Globalization’s Enabler: Mobility
How do we make people as mobile as money?
How do we make people as mobile as money?Mobility for capital has been a major driver of globalization. The end of the Cold War, digitalization of financial transactions, loosening of cross-border capital flows, all of these things have made capital more mobile. This in turn frees it up to find places where it can get the greatest return. Left behind in this conversation is how much more difficult it is for labor, that is, people to move just as easily.
In a game where you can move capital with mouse clicks, but people require airplanes, cars, trains, or ships to relocate, capital will always have an advantage. Is this an acceptable feature of the global trade game? Or should freedom of movement for people be a more important consideration when discussing trade liberalization?
Two elements serve as barriers to mobility. The first are procedural barriers. These relate to the legal process needed to move. Getting permission to move out of where you currently live, obtaining a visa to enter the new country, finding a way to become a permanent resident; these represent the procedural barriers to mobility. Free Trade Agreements as they currently exist often touch on, but don’t remove all of the major procedural barriers to immigration. The popular aversion to open immigration often makes politicians wary of liberalization immigration policies as part of trade liberalization.
The second are substantive barriers. Even if it’s easy to pass the procedural hurdles, how difficult is it to actually obtain the necessary resources to move? Is having an open immigration system worth anything if airfare to the destination still costs an arm and a leg? At certain levels of scarcity, we know that capital is willing to shell out the relocation costs for people. The problem for most people is that they don’t fall into this category of labor and have to shoulder the relocation costs themselves. In reality most unskilled, and even skilled labor falls into the category of substantively unable to move.
Globalization, then, is currently a situation of mobility for me, but not for thee. Freedom of exit for capital to choose the rules most favorable for it, but not labor, which more often than not is constrained geographically. The procedural hurdles for labor mobility remain high, but perhaps more crippling is the substantive one: For the vast majority of the world’s population, airfare is out of the question. So for that matter is a ticket by the sea. Oh, sure they can get a bus pass or a rail ticket a certain distance, but even then they’re constrained by movement restrictions of one sort or another.
Some method of making transportation cheaper for a much larger proportion of the human population than we’ve managed so far is going to be the necessary precondition to putting labor and capital back on the same footing. But where is that innovation? Will it ever come to pass where we can hop on a super rapid transport from Mumbai to New York or vice versa to take advantage of a fast food job opening? Will energy restrictions just keep that from being feasible?
The asymmetry of mobility is translating substantively into economic asymmetry between those who provide capital and those who provide labor. Some of the biggest problems regarding the localization of costs and the globalization of profit in the world economy today could probably be solved if people were more mobile. So what’s the solution?
It’s worth noting that removing procedural barriers would still be an improvement, even if the substantive barriers remain. That would go a long way toward improving the lot of providers of labor even if it remains out of the reach for many.
Also, I’d warn against the language regarding making labor and capital equally mobile because there are plenty of people who would react to that by saying we should just restrain capital rather than free labor.Report
Mobility equality is probably not practical, but we can certainly take better steps to put them closer to one another.Report
Also, I’d warn against the language regarding making labor and capital equally mobile because there are plenty of people who would react to that by saying we should just restrain capital rather than free labor.
That’s exactly what I’d say. In addition to the benefits of lowering the playing field for labour and thus enabling better-paying jobs, East Asia’s certainly seen enough damage from excessively mobile and unregulated capital, ranging from the financial crisis (not 2008, the previous one) to countries that had their entire currencies destroyed by rampant speculation.Report
Evening the playing field, I meant.Report
countries that had their entire currencies destroyed by rampant speculation.
Those are generally countries that are making bad policy decisions that make them ripe for speculation. Preventive regulation’s main effect may be to paper over bad policy.Report
If removing the regulation allows speculators to destroy the currency, then removing it is bad policy.Report
@katherinemw
1) I’d like to point out that preventing capital from flowing from capital-rich countries to capital-poor ones would make it vastly harder for poor countries to become richer. You would be condemning the poorest people on earth to poverty for far longer than is necessary. Not everyone has the privilege of living in a country with a ready source of domestic capital.
2) “Rampant speculation” is a common whipping boy for economic problems, but the point of speculation is to successfully guess what is going to happen because that’s how they make money. In almost all cases, speculative activity is a symptom of some other problem, and blaming speculators is just shooting the messenger.Report
@james-k , but do poor countries actually become richer due to this foreign capital? How? The capital doesn’t become the property of the natives. The profits aren’t retained in-country for reinvestment. They don’t even generally get to consume the products. All that happens for the good is the payment of some wages, but that’s as little as possible. After all, that’s the entire rationale for the endeavor.
Are you sure this isn’t really just the modern form of colonialism? All the profit without the administrative woes?Report
If removing the regulation allows speculators to destroy the currency, then removing it is bad policy.
I don’t think that’s how it works. Do you know, really, how currency speculation damages a currency? This is one of those things where most critics seem rather fuzzy on the details of how things actually work.
Speculators just work on expectations of future values. If I think the Bongonesian currency is undervalued, I’ll buy some. If I think it’s overvalued and ripe for a decline, I’ll sell. If the currency is not really overvalued, somebody else will be quick to buy what I’m selling, and the price of the currency will stabilize quickly, so spevulation can’t do much damage. In fact speculation–by the buyer–has kept it stable.
If everyone sells, and nobody wants to buy until the price has collapsed, it indicates general agreement that the currency is overvalued. So how does a currency get overvalued? Generally because there’s too much of it, which is a policy choice. Or the investors may see some fundamental economic weaknesses and realize they need to get out before they lose their shirt. Either way, if the country’s policy and economic house is in order, a speculative probe will be met by other speculators being willing to buy the currency, keeping its value up.
So in the end bad policy–not a lack of regulation on capital–is the underlying cause of currency collapses. It’s a mystery to me why so many folks are so reluctant to consider the role of bad policies in creating conditions that promote currency crises. Granted that international currency traders are amoral and don’t care if their actions hurt a country or its citizens, that’s still no reason to excuse the policymakers. Why give them a free pass on creating policies that invite currency collapse?Report
@rod
It comes down to synergy. Adding capital to a production process not only increases output, it makes labour more productive. Workers can produce more when they have machines helping them. Since the addition of capital makes workers’ Marginal Product of Labour higher, they can command higher wages. Since poor countries have very little capital, the returns to capital in poor countries are very high, so the investors don’t really care that they’re paying workers more (especially since they are getting more output from those workers).
Capital does a lot more good than simply producing dividends, which is why I find the “stop sending profits overseas” line irritating.Report
James,
What did Argentina do?
(I know what Iceland did.)Report
@james-k ,
It comes down to synergy. Adding capital to a production process not only increases output, it makes labour more productive. Workers can produce more when they have machines helping them.
So far so good.
Since the addition of capital makes workers’ Marginal Product of Labour higher, they can command higher wages.
Come again? I was under the impression that prices–and wages are prices after all–was a function of supply and demand. It seems far more likely, approaching certainty, that the capitalist will, with decent justification, attribute the increased productivity to his investment and either pocket the difference or lower prices to capture market share. Wages will only rise in response to increased demand for, or diminishing supply of, labor.
Since poor countries have very little capital, the returns to capital in poor countries are very high, so the investors don’t really care that they’re paying workers more (especially since they are getting more output from those workers).
I’m sorry, but the pattern I see is Capital constantly chasing after lower wage rates, the current gold standard being Bangladesh at about $1.50 per day.
Capital does a lot more good than simply producing dividends, which is why I find the “stop sending profits overseas” line irritating.
Here and I thought we were discussing economic development. You know, capital formation through savings and re-investment. The employment at ever-so-slightly above traditional rates is nice but not particularly conducive to that process. And expatriating the profits seems to cut off the other means to that end as well.
So… yeah, I’m just not seeing it.Report
@rod
You’re thinking of wage setting as a negotiation, I’m seeing it as a process of incentives doing their thing. Marginal Product of Labour defines the demand curve for labour, a wage rate equal to the Marginal Product of Labour is a necessary condition for supply equalling demand, if wages are below Marginal Product of Labour, it implies the company can make more money by raising wages to attract more workers.
And of course increasing capital stocks increases wages, how else do you explain the standard of living increases in Europe over the past 200 years?Report
I’d like to point out that preventing capital from flowing from capital-rich countries to capital-poor ones would make it vastly harder for poor countries to become richer. You would be condemning the poorest people on earth to poverty for far longer than is necessary. Not everyone has the privilege of living in a country with a ready source of domestic capital.
Untrue. I never said “no foreign capital”. I said that regulations on foreign capital are valuable – precisely because they enable countries to ensure that their people do benefit from foreign capital, and that they ways foreign capital is being used are productive rather than destructive. There are situations in which foreign investment can benefit a country; there are also many in which it can damage a country while doing nothing to benefit its people (capital-intensive, environmentally-destructive natural resource industries are a major example of this, especially when taxes and royalties on them are low to non-existent, which is very common. The company comes in, takes the resources, makes all the profit off them, creates few local jobs, and leaves behind toxins and health hazards that will last for decades if not centuries. The country loses its natural resources – which are potentially very valuable, and very capable of contributing to development – and gains nothing in return). Short-term foreign investment that is unstable and doesn’t contribute to long-term development is also often more harmful than helpful.
Regarding currency speculation, the cases to which I was referring weren’t of currencies that were overvalued – they were of speculators deliberately short-selling a currency and starting panics that led to massive sales and drops in value of currencies that were – prior to the speculator’s actions – quite stables.
James, your problem is that your arguments are based on theory. They’re based on your idea of what ought to happen in an economic system. The real world doesn’t match your theory, and simple platitudes like “investment = growth = better standard of living” don’t hold true across the board. In the third world, investment is destructive at least as often as it is productive.Report
Regarding currency speculation, the cases to which I was referring weren’t of currencies that were overvalued – they were of speculators deliberately short-selling a currency and starting panics that led to massive sales and drops in value of currencies that were – prior to the speculator’s actions – quite stables.
You think it was quite stable. But how closely did you study the case? Did you study it as closely as the short-seller?
Because how does short-selling work? It means you sell something you don’t actually have–that you have borrowed–because you think the price is going to go down. When it does you buy (so you can return what you borrowed), and your profit is the difference in what you sold for and what you bought for.
So if I think the currency is stable, short-selling is hugely risky. If it’s stable, others are happy to buy because they think you’re underselling, the price won’t go down, and you’ll lose your shirt. If the price does decline it indicates others are reluctant to buy, which indicates they also think the currency was overpriced. The success of the short-selling is pretty strong evidence that in fact the currency was overpriced.
Frankly, I’m more inclined to believe the perceptions of people whose business it is to look for opportunities to make a profit from differences in nominal and real value than someone who doesn’t have the same incentive to look for real differences between nominal and perceived value, but just sits on the outside looking in.Report
How do we make people as mobile as money?
Due to sociopolitical considerations outside the scope of a single nation to address (even in the EU), we can’t.
We can make money more immobile, either by placing barriers to exit on it, or by increasing taxes on capital. These both come with their own costs and drawbacks, though.
We can attempt to correct for the mobility discrepancy by subsidizing labor at a cost to capital, as well. This also comes with drawbacks.
The asymmetry of mobility is translating substantively into economic asymmetry between those who provide capital and those who provide labor.
