economic ideology that I asked about exports and was answered with the importance of foreign investment/ownership. So my original question still stands.

Meanwhile, it's obvious that foreign investment is *not* necessary for economic development. This can only come from a basic idea that money/capital is some kind of autonomous substance, which is the source of everything and without which nothing can happen. Having granted that notion, you can then plug numbers into clever models and gain as many counterfactual notions as you like. But logically, if this notion were true, clearly it would have been impossible for the first country to industrialize, or indeed for humanity to have exited the neolithic.
But in fact, capital is generated by labour. Clearly, Marx was right about that much. You start with people doing work, and they make something. This can, and to this day frequently does, happen in the absence of money. Any analysis that assumes everything has to remain static in the absence of outside input is nonsense; history and archaeology shows places developing gradually on their own all over the place. The existence of money grants a certain fluidity to the results of human toil and thought, making reinvestment quicker and more selectable. But wealth creation and building can clearly happen without money, much less capital. From peasants creating terraces on which to farm and breeding better varieties of crops and animals to natives in California gradually planting oak forests so as to have acorns for flour when they wanted them to medieval construction of wind- and water-mills, new wealth has been created by local effort with local resources.

Good post, sir. Way to set things straight.

But what I find very offensive and dangerous about these so-called "free trade" arrangements that are being pushed on everyone is not that they "open up" national economies to foreign investment. But that they compel governments and communities to turn over a great deal of their public decision-making and regulatory authority over to undemocratic private corporations and secretive trade bureaucracies (like as prescribed under NAFTA or on which the WTO, IMF and World Bank operate).

It appears quite evident historically that even the most "closed" (a grossly misleading term) economies have been very receptive to large scale foreign investment--when it is, at least to a significant degree, on their terms.

For example, even at the heights of the Cold War, the heavily nationalized state capitalist (as Lenin himself called it--see above debate) economies of eastern Europe traded quite heavily with the more "mixed" economies of the West.

"Joint ventures" between large Western European, and even some US firms, and the state owned Eastern European companies made their marks in huge economic sectors, like automotive, heavy machinery, agriculture and food products, telecommunications and banking and finance (a key way that the Soviet Union kept control over its satellite states).

The difference now is not that there is "unlimited" foreign investment--since all investment is in fact limited by the size and buying power of markets (which are created by the earning power of labour). Rather it is that the terms and conditions that govern investment and capital flow, and who gets to set them, have changed.

Before, governments, which to one degree or another could be influenced by public demand and pressure, had a much greater say in calling the shots as to how investment decisions would be shaped, including who would benefit, as well as the behaviour of the agencies that control investment capital, within their jurisdictions.

Now, under "free trade" (that term is really a joke), governments have turned much of that control (more and more as time goes on, it seems)over to those capital-controlling agencies, and they now call most of the shots--and they are much less subject to public influence or pressure.

That is the nature of the "forced trade," as someone here called it (there's even a book out with that title), as I see it.

It's not that countries or communities are being forced to trade when they don't want to. It's that they are being forced by institutions they do not control to trade under terms and conditions they do not set and therefore do not benefit from.

[ 22 October 2005: Message edited by: Stephen Gordon ]

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It's not for us to tell poor countries that they should take the slow road to development

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I wasn't suggesting we tell them anything. This sounds a bit like an accusation of first-world chauvinism, Oliver, which is being used too much by Western capitalists these days to shut down inquiry. Anyway, my point (and I don't have much of one really) is the question of how slow or fast meaningful change can happen, and just exactly what values are we expecting other societies to adopt.

[ 22 October 2005: Message edited by: Stephen Gordon ]

quote:

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Jeff: I would have opposed the Opium Wars

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Good for you! The point though, was that "free trade" is about forcing people to participate in the worldwide sytsem of trade. You say people are free not to participate, and that has simply not been true, historically.

Japan was "opened" by Commodore Perry and is gunboats. The "open door" policy was imposed on China. The books of William Appelman Williams give another hundred or so examples from the years 1850 to 1930...

When Britain came to the US while under Nazi attack, and begged for assistance, it was granted, but Churchill was forced promise to end empire tariff preferences, to allow "free competition in trade".

As I said in my original post, the main objection to Soviet style economics was not that they gassed their own people (as US friend Iraq did), but that they were creating a trade bloc which excluded the western powers.

So the numerous american interventions post world war II have to be understood as attempts to prevent people from creating nationally-sufficient economies not dependent on the West.

