“It’s about efficiency!” – Myth of the Capitalist

At first glance, jobs moving from one location to another may seem like a zero sum game. One group gains a source of income, where another loses one. It’s easy to understand how this looks to those who are directly affected. However, it’s not nearly that simple.

The jobs are now being done for lower wages. This is, after all, the main reason manufacturing has moved to the third world; to take advantage of lower wages. This lowers costs, enough to pay for relocation and even added shipping costs. Efficient, right?

Think for a minute what this really means. By lowering the value of the work done, it devalues the work in the only real way things have value … how much it was paid for. This isn’t efficiency, it’s deflation. When before soldering a joint was worth $20/hr, it’s now worth $2/day. When before the product of that work was worth $100, it’s now worth $80. (And that’s not the half of it …) The world economy has taken a hit.

The Cover Up

This is an easy sell where it matters of course. Politicians in developing economies get to skim some of the cream off the top. Stock holders get higher earnings per share. Management get’s bigger bonuses. Consumers which support the manufacturers by purchasing their products get cheaper merchandise. (Again, deflation at work. Only with the “bad” part of that shipped off to people we don’t care about.) The new workers are happy just to be able to earn a meager living, because it’s ever-so-slightly better than the alternative.

Even the displaced workers are likely not to kick and scream too much. Why you ask? Well, there are social safety nets that don’t let them fall too far in most cases. Unemployment, welfare, and of course the reduced costs due to cheaper consumer goods. Perhaps the most important reason for overall social stability though is…

Why It Creates Jobs

When you hand a person a dollar, it doesn’t disappear. They then can hand it to someone else for exchange of goods and services as well. So long as people have needs and desires, they have use for dollars. It is only at the extremes where dollars are not useful; where there are more than are needed or even wanted (towards consumption), and where there are not enough.

The people who are gaining these jobs were destitute before. Completely unable to participate in this game. So demand was reduced. Demand for goods and services which are now able to be paid for. Their use of the money they are paid is much more valuable to them. While it may mean a difference of a nice tv or car for the US factory worker, it can mean life itself for the worker in a developing nation.

There are other jobs created. Transport of the goods requires ships, that requires manufacture and fuel, those industries need support, ect, ect. Some of the “displaced” workforce is going to (directly or indirectly) migrate to these jobs, and often they’re better jobs in fact. However, is that really a good thing? Or is it a broken window fallacy of massive proportions?

Why It’s Oh So Wrong

First of all we are dealing with finite resources. When judging value simply by what it costs, we can sometimes come to some very backwards conclusions that ignore this fact, or pass the buck onto other parties. If it costs $30 to send an item across the Pacific, and we save $40 on the manufacture of the item because of lower wages, we see that we are being efficient. The problem is the equation is far too localized, and so doesn’t see the reality of the situation.

We’re bleeding away our lifeblood to get at that efficiency. We’re burning fuel that is dwindling. Prices rise for all fuel consumption. When you go to the pump and pay $3 or $4 per gallon, you’re paying a premium to the execs and shareholders who moved manufacturing overseas. Our environment is damaged. We all pay the cost. That’s why these corporations are able to see the efficiency, because the whole world helps to pay the price of their choices.

While lifting up people who couldn’t participate in the economy before does increase demand, there is decreased demand for goods and services from the lost jobs in the US. The kicker here is the increase is much less than the decrease in regards to purchasing power. Any benefit that we get from having more money in the hands of the (nearly) poorest is offset by having far more money in the hands of the richest (where it is least valuable), while the middle class suffers.

The Great Hypocrisy of Our Age

Our economy is one of scale. A single widget produced would need to be sold at high enough a price to cover not only it’s production, but the development and manufacturing infrastructure as well. The development costs do not change much at all whether it’s one widget sold, or a billion widgets sold. So as more widgets are sold efficiency increases.

We are told, “greed is good” by many of the “best and brightest”. It is a justification rather than a principle. It is small minded people settling for everything they can grab in front of them, rather than actually thinking out how to best increase their wealth. However if those who were greedy were not so shortsighted, it may actually do a great deal of good.

Half the world is just left out. We know that a human being can produce more value than they consume. We know that by specialization we can tremendously increase the efficiency of production, and open up new avenues of value that were never possible before. We know that by mass producing goods we can reduce our costs per widget, and thus increase profit per widget. All of civilization is built on these principles. We do not have to hunt and gather our own food, defend ourselves, build our homes, and sew our clothes. We do our job, we do it well, and exchange goods and services.

Even though we know this, we leave half the world out. Half the possible consumers never get a chance to buy our products or services. Half the great minds never get a good education or shot to prove themselves. How many great inventions have died for want of food while we burn grain, pay farmers not to farm, institute quotas, enact protectionist policies, all to raise prices?

The demand is there. We don’t have to jump through all these hoops to simulate it’s effect on prices. We just need to open our doors and let the demand in. Or perhaps I should say, “out”.