Largely, this is where the income and wealth disparity in the US comes from, iff’n you ask me.
And yes, I agree it is a problem, for a wide variety of reasons.Report
Yes, I think looking at the list of potential solutions and weighing their cost/benefit to be the next step on this discussion.Report
Part of weighing cost/benefit needs to include the value of not relocating if you have a strong support network where you already are; particularly true for families with children.
Having parents, in-laws, siblings, aunts, uncles, etc. around to help with childcare duties, etc., is very, very valuable.Report
That’s true, Zic, but building policy off of that will very likely necessarily favor those people with those support networks over the people without access to those networks.
Generally speaking, the people without those networks are more in need of societal support than the people *with* them.Report
@patrick, what I mean is that the people with those networks might need more support if they leave their networks to follow work. Cheaper labor flooding into a geographic region would result in increased social needs, perhaps cost-shifting to the receiving community; not to mention creating downward-pressure on local wages.
What Nob’s suggesting brings up all sorts of migrant labor issues. Given the current political landscape, it sounds similar to guest-worker programs; we get them here every year, young, often South American, come to work at the ski resorts; doing everything from parking cars to cleaning rooms to selling lift tickets.Report
@zic – although there is another side to the extended family dynamic, when it comes to non-OECD countries. The first is, due to endemic underemployment and prolonged periods of unemployment, when one finally gets a stable source of income, one has to spread that a lot farther, including among other working age family members. The other is related, and somewhat more cultural, but there’s an expectation in some circles that if one does come across a ‘windfall’ (even if it is just a steady paycheck) one is expected to ‘share the wealth’ across the larger family.
Both inhibit capital formation (i.e. savings) at the individual and family level, and perpetuate economic under performance. (and at a certain level, if one is able to achieve a position of some authority, whether in the public or private sector, outright corruption)Report
I’m largely in agreement. Not every nation-state is going to be open to open boarders. Even fairly liberal nation-states can bulk at mass immigration at times, particularly if there is a clash of values that is off setting like a very progressive and tolerant country when it comes to thinks like feminism and LBGT rights receiving a lot of immigrants from some of the most patriarchal and conservative societies on the planet. Progressive nations are also going to want to take steps to protect the in interests of their own citizens over those of non-citizens in many circumstances. If they perceive limiting immigration as a way to do this than so be it.Report
Wealth disparity in America comes for two reasons:
1) systematic racism.
2) It’s really, really expensive to be poor.Report
I agree. I have friends who immigrated to foreign countries from the US and are probably permanent or going to be permanent in Europe. They make it sound so easy and are a bit dismissive when I say it intrigues me to work in Europe but it is hard to find positions for my skill set. How many theatre artists or run of the mill lawyers do you need? My friends are academics and got positions and post-docs or the non-academics got lucky. I’m sure a few had EU citizenship through a parent.
My slightly easy out is that I can do right of return to Israel but even that has a bit of a hurdle. Not as much as other people though.
It would be nice to live in an Open Borders world where people can pick up and move to whereever they want without VISA hurdles like I could move back to New York today if I want. This is not going to happen anytime soon probably.Report
This is not going to happen anytime soon probably.
No, it’s surely not. But it should be our goal and we should encourage all baby steps in that direction.Report
There’s also the question of whether the labor wants to follow the capital. I’m pretty sure that a guy living in Silicon Valley would not really be interested in the life of a Mumbai minimum-wage code slave.Report
What would be interesting would be if the Mumbai minimum-wage code slave would do.
All those “emerging offshore” type of jobs start bootstrapping their local economies, but as soon as you get enough to qualify as middle class your two options are “agitate for better infrastructure” or “move elsewhere”.
If most nations really had open/revolving door immigration policies, I wonder how many Mumbai minimum-wage code slaves would get to be decent software engineers and then jump to some country with more infrastructural support than India…Report
Tiebout sorting at it’s finest, no? And ideally India starts upping its investment in the infrastructure to keep them. Why should they bother if there’s no exit, only voice?Report
Exactly that, yeah.Report
Though one should also add that it is not only Capital that is easily moveable but the holders and dispersors of Capital. Many writers have noticed the growth of a new global elite who have more in common with each other than their fellow countrymen. Yes these people probably remain citizens of one country or another but they spend enough time on the road as to have multiple residencies:
http://www.theatlantic.com/magazine/archive/2011/01/the-rise-of-the-new-global-elite/308343/
Part of the rise of Bill De Blasio is a feeling that Bloomberg does too much to court billionaires with part time residencies in New York and not enough for people who live and work in the city and make it habitable.Report
This isn’t really a new phenomenon. One reason why most European monarchies or really most monarchies and nobilities collapsed was that the ended up as international institutions in an age of nationalism during the early and mid-20th century. Before the world wars killed them off, the European aristocracy, particularly the richest members, were a remarkably cosmopolitan class. Most spoke French better than they did their native language Sometimes really rich people could join them. However, this was an age of growing national identity and the ordinary people began to see the elite as not really being part of their nation. The aristocrats that were able to nationalize themselves like the British royal family and peers at least partly survived. Those that did not perished.
The mid-20th century was a brief period where the international elite went into hiding to an extent but only to an extent. During this time, there was still the International Jet Set. The fall of communism and the spread of capitalism during the 1990s gave the international elite a new lease on life.Report
Yeah, I’ve made some points like this about the new international aristocracy, but I’m sussing out the long-term implications.Report
That wasn’t necessarily a good thing. Wilhelm II spent a lot of time hanging around the British royals, and he thought they were really cool, and he was so jealous of them that he ended up creating the warring-Empires conditions that led directly to World War I (and, basically, all of history thus far.)Report
@nob-akimoto, based on history I don’t think the long term implications are good unless the new international aristocracy gets hit with a clue stick. I suspect that we are going to see a return to class-based politics on the left and nation-based politics on the right. There will be a lot of mixture between the two. Voters are eventually going to see the international aristocracy as being traitors to whatever nation and act accordingly.Report
Nob,
It’s not new. They’ve got the same agenda they’ve always had, even if the players always change.
Lee,
Propaganda’s the only game in town, anymore, it sometimes seems.
Try making some.
The reactionaries have had 300 years to teach the peasants not to kill ’em.
Judging by history, it seems to have worked fairly well.Report
You don’t have to get to billionaire level before you see this type of thing. There are lots of Park Slope yuppies (De Blasio’s base) who likely think of themselves as having more in common with Parisian BoBos than with the yokels in flyover country, especially the ones in red flyover states.Report
NewDealer,
you’re looking in the wrong place.
London’s real estate is an emerging global reserve currency.Report
http://www.nytimes.com/2013/02/12/nyregion/paying-top-dollar-for-condos-and-leaving-them-empty.htmlReport
Another issue of global capital and the people behind it being very moveable is that they are going to be increasingly hostile to any government action especially if it is perceived as a barrier to them:
http://nymag.com/daily/intelligencer/2013/10/silicon-valleys-secessionists.html
I’ve long suspected that Silicon Valley is going to be the next group of people who think they are more important than they really are. A la “masters of the universe” from Wall Street of the 1980s. This seems to confirm it.Report
They are, however, comparatively easier to knock off their pedestal than the Wall Street types. Tech billionaires are only as good as their last IPO.Report
Awww, that’s a little harsh. At least we tech folk make stuff. That justifies at least a small percentage of the gargantuan ego.
That being said, I find that we have a lot of extreme anarcho-captalist types in our field. I have a few ideas about why. In no particular order:
* We work in a field that’s much closer to a real meritocracy than most others. It’s harder to hide serious incompetence or fake real expertise in tech fields than in many other areas, so “deserves rewards” and “receives rewards” are highly correlated in our experience.
* We are attracted to elegant solutions to complex problems and annoyed by edge cases that break our elegant solutions. Simple systems for morality without a lot of gray areas have a very strong appeal.
* Growing up, “society” as it appeared to us wasn’t all that friendly to the nerds. Now that we have money, society wants warm fuzzies from us? Take a hike.
* Top down is bad because top is management. Bottom up is good because bottom is engineers, and we understand the problem better than the managers do.
These aren’t entirely crazy beliefs to keep in your head, but the number of people who hold those beliefs to crazy extents is pretty high around here.Report
I don’t even bother with building things, I wait for others to build crap which falls down in a steaming wreck. Sort of a software tow truck, just waiting for these supposedly Elegant Solutions, written by people who know more about type faces than variable typing, to fail.
The money’s far better. I can’t agree with this business about hiding serious incompetence. It’s quite easy to hide — for a good long while, too. Millions of dollars in billable hours. Silicon Valley, especially one outfit on Oracle Parkway, is the greatest den of panjandrums and confidence artistes in the US of A.Report
We work in a field that’s much closer to a real meritocracy than most others. It’s harder to hide serious incompetence or fake real expertise in tech fields than in many other areas, so “deserves rewards” and “receives rewards” are highly correlated in our experience.
Boy howdy do I wish that was actually the case. It would result in a mass firing of half of the systems support staff in the world…Report
Yeah, I am not buying a lot of this stuff. I think it sounds like a lot “stuff we tell ourselves” to make us feel better, a great noble lie. Disruption is also one of my least favorite buzzwords.
“At least we tech folk make stuff.”
I think this depends on the company. Square? Makes stuff and good stuff. Apple? Makes stuff? Twitter? Does not make stuff. Zygna? Not quite a great and noble build either. There is just as many products in the tech world that can easily be as much flim-flam as “financial engineering”
“We work in a field that’s much closer to a real meritocracy than most others. It’s harder to hide serious incompetence or fake real expertise in tech fields than in many other areas, so “deserves rewards” and “receives rewards” are highly correlated in our experience.”
Yeah right. I’ve read a ton of articles that expose the lie of meritocracy in tech and show how the big tech companies can be just as narrow casting in terms of alma maters as the Wall Street firms. Maybe once upon a time any bright kid could get a job but not anymore. Also countless stories about sexism and racism in tech.
“We are attracted to elegant solutions to complex problems and annoyed by edge cases that break our elegant solutions. Simple systems for morality without a lot of gray areas have a very strong appeal.”
There is no such thing as a simple system for morality or ethics without a lot of gray! Part of being human and a very smart one is learning to deal with situations and be at home with the idea that there are a lot of times when there is not a clear-cut answer. Any lawyer who has done even a little litigation can tell you this. I don’t get the overwhelming desire for black and white and not realizing that most of everything is in gray.
“Growing up, “society” as it appeared to us wasn’t all that friendly to the nerds. Now that we have money, society wants warm fuzzies from us? Take a hike.”
This goes into the two wrongs don’t make a right argument and make it sound like you want revenge for being teased in middle and high school. I wasn’t Mr. Popular during those years either but I’m not going to make this cause me to develop anarcho-capitalist fantasies.
“Top down is bad because top is management. Bottom up is good because bottom is engineers, and we understand the problem better than the managers do.”
Except when it is blue-collar workers or women or minorities fighting for their fare share or pointing out when the engineers are being kind of jerky. Then come out the death threats and tweets about using Dobermans to solve labor disputes.Report
NewDealer:
First, I’m pretty sure I wasn’t endorsing those positions. Chill.
If you’re going to hold software companies to the standard of, “makes physical stuff,” you’re going to be pretty disappointed. I suppose I can be more clear: Tech companies tend to make products that are positive sum. You may think Twitter is useless, but it’s not hurting anybody and a lot of people use it for good things. On the net, we’re better off for having it.
