Thursday, July 27, 2006

Economics: Grieder and Rubin

Grieder and Rubin on the economy.

Excellent, important article in the Nation. Click on the title for the full article.
The question is: Will convergence happen because their wages go up or because our wages go down?
That leads right to my next question. I'm asking, as you must know, from the critics' camp. If you go to the core of what reasonable, intelligent, rational people are trying to say from the labor-left-environmental camp, it goes like this: The world's global trading system needs labor standards and worker rights and some mechanism that requires the poorer developing countries to build a rising wage standard in their economy--a minimum wage relative to their prosperity or poverty--so you won't wind up with an endless convergence, in which the top comes down from middle-income wages in advanced countries and the bottom doesn't rise as fast as it might. Because the world is huge and full of poor people and producers, multinationals and otherwise can constantly, continuously move their production to the next cheaper country.
Labor would say: If you are not going to stop the process of convergence, you are at least going to moderate it. Because you've forced rising wages at the bottom, you have some chance of not completely decimating high-wage, blue-collar labor in America or elsewhere.
Well, I guess there are two pieces to that. If you are saying what you want to do is improve the distribution of income in low-income trading countries and that will have advantage to everybody concerned, low-income countries and to us, I think that is in everybody's interest. On the other hand, I've had exposure to people who make that argument and I think make it as a way to prevent trade liberalization.... But it is a complicated question. The one hope that some of these countries have to take people out of abject poverty is that their labor-cost advantage will result in a shift of production to their countries from the place that it's now taking place and, if you require them not to take advantage of their labor-cost advantage, then you really have condemned them to poverty. It's not so simple, I think.
What we have now in many parts of the world is manufacturers, multinational and domestic, moving their production to the next country. You go from Thailand to Shri Lanka or Cambodia because the textile workers in Thailand are organized and demanding higher wages. Our side would say that way is the "race to the bottom" for everybody, both for the workers in Thailand and for workers in advanced countries.
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