I found myself arguing the justice of international trade with a few leftish college students last week (and was slightly horrified to discover that it’d been so long that some rather elementary economic points took rather longer than they ought have to rouse from their slumber in the corners of memory). One allowed that foreign-owned factories in the developing world do tend to pay better wages than the domestically owned ones, but objected that what was particularly reprehensible about globalization as currently practiced was that the foreign firm (presumably unlike the domestic one) could pay still more. In short, the ugly part—to be remedied by trade laws forbidding the importation of goods from factories that didn’t pay someone’s idea of a “living wage”—was that the workers should be so badly off while the companies employing them reaped huge profits.
Since they were already convinced I was Satan’s second cousin, I let it go at that, but the observation that probably would’ve put me utterly beyond redemption is: It’s precisely when the workers are so very badly off that it’s most vital that still more investment (and employment) be lured to the region. And investors will generally go where there’s the best expectation of high profits. (Some, of course, may invest according to some social conscience, but for them restrictive laws will be otiose.) So really, we ought to hope that the regions with the most immiserated populations be the places where corporations reap the most “excessive” profits, pour encourager les autres.
3 responses so far ↓
1 Brian Moore // Jul 12, 2005 at 3:58 pm
See, once you’ve gotten that crack in the armor, it’s pretty smooth sailing from there on out.
Once they’ve agreed that corporations are at least a little good, while allowing them to insist they could be doing “more” good, you’ve got them.
2 tom // Jul 12, 2005 at 5:42 pm
Are wages really typically higher? My understanding was that Free Trade Zones in developing nations frequently receive temporary waivers or lax enforcement when it comes to meeting the country’s labor laws, including minimum wages, in order to encourage investment. Eventually the company will be brought into compliance, but of course they can always pull up stakes and move somewhere more inviting…
The introduction of foreign investment also has the potential to destabilize local economies, preventing traditional jobs (e.g. agriculture) from being a viable option. Painting poor conditions in these factories as a “they can take it or leave it” situation oversimplifies the issue. Globalization is inevitable, but the fact that the process is making the involved workers more wealthy than they were (by at least some metrics) doesn’t mean that they’re being treated fairly. Nor does it mean that enough capital will accumulate in the local economy prior to the company moving on for any difference to have been made.
I’m optimistic that the process will ultimately be beneficial to folks outside the industrialized world, but it doesn’t seem clear-cut to me.
3 Kat // Jul 13, 2005 at 5:10 pm
When you talk about ‘investment’, are you referring to FDI or are you taking about encouraging foreign entities to invest in local companies? From what you’re arguing here I’m assuming it’s the former, but my response to this depends on this distinction.