When they’re at their best, financial companies are middle men, which is important but hardly “masters of the universe” stuff. On the other hand, the hedge fund managers who think that the world would fall apart without them are really mostly just taking money from one set of people and giving it to another set who pay them handsomely to do it.
True to some extent. Every company filters based on resumes and not looking deep into your soul for greater cosmic value. But ask yourself how many skilled software engineers you know who aren’t making good money somewhere. It’s nothing magic about the people or the field–it’s just easier to notice when somebody is a key player or when somebody is consistently screwing up, and it’s easier to put a price tag on it. In a lot of fields, it’s harder to evaluate, so good people are more likely to end up getting less than they deserve and dummies more than they deserve.
Computer nerds often seem to think, “Well, every smart person I know is doing great, so if you fail, it must be because you’re not smart. There’s no way to end up at the bottom unless you’re not contributing.” If you buy that, it’s easy to start buying into grandiose notions of all the financially successful people taking off somewhere to create a perfect society of productive people.
Because there’s huge money to be made in zero-sum skimming of financial transactions? I’m not understanding the basis of the question. I mean, somebody builds chemical weapons but I don’t think that they make the world a better place. I tend to think that high frequency trading is pretty much a nothingburger, in any case.
At minimum, because it sucks to have all of your personal wealth tied up in a high-risk illiquid asset. A lot of us end up putting a lot of unpaid time into building businesses with very long payoff schedules, so the ability to diversify instead of letting it ride for years is pretty sensible for somebody who pays a mortgage.Report
“Computer nerds often seem to think, “Well, every smart person I know is doing great, so if you fail, it must be because you’re not smart. There’s no way to end up at the bottom unless you’re not contributing.” If you buy that, it’s easy to start buying into grandiose notions of all the financially successful people taking off somewhere to create a perfect society of productive people.”
I believe there was a lot of criticism of Romney and is followers during the 2012 election. Hence my skepticism…. You are pretty much admitting that a lot of Silicon Valley people are easily fooled into the 47 percent narrative as well.
The tech industry has produced a lot of good and they are undoubtably very smart in their fields but this does not mean that they can run other things or systems with equal skill.Report
They absolutely do. I’m pretty sure you’re arguing with somebody else, though.Report
Autism, basically.Report
NewDealer,
Be bright enough, and you can get a job anywhere.
I know a guy who hasn’t graduated college,
but he works for… well, just about everyone.
Of course, he’s probably in the top 100 people
in the country, in terms of pure intelligence.
People run studies, but who the fuck wants to
admit that they hired people who hacked their
fucking systems? (also: you sure the hackers
haven’t planted fake degrees in their past?)Report
NewDealer,
Take the Simpsons as your example if you want to explain how
the tech folks can’t do other people’s jobs. Because, man, that
is one excellent fucking tv show. And those were nerds, techs,
what have you.Report
Be bright enough, and you can get a job anywhere.
I know a guy who hasn’t graduated college,
but he works for… well, just about everyone.
Eh, I know plenty of guys who didn’t finish college who are good programmers or IT guys, and they do indeedy have good jobs.
But they all have a healthy dose of serendipity in their career track, wherein they found the right mentor or they worked at desktop support at a company that had a bazillion good coders that broke up and spread those coders far and wide, and the guy had made friends with a whole slew of those coders by being good at foosball or something.
Don’t mistake “I was in the right place at the right time to make a lot of friends who could give me recommendations for the next twenty years” as anything other than luck. Effort helps, sure.Report
Patrick,
oh, luck helps, a ton.
I don’t say that it’s a good career choice these days.
But it’s not like what ND is alleging.Report
I used to think that.
Now, I’m not convinced. Terry Gross interviewed Gary Rivlin on Dodd-Frank, and he described the obstruction via the justice department that’s got it absolutely tied up for decades. We can’t even get through a legitimate rule-making process, its been hijacked by people with enough money to hijack it.
Scalia’s son’s the bad guy in that interview. He’s using the legal process to disrupt financial regulation every which way he can, and he’s paid by the bankers. He’s making sure that 1.) every public comment has a cost-benefit analysis performed and 2.) that there are specific comments designed to overwhelm the ability of government to perform that cost benefit analysis. Then he’s taking every instance before the court, spending more tax-payer money to defend the cost-benefit analysis we don’t have enough government workers on payroll to provide.
This is just the rule-making process; what we have to go through to get a set of rules out of Dodd-Frank that regulators can enforce.
I’d imagine this game used all the time. If you’ve enough money, you can pretty much tie any process in any nation in the world with legal challenge. Once in a while, you’ll loose the game, but like paying lobbyists, you’ll win enough to more then justify the costs.
Bleak House Revisited.Report
We can’t even get through a legitimate rule-making process
Blame Congress. They punted on making a law of much substance, following their common practice of making a framework and telling an agency to make all the tough decisions. Except in this case the framework was even more vague than usual. I complained at the time that Congress was creating an opening for lobbyists, because there’s so much money at stake. And, yes, there are enough rules surrounding the ruke-making process that any proposed rule can be challenged in courts. It’s easier for Congress to pass vague legislation like this, because lots of people could get warm fuzzies from the idea of financial sector regulation, while getting down to the details evokes more serious and determined opposition.
Liberals like this when it’s rules that might favor corporations. In fact it’s liberals who demanded such things as public comment periods and the original policy–NEPA and its EIS requirements–that led to benefit-cost analysis being used regularly im agency rule-making. And lawsuits have been a common tactic of liberal groups, particularly environmental groups, as well as conservatives, in challenging ruke making.
Live by the sword, die by the sword.Report
James,
I’d be a lot richer now if the laws on the books were being enforced.
And they’ve been on the books since well before Dodd-Frank.Report
@troublesome-frog
If Wall Street is so horrible, why did engineers design programs capable of doing thousands if not more trades per a second and other instruments of financial engineering?
Why does every tech company yearn for an IPO?Report
Why does every tech company yearn for an IPO?
Because Step 5 is “Profit!”
And if you’ve gotten to Step 4 and your idea is not making any money, then selling the company is the only way to get to “Profit” (for “Profit” == “I make money”)Report
That’s a little bit hard on the people doing it. Yes, there’s a lot of gold rush stupidity out there. But a lot of companies take a really long time to pay off, especially if they’re driven by micro-penny ad revenue. If you put in a year or two with little to no salary and it’s going to take years before the thing you’ve built actually starts trickling money back to you, it may make sense to sell that perfectly good asset to somebody whose financial situation allows them to wait for it.
If I gave you the opportunity to forgo your salary for a year with the certain knowledge that in 10 years, you’d get slightly more than the present value of a year’s salary, you may still be perfectly rational not to take the offer. It all depends on how long you’re actually able to wait on an investment of that size.Report
Eh, that would be my plan. I don’t want to be the next Bill Gates. I want to come up with an idea that gets Google to want to buy me for enough money to retire.
My law of diminishing returns hits. I’m 42. I don’t want to spend the next 23 years building a big company. I want to spend it fishing with my kids.
Everybody talks about selling out as if it’s a bad thing. Selling out is awesome.Report
The lack of mobility is part of the drive behind the Sea Steaders. To many of them, it is the difficulty of getting out of (or out from under the thumb of) the US if you are not wealthy enough to play the game.Report
I’m not sure how making a bunch of floating archologies that would probably be pretty hard to emigrate to would really improve that, though.Report
Neither am I, but it’s one of the stated rationale.Report
I’m not sure how making a bunch of floating archologies
Or “ark”ologies? 😉Report
Building a stateless free utopian city way out at sea, you say? What could possibly go wrong?Report
Oh, sure, you bring up that place!
One spectacularly failed fictional utopia, and we should just not even bother trying to learn from the mistakes (Little Sisters & Big Daddy’s are a bad idea; unfettered libertarianism does have a potential downside; avoid genetic modification serums that grant cool elemental & psychic powers – wait! Maybe we could try that one again) & trying again.Report
The problem is largely solving itself. The migration of technical talent and entrepreneurs to more-stable nation states is the great equaliser. These people produce the wealth. They leave bad nation states for good ones. Either nation states will get their acts together, attenuate corruption, behave responsibly, regulate their own markets and encourage these people to stay — or they will sink ever farther.Report
I don’t know, Blaise. I don’t think it solves the problem for largely low skilled laborers who don’t have that sort of value. If anything it puts them further at the mercy of capital than they already are at now.Report
That’s correct. But it’s a great caution to these corrupt rulers, to realise they’re getting stuck with the dregs of their own societies as the moneymakers run away.
What have I always said about refugees? My Dad’s rule: If you want to sort out the bad guys from the good guys in any conflict, look at the footprints left by the refugees. Refugees always run away from the bad guys.
Such nations become irrelevant. They’re just problem children. Even the dictators depend upon the illusion of stability.Report
Well, Nob, we can always invade them and give them a better government. 😉Report
We’ll start with Michigan.Report
Believe it or not, we do have better government now, at least temporarily. It’s a bit disturbing that it’s taken full GOP control of the state government to get there, but we may actually be getting our financial house in order and (autocratically) getting some of our worst run cities brought to heel. It’s interesting times up here from a policy guy’s perspective.Report
@jm3z-aitch
The same can be said for California now that the Democratic Party basically controls everything : )Report
Heh. If Michigan politics prove anything, it’s that neither Democrats nor Republicans are capable of dealing with change. It’s kinda hilarious, to see Dr. Republican who promised to cure the patient — now wheeling the corpse to the waiting hearse.Report
ND,
Good point. And we can compare both states favorably to the U.S. Congress.
The implications for the value of one-party v. multi-party governance are very troubling to me.Report
It’s kinda hilarious, to see Dr. Republican who promised to cure the patient — now wheeling the corpse to the waiting hearse.
That doesn’t describe Michigan today. Gross domestic product is up, although unemployment is still high and has increased marginally this summer (although still well below the peak rate during the recession). The tax code has been modernized and made less investment-unfriendly. And the state’s emergency manager law–as unpopular as it is–is giving cities like Detroit and Flint their first real chance in decades to get their own financial/political houses in order. Liberals complain about the spending cuts, but they never proposed any solutions to budget woes other than raising taxes even further. (Well, not entirely true–both parties have found a partial solution to state budget shortfalls by reneging on revenue sharing with municipalities, which are really struggling to make ends meet as a consequence.)
There’s no doubt the state still has a long way to go, but decades of poor administration take a long time to unravel. And of course the GOP dominated legislature has its share of yahoos who think the most important issues are same-sex marriage and abortion. But I’ve been in the state for a decade now, and this is the first time since I’ve been here that I’ve thought there was any hope for the future.Report
GE Capital, one of my clients, has moved into both Michigan and Louisiana to take advantage of the Fire Sales these GOP states are conducting.
But hey, for every municipal corpse in the morgue, that just frees up another bed for Dr. GOP’s waiting list of patients, eh? No dark cloud without a silver lining.Report
James,
Oh, don’t let it be! Remember, these places were one party beforehand.
You have some competents in any party, I supposeReport
Well, Blaise, if you keep all your claims vague enough, you don’t have to be proven wrong, do you? I have no idea what you mean by fire sales, and from past experience I don’t expect that you’ll explain it in a way that I find satisfactory. Then we’ll have an argument that resolves nothing.