[ 22 October 2005: Message edited by: Stephen Gordon ]

In addition, I think I may have mentioned this before, but the Ricardian model posited the exact opposite of the situation that faces many nations today - it posited the immobility of capital and the mobility of labor, and in addition, operated in a Say's Law environment which assumed perfect translatability of savings into investment (or its corollary, that demand could never fall into deficiency against supply, since the act of production was supposed to guarantee the incomes necessary to consume that production).

Say's Law is inoperative in a world where capital markets operate primarily on speculative purposes, and where there can be many savers and comparatively few investors, so that companies that do self-finance do so out of retained earnings, which are sensitive to recessions and therefore exacerbates the procyclical nature of capital investment.

Furthermore, Ricardo's model is inoperative or at least severely flawed in a world that throws up all kinds of barriers to the movement of people (labor) and allows comparatively free flow of capital.

Finally, I note that my model of international trade is as outlined by others:

[ 22 October 2005: Message edited by: Stephen Gordon ]

That having been said, it is one thing for a company to transfer a plant overseas and re-import the products when the plant used to be located within the country of interest, and another thing for a company to have plants in both countries, each producing for the domestic markets of both nations.

If the Ricardian model of international trade cannot be made to work today, since political realities are such that labor will never be freely mobile, then it is not realistic to insist that capital mobility is the perfect substitute.

In addition, since I support a regime of fixed exchange rates, or failing that, reduction of volatility in floating exchange rates, capital controls must be used in order to prevent speculative outbreaks from harming countries.

The reason for the restriction of the flow of capital has also to do with the power dynamics and who actually owns it.

Capital is not a value-less entity, and is not a homogeneous one either.

The owners of capital and those who benefit from its accumulation tend to be a fairly concentrated group of people. By contrast, labor is fairly diffuse.

If I may be permitted a rather poor analogy, it is like the difference between a diffuse gas and a rock. The diffuse gas cannot be as efficiently made to do work against, say, a nail, as a rock can.

Thus, it is clear that permitting the mobility of labor benefits the vast majority of people in the world, while permitting the mobility of capital benefits comparatively few.

[ 22 October 2005: Message edited by: Stephen Gordon ]

quote:

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Among other things, the documents indicate that for internal IBM accounting purposes, a programmer in China with three to five years experience would cost about $12.50 an hour, including salary and benefits. A person familiar with IBM's internal billing rates says that's less than one-fourth of the $56-an-hour cost of a comparable U.S. employee, which also includes salary and benefits.

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[ 22 October 2005: Message edited by: Stephen Gordon ]

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The cost of living in China is quite a bit lower than in the US, so $12.50/hr probably buys a fairly decent standard of living.

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It doesn't say IBM pays them $12.50 an hour, it says that for accounting purposes they cost $12.50 per hour. 'Accounting pursposes' would certainly include benefits and could include all manner of overhead. Maybe there are 12 programmers making 30 cents an hour working for a manager who makes 300 grand a year.

The concern here for most people is that cheap labour will bid the price of labour down in first world countries. The result will be an ever-increasing wealth gap between rich and poor and the re-establishment of classes (and it doesn't take much of a grasp of history to understand the problems that can cause). There is also the concern that lax environmental laws will force first world countries to relax their own laws.

quote:

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Suppose that IBM had a project and had a 56$/hr budget for labour. They could hire one US worker or 4 Chinese workers. Does anyone have a good story for why the interests of the one US worker should outweigh those of the four Chinese?

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IBM isn't going to hire four people to do a job if it can be done by one. Then the real question is to whom do the benefits accrue. If they go to a relative handful of already wealthy IBM executives and shareholders, I have a moral issue with that.

>That 17-year-old girl would probably not thank >us for preventing the construction of a >sweatshop. She might think that it was better >than scavenging a garbage dump.

This scenario, constantly put forward by corporate Canada, shows what a big dead end their policies and institutions are.

The choice they offer this 17-year-old girl is:

A: work in a sweatshop
B: scavenge in a dump

And then, after brutally imposing these two horrid options, with the help of the authoritarian regimes that govern most of these nations, have the audacity to say things like:

>"We don't have the right to impose our values >on them." or "we can't decide for these people >what they want."

Historically, most of these countries had large subsistence economies, based on small business, tenant farms etc.

