A question regarding free trade... cheap labor inhibiting innovation?

[st_swithin]

Speaking for about a quarter billion Chinese people who are working those less-than-minimum wage-paying jobs, very little thought is given to patriotism, capitalism, or economic theory, since living at a subsistence/ poverty level doesn't usually promote that sort of mental exercise.

That's great for the American companies exporting work to other countries - no labour unions will be forming any time soon. These people are so grateful for any source of income that rampant unethical corporate practices go virutally unnoticed for years.

The consumer gets lower priced goods and the American corporate leaders demonstrate a great P&L. Just makes good business sense. All those Asians look alike anyway - why care about them as if they were human beings? Ah anonymity, the saviour of the corporate conscience.

[Lawrence of Arabia]

Here's what happens

1. Companies move out of America to Thailand where the labor is cheaper
2. Said company employes people and gives them wages
3. More companies move to Thailand, employing more people/ existing companies expand and hire more workers
4. Unemployment in Thailand goes down, resulting in increase of wages. Higher wages means less workers and more innovation.
5. Companies move out of Thailand to go get cheaper labor.

[St Leo]

Slavery always discourages innovation.

[Imran Siddiqui]

Explain the cotton gin, then .

[Sava]

Originally posted by Imran Siddiqui
Explain the cotton gin, then .

frees up more slave labor for whipping... damn crackers...

[Adam Smith]

True But Irrelelvant

The good thing about trade is that it lets us have more goods and services from the same amount of inputs.
The good thing about innovation is that it lets us have more goods and services from the same amount of inputs.
I'm not particularly worried about trade choking off some innovation, because we can get the same benefits sooner and at less cost (no r&d required) through trade.

Originally posted by st_swithin
Speaking for about a quarter billion Chinese people who are working those less-than-minimum wage-paying jobs, very little thought is given to patriotism, capitalism, or economic theory, since living at a subsistence/ poverty level doesn't usually promote that sort of mental exercise.

Which "less than minimum wage" dearie? The US minimum? And why would that be relevant to the Chinese "subsistence / poverty" level? You might want to check the World Bank statistics in THIS thread, indicating that Chinese per capita income has risen by a factor of four since 1960, even after accounting for inflation. Or you might want to visit some of the cities in eastern China (I have, twice). Many of these cities could pass for western. That does not sound like "subsistence / poverty" level wages to me.

Guangzhou, China

[Theben]

Re: True But Irrelelvant

Originally posted by Adam Smith
I'm not particularly worried about trade choking off some innovation, because we can get the same benefits sooner and at less cost (no r&d required) through trade.

Are you sure you aren't referring to civII camels?

[Adam Smith]

Gotta love those camels.

[Urban Ranger]

Re: True But Irrelelvant

Originally posted by Adam Smith
Or you might want to visit some of the cities in eastern China (I have, twice). Many of these cities could pass for western. That does not sound like "subsistence / poverty" level wages to me.

You are right, some of those cities are very modern.

The only thing is, most manufacturing facilities aren't in those cities. They are further out in the countryside, in the "secondary line" cities and towns.

[NeOmega]

When the wealth is spread everyone wins.

So India is getting some good technology jobs; There are some things Indians will never be able to do for Americans. These Indians also become better consumers, so they buy more products, inevitably American products.

America has by far the most "Armchair jobs" where people's jobs are simply to make decisions. This is because, in the end, the wealth ends up in America.

Plus, I know American corporations pay little overseas many times, but, the pay is better than anyone else, and many times, they also feed and shelter the worker's families.

Worldwide wealth could only mean a more prosperous, peaceful global economy.

[Az]

When the wealth is spread everyone wins.

Damn, NeOmega, I didn't think you were a communist.

[DAVOUT]

Originally posted by chegitz guevara
Innovation is largely driven by the need to cut costs. If labor costs are dirt cheap, it makes no monetary sense (or cents) to invest heavily in R&D to lower those costs. This is one of the fundimental contradictions inherent in capitalism, btw.

Improvement of existing techniques is partly driven by the need to cut costs, but innovation resulting in new techniques (such as cellular phone) are not. There is no contradiction in that, and it would be true under any economic system.

Regarding the future of low asian wages, they will progressively go up, and their competitiveness will deteriorate also because the transportation costs are bound to increase ceaselessly. The real danger result from the fact that the asian countries (mainly China) will not limit themselves to easy manufacturing but will follow the same learning curve than Japan, then Taiwan, then South Korea.

[DAVOUT]

Sub-contracting is as old as industry, and out-sourcing is more recent but aims also at reducing the costs and commitments caused by direct employment. This was developed to the extreme in the theory of the company without factory, and it can be said that the delocalisation is not different in its causes and consequences than sub-contracting and out-sourcing.

Innovation is not always a perfect solution, particularly when it is based on marketing tricks. Let take the example of the sport shoes and apparel industry. Before the revolution conceived by Nike and al., the price for the consumer incorporated a value not different in magnitude from the value incorporated in the ordinary shoes and apparel. After the revolution, the price for the consumer increased five or ten fold by the incorporation of immaterial value (Image carried by trademarks build on sport stars). The end result, as far as employment is concerned, was the trade off of low qualified jobs against a much lower number of highly paid jobs in marketing, advertising, design, and a torrent of cash on sports teams and individuals. I would bet that the total payroll generated in the US has increased a lot. The question is : is not such an industry excessively volatile ?

[Adam Smith]

UR:

I was thinking mainly about cities like Nanjing, Changzhou, and Wuxi.
(Don't have a scanner, and couldn't find any good pictures on the web)
These cities are all about 1-3 mil in population, about 100-200 miles from the coast, and lots of factories.
Is this what you meant by "secondary line cities"?

Davout:
The real question is why people keep paying stupid amounts of money for shoes. My lawn doesn't care if my shoes have a swoosh.

[Urban Ranger]

Originally posted by Adam Smith
I was thinking mainly about cities like Nanjing, Changzhou, and Wuxi.
(Don't have a scanner, and couldn't find any good pictures on the web)
These cities are all about 1-3 mil in population, about 100-200 miles from the coast, and lots of factories.
Is this what you meant by "secondary line cities"?

Something like that. First you have the major cities such as Beijing, Shanghai, Chongqing, and Guangzhou. Then you have smaller cities and towns that lie around the outskirts of them.

These towns and cities have cheaper costs and much more laxed law enforcements. We keep hearing lots of workers get killed in fires because factories put locks on the escape doors and bars on windows. [And completely non-existent firefighting facilities, of course]

Originally posted by Adam Smith
The real question is why people keep paying stupid amounts of money for shoes. My lawn doesn't care if my shoes have a swoosh.

Ming knows.