Let’s just jump to the end and say we already did it.Report
Let’s just say GE Capital had me go to New Orleans, only to fly me up to Detroit for a while. Can’t get any more specific than that. Clearly, the GE Guys like these Fire Sales.Report
James, how the hell is rising unemployment, growing GDP, and cuts to services supposed to be a good thing? The situation you describe is one of wealth being concentrated at the top, while life gets worse for everyone else, because they have fewer jobs and less access to basic supports for people who can’t find jobs or whose jobs don’t pay enough to afford basic expenses.
GDP is a means to an end – better living conditions. If people’s lives aren’t getting better – if unemployment is stable or rising and the social safety net is being dismantled – then GDP growth means nothing except that the rich are doing well out of that situation. The goal of economic policy shouldn’t be “give more money to the rich”.Report
Katherine,
Snapshots in time don’t reveal dynamics. But I’ll not argue with you because we’re coming from such radically opposed understandings that neither of us can possibly reach the other.Report
But can their states get their “acts together” if their best and brightest are leaving?Report
Of course they can. They have to crack down on their own cultures of baksheesh.Report
Will states get their act together if they can just prevent anyone from leaving?
What’s going to be their incentive, short of a revolution that kills thousands of people? Are corrupt oppressive states just some day going to decide they ought to change their ways for good?Report
Those oppressive states really don’t have a choice any more. It’s what I call the Kulliye Problem.
The Ottoman Empire arose from the wreckage of several empires, mainly the Seljuk. The Ottomans secured the Silk Road, actually several different roads — but what’s important is that the Ottomans had a ready-made solution for infrastructure, the Kulliye.
A Kulliyes starts with a mosque, of course. Next to the mosque is a school, sometimes a hospital. There’s a local not for profit administration, the waqf. In the same way markets in Europe developed in the plaza in front of the church, the Kulliye build two enormous covered spaces, the hana, a commercial building, offices and shops and such. And they built a caravanserai, a secure corral with covered loading and unloading areas, a shipping dock if you will. The caravanserai usually had an armed contingent of guards and patrolmen. Part of this guard would move with the caravan.
The Ottomans got so good at this, they could actually sell a sort of insurance policy for travelling merchants. They would establish way stations for caravans, too. Worked for five centuries. But the Ottomans never got into shipbuilding and overseas commerce as they should have. Wasn’t as if they didn’t have the ports, they did, especially Basra. We know of Basra from the tales of Sinbad the Sailor.
The Ottomans never adapted to the nation state. They were an Empire, which means top-down reforms, never the correct vector for reforms, which must always start from the bottom up.
But now, the nation state faces the Kulliye Problem. They aren’t evolving to serve the needs of markets. Someone has to build a model for the Kulliye for our times. The “Free Market” won’t do it on its own. It doesn’t want to govern. It wants to make money.Report
Case in point: the recent phenomenon of pregnant Chinese women giving birth in the USA, taking advantage of American jus soli citizenship rights.
China might be advancing in the world but its government, markets and banks are corrupt. China is feverishly trying to address some of these problems but with little success. Its elites don’t exhibit much loyalty to the regime they looted.Report
I agree with your observations on the asymmetry of mobility, but there is another factor to consider: are people willing to relocate for work? There is evidence (see Manpower Inc. research) that “only” 1/3 of workers are willing to relocate internationally (and considerably more within national borders). Of course, how likely one is to be willing to move is probably directly correlated to how bad the economic situations is at home. In addition, it is also driven by a cultural, language and historical factors. So, even if moving was much easier, the asymmetry would still exist: capital doesn’t care where it resides, labor does.
Also, I wonder to what extent the detriment of high-skilled emigration, rather than immigration, drives some international agreements. It is clearly in some states’ best interest that the US and UK – two popular work-immigrant states – have barriers in place.
Great observations and I wonder to what extent the EU experiment can shed light on some of these issues.Report
There’s also a large number of low-skilled immigrants coming into the US and that creates all kinds of weird questions with regards to what the Just thing happens to be with regards to them.
Do we wish to put more effort into protecting low-skilled workers who are already here and having a rough time of it?
Do we wish to say that the important thing is that these people wish to work and if they wish to work we should let them?
The entire issue has a lot of dynamics that will leave a sour taste in one’s mouth.Report
I don’t think it should be shocking that people generally want to stay close to their friends and families instead of moving 3000 or more miles away to a different nation, culture, and possibly language.
Friends and family are good and skype time generally doesn’t do it for most people.
Another issue of moving is that it takes a lot of guts to move somewhere without a job, let alone any connections. I can see moving abroad if I had a job lined up. I can’t see moving to London or Paris and hoping for the best on a lark.
Timothy Noah covered this for the Washington Monthly reasonably:
http://www.washingtonmonthly.com/magazine/november_december_2013/features/stay_put_young_man047332.php?page=all
Talking about “why aren’t people moving?” is a perfect question for the Matt Y set. A faux-naive question that anyone can think of an answer to in a few seconds except a well-paid neo-liberal blogger and columnist.Report
I wasn’t really trying to talk about “why aren’t people moving” and was more “people are harder to move than money”.Report
From my years of working with refugees and illegal aliens in the USA, these relocators don’t just come from anywhere and they don’t arrive just anywhere. About half the men from a single village in southern Mexico live and work in Carpentersville, Illinois.
Labour does care where it lives. I’ve driven through that very town in Chiapas, Mexico. Those guys in Carpentersville are having large homes built here with the proceeds of their work in the USA. Only grandparents and grandchildren live there, a few wives. Those men plan to return to the town.
If the USA had any sense, which it doesn’t, of course, it would issue worker visas to Mexicans, so they can do the stoop labour, working in the fields, as they once did decades ago, following the harvest north from California to the apple orchards of Minnesota — then allowing them to return when the work was done. It would work out wonderfully for everyone: American farmers, Mexican workers.Report
Farmers around here do that routinely.
Learned a lot about growing tomatoes from
their Mexican workers too.Report
Is it your premise that labor mobility plays a significant role in the current situation of high unemployment? If so, this should make you popular among conservatives, who think people are just too lazy to move; and why should they when they live such a high life on food stamps and generous unemployment benefits and fraudulent disability claims? And of course the standard policy prescription here, as always, is to cut off such benefits, in this case so people will move to take any job they can find.
Sadly for this story, though, the only way it works is if a surplus of workers somewhere is matched with a shortage somewhere else. We don’t find this anywhere (and no, North Dakota isn’t populated enough to count) so the whole story falls apart.
So no, the problem is slack demand, not labor mobility.Report
My premise doesn’t really address the situation in the US in any sense at all. I would argue that the ease of capital mobility over labor mobility does make it easier for capital to move jobs abroad more quickly than labor can move to take advantage of it, but I’m also of the belief that a more equal situation between labor and capital would probably dramatically raise the cost of labor globally, because my suspicion is that if even unskilled laborers could relocate to states with favorable labor conditions, they’d do so at the drop of a hat. (And therefore force anyone needing labor intensive industries or services to pay that prevailing wage.)Report
It makes little difference whether we’re talking about international or interstate commerce; the only way to posit significant gains from increased labor mobility is to match labor surpluses with labor shortages. Then you have to build a story in which improving labor mobility causes a significant net gain for the workers, which is quite hard to do.
In any case, you’re working against significant language and cultural barriers to your goal. Consider the EU, where legal barriers to labor mobility are low, but differences in unemployment rates remain quite high. Not many Greek workers are going to move to Germany for a job. So really, even if lack of labor mobility is a significant part of the problem, it’s not one amenable to direct solutions.Report
Touche. I’ll have to think about a reply to this one.Report
I spent almost a decade moving factories from Japan to the USA. These days, it’s tax rebates and incentives which move factories. Screwdriver factories are easily disassembled and moved: you pit these states and municipalities against each other, take the best grab bag of freebies, pour a slab of concrete, run the factory until the minute the tax incentives disappear — then move the factory again.
I can show you the slabs of concrete in Norcross Georgia.Report
The best way to protect labor and the rights of ordinary people in an age of capital mobility is not through stateless borders, which is impossible to achieve for various reasons, but through a global unionization. The reason why capital flight occurs is because companies can go to countries with cheaper workers that are less protecting by organized labor. If mass unionization was allowed and unions across the world cooperated with each other on wages and work standards than the problems of capital mobility and the lack of labor mobility would at least partly be solved. There needs to be international standards in wages and working conditions.Report
Oh I don’t necessarily disagree with that, but I’m not sure if that’s more or less feasible than open borders and stateless society.Report
I’d argue thats its much more feasible than open borders and a stateless society. I think that while open borders and stateless society would provide short term relief for most people but long term pain. To protect ordinary people we need something that is just as powerful as a corporation. This has been traditionally been a state. Even in the heyday of organized power, it was government and the state that brought corporations to heel and made them obey the law for the common good. Without a state, corporations are going to be too powerful and be able to cause all sorts of abuses. It might not be Shadow Run bad but its going to be awful.
The other things about open borders is that a lot of people aren’t going to have the resources or ability to move because of various social obligations like caring for children or elderly relatives. We must also seek to preserve the family unity. We do not want a situation where fathers go off from work and are separated from the wives and children for months or years or any sort of similar arrangement. Kids need to be educated. Without a global language, they need schools in the language that they know. They can’t really follow their parents easily. A global labor movement would be better this way. Make labor rights the same everywhere and capital will see less benefit in being highly mobile.
Finally, most people need a group that they could associate with thats bigger than their family and neighborhood but smaller than the entire world. Religious, ethnic, and class solidarity as created problems in the past but so has the utopian attempts at universalism. People are going to form groups, its probably a necessary for humans to do so. Its best to acknowledge this.Report
Open borders and stateless society are not the same thing, nor will they of necessity occur in conjunction with each other. “And/or” would be a better formulation.Report
Moreso. It’s already been testdriven.
(like flashmobs. useful proof of concepts come easy)Report
Workers of the world, unite!
I’m hugely in favour of this if it can be achieved.Report
What should they do after they unite?Report
@roger, the same thing that past labor movements thought for decent wages, good working conditions, and a say in how things are run on the factory floor.Report
What if six billion people don’t agree or have the same values? Let’s say some want shorter hours and cleaner bathrooms and others want long hours and would rather have more take home pay (considering tradeoffs)?
What about that significant portion of workers who dislike unions on principle?Report
Also, what if the union workers in the developed world argue that the union workers in the developing world should demand higher wages, spinning the argument as being good for third-world labor, but really intent on pricing third-world workers out of the labor market, to the advantage of workers in the developed world?
Note that I don’t have anything against proposing international labor standards. It’s good to set goals and create benchmarks so we can push for and clearly measure progress. I’m just dubious that proletarian unity will overcome national and self-interest in this era anymore than it did under communism, which explicitly proclaimed that goal. People are still people.
But promulgating labor standards similarly to the way ISO promulgates business practice standards, or ANSI promulgates safety standards? I’m all for that so long as it doesn’t become a hidden means of discriminating against third-world labor in the guise of helping it.Report
Roger,
then you’re into anything done by committee. who’s got the power, etc. etc.