But over the past 30 years, the brutal treatment of these economies by the World Bank/IMF, first forcing them into debt for supposed "development;" then forcing them into austere "structural adjustment programs" to service the debt, has resulted in huge bankruptcies and unemployment, creating a ready-made desperate work force for the multinational corporate backed sweatshops that conveniently got set up there.

Obviously, the corporate power structures feel they can impose their worthless "values" on them, and tell them exactly what to do and force them to do it by restricting them to either "working in sweatshops" or "scavenging in dumps." But they don't want the rest of us to challenge them on this. Hypocrisy is always a hallmark of dictatorship and plutocracy.

If you gave that girl a third choice: one that offered her the opportunity to get an education and a secure, fairly challenging trade that she could support her family with, do you still think she would choose to work in a sweatshop or scavenge in a dump?

I think not. Why am I so sure? Because, while certainly no one should never try to decide for others what they want or should have, we can fairly easily learn what it is they do want or what opportunities and freedoms they would like to have: we ask them.

There are no shortages of verified reports and statements from community leaders, churches, local community groups and NGOs and labour unions and cooperatives in these countries (not from here) that give a general idea of what at least a great majority of these folks would like.

I have read many of these, and I see that remaining shackled within the restrictive parameters set up for them by global corporate capitalist agencies and their sweatshops (which limit them to either working in sweatshops or scavenging in dumps) isn't what they they're looking for.

Much of what they are looking for isn't all that much different than a lot of what those in more developed nations want: personal and social liberties, stable gainful and meaningful jobs well above the poverty line, accessible public health care and education, safe and healthy communities and environment, opportunities for advancement, etc.

That's not too surprising. These are all things that are historically proven to be what have contributed to healthier more prosperous human race--all things that corporate capitalism and its colonial and feudal predecessors have never provided. In fact they have set huge obstacles in front of these, which have to consistently be challenged or balanced by liberal/social democratic reforms and public interest forces, like trade unions, etc. This is history.

[ 22 October 2005: Message edited by: Stephen Gordon ]

[ 22 October 2005: Message edited by: Stephen Gordon ]

Oliver Cromwell said, "The problem is the lack of capital, and in a closed economy, creating capital requires sacrificing consumption."

Hold on a minute. The general sentiment on this whole string is that most of the sweatshop-dominated countries out there have what corporate apologists and WTO gurus consider "open economies" because their regimes support exclusive multi-national corporate control over capital, including its movement across borders at their discretion. That's how in part these regimes attract sweatshops to their jurisdictions, along with the brutal suppression of labour unions and other democratic rights, undermining ecological standards, near zippo corporate taxation, etc.

Capital represents the value of useful transferable wealth for trade, and this is created purely by labour, which also creates the markets that provide the basis for trade, not sacrificing consumption. If you sacrifice consumption, you restrict the ability of labour to consume, and thus remove the impetus for labour to produce, and therefore you have less capital that can be created.

The latter does nothing other that allow the temporary accumulation of existing capital by pre-determined select agencies by depriving everyone else of what they earn. In other words, a few folks get fatter, while everyone else gets poorer. This is true whether an economy is considered "closed" or "open."

So it seems the "open" economies of these tin pot sweatshop-infested dictatorships of the Third World are starving people to enrich a privileged few the same way Stalin's "closed" state capitalist (read above debates) economy of the 1930s did (or the way our "neo-liberal" governments are doing with their austerity measures here in the developed world).

Oliver Cromwell also said:

"Many governments dealt with the problem by running deficits. This provided much-needed services in the short run, but when they couldn't borrow any more, they had to go to the IMF."

According to histories I have read of the OECD and other global economic bodies, third world governments were pushed into developing the way they have by the G-8 (G-7 in the 1970s) and elite corporate think tanks. This involved getting them to borrow huge sums of money to invest in public infrastructures, not to improve the quality of life of their citizens as much as it was to provide a support system for multi-national corporate investment, i.e., sweatshops. That's why these regimes were also encouraged to continue the colonial practices of suppressing democratic development, especially trade unions. Apparently, the whole idea was to provide corporations and capitalist agencies with cheap labour pools and resources in these countries to produce high mark-up goods for the seemingly (in those days) expanding consumer markets of the industrialized nations.

It seems the plan went sour in the 1980s, when they realized these regimes would not be able to service their ballooning debts (and that consumer markets were no longer expanding like before). So, that's when the IMF stepped in with its "structural adjustment" crap, which dictated that those courtiers were to start gutting the same public infrastructures they were pushed into setting up in the first place.

