Viewing the glass half-fullnicegeekJuly 26 2010, 16:10:54 UTC
This article seems to be doing the economic equivalent of complaining that gravity is too strong. If someone drops something on their foot, it hurts...if someone else is able and willing to do a job for less, they'll probably be the one to get the job.
I don't want to disregard the pain caused by these changes; these are real people, losing real jobs. But viewed from a global perspective, rather than an American-centric one, these changes are tremendously positive. While the American middle class has shrunk, the global middle class has grown tremendously (and the American middle class still maintains a standard of living far above the global middle class).
In addition to thinking globally, I also prefer to look ahead to the long-term outcome. There are only so many countries in the world. Globalization's first waves have already moved through Mexico and much of Eastern Europe, and are moving through India, China, and other East Asian countries. In their wake, living standards rise, as do wages. Eventually, we will run out of countries with large, unskilled populations, and the world will be better for it.
Re: Viewing the glass half-fullnuadha_primeJuly 26 2010, 20:32:55 UTC
Damn. I typed up a long response to this and lost it. It is getting damned hot here, so I need to shut off my computer. The short of it was:
1- I am all for a global view and have not lost view of the global situation. Exploiting workers across borders and making them bid lower and lower than each other will not make the world as a whole better. If you can show me proof that the standard of living has improved enough overseas to balance the destruction of the middle class here, please do.
2- As you said, this growing middle class overseas does not have the standard of living the dying middle class here enjoys, so you make my argument pretty well there.
3- Are you seriously listing Mexico and Eastern Europe up as showing the advantages of this formglobalization? Sorry, but I would never want to see the conditions for either the US Working or Middle Class sink so low.
4- The so-called rise of living standards right now in India are extremely questionable.
5- I am for a globalization of the working class. When, internationally, the workers agree that they will stand together and demand fair wages and good working conditions, then the capitalists will not be able to keep having us bid lower and lower for the right not to starve.
Re: Viewing the glass half-fullnicegeekJuly 26 2010, 22:35:54 UTC
1) Sure. Check out the statistical annex for the U.N. Millenium Development Goals, Indicator Table 1.1. This shows the percentage of the population in various areas of the world living in poverty. Note that across the entire developing world, it's dropped from 45.7% to 26.6%. I'm not sure just how many people that represents, but it's probably in the range of a billion or so, and certainly enough to dwarf the U.S. middle class many times over.
2) Your implication is that everyone has a "right" to an American middle-class lifestyle. But by global standards, our working class lives like kings. Most of them have multiple televisions and cars, Playstations, DVD players, and a computer or two, not to mention clean running water, climate-controlled houses, and a diet with more calories than is healthy for them. Would it be nice if everyone in the world could live that way? Certainly. But the global economy doesn't create nearly enough wealth to do so, even if it were spread around more evenly (nor could the environment withstand it...but that's a different debate). In order to raise global living standards, we need to grow the economies of the developing world. And the best way to do that is to create jobs there by the millions, even if they only pay a few dollars a day to start with.
3) The extreme poverty rate in Mexico declined from 8% in 1998 to 0.65% in 2006 . The rural general poverty rate declined from 24.2% in 2000 to 17.6% in 2004. By global standards, Mexico is now considered upper middle income country. And while that standard of living might seem scary to us, it begs the question: What's our justification for saying that we deserve the living standards we've been enjoying?
4) The World Bank Poverty Calculator shows a steady decline in the number of extreme poor in India, from about 60% in 1981, to under 42% in 2005. Do you have a reason to doubt their data?
5) Sounds nice...but who gets to decide what "fair" means? If it's "Enough to maintain an American standard of living", then there will be a lot of jobs that won't create enough value to justify their existence. Paying a worker $10 to make a widget that can only be sold for $5 just doesn't work, even if that worker needs $10 to support their family.