I do not support people using unions as a tool for imperialism. There, I said it.Report
Roger, what to demand will be worked out within unions. I really don’t understand where the trope that workers in developing countries are happy about take low-paying jobs in bad working conditions comes from. History and recent events show otherwise. The labor started soon after industralization appeared in the West. The recent problems in Bangledish and the suicides that occured in Chinese factories show that there is a real desire for labor rights in the developing world to.Report
Yes, though I would include environmental conditions. It’s really easy to dump polluting industries in poverty-ridden neighborhoods.Report
It’s not that simple. Even if labour is cheap, multinationals won’t go there unless they can be guaranteed some level of stability. It’s easy to get this right. Straight out of Hobbes and from Confucian thought, long before.
The measure of a nation is the happiness of its citizens. Nobody wants to leave home. Capitalism depends on some markup on the price of labour, this is called Exploitation and it isn’t always a bad thing. As long as a nation cleans itself up, gets rid of corruption, yes, I suppose tolerating some trade unionism is a good thing, though I’d always favour some scheme where management was reasonably enlightened and worked in concert with the workers and not against them — capital does flee.
But where does it flee — and why? What goals does it pursue? These days, Africa’s the new frontier. Well run nations like Rwanda are doing quite well. Yes, they’re authoritarian but they’re enriching the people and running a reasonably upright government, not some slovenly den of corruption where nobody benefits. Or some wreck like Egypt, with rampant illiteracy and no infrastructure.
Nation states are markets, too. Capital will move to the most inviting target.Report
Literacy rate: Egypt 72%, Rwanda 71%
GDP per capita: Egypt $1600, Rwanda $390
GDP per capita growth, 2002-2010: Egypt $1170 –> $1600 (27%), Rwanda $243 –> $290 (16%)
Poverty rate ( % people with less than $2/day, purchasing power parity): Egypt 15.4%, Rwanda 82.4%. Compare the Rwanda rate to the GDP per capita and you’ll get a sense of the extreme level of wealth concentration in the country.
Your contention about “doing quite well” and “enriching the people” does not appear strongly supported, nor does the idea that Egypt’s a “wreck” in comparison. Just providing a little perspective.Report
Egyptian literacy is only at 72%? I’d thought it would be a lot higher. Literate people are much more easier to propagandize than illiterate people and since Nasser, Egypt’s government depended a lot on propagandizing its citizens.Report
Egypt’s a wreck. There are no meaningful statistics since most of the economy is completely informal. Capital formation is a mess. Illiteracy is a problem and it’s getting worse.Report
Adding on to Katherine MW, Transparency.org ranks Rwanda and Egypt nearly identically in terms of corruption.Report
Blaise – if most of the Egyptian economy is informal, it may well be better off than the GDP statistics show, since GDP measures often leave out much of the informal economy.
Lee – Egypt’s low literacy rate has a fair bit to do with gender disparity (63.5% of women are literate, 80% of men). Fortunately literacy is rising and the gender gap is shrinking, though it’s still present (84.3% of young [age 18-24] women are literate compared to 90.6% of young men).Report
Huh? An informal economy, by definition, doesn’t put its money in the bank. Drug dealers. Black markets. Fencing of stolen goods. That sort of thing. I’m sure someone will try to tell me drug dealing could be made into a regulated market — in which case it would not be part of the informal economy.
Informal economies are a sign a nation state isn’t working. It’s doing something wrong. No hidden good in an informal economy. The larger a nation’s informal economy, the worse, not the better it is.
All this trying to compare Rwanda to Egypt — there’s a specific reason I chose these two countries. In Rwanda, in recent memory, people were eating each other. There was no effective government. Rwanda is getting capital investment and Egypt isn’t — because that’s changing. And if Egypt doesn’t get its act together, the people will start eating each other there, too. Bombing churches is not good for the economy, It sets capital flight in motion — away from Egypt and to other places.
Mine being insufficient, perhaps someone else has an explanation for why Rwanda can get loans and Egypt goes begging.Report
perhaps someone else has an explanation for why Rwanda can get loans and Egypt goes begging.
Could you supply us with evidence, so we know this is a real thing, before we try to find explanations for it?Report
Well, sure.
International development expert, Paul Collier, author of “The Bottom Billion,” called the Rwandan statistics “deeply impressive” and said that Rwanda had pulled off a rare “hat trick” of rapid growth, sharp poverty reduction and reduced inequality.
“This should be happening everywhere in Africa,” Collier said, at the release of the report. “Instead, it’s happening nowhere else.”
Now don’t let me stand in the way of you providing that Alternate Explanation.Report
Thank you. That is interesting, and a positive development in a place that has great need of positive developments.. My off-the-cuff guess would be simple political stability, Rwanda having stabilized–compared to the ’90s–and Egypt being a little less than stable right now. But I won’t pretend that’s anything more than an off-the-cuff guess. A better analysis would require looking more deeply into what’s going on in Rwanda and comparing its stability and receipt of loans and investment with that of its neighbors.Report
Rwanda isn’t perfect. It’s still run by a horrid little autocracy. But Rwanda is a strange sort of proof, one which starts with a Zero in the sequence, not One. Rwanda was shattered. Zero. Nothing. It’s rising where others are failing. And yes, the parallels with Egypt are exact. Since independence, Egypt has been controlled by statist maniacs who’ve wrecked the economy. Food subsidies, a parasitic military, every stupid thing you can do to a modern nation, the Egyptians did it.
Rwanda’s example can’t be duplicated elsewhere — but many of its principles can be recycled elsewhere. For all this harrumphing about Capital Flight and Mobility of Peoples — all very interesting to be sure. But completely irrelevant. Money and jobs move to more promising locations. Certain principles and equations can be applied to these transits. If people are moving from A to B, that’s proof something either very, very wrong with A, or nobody was at the destination point B for whatever reason.Report
That would be great news if it was correct, Blaise.
Poverty: The proportion of the population making $1.25/day or less (purchasing power parity), i.e. in extreme poverty, was 63.3% in 1985 and is now 63.2%.
Inequality: Rwanda’s Gini coefficient (measuring inequality) rose from 29 in 1985 to 51.5 in 2000, and remained at 51 in 2011.
Growth has been rapid in the mid-to-late 2000s, but it hasn’t been matched by reduction of either poverty or inequality in the long run. You only see poverty reduction if you measure from the point when things were worst (the mid-90s to early 2000s) rather than looking at the fact that conditions got worse in the ’80s and ’90s and we’re only now seeing some recovery from the damage done then. Inequality isn’t falling even if you look at just the short term, and has risen massively in the long run.
There’s been a lot of talk about emerging Africa, but when you look at conditions in many countries a lot of it has to do with GDP growth heavily concentrated at the top combined with comparatively little movement on living conditions or poverty reduction, and rising inequality. That’s not sustainable; it’s not even development, if you look at development as a process of improving people’s lives and expanding their opportunities rather than simply one of GDP growth.Report
This post is about capital flight. Rwanda is attracting capital where other regimes are not. If Rwanda is to get out of poverty, it will not do so by acting like other stupid nations who can’t. Like Haiti, which is so corrupt it can’t see straight. Bonne chance, là-bas.
You know perfectly well Rwanda is on its way up. I’m a Liberal. I’m not an idiot. Anyone who strives for Equality will find every bowl empty.Report
There’s been a lot of talk about emerging Africa, but when you look at conditions in many countries a lot of it has to do with GDP growth heavily concentrated at the top combined with comparatively little movement on living conditions or poverty reduction, and rising inequality
You mean like England in 1800? It’s really a shame what that led to.
I really should drop this now, and maybe I will, but I really think you need some more study in economic history, Katherine.Report
But unions are dying as it is, and I don’t expect that trend to reverse. And how on earth would global labour standards even work?Report
And how on earth would global labour standards even work?
Via mechanisms similar to those used to set and enforce global standards in other domains. So using international organizations like the ILO for instance. Punitive measures are underdeveloped at present, but in terms of setting standards a lot of work has already been done in that domain (ILO conventions).
There’s also the possibility of explicitly including side-agreements on labor (and the environment) in the course of negotiating free trade agreements (NAFTA had parallel agreements on labor and the environment for instance; the EU is probably the most thoroughgoing kind of multi-layering that was constructed upon free trade, in coal and steel, initially).Report
I do. We need modern unions, just as globalized as the industries they’re in.
It’s not been a priority (America needs to get significantly less crazy),
but that doesn’t mean it’s not being worked on.Report
Creon,
Thanks for sharing that. Aren’t you worried that wealthier countries with different tradeoffs would use a mechanism like this to force their standards on less developed countries? In other words that the net effect would be to eliminate the potential efficiencies and comparative advantages of poor nations?
How would these conventions be monitored and set in such a way that avoided privileging advanced economies?Report
Roger and Creon,
A similar case in point has been the U.S.’s use of environmental laws to de facto discriminate against fishing industries in the developing world, that are much less capitalized, more labor intensive, and unable to afford to shift to the type of equipment demanded by U.S. environmental laws. The intent on the part of the U.S. government wasn’t necessarily to discriminate, but the demands by the U.S. fishing industry that other countries’ catch be excluded from U.S. markets certainly was.
But the free trade laws did put some constraints on the U.S.’s ability to discriminate this way, and one of the outcomes has been that the U.S. has helped out with some modernization of other countries’ fleets.
So there’s a mixed bag, however you look at it. Higher standards used to screw over poorer countries, but also pressure to even the playing field by helping those countries’ industry to develop.Report
Thanks, James.Report
Aren’t you worried that wealthier countries with different tradeoffs would use a mechanism like this to force their standards on less developed countries?
In terms of how states are represented in the ILO, developing nations outnumber developed nations. In terms of negotiating free trade agreements, developing nations can/have follow the strategy of banding together in negotiating with major trading partners to attempt to even out the power differential when negotiating with major global economies.
net effect would be to eliminate the potential efficiencies and comparative advantages of poor nations?
Just to be clear, the comparative advantage in this instance is abusing workers and environmental degradation. I highly suspect these as bases to ground development. Here are the titles of some of the conventions the ILO lists as Fundamental: Abolition of Forced Labor Convention, Freedom of Association and Protection of the Right to Organise Convention, Worst Forms of Child Labor Convention. The technical conventions get a lot more into territory that might rise concerns about diminished comparative advantage, but I’d point to the carve outs and exceptions that’ve been negotiated. Skimming through the Night Work of Young Persons (Industry) Convention (1919), I see carve outs at least for India and Japan regarding age limits and definitions. Skimming the Work in Fishing Convention (2007, not yet in force), I see carve outs regarding local authorities ability to make exceptions and “progressive implementation” language that gives leeway to developing countries. If anything, given the facts of working conditions in the developing world, the ILO’s work has been insufficiently protective of workers.
How would these conventions be monitored and set in such a way that avoided privileging advanced economies?
Unfortunately advanced economies don’t want for labor abuses. The abuses may just occur in different quantities, or in different domains of concern for workers. Anti-discrimination comes to mind as an area of outstanding concern for the advanced economies.Report
@creon-critic
Why not? They have been for every country that has actually developed. Think about England in the 19th Century.Report
As I have written to Patrick, to the extent the labour standards represent liberalization and economic freedom, then I support them. To the extent they privilege first world labor, I reject them.
I do not trust partial developed-world people to decide on the pollution or work safety standards of those in the developing world, and neither do many of those in the developing world.
