Thursday, June 27, 2002

I don’t want to miss out on my two bob’s worth on the Nicholas Kristof piece in the New York Times.

Kristof has finally noticed that if you insist on higher wages in overseas workplaces, then you get unemployment. Nice of him to own up.

Wage differential is what globalisation is all about. Bangladeshis get paid less than Pakistanis, who get paid less than Indians. New Zealanders get paid less than Australians, who get paid less than Italians.

Once you accept the fact of wage differentials, then the question is no longer a moral or ethical one, but more about numbers, laws and enforcement. Unless you really think that an auto worker in Nairobi should get the same pay in US dollars as an auto worker in Detroit, then there is no moral point to argue, only the degree of difference you feel comfortable with.

Wages are decided within the marketplace, subject to local laws. Customers are entitled to scrutinise the laws (wage rates, occupational health, child labour), and make decisions about purchasing. But they should know the immediate consequences of their action will be hard currency that does not go to the people making the items. The customer can accept whatever degree of responsibility they wish for those consequences.

People work at the best job they can find, for the highest wage they can negotiate. Nobody works at a job where they can’t keep body and soul together. This means simply that if you see somebody working in what you call a sweatshop, then that’s the best job that person can get. If you withdraw your customer dollar, then part or all of that job will vanish along with it. Buy or don’t buy, but don’t pretend you don’t know what happens.

This doesn’t preclude the possibility of improvement, through collective bargaining or other means. This is what unions were invented for: to improve the lot of employees through collective bargaining. Unions in developing nations do not have the same muscle as unions in more developed nations. It’s hard to strike effectively when the local unemployment rate is 30%. Westerners can insist labour laws be improved to what the local market can bear, and then maintain pressure for those laws to be enforced.

The best form of foreign aid is a job that pays hard currency. Once money begins to flow to employees, the very first thing they do is take their kids out of work, and send them to school. Now you’ve got educated children getting ready to take on more skilled jobs, bringing in still more foreign earnings. They will become the middle class, who will demand rule of law from their government, in order to assure security for what is becoming a decent legacy for their children. That’s the end of El Presidente, and the start of democracy. Democracy, rule of law, and property rights. That’s us.

Eventually, you’ll be laying top dollar for your sneakers, but you’ll feel a big bunch better.

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