Re: Viewing the glass half-fullnuadha_primeJuly 29 2010, 03:58:35 UTC
1) While it is really good to see the amount of extreme poverty has gone down, that still has not answered my request - some proof that the international quality of life has improved in some significant way to balance the loss of the American middle class. Creating more working-poor jobs where people are not starving, but are damned close to it, is not in my mind a good thing when the resources are there to create decent paying jobs for everyone.
2) I would hope that you would know me well enough to know that I don't have some weird idea that the American way is the way to live. I do, however, believe that destroying 5 middle class American jobs to create 5 jobs where the people are working in poor conditions and making just enough to make sure they don't starve and then when they start demanding more wages moving the jobs to another country where you get get away with paying pennies is a poor thing for the world. This is what capitalism does. There is more than enough money made by companies to pay worker's an American middle class income if you remove the elite pay from the equation. Which is better for the world economy and well-being; that a CEO makes a hundred million a year or 2,000 workers make 50,000 a year? I think I have a good idea what is better but if you can give me a reason why anyone should be worth millions while people starve, I would be interested to hear your reasoning.
3)Again, you list a change in extreme poverty. This is good, but does not show a success of capitalism. It is not the standard of living that scares me the most, it is the standard of working in these countries. The factory conditions in a lot of these countries are appalling and work only stays there until the companies find a lower price somewhere else. While I agree that Americans have had luxuries that were unnecessary (like home ownership and automobiles) this does not mean that it should be as low as it is in the countries that you are using as some example of the success of capitalism. "Look! These people are now just poor instead of extremely poor while the American working class of the US has become extremely unemployed and the exploiting class of the US is richer! Success!"
4) I would have many reasons to be distrustful of anything coming from the World Bank. It doesn't take much digging to see that their interests lie with big business and capitalism and not the good of the people. However, I completely believe that statistic since it again measures "extreme poverty" and India has gotten a lot of our jobs and a poor paying job with poor working conditions is better than no job so it has without doubt raised a good number of Indians out of extreme poverty. The problem I have is that it is not creating more jobs when they ship a decent paying job to someplace like India. It is only making the same job get paid a lot less and creates an even better disparity between the exploiting class and the working class. This is bad for the economy as it would create less jobs. Remove the exploiting class from the equation, and either pay more money to existing workers (allowing them to buy more things like Playstations, etc., which creates more jobs) or just use the money to employ everyone even if it at low pay and decrease the working hours so that everyone gets to have a job with living pay and the hours to pursue other important pursuits like education, self-improvement....or just spending time with their loved ones. (This would be the socialist preference, by the way.)
Eliminating Poverty Is MeaningfulnicegeekJuly 30 2010, 02:24:40 UTC
(I'm going to re-organize my answers to try to focus the discussion on the key points of debate, and present them in separate posts).
You indicate that you don't feel that eliminating poverty is a meaningful measure of quality-of-life improvement. I disagree. In my view, the difference between "starving to death" and "not starving to death" counts as a big quality of life improvement, and is arguably more significant than the difference between working and middle-class, as the latter is only a difference of lifestyle; the former is a difference of life and death. Globalization does the most good for the people at the very bottom; trying to say that the lives improved/saved in this manner shouldn't count in the cost/benefit analysis because they're not improved "enough" does not make sense to me.
Re: Eliminating Poverty Is Meaningfulnuadha_primeJuly 31 2010, 18:58:26 UTC
I have never said that eliminating poverty does not matter. What I have said is that this says "extreme poverty." What is extreme poverty? Not working and starving and being upgraded to working and still starving is not a meaningful difference, and no where does it show me that the rich getting richer and the working class becoming poorer is in any way ethical.
Re: Eliminating Poverty Is MeaningfulnicegeekJuly 31 2010, 19:48:26 UTC
Note that I specifically said "not starving". "Extreme poverty" means that the person cannot meet the basic needs of life, meaning: - Enough calories to live (so they are not "working and starving") - Water that won't make them sick. - Enough shelter not to die of exposure.
This threshold is currently set at $456/year ($1.25/day) in 2005 US dollars.