Thus it makes sense to suggest standards and encourage and persuade other nations to accept them. But the choice must be theirs.Report
If those standards came with money attached like say a lot of the choices for capital based governance changes do, they’d probably make different choices. Letting just one side of the transaction set all the rules, particularly when they have a substantially larger amount of influence than the other is dangerous in any situation.Report
James,
ahh, but what does capitalism do?
it gets BETTER at things!
Now only women get hired, in so far as that is possible.
They bitch less, strike less, are more subject to blackmail
and other threats of force.Report
@james-k
Why not? They have been for every country that has actually developed.
I wasn’t clear. I highly suspect them because they, abuse of workers and environmental degradation, are wrong. I’m not contesting that countries have used these means to develop. To me, that evidence is unreasonably used as a get out of jail free card when scrutinizing pathways to development (scrutiny for compliance with universal standards of human dignity for instance). Also, how does one tradeoff environmental degradation (especially the irreversible kind) against the interests of future generations? Desertifcation, deforestation, extinction and endangerment of thousands of species, I doubt future generations will thank us for these. What GDP per capita figure can justify that kind of environmental damage?
Think about England in the 19th Century.
Precisely. I do. Oliver Twist does not need Rajesh Twist, Mohammed Twist, and Twist Wei for company.Report
Good discussion all. I found wisdom in all the above comments.Report
@creon-critic
And that’s your problem. Your “universal” standards of human dignity are themselves the product of a society wealthy enough to afford them. The thing about dignity is that you can’t eat it. When labour productivity is low the returns to labour are also low, and that can mean choosing between your dignity and your next meal. This is of course an entirely unacceptable state of affairs, but it is the natural state of humanity, and I am loath to interfere in the one thing we know of that can bring this state to an end.
I have no doubt that our descendants will wonder at the indignities we subject ourselves to in the name of steady pay, but if they could reach back in time and insist we (for instance) work no more than 4 hours a day, I doubt we’d thank them.Report
@james-k
Your “universal” standards of human dignity are themselves the product of a society wealthy enough to afford them.
Looking at the ratifications for human rights conventions and (fundamental) ILO conventions I see a lot of societies that are not wealthy represented. Furthermore, those societies were represented during the drafting of these conventions. So no, apparently many nations, both rich and poor, can agree on the import of human dignity and further agree as to the ideas to take forward about what human dignity means.
The thing about dignity is that you can’t eat it.
Yes, dignity is inedible. That doesn’t reduce its importance one jot. You can be killed, poisoned, or maimed for lack human dignity. Events like the Triangle Shirtwaist Factory fire come to mind. We should seriously consider why that fire has echoes in the developing world and what steps can be taken to prevent disasters like that from recurring. So yes, mandatory 4 hour workday laws from the future wouldn’t be so helpful. That doesn’t obviate the need to better fire safety so workers don’t repeatedly burn to death. Fire safety isn’t some yet-to-be invented technology from the future. It is a here-and-now thing that prevents disasters on the order of Triangle Shirtwaist.
It is precisely because the choice between dignity and the next meal is so awful that we, those in a privileged position compared to developing world factory workers, need to consider what interventions can be made to enhance the safety/dignity/well-being of those who are vulnerable to abuses. The argument could be made, not saying you are suggesting this, the status quo is acceptable and everything is currently structured in a way that pays maximum attention to the dignity of the vulnerable while accommodating the need for economic development. But even if that’s the answer, the questions, the scrutiny, is still well worth the effort.
I am loath to interfere in the one thing we know of that can bring this state to an end.
Huge swathes of the current structure of global trade today are constructs of states. Intellectual property, anti-dumping, regulating the transfer of dual use technologies, agricultural subsidies… the fact is that given the state system, the global trade system is defined by interference. There is interference throughout that defines the contours of what global trade and development currently look like. In my view, accounting for the human dignity of workers and having a care for the environment should be (a bigger) part of that picture. Basically, I don’t see a route for non-interference, the global trade (and development) system is already the product of many, many conscious policy choices. It is unclear to me that the pathways to development must mirror past brutality.Report
James,
Are you willing to volunteer to feed a sex slave?
After all, if someone’s dad is willing to give you a wife
(despite her being less than ten at the time…)
Yes, societies do have the morals that they can afford.
When people wish to have higher morals than their society,
they sometimes resort to giving their children away.Report
Kos had an article about one of the German car companies, whose entire union was raging to get their TN plant unionized. Likely to happen too, despite all the bawling by American Officials.Report
In what way is mass unionization not allowed? The barriers to global labor standards are much more logistical and ideological (some people on both the worker and the employer side just don’t want to be part of a union) than because of any specific set of prohibitions.
Also, the hope for one big union (or even one big shop) seems to completely belie the reality that much of the success that labor unions had in post WWII America come precisely from the existence state borders and not in spite of them.
Capital and labor move for the same reason: arbitrage. Remove that and we will all end up poorer.Report
When a nation passes laws against the formation of trade unions and tolerates violence when people do try to organise them, that just might constitute Not Allowing by some people’s lights, if not yours. Pretty sure not yours. And those nations get exactly what they deserve, the crappiest jobs.
If the trade union model is screwed up, and it is, to a large extent, it’s because the nation’s economy is screwed up. But in other nations, such as Germany, Japan and the like, have healthy worker-owner relations, it simply isn’t a problem.
The USA has busted the trade unions, for better or worse. It’s been replaced by other market distortions, where taxpayer money funds the creation of Beggar Thy Neighbour enterprise zones. Thanks so much, union busters. Now the screwdriver factory has wheels. It goes where the state governments are the stupidest and greediest.Report
@blaisep
Sure, union organizing is either outright illegal or made extremely difficult in lots of countries, but it’s also perfectly allowable in lots more.
So, why hasn’t one big union taken hold across those countries with strong union movements? Because strong unions in developed economies use state borders to keep industries where they are and help exclude imports from the domestic market, thereby extracting higher wages for domestic workers.
The effect of one big union in a stateless world would be an acceleration of convergence. In other words, wages and conditions for the poorest workers would increase, but it would also decrease for workers in the developed world. To what extent those two movements would offset each other and whether it would increase or decrease total profit to capital is an empirical question.Report
Let’s not po-mouth the state of the trade union these days, as if everything was A-OK. We both know it’s not true. It’s just irritating to be queried on counterfactuals, why hasn’t one big union taken over — the experiment was tried. It was called the Communist Revolution. It failed, if memory serves.
And mercantilism has been dead and buried all these many years. Coupla centuries at least. The nation state is with us, may always be with us, while mankind deludes itself into reifying the State. That’s what I find so goddamn pathetic about all such talk — as if the State was anything more than the people who comprise it and the constitutions which give them any mandate.
And it’s not an empirical question. I wish people who use terms like Empirical understood what’s happend in the last few centuries of philosophy, especially the Pin of Polyani popping all the empirical balloons in the room. The tests we compose to validate our theories are not quite as objective as we say they are.
Capitalism’s great. Hasn’t solved any more problems than it’s created, though. Socialism, to varying degrees, represents the triumph of reason in state policies. Socialism and Capitalism can dance like Fred Astaire and Ginger Rogers. To achieve this level of facility requires a certain amount of training, mostly of the sort where you know where your partner’s feet are, so you don’t tread on them.Report
Nob,
Glad you brought this issue up again. Do you see the mobility of capital as a problem? Or is it a good thing overall which creates some problems because capital mobility has raced ahead of labor?
Said another way, assuming for arguments sake that we are unable to get more labor mobility, would you recommend less capital mobility, and if so why?Report
Said another way, assuming for arguments sake that we are unable to get more labor mobility, would you recommend less capital mobility, and if so why?
Generally speaking, I’m less inclined to make capital less mobile than I am to compensate for the lack of labor mobility through progressive tax policy and labor subsidies, but that comes with its own problems.
I just happen to think those problems are less worse.Report
Thanks Patrick.
By progressive taxes are you suggesting more taxes on capital? The problem here is that capital is mobile and will find lowest taxes most easily. Taxes on higher skilled labor could avoid much of this of course.
Are you suggesting redistribution of these progressive taxes and labor subsidies across borders? That our aid no longer go to poor Americans, but rather to people in Bangladesh? The reason I ask, is that labor subsidies for first world advantaged workers would quite possibly make global inequality even worse. You would effectively be subsidizing advantaged first world labor at the expense of third world labor…no?
I am also interested in any others’ opinions. Are we pushing for restrictions on capital, or a lowering of barriers on mobility of labor? I certainly agree with the latter.Report
By progressive taxes are you suggesting more taxes on capital? The problem here is that capital is mobile and will find lowest taxes most easily. Taxes on higher skilled labor could avoid much of this of course.
Yes, capital is fairly mobile and pinning the sucker down to tax it is problematic. We have tax evasion on capital when our capital gains rate is relatively miniscule, though; I’m not sure where the tradeoff point is, but I imagine it’s somewhere north of where our rate is now. We would encourage more tax evasion if we bumped up the rate 10%, but I’m not sure how much.
I imagine our labyrinthine tax code has more to do with hiding income than anything else.
Are you suggesting redistribution of these progressive taxes and labor subsidies across borders? That our aid no longer go to poor Americans, but rather to people in Bangladesh?
To some degree. Still working out how that could work in my head.
The reason I ask, is that labor subsidies for first world advantaged workers would quite possibly make global inequality even worse. You would effectively be subsidizing advantaged first world labor at the expense of third world labor…no?
Well, this whole thing is tricky, right? If you push on this lever here without turning that dial over there and toggling those five switches across the room all at the same time, the thing is going to blow up, sure. No argument there.
But “subsidizing labor” can be expressed all sorts of different ways. Some countries don’t allow unions. Some have terrible occupational safety laws. Some countries have universal health care, and some shove that cost onto businesses. Some countries offer job retraining, some don’t. Some have worker visas, some don’t.
I would expect that a really solid, effective attempt to compensate for labor immobility would have to be hammered out on a small cases basis. You can’t treat Mexico, the U.S., and Canada as the same place; that’s obvious nonsense. You can’t level a playing field just by saying “we’ll all play by these rules” if the rules don’t compensate for the fact that one team plays on astroturf, one plays on grass, and the third plays on tarmac.
I am also interested in any others’ opinions. Are we pushing for restrictions on capital, or a lowering of barriers on mobility of labor? I certainly agree with the latter.
In a perfect world, I’d agree with the second in a heartbeat, but I just don’t see how effective that approach can be, in the real world. As pointed out above, worker mobility laws in the EU are pretty liberal, but Greeks don’t pack up and leave home because the unemployment rate in Germany is a lot lower than the unemployment rate at home. People’s preferences aren’t all expressible in their employment choices. In order to make labor as mobile as capital you’d probably have to cross the line from “I’m making it easier for you to move” past “I’m encouraging you to move” and all the way to “I’m putting serious disincentives in place for you to stay, if you’re this type of labor… you should go over there.”
Now, maybe labor doesn’t need to be *as* mobile as capital, just more mobile than it is now (probably not).