The Prison

What is the solution to this problem? Bring back the jobs? No. Stop sending jobs overseas? No.

The solution is to change the business environment where it is attractive to send jobs overseas simply to save labor costs. What has lead to this situation? Why are people in developing nations willing to work for a couple dollars an hour?

They are prisoners. We have enslaved them.

You might scoff at this, but it’s the truth. We’ve built walls, put guns on these walls, and trapped people within those walls. This is the workforce we’ve reserved by our immigration policies, their land appropriated and redistributed by our colonialism in the past.

Inside these walls, we have no competition. We or our proxies own the land. We hold salvation in our hands, and we dribble it out in doses just large enough to ensure the status queue continues. Gone is the taskmasters whip, and in it’s place is starvation and utter destitution. We wantonly wield this weapon and pretend we are doing them a favor. We point to those who we have taken everything from and deny everything to as evidence of our goodness and mercy.

“Do it, or we’ll switch you with one of them.”

The Extraordinary Idiocy

We’re killing ourselves to accomplish this. We’re creating enemies everywhere, some of whom at least hate us for very valid reasons. We fight wars and proxy wars to keep “order”. And to keep orders coming for our weapons.

We’re killing our planet to do it. We’re killing our profits. In this digital age when the cost of production of another unit of value is often ~0, we have as a society halved our sales voluntarily. So we can save 20% when we go to the store. We’ve dramatically increased the resources necessary for production and transportation. We’ve paid to let productive land go fallow while marginal land is slashed and burned to offset it. We turn corn to ethanol when it’s less efficient than sugar, enact sugar subsidies and tariffs to force farmers in developing nations to grow corn where it’s not as productive. The list of travesties is endless.

If we continue on this course we will be forever remembered as the most foolish group of people who have inhabited this planet. We hold all the keys to peace and prosperity, but none of the wisdom or will to act on them. People in the past may have been more cruel than we were, more unjust, but we are the most hypocritical and blind. They never had the ability to actually fix things, we do. And we sit on it, hide it away, pay lip service to it and then do the opposite, all to our own detriment.

How We can be Heroes

As I just said, we hold all the keys. Never before in the history of mankind has there been this opportunity to end poverty and suffering. Never before have we had economies so well designed to pick up the slack and increase profit from additional workers and consumers.

Here we are with an over-abundance of college trained workforce. People with 4 year degrees hoping to find a job flipping burgers, because the workforce which should have been demanding their high value services has gone from making $20/hour to $2/day. We killed the demand for our own jobs by our desire for more shiny plastic crap than we know what to do with.

The solution is to pay that 20% more for our shiny knickknacks and do-hickeys. It’s a step that no one is willing to take, for fear their competitors won’t take it, or that we might not survive if we can only upgrade our cell phone once every 2 years, instead of once every 18 months.

But there is an opportunity here. An opportunity for someone, or some group of people, to forever change the world. To do something that has never been done, and will never be replicated. There would never be a brand, or nation, so highly esteemed. Business would be good with half the world as grateful and devoted customers. Highly skilled workers in the developed world would once again be in demand, more-so than they’ve ever been before. Because half the world will be looking for those services.

Who will it be?

© 2012 Globalize This

Currently, globalization seems to have taken on an economic colonization model where the land ownership and wealth of developing nations is simply funneled to other more mature economies. This is dangerous to the environment and local populations because without land ownership to tie the value of the land to it’s inhabitants, the stewardship of the land is compromised.

An exec sitting in a 24th story office in New York isn’t going to care if the open pit mine in some third world country is destroying the local ecosystem and agriculture. They may be forced to care by laws, but too often in these nations the laws are written by the colonizing corporations. They are the ones who have the money to protect their interests, and when it comes down to it, politics is really about money. (That holds true in the 1st world and 3rd.)

A landless worker isn’t going to care about, or have much ability to protect their local environment either. By detaching the local population from the stewardship of the land they live on, the land suffers and so does the population.

We may think that this doesn’t affect us, but that is ignoring the reality of the global nature of the economy and climate. Why are so many in the first world without jobs? Well, when half the world’s population can’t be consumers, there’s obviously less demand for goods and services. That means less need for production of the goods and services, and thus fewer workers that produce or provide them.

The impact on the environment is even more dangerous to us. Huge swaths of land are being deforested and left barren. This reduces the carbon buffering capacity of the world as a whole, at a time when we’re pumping carbon from the ground into the atmosphere at ever increasing rates. There are long term sequestration mechanisms that will eventually help restore a balance, but we are overloading those mechanism and seem intent on doing so for decades to come. Will it be too late by the time the earth can catch up?

It is in all of our best interests to help the developing economies to do so in a way that is healthy not only for our own balance sheet, but also for the local populations and their economies. If we leave them behind, we are leaving behind our potential customers for high value services, and ensuring further damage to our environment at the same time.

We cannot decouple our economy, and we certainly cannot decouple our climate. These are global issues that will affect us all.

© 2012 Globalize This