So when I talk of moving people out of extreme poverty, I mean moving people who are currently below this threshold, and getting them at least up to that point, so that they are not routinely dying. Over the last 30 years, we've gone from having over 40% of the world's population in this state, to less than 20%.
Absolute vs. Relative GainnicegeekJuly 31 2010, 20:22:43 UTC
I'll also mention that I don't really care if the rich get richer in the process of helping the poor become less poor; I mainly focus on absolute gain, not relative gain. By that, I mean that even if a course of action helps the rich more than the poor, if it leaves the poor better than they would otherwise have been, and the alternative is leaving them as they are, it's still better to do it than not do it.
For example, if the population of a poor town is currently living on $2/day, and a company offers to build a (new, honorably run[1]) factory there that will boost that to $3/day, it's worth it to get the factory, no matter how much it also makes for its owners, because it still improves the lives of its workers compared to not having the factory there.
[1] As I mention below, there are corporate practices that we probably both agree are corrupt and exploitative.
Demand For Labor Is Not Price-InelasticnicegeekJuly 30 2010, 02:24:54 UTC
The problem I have is that it is not creating more jobs when they ship a decent paying job to someplace like India. It is only making the same job get paid a lot less. This assumes that labor demand is price-inelastic...that is, that companies want to buy the same number of labor hours, regardless of how much each labor hour costs. This is usually not valid; I'll give a real-life example from my own company:
Some years ago, our QA department was given a budget with which to expand. It was enough money to hire three or four workers in our U.S. office. Instead, we used that money to open up a whole new office in India, employing 15-20 people, plus the office infrastructure to support them.
For another (hypothetical) example, imagine a manufacturing CEO who has some money left in his budget, and who feels that he might need a bit more production capacity in the next couple years, but isn't sure. His budget is not large enough to set up an American factory, but it's enough to create one in a village in Cambodia, with enough left over to pave the road to the village so that the trucks can get there. If the CEO can open the Cambodian factory, he probably will...but if he can't, he'll just pay the extra out as a shareholder dividend.
The point is that when labor is cheap, companies will buy more of it. Consequently, globalization usually creates many more jobs in developing nations than it eliminates in developed ones.
Corollary: High Labor Prices Are Bad For Labor In the Long RunnicegeekJuly 30 2010, 21:55:22 UTC
As a corollary to the above, when labor is expensive, companies will find ways to need less of it. One way they do this is to invest in improving automation technologies. In my opinion, this is actually the biggest long-term threat to unskilled labor, because once these technologies are invented, they do not go away, and they have the effect of permanently decreasing demand (and therefore wages) for unskilled workers. Consequently, while pushing up labor prices might help today's workers for a while, it will make life even harder for the workers of the future.
Re: Corollary: High Labor Prices Are Bad For Labor In the Long Runnuadha_primeJuly 31 2010, 19:01:52 UTC
Thanks for once again pointing out the problems of capitalism. I have been pointing to the move to automation as a way to cut out decent paying jobs for some time as one of the main examples of why free markets and capitalism is not sustainable.
Re: Corollary: High Labor Prices Are Bad For Labor In the Long RunnicegeekJuly 31 2010, 20:39:52 UTC
Technological devaluation of low-skill labor is a problem, but I'm not sure that it's limited to capitalism. I'd be interested in hearing socialism's solution, but that would probably be best made in a fresh thread.
For now, I view this as a race between globalization raising the education level of the world's poor, and technological advancement raising the minimum education level needed for a person to be usefully productive. High labor prices speed up the development of automation, and make it so there's less and less of a market for the cheap labor that developing countries can use as a starting point for their economies.