It never seemed to occur to any of these morons that maybe, just maybe, if they freed up capital by taking it from the corporate elites and the third World dictatorships, and providing massive low interest loans and grants, and putting this wealth into the hands of the population via allowing trade unions, community associations and cooperatives to develop, then their domestic markets would boom and they could pay their debt.

But of course they wouldn't think of such things. Despite that even half-assed limited measures to stimulate economic development and markets by putting a bunch of money and certain liberties back into the hands of working people, known as the New Deal and the Marshall Plan, were hugely successful in Europe and North America. But then, if they did that, there would be no room for sweatshops and huge profits exclusively for multi-national corporations and banks. SO, we got what we got today.

"none of this depends on how the economies in the rich and the poor countries are structured."

Sorry, Olly, but it seems quite apparent that it does. If what these economies need is capital, and if most of this is frozen out of the economy by corporations and other undemocratic clubs that refuse to release it without demanding huge unsustainable rates of return (like now), then that is a problem.

If people are being forced to create capital wealth, which they do excessively in sweatshops that sell their products at hyper mark-up prices, yet are denied access to any of it via oppressive measures, then they will continue to remain poor, no matter how much "productive capacity" exists in these facilities. That is a problem, since they will never develop local markets to stimulate trade and economic activity.

Worse yet, once the "high-price" markets here dry up, which is slowly happening as overall wage rates and earning capacity of labour decline, the sweatshops push for even worse conditions and eventually close.

Equations like "Investment = Savings - Govt Deficit + Trade surplus" that the IMF talks about don't add up to much in reality if the population of any economy is denied access to the investment capital, government expenditures and benefits of trade surplus (which they all create via labour), which is exactly the case the world over, especially in the Third World.

"The development-via-trade story provides a way of accelerating capital accumulation in poor countries without demanding cuts in rich world standards of living."

So far, under this consolidating global "free trade" regime, it seems the capital accumulation in poor countries is exactly where it has always been: in the hands of a privileged elite, while the working population remains poor. Conversely, what we see now in developed countries is a slow but steady overall decline in living standards for most working people.

"these things could also be achieved if rich countries agreed to massive transfers of wealth to poor countries...But since this would involve a major reduction in no-longer-quite-as-rich country standards of living,..."

Why cut our standards?. According to UN stats I have read, a whopping 83 per cent of tradable wealth and assets in the world are under the thumb of a paltry one per cent of the population. In Canada alone, one per cent controls 50 per cent, and, according to Maude Barlow, Revenue Canada figures show a select one per cent in this country took in more last year than the lower two-thirds of everyone else. And this is apparently commonplace year after year.

It seems clear to me that we don't have to lower anyone's standard of living, except an obviously gluttonous lethargic and unduly powerful elite, to help at least in part capitalize these countries. The capital wealth invested in Asia over the last 20 years alone could go a long way to doing this. Again, most of this is in the hands of a tiny minority of wealthy do-nothings and administrative bureaucracies.

[ 22 October 2005: Message edited by: Stephen Gordon ]

PUBLIC STATEMENT
22 January 2004

WE LOST INDUSTRIOUS CAMPAIGNER FOR WORKERS RIGHTS

It is a very sad day for us and the Cambodian trade union movement. Our President Chea Vichea, 36, was gunned down this morning by at least two unknown assassins.

Chea Vichea had been leading our Union since 1998, but his involvement in improving working for workers in the Cambodian garment industry had been long before that. He was an ardent supporter of democracy, freedom, and human right.

The Free Trade Union of Workers of the kingdom of Cambodia denounces this cowardly act, and demand that the authorities apprehend and bring the assassins to justice.

We would like to appeal to the international community, especially the union movements all over the world, to take serious note and actions against such killings and the culture of impunity that has been rife in Cambodia.

Chea Vichea is survived by his daughter and his wife who has been carrying their second child.

quote:

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Thus spake Oliver Cromwell:
You only need to suppose that what is bought is equal to what is sold.

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What happens if this assumption is invalid?

Another question:

[ 22 October 2005: Message edited by: Stephen Gordon ]

Every Econ 101 student is taught that banks create money every time they book a loan, since they only need to back a portion of the loans with deposits on hand.

[ 22 October 2005: Message edited by: Stephen Gordon ]

Sorry, sir. But economics is not physics. The latter is based on relatively undisputable iron laws, just like basic math: one plus one always equals two.