But I highly suspect that the sweet spot between capital mobility and labor mobility is far away from where we are now, and I don’t see how we can make labor mobile *enough* to get close enough to the sweet spot. But that’s based on gut feel, not any sort of real analysis of global labor movement and capital markets.Report
There’s a law against deer baiting in Wisconsin. The problem isn’t taxation. It’s return on investment. People still do business in high tax zones — if that’s where they must go to make the money. But if you create a no-tax zone, or in the case of some of these idiot states, actually subsidise industry — possibly the stupidest thing I’ve ever seen, Louisiana is currently in a paroxysm of subsidising the film industry — you get the worst of both worlds. People will come spend money in your state but they won’t stay. They have no other reason to stay than your state subsidy.Report
Insightful comments, Patrick. Thanks.
I am not sure what you are trying to accomplish with taxing capital (other than just raising revenue). It seems any tax increase would have the opposite effect you desire — in effect pushing capital elsewhere and reducing economic efficiency.
“Well, this whole thing is tricky, right? If you push on this lever here without turning that dial over there and toggling those five switches across the room all at the same time, the thing is going to blow up, sure. No argument there.”
Indeed, this is one of the major arguments against too much dependence on top down planning of complex adaptive systems, especially where politics is involved. We end up with political parties recommending their dial irregardless of the effects. We end up getting more or less pressure on a dial based upon political happenstance and power.
“But “subsidizing labor” can be expressed all sorts of different ways. Some countries don’t allow unions. Some have terrible occupational safety laws. Some countries have universal health care, and some shove that cost onto businesses. Some countries offer job retraining, some don’t. Some have worker visas, some don’t.”
I can see how to recommend extending economic or political liberalization everywhere. The freedom to join a union, quit a job, acquire contraceptives, or own property or cross borders. What we cannot practically do is require free people to pay for something which costs money, as they either do not have the money, or they may disagree with our priorities (if they have freedom, money and they agree they, would supposedly already have it).
The concern thus becomes one of forcing our values upon others, especially in ways which sound noble but effectively undermine poor people’s comparative advantage. I guess we can recommend best practices and all, but that we should leave adoption up to the actual people living under them.
“…. I highly suspect that the sweet spot between capital mobility and labor mobility is far away from where we are now, and I don’t see how we can make labor mobile *enough* to get close enough to the sweet spot. But that’s based on gut feel, not any sort of real analysis of global labor movement and capital markets.”
My gut feel is that mobility and efficiency of both factors is in general a good thing.* In general, I think labor actually benefits from this capital mobility more than it is harmed. Over time higher returns to capital would tend to lead to more money going into it, thus more factories, more competing producers and more jobs and higher returns to labor. Over time, the balance between the two will re-stabilize with substantially higher average incomes. The system will self adjust to a great extent. Indeed I think too much interference with the dials and switches will more likely cause more harm than good.
The billion people pulled out of poverty in the last generation were pulled out by this mobile capital. It wasn’t the problem. On net, it was the solution.
* though this partially depends upon also pushing for economic liberalization as above!Report
I am not sure what you are trying to accomplish with taxing capital (other than just raising revenue). It seems any tax increase would have the opposite effect you desire — in effect pushing capital elsewhere and reducing economic efficiency.
Three things can be done by changing the capital gains tax rate. First, you cut down on capital liquidity (if you believe that capital liquidity is a problem, relative to labor liquidity). Second, you raise revenue for whatever at-home labor subsidization you find necessary (being at heart an economic conservative, I prefer paying for stuff as I go than trying to drum up revenue later). Third, you change the long term incentive rewards for labor over investment (right now, I think we over-incentivize investment over labor, but that’s me).
Indeed, this is one of the major arguments against too much dependence on top down planning of complex adaptive systems, especially where politics is involved.
Oh, yeah. But this is a design concern, not a deal-stopper (again, for me). As long as your top-down framework isn’t directly contraindicated by current political will (for example, “let’s privatize Social Security!” is a political nonstarter right now, whether or not it’s a good idea) and you’re not significantly hampering your ability to change (which is more often than not a bigger problem with top-down designs than anything else, in my opinion – they’re over-engineered at the wrong layer of abstraction and thus too inflexible), you can get coverage advantages with top-down designs that you can’t get with bottom-up ones that offset their efficiency disadvantage.
What we cannot practically do is require free people to pay for something which costs money, as they either do not have the money, or they may disagree with our priorities (if they have freedom, money and they agree they, would supposedly already have it).
If they don’t have the money, they don’t have the money. But we require people to pay for stuff all the time. We can leverage this even at the international level to some extent.
The concern thus becomes one of forcing our values upon others, especially in ways which sound noble but effectively undermine poor people’s comparative advantage. I guess we can recommend best practices and all, but that we should leave adoption up to the actual people living under them.
History is replete with stories of the well-meaning liberal (or conservative) person who relies upon the mechanism of the state designing a system with unintended consequences, sure. But not all unintended consequences are bad, and as long as you’re open to changing the system temporal spikes in unintended consequences aren’t necessarily a trade-off that isn’t worth making for long-term improvement.
My idea of “best practices” is less “do things this way or else” and more along the lines of, “We recommend that you do things this way, if you choose not to do them this way, that’s fine, but then you have to tell us what you’re doing that isn’t ‘this way’.” If Brazil wants to spray DDT on their crops because malaria is a problem, well, that’s okay with me, but then if you’re shipping foodstuffs into the U.S. it’s big red label time.
In general, I think labor actually benefits from this capital mobility more than it is harmed.
I think it is too.
The billion people pulled out of poverty in the last generation were pulled out by this mobile capital.
And that’s important to remember. Getting people out of poverty is important. But that’s a first step, where do we go from there is important too.
The other question is, “Well, okay, labor internationally has benefited quite a bit from capital liquidity. But have the holders of the capital also benefited, and to what degree is the difference in benefit notable?”
And judging on where the liquid capital is coming from (mostly us) and where the return on that capital is going (almost entirely a very small set of people), and the income/wealth disparity in the U.S., I think it’s pretty obviously the case that we’ve lifted a billion people out of crushing poverty worldwide (yay!) at a cost of severely damaging our own upward mobility (boo!) particularly for the lower and middle classes (double boo!) while letting all of the benefits of that mutual exchange go to capital holders.
Hey, to some extent, they’re providing the money, they deserve most of the benefit. But the winners in this exchange are “the global poor” and “the local very rich”. That’s a lot of benefactors, to be sure. But I don’t think it’s sustainable for our own local economy, really.Report
@roger
I am not sure what you are trying to accomplish with taxing capital (other than just raising revenue). It seems any tax increase would have the opposite effect you desire — in effect pushing capital elsewhere and reducing economic efficiency.
I hear this claim a lot. I am not sure it’s substantiated; however, particularly in capital that’s actually working. It seems more a problem of idle money.Report
@roger
Go ahead and tax capital all you like. 75% of it is dumb money anyway.Report
Oh, and awesome graphic!Report
One question that might be worth exploring is: What policies does Mexico have that makes it so easy for Mexicans to up and leave for the US?Report
Lack of a law against leaving and economic policies that make leaving attractive. It really is that simple. Mexico likes the foreign currency that’s sent back by workers who might otherwise be unemployed, it boosts local economies.
Although with a weakened U.S. economy and a strengthening Mexican economy, many fewer are coming these days.Report
I’d say it’s less policy than geography – you don’t need to catch a flight to get to the United States, just find a way to get across the border. For poor people who can’t afford an airline flight halfway around the world, that would make a big difference.Report
Does equality of mobility matter? It’s not like capital mobility is just some scheme for holders of capital to screw over labor–it’s been a huge boon for workers in historically capital-poor countries.
The important thing is to achieve a more even distribution of capital over the world’s workers, rather than having it concentrated in a handful of wealthy countries. Whether this is achieved with labor mobility or capital mobility is less important than that at least one be mobile.
Now, labor mobility is probably better than capital mobility if you have to pick one, since labor mobility tends to result in workers moving to high-capital countries with relatively liberal economic regimes (to say nothing of the personal freedom angle), whereas capital mobility tends to move capital to low-capital countries with illiberal regimes. And having both would be even better. But I don’t think that equality as such is important at all.
Also, I think what most people have in mind when you talk about equalizing capital and labor mobility is that capital is screwing labor over, and that increased labor mobility will finally allow us to get ours. Which is the exact opposite of what would happen. Capital mobility has eroded some of the privileges of first-world workers, and labor mobility would finish the job. Which is great, if you’re a cosmopolitan or a third-world worker, but if you’re a first-world worker who just wants higher wages for yourself, labor mobility is the last thing you want.Report
Capital mobility is screwing workers over. It means that factories and work move extremely quickly and can be extremely unstable – an industry can stay in a poor country only so long as the workers are making starvation wages, and leave immediately if labour conditions look like improving in any way (this has happened in multiple attempts to create a Haitian textile industry). If capital is less mobile – if it’s more expensive to relocate – then once it’s established in a country it has reason to stick around even when wages rise somewhat, enabling people in that country to gain decent jobs after a while.
If capital has complete mobility and labour doesn’t, then capital and industry continuous moves to countries that allow them to pay starvation wages, build factories that collapse on and kill their workers, and dump toxic waste that kills both people and the environment. That doesn’t improve people’s lives – and often makes them worse.Report
@katherinemw
A barrier to exit is a barrier to entry. The most likely result of reducing capital mobility is that those factories are never built.Report
Insofar as the USA plays Beggar Thy Neighbour, each state and municipality contending for these jobs, the Screwdriver Factories will continue to take advantage of their greed and shortsightedness.
There are three sorts of nations in the world. Sellers, Makers and Thinkers. Sellers are at the bottom of the heap. They sell their lumber to the Maker, who has the tools to turn it into a chair. The Maker sells it to the Thinker, who sits in the chair and designs the next turret lathe.
The Thinker stays on top of the heap by technology transfer. Soon enough, the Seller has enough money to buy a lathe (probably second hand from a Maker) and add value by turning his own lumber into chairs. Thus do Sellers become Makers.
Makers steal technology from Thinkers, if they can. Some Makers are awfully ingenious about this process, demanding the Thinker societies give them access to everything in the Making of Maker Tools. The Thinkers, in response, don’t take their best tech overseas, preferring to keep high end Maker jobs in their own nation. The Maker just hires better hackers and gets into the Thinker’s servers — and steals what he wants.
Of course low-end manufacturing jobs are going to move around. They roll downhill, if they can, in accordance with basic capitalism. But if you’ve ever been a Maker, you never go back to just being a Seller again. You have an advantage on the guy who’s getting your old low-end job. You have Maker skills, Maker tools.
And let’s get this straight, too. Those low end jobs going from Country A to Country B? That only means Country A is moving up the ranks. Because if your nation has any sense, it gets out there and attracts better-paying jobs to replace the low-end jobs. If your nation plays the game reasonably well, it dumps all the low cards it can and draws again. Don’t hang onto a low-end job. Get the promotion, if you can.
Those Sellers and Makers, they’ll do reasonably well. If the world was not run by cretins and dictators, capitalism would have long since eliminated most of these disparities.
The guy who’s most in danger is the Thinker. If he doesn’t have a market for his Thinker Tools, if someone’s made the proverbial Better Mousetrap, he has to slide back down to Maker. Perversely, this makes many Stupid People very happy, aw jeez, lookit that, a new factory going up. American Jobs. No they’re bloody well not. That capitalism at work, putting the profits in someone else’s pockets.Report
Now, labor mobility is probably better than capital mobility if you have to pick one, since labor mobility tends to result in workers moving to high-capital countries with relatively liberal economic regimes (to say nothing of the personal freedom angle), whereas capital mobility tends to move capital to low-capital countries with illiberal regimes.