Axing Executive Pay Would Not Significantly HelpnicegeekJuly 30 2010, 02:25:08 UTC
...the resources are there to create decent paying jobs for everyone. There is more than enough money made by companies to pay workers an American middle class income if you remove the elite pay from the equation. (with the example of a 2000-employee company CEO making $100M)
I think it might be worth checking the numbers on this, and then reassessing. Big company CEOs make in the low tens of millions, with 80% or more of that in restricted company stock, not in cash. While I don't disagree that their compensation has been inappropriately inflated by mutual backscratching at the board of directors level, their companies generally have hundreds of thousands of employees, so divvying up the CEO's pay would only add hundreds of dollars to each employee's annual salary. At most companies, even if you spread around the pay of all of the executives, it would not make a material difference in the wages of their rank-and-file employees. Walmart's CEO makes about $35M; enough to buy each of its 2.1M employees about a third of a share of Walmart stock each.
Creating Jobs In Developing Countries Is Good For Those Countries, And Good For The WorldnicegeekJuly 30 2010, 02:25:35 UTC
The factory conditions in a lot of these countries are appalling and work only stays there until the companies find a lower price somewhere else.
First off, I do believe that workers should have a safe working environment, and should be fully informed of any hazards that are part of the job before they start working. Companies shouldn't "take over" towns in a way that gives them monopoly power, or that holds aspects of the community hostage (Owing one's soul to the company store and such). They shouldn't dump their waste in a way that makes someone else clean it up. They should deal honestly and above-board, and eschew bribery, kickbacks, and other corrupt practices. And both local laws and international trade agreements should enforce this conduct.
So to the extent that you have a problem with the above practices, I agree with you, recognizing that many companies fail to uphold these standards, and not just in the developing world. However, it is possible for companies to behave honorably while still seeking out the cheapest labor, and I support those that do so.
...when they start demanding more wages moving the jobs to another country where you get get away with paying pennies is a poor thing for the world.
The question here is "Why are wages there rising?" Typically, it's because the people have more jobs offered to them than they can fill...otherwise, the people have no basis to demand a raise. Often, this happens because the original workers send their children to school while the parents world, and the children are therefore qualified for more jobs, and price themselves out of the original company's desired range. Thus, even if the original manufacturing company moves out to find cheaper manual labor, because the town now has an Internet connection and a higher literacy rate a clerical company might outsource work there.
Also, as I mentioned before, globalization helps the people at the very bottom the most. The end goal of globalization is that the world will eventually run out of places with unemployed extreme poor, at which point the companies will have no choice but to start boosting wages.
I don't want to disregard the pain caused by these changes; these are real people, losing real jobs. But viewed from a global perspective, rather than an American-centric one, these changes are tremendously positive. While the American middle class has shrunk, the global middle class has grown tremendously (and the American middle class still maintains a standard of living far above the global middle class).
In addition to thinking globally, I also prefer to look ahead to the long-term outcome. There are only so many countries in the world. Globalization's first waves have already moved through Mexico and much of Eastern Europe, and are moving through India, China, and other East Asian countries. In their wake, living standards rise, as do wages. Eventually, we will run out of countries with large, unskilled populations, and the world will be better for it.
Reply
1- I am all for a global view and have not lost view of the global situation. Exploiting workers across borders and making them bid lower and lower than each other will not make the world as a whole better. If you can show me proof that the standard of living has improved enough overseas to balance the destruction of the middle class here, please do.
2- As you said, this growing middle class overseas does not have the standard of living the dying middle class here enjoys, so you make my argument pretty well there.
3- Are you seriously listing Mexico and Eastern Europe up as showing the advantages of this formglobalization? Sorry, but I would never want to see the conditions for either the US Working or Middle Class sink so low.
4- The so-called rise of living standards right now in India are extremely questionable.
5- I am for a globalization of the working class. When, internationally, the workers agree that they will stand together and demand fair wages and good working conditions, then the capitalists will not be able to keep having us bid lower and lower for the right not to starve.
Reply
2) Your implication is that everyone has a "right" to an American middle-class lifestyle. But by global standards, our working class lives like kings. Most of them have multiple televisions and cars, Playstations, DVD players, and a computer or two, not to mention clean running water, climate-controlled houses, and a diet with more calories than is healthy for them. Would it be nice if everyone in the world could live that way? Certainly. But the global economy doesn't create nearly enough wealth to do so, even if it were spread around more evenly (nor could the environment withstand it...but that's a different debate). In order to raise global living standards, we need to grow the economies of the developing world. And the best way to do that is to create jobs there by the millions, even if they only pay a few dollars a day to start with.