Other than the three essentials of creating any kind of economy (labour, trade and the environment), it seems to me economies is a large and varied series of social contracts, traditionally established practices and value judgments. It certainly has its many laws of motion, laws of returns, laws of accounting, etc. But these often conflict and get changed and reformed as time goes on, depending on what conditions are.

The former can, as far as we know today, applies in every situation and can never be changed.

The latter seems to change constantly, depending on where and when and what factors and social forces prevail.

Hence, economic equations, including national accounting identities, are subject to all kinds of conditions and can be changed, as they have many times over the decades.

Your sample equation earlier: Investment=trade surplus-government deficit. You know well that this is entirely based on assumptions and situation-specific definitions of these terms.

For example, "investment" can be measured in many different ways, depending on how you define it.

Most economists I have read can't help but agree that most important form of investment in the economy is the non-profit expenditures of the masses of consumers into the economy--most of whom are workers (that's where the assertion that it is labour, not the business establishment, that creates jobs and economic activity because it is mainly responsible for creating markets).

Yet in numerous circles, including banking and finance, capital investment clubs and marketing, this isn't even considered. why? Because they only consider "investment" as anything that generates a direct financial return or acquires equity.

Another example: the US has huge government deficits. But it also has a huge trade deficit. So does this mean it also has a negative investment climate? Get serious. That nation has some of the biggest domestic markets in the world.

The same goes for deficits. If the government runs a deficit in order to initiate or finance a major job creation plan, can this not be considered investment? Of course it can, depending on who you talk to. therefore, your equation doesn't necessarily apply here either.

In the same way, the identities that Oliver proposes that economists use may be unquestionable in the terms in which they are defined, but they are all defined using highly loaded terms. "Deficit." "Savings." "Investment." It is the social and political weight of these terms that gives me (and I suspect others) a reason to doubt the unquestionable nature of these identities--in the same way that I would see a formal system for language representation as subject to question.

It is telling that Oliver compares these identities to the "law of conservation of energy." Conservation laws are not the same as identities; not like saying that a + 0 = a. Conservation laws are generalizations based on empirical evidence and they can be questioned. At certain levels of physics, it seems to be a serious question whether or not one really can get something for nothing, or how these laws actually apply (over time? over space?). Are these identities really like conservation laws? Or are they like arithmetical identities? But the fact is that arithmetical identities only work for arithmetical systems. That they work in real life is only that they seem to correctly describe a natural object--arithmetic.

quote:

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Originally posted by Klingon:
Your sample equation earlier: Investment=trade surplus-government deficit. You know well that this is entirely based on assumptions and situation-specific definitions of these terms.

For example, "investment" can be measured in many different ways, depending on how you define it.

Most economists I have read can't help but agree that most important form of investment in the economy is the non-profit expenditures of the masses of consumers into the economy--most of whom are workers (that's where the assertion that it is labour, not the business establishment, that creates jobs and economic activity because it is mainly responsible for creating markets).

Yet in numerous circles, including banking and finance, capital investment clubs and marketing, this isn't even considered. why? Because they only consider "investment" as anything that generates a direct financial return or acquires equity.

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Economists actually do differ from the general public in terms of what they consider "investment" - most people would call stock purchases "investments", but in economics lingo, "investment" is strictly the purchase or construction of equipment designed to produce something. In this respect, share purchases and the like (derivatives transactions, for example) are excluded entirely from GDP (national production), since economists have recognized that these do not contribute to the production of goods and services.

quote:

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Another example: the US has huge government deficits. But it also has a huge trade deficit. So does this mean it also has a negative investment climate? Get serious. That nation has some of the biggest domestic markets in the world.

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The missing link is this:

Trade flows have to be balanced by capital flows. If the USA as a whole has a deficit in its trade balance, it will have a surplus in its capital balance.

Restated, this means that the amount of the trade deficit roughly equals the amount of inbound capital flows, so that, put crudely, the USA is selling its assets to foreigners to pay for current consumption of the production of foreigners.

quote:

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The same goes for deficits. If the government runs a deficit in order to initiate or finance a major job creation plan, can this not be considered investment? Of course it can, depending on who you talk to. therefore, your equation doesn't necessarily apply here either.

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It depends on whether you stuff it in the G heading or some other heading altogether. G, strictly speaking, refers only to the current spending by the government, ignores cash transfers to individuals, and apparently the capital budget of a government isn't even considered.

[ 22 October 2005: Message edited by: Stephen Gordon ]