This is an important observation.
And having both would be even better. But I don’t think that equality as such is important at all.
I agree, it’s not a question of balancing scales, it’s a related rates problem.Report
A barrier to exit is a barrier to entry. The most likely result of reducing capital mobility is that those factories are never built.
And that’s fine, and workers are not made better off by the existence of a factory that will disappear in six months when they find a place where they can pay workers $.60 a day instead of $0.75, when the minimum amount needed to feed and house oneself and one’s family is at least a few dollars. They do nothing to either improve people’s lives or contribute to long-term economic development, and when the company leaves then you’ve wasted a piece of potentially-useful land on a factory that’s not being used.Report
That’s might white of you to make that decision for the little brown people, Katherine. Revoltingly patronizing. And just plain false. Those factories were an important step in the development of the PRC, the ROC, and the ROK, and more recently they are helping countries like Vietnam, Thailand, Mali, and Malaysia develop. Your patronizing kindness is in reality a vicious cruelty that would promote even longer periods of under-development in these countries, would undermine infrastructure development that provides better sanitation and safer drinking water, would condemn more girls to not getting an education.
If you want to argue for better wages and safer working conditions, that’s within the realm of reasonable discussion. But saying these factories shouldn’t even be built is bordering on evil. It’s so easy for a privileged westerner to say, but then you’re not the one struggling to improve your family’s lot so that maybe your grandkids can hace the opportunity to live a life approaching western standards.
Do you really think people in Vietnam want you telling them what is or isn’t good for them?Report
@jm3z-aitch : Heh. “Exploit me, please!”
That said, some exploitation is godawful. There’s decent jobs which admittedly (and necessarily) pay lower wages than we might pay here in the States for the same work. But comparatively, they’re excellent wages for the target nation.
Now here’s where it gets ugly — and can be stopped, in the interests of humanitarian concerns. The villains in these situations are the middlemen. They really are horrible people and they’re invariably local yokels. They abuse the workers, often sexual abuse goes on, they extort kickbacks, run little Potemkin Workshops all nice ‘n cleaned up when los yanquis come by to inspect the place.
These guys must be stopped. And the only people who can crack down on them are local officials. But los yanquis can do something to stop it, on their own. They can put someone on the ground to observe the place, keep an eye on things, keep the role of the abusive middleman to a bare minimum. It just doesn’t have to be as bad as it currently is, in many of these places.Report
Blaise,
I agree. But you’re making a distinction between types of factories that Katherine is not. She’s saying “keep the foreign factories out.” You’re saying, “clamp down on the guys who run their factories along organized crime principals.”Report
This is one of the reasons that I say the Federal Reserve’s so-called dual mandate no longer makes sense. 30 years ago, when the Fed made it easier for banks to lend money, that money was constrained to the point that loans for domestic business expansion (and domestic hiring) were pretty much the only thing that could happen. But for a banker, identifying good candidates for loans is a tough way to make a buck — much easier to do any of the various things that are allowed these days. Send the money overseas. Buy exotic financial instruments. Bernanke has come surprisingly close on a few occasions during his regular Congressional testimony to saying, “Ladies and gentlemen, the Federal Reserve can’t force money into channels that will result in increased domestic hiring. That part is up to you.”Report
In a game where you can move capital with mouse clicks, but people require airplanes, cars, trains, or ships to relocate, capital will always have an advantage. Is this an acceptable feature of the global trade game?
Yes/
Or should freedom of movement for people be a more important consideration when discussing trade liberalization?
Freedom of movement should be a more important consideration than it is given, but it shouldn’t be more important than capital, as people aren’t just units of economic input.
The substantial barriers are insignificant compared to the procedural barriers. One can be anywhere in the world in 12-18 hours on less than 2 weeks notice for around a month’s worth of world GDP per capita – and more advanced planning and picking certain locales can reduce this cost significantly.
Or to put it another way – if substantial barriers to human migration were an issue, we wouldn’t be having a debate about the Washington Redskins. We would be having a debate about a team named the in Solutreans in the Iroquois Lacrosse League.Report
Well, if global fertility continues to decline this will be a problem that fixes itself. Ditto if the global standards of living continue to improve. I can see how it sucks for the lower skilled workers in the first world, the jobs they used to do are essentially being diverted to develop undeveloped nations. I just don’t see any way of changing that phenomena without the cure being worse than the disease; the only way out is through. Though I’m all for efforts to mitigate the pain and progressive taxation makes enormous sense in that context.Report
In my idle moments of rumination, and I have a lot of those as I drive, it has occurred to me that the primary problem with the nation-state as it currently exists is that it tries to do too much, that it has too many disparate areas to manage cohesively. So then I imagine, what if we could break this up into overlapping, poly-centric sovereigns?
We could have geo-states that function primarily as landlords, providing certain geographically-bound services such as infrastructure and security. Capital-states that would basically be our transnational corporations, and where citizenship = shareholder. Labor- or vocation- states that are essentially unions or guilds. Perhaps also religio-states. One could be a citizen of one or more of each simultaneously.
This is really a kind of an-cap setup with polycentric law. Labor relations would be governed by treaty between capital-states and labor states. Environmental issues by treaties among land states and capital states, etc.
It seems worth thinking about since we seem to be heading sorta in that direction anyway and we might want to consider where we want to end up.Report
This didn’t work out so well when Neil Diamond proposed it in Snow Crash and the Diamond Age. There is going to be a lot of disagreement about what states provide which services and who is responsible for law enforcement. I imagine that a lot of people on the Left aren’t going to be happy with giving any religio-states, and there will be a demand for these states, any power over legal issues and at least two religions on this planet have actual law codes and judicial systems already in place.
I imagine that capital-states are going to be just as fond as labor-states as the original corporations were fond of labor unions, not very. They are going to use their power to crush them?
Who gets the monopoly on violence?Report
Neal Stephenson, I think you mean. And I agree that the phyles described in Diamond Age seemed quite unworkable — and I note that they had to work hard to establish overlap with geographic areas where they could assert sovereignty, even if those areas were somewhat fluid and even at the expense of ostensible extant nation-states.Report
Nob,
I think the vastly greater mobility of capital than labor does cause problems. But we can’t look at that problem in isolation. Capital mobility has done a lot of good for the world’s poor, despite examples of poorly built factories collapsing, low wages, and moments of capital flight when investors realize a government has over-valued its currency. Most important to date, I’d argue, is increasing ability of developing world families to educate their children and ability of developing states to build infrastructure…if corruption doesn’t waste the resources.
And there’s the primary problem, not capital mobility but corruption in poorly managed states. That’s probably the primary factor limiting development. Contra what some folks believe, businesses prefer to work in non-corrupt states because there’s less chance of getting burned on their investments. The capital flight from Russia, for example, in the ’90s was a response to the realization that western investers were all at risk of having everything they invested in nationalized.
We can’t limit capital mobility significantly without favoring investment in the developed world over investment in the developing world. I’m not sure how anyone can advocate that.
Labor mobility will always be more limited, even if procedural and substantive barriers fall, because people, unlike capital, form emotional attachments. We can improve matters, but the disparity will remain. So the question is whether the problems of the disparity outweigh the benefits of capital mobility. Unless we want to limit capital investment in poor countries, it probably does.Report
I recall some news article in the recent past about the mobility of workers in the us, or lack thereof. While it is much easier to pack up and move within the us, it wasn’t happening as much as one would expect during this “recovery”. One would think with all the job losses, people would be more willing to flood areas, like the dakotas, or such, but there wasn’t as much movement as expected. The conclusion was that a lot of people were “tied” to the locale-had kids in school, had family, etc. in the area and didn’t want to leave, couldn’t sell the underwater house, etc.
So, I think there are some barriers that would still be strong even if you removed all the barriers mentioned above. Additionally, do these “anchors” suggest new policies to implment to address them or do they just become unaddressed?Report
Well, one of the big ideas is something like “homesourcing”.
Instead of having to pay for infrastructure of a call center in the US, with its attendant bathrooms and handrails and signs pointing out a lip in the carpet, just pay for a high-speed internet connection, high-quality headset, and mid-quality laptop and you’ve got yourself a distributed call center for pennies on the dollar.
The problem with that is the whole “micromanagement as managerial benefit” thing gets denied to the managers in the company.
Also, the whole “if we can save X dollars homesourcing… we could save Y dollars outsourcing to Costa Rica!” temptation. (Though I’d hope that the last 10 years would have pointed out the diminishing returns of such thinking to US companies, my hopes in that vein are regularly dashed.)Report
Actually insourcing to the U.S., and bringing previously off-shored operations back, is a lot more common than people think. Firms in other countries build favtorirs, etc. In the U.S., or U.S. firms that experimented with off-shoring find that in their case it wasn’t cost-effective so they repatriate the operation. We just don’t hear about it as much because as news it doesn’t bleed so it doesn’t lead.
E.G., the WSJ reported in May that foreign direct investment in China for the first quarter was $38.3 billion. Round up to $40 billion and mltiply that by four quarters and you get $160 billion or so for the year. Meanwhile, the Congressional Research Service claims around $300 billion of FDI in the U.S.Report
James,
Does that fdi count people buying real estate as speculation?
Or is this purely “money to factories”?Report
The FDI doesn’t count anything as “speculation.” But, yes, it counts purchases of real estate as investment.Report
Damon,
If the piece you mention on mobility is the Timothy Noah one from last week, I noticed that some of the stats he was comparing current relocation rates to were from the ’50s. I wonder whether we’ve accounted for changing family norms around work outside the house. To be sure, women worked outside the home plenty in the 1950s and before. But I wonder whether that work was valued in the family enough to be something that might present a family-level coordination barrier in the way it might today. I.e., I wonder whether, in the 50’s, because of the sexism inherent in the family structures of the times, if a married man received an offer of employment or a promotion offer that required relocation, it was simply assumed that there would be no or little friction (i.e. not more than the unavoidable: kids having to change schools, etc.) from within the family to impede the decision to make that move. Today, especially with the way we tend to sort ourselves by marrying people with similar professional and earning aptitudes, it seems to me that in any given case where a married person receives an attractive professional offer that would require relocation, there is likely to be another person who has a job that may be no more able to accommodate geographic remoteness than th one that’s been offered. And there’s no (or much less) assumption that if it’s the husband (or even unmarried partner) receiving the offer, that will automatically and obviously take precedence over the professional connections of the wife, like there may have been in the past. This isn’t to say that modern professional couples can’t accommodate these friction and they do, but it may be a contributing factor to an unexpectedly low rate of economic relocation within developed countries, especially in the skilled professional classes.Report
Michael,
I don’t recall when exactly I heard the report. Could have been last week, could have been 3 months, but you make a good point. This was exactly the issue with me when i was married.
My wife and i at the time, made about the same. When discussing advancement opportunities with my boss, she indicated that there was plenty of opportunity–in Ohio. My response was “Is the company going to hire my wife too, ’cause otherwise I’m taking a 50% paycut accepting any job in Ohio.”Report
Nob,
http://wikitravel.org/en/Freighter_travel
How much is a train ticket again?
If it’s ~$200 to get across the ocean (even with the timecost),
is that enough?
Are we suffering from a knowledge deficit?Report