3) The extreme poverty rate in Mexico declined from 8% in 1998 to 0.65% in 2006 . The rural general poverty rate declined from 24.2% in 2000 to 17.6% in 2004. By global standards, Mexico is now considered upper middle income country. And while that standard of living might seem scary to us, it begs the question: What's our justification for saying that we deserve the living standards we've been enjoying?
4) The World Bank Poverty Calculator shows a steady decline in the number of extreme poor in India, from about 60% in 1981, to under 42% in 2005. Do you have a reason to doubt their data?
5) Sounds nice...but who gets to decide what "fair" means? If it's "Enough to maintain an American standard of living", then there will be a lot of jobs that won't create enough value to justify their existence. Paying a worker $10 to make a widget that can only be sold for $5 just doesn't work, even if that worker needs $10 to support their family.
Reply
2) I would hope that you would know me well enough to know that I don't have some weird idea that the American way is the way to live. I do, however, believe that destroying 5 middle class American jobs to create 5 jobs where the people are working in poor conditions and making just enough to make sure they don't starve and then when they start demanding more wages moving the jobs to another country where you get get away with paying pennies is a poor thing for the world. This is what capitalism does. There is more than enough money made by companies to pay worker's an American middle class income if you remove the elite pay from the equation. Which is better for the world economy and well-being; that a CEO makes a hundred million a year or 2,000 workers make 50,000 a year? I think I have a good idea what is better but if you can give me a reason why anyone should be worth millions while people starve, I would be interested to hear your reasoning.
3)Again, you list a change in extreme poverty. This is good, but does not show a success of capitalism. It is not the standard of living that scares me the most, it is the standard of working in these countries. The factory conditions in a lot of these countries are appalling and work only stays there until the companies find a lower price somewhere else. While I agree that Americans have had luxuries that were unnecessary (like home ownership and automobiles) this does not mean that it should be as low as it is in the countries that you are using as some example of the success of capitalism. "Look! These people are now just poor instead of extremely poor while the American working class of the US has become extremely unemployed and the exploiting class of the US is richer! Success!"
4) I would have many reasons to be distrustful of anything coming from the World Bank. It doesn't take much digging to see that their interests lie with big business and capitalism and not the good of the people. However, I completely believe that statistic since it again measures "extreme poverty" and India has gotten a lot of our jobs and a poor paying job with poor working conditions is better than no job so it has without doubt raised a good number of Indians out of extreme poverty. The problem I have is that it is not creating more jobs when they ship a decent paying job to someplace like India. It is only making the same job get paid a lot less and creates an even better disparity between the exploiting class and the working class. This is bad for the economy as it would create less jobs. Remove the exploiting class from the equation, and either pay more money to existing workers (allowing them to buy more things like Playstations, etc., which creates more jobs) or just use the money to employ everyone even if it at low pay and decrease the working hours so that everyone gets to have a job with living pay and the hours to pursue other important pursuits like education, self-improvement....or just spending time with their loved ones. (This would be the socialist preference, by the way.)
Reply
You indicate that you don't feel that eliminating poverty is a meaningful measure of quality-of-life improvement. I disagree. In my view, the difference between "starving to death" and "not starving to death" counts as a big quality of life improvement, and is arguably more significant than the difference between working and middle-class, as the latter is only a difference of lifestyle; the former is a difference of life and death. Globalization does the most good for the people at the very bottom; trying to say that the lives improved/saved in this manner shouldn't count in the cost/benefit analysis because they're not improved "enough" does not make sense to me.
Reply
Reply
- Enough calories to live (so they are not "working and starving")
- Water that won't make them sick.
- Enough shelter not to die of exposure.
This threshold is currently set at $456/year ($1.25/day) in 2005 US dollars.
So when I talk of moving people out of extreme poverty, I mean moving people who are currently below this threshold, and getting them at least up to that point, so that they are not routinely dying. Over the last 30 years, we've gone from having over 40% of the world's population in this state, to less than 20%.
Reply
For example, if the population of a poor town is currently living on $2/day, and a company offers to build a (new, honorably run[1]) factory there that will boost that to $3/day, it's worth it to get the factory, no matter how much it also makes for its owners, because it still improves the lives of its workers compared to not having the factory there.
[1] As I mention below, there are corporate practices that we probably both agree are corrupt and exploitative.
Reply
This assumes that labor demand is price-inelastic...that is, that companies want to buy the same number of labor hours, regardless of how much each labor hour costs. This is usually not valid; I'll give a real-life example from my own company:
Some years ago, our QA department was given a budget with which to expand. It was enough money to hire three or four workers in our U.S. office. Instead, we used that money to open up a whole new office in India, employing 15-20 people, plus the office infrastructure to support them.
For another (hypothetical) example, imagine a manufacturing CEO who has some money left in his budget, and who feels that he might need a bit more production capacity in the next couple years, but isn't sure. His budget is not large enough to set up an American factory, but it's enough to create one in a village in Cambodia, with enough left over to pave the road to the village so that the trucks can get there. If the CEO can open the Cambodian factory, he probably will...but if he can't, he'll just pay the extra out as a shareholder dividend.
The point is that when labor is cheap, companies will buy more of it. Consequently, globalization usually creates many more jobs in developing nations than it eliminates in developed ones.
Reply
Reply
Reply
For now, I view this as a race between globalization raising the education level of the world's poor, and technological advancement raising the minimum education level needed for a person to be usefully productive. High labor prices speed up the development of automation, and make it so there's less and less of a market for the cheap labor that developing countries can use as a starting point for their economies.
Reply
There is more than enough money made by companies to pay workers an American middle class income if you remove the elite pay from the equation.
(with the example of a 2000-employee company CEO making $100M)
I think it might be worth checking the numbers on this, and then reassessing. Big company CEOs make in the low tens of millions, with 80% or more of that in restricted company stock, not in cash. While I don't disagree that their compensation has been inappropriately inflated by mutual backscratching at the board of directors level, their companies generally have hundreds of thousands of employees, so divvying up the CEO's pay would only add hundreds of dollars to each employee's annual salary. At most companies, even if you spread around the pay of all of the executives, it would not make a material difference in the wages of their rank-and-file employees. Walmart's CEO makes about $35M; enough to buy each of its 2.1M employees about a third of a share of Walmart stock each.
Reply
First off, I do believe that workers should have a safe working environment, and should be fully informed of any hazards that are part of the job before they start working. Companies shouldn't "take over" towns in a way that gives them monopoly power, or that holds aspects of the community hostage (Owing one's soul to the company store and such). They shouldn't dump their waste in a way that makes someone else clean it up. They should deal honestly and above-board, and eschew bribery, kickbacks, and other corrupt practices. And both local laws and international trade agreements should enforce this conduct.
So to the extent that you have a problem with the above practices, I agree with you, recognizing that many companies fail to uphold these standards, and not just in the developing world. However, it is possible for companies to behave honorably while still seeking out the cheapest labor, and I support those that do so.
...when they start demanding more wages moving the jobs to another country where you get get away with paying pennies is a poor thing for the world.
The question here is "Why are wages there rising?" Typically, it's because the people have more jobs offered to them than they can fill...otherwise, the people have no basis to demand a raise. Often, this happens because the original workers send their children to school while the parents world, and the children are therefore qualified for more jobs, and price themselves out of the original company's desired range. Thus, even if the original manufacturing company moves out to find cheaper manual labor, because the town now has an Internet connection and a higher literacy rate a clerical company might outsource work there.
Also, as I mentioned before, globalization helps the people at the very bottom the most. The end goal of globalization is that the world will eventually run out of places with unemployed extreme poor, at which point the companies will have no choice but to start boosting wages.
Reply
Reply
Leave a comment