All About the Lempiras

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The following paragraph in a story about P. Diddy's Sean John clothing being made in sweatshops caught my eye:


Activists said workers receive $33.15 to $50.18 for a 51-hour workweek, or 65 to 98 cents an hour, higher than Honduras's prevailing minimum wage of 55 cents an hour but less than what families need to survive.

First, this reminds me a bit of those (definitionally false) claims you sometimes see that so-and-so many people are "living below subsistence." Maybe that one income alone isn't enough to maintain a family, but if people keep working the job, then when you take all of the family's assets and incomes into account, it apparently is enough to survive. That or Puffy's ingeniously found a way to get corpses to stitch shirts.

Second, while I don't want to minimize how awful it is to work for one of these maquiladoras, should PD really catch so much flak for driving up wages in developing countries? Seems perverse to create a situation where a clothing maker can avoid public criticism by moving production to higher-wage, higher-productivity countries that don't need the jobs as desperately.

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  1. “Maybe that one income alone isn’t enough to maintain a family, but if people keep working the job, then when you take all of the family’s assets and incomes into account, it apparently is enough to survive.” Who do you think is earning those other incomes, Julian?

  2. The “below subsistence” comment reminds me of Bill Buckley’s response years ago to a Firing Line guest who claimed “People are starving in America.” “Why, then,” asked Buckley, “aren’t they dead?”

  3. People define subsistence as the amount of cash you need to support a family of four without a supporting income living in at least a two room apartment in Boston. Don’t forget the cable.

    joe:

    Come on, be reasonable. Every developing country developed from a model of having more kids to work the land so as to pool the value of labor to a model of having only parents work. These laborers would be going to college or finish a basic education in the west if they weren’t working, they’d be starving. You may as well as the government of Honduras to raise the minimum wage to $15.00 an hour to pay for schools.

  4. This is one of the many places where the libertarian, “free market” approach is flawed, because it has no compassion.

    Check the profit margins on thug Sean Combs’ (“P. Diddy”) clothing. Find out that shirts made for $5 in materials and $2 in labor sell for $60.

    There is a reasonable solution to this problem: pay the folks in Honduras a living wage. No, that doesn’t mean enough to live in Boston. Maybe it means $1 or $2 an hour, to allow them to live in Honduras.

  5. I read that these activists don’t blame Puffy personally for the low wages, but hope that he’ll use his “star power” to shed light on the situation etc. A clever approach on their part, though I wonder why Kathy Lee or Nike weren’t/aren’t allowed the same sort of wiggle-room.

  6. well seeing as how ver few middle and upper class households only have 1 income (and are very stretched and at risk if they do) why should things be different for low income? delivering pizzas doesn’t let you have a family of 4? really! i’m shocked…

    but… if every job had to support 3-4 people, then the prices would rise, making things less affordable… etc

    20+ years ago, people had much lower standard of living. that’s how they had 1 income and a fam… if you want 3 mercedes and a 5k sq foot house, well damn it you’ll have to double shift and get the wife (or partner, or whatev) to also get a job or two…

    same goes in developing world.. idiots

  7. midori:

    This is probably going to confirm your hypothesis for you, but compassion isn’t the purpose of a business, nor should it be.

    A business can offer jobs at any wage it likes. If the people who accept those terms are being exploited by the wage they accept, what was happening to them before P Diddy opened up his torture factory?

    Secondly, you can’t sit on the outside and eyebally what a ‘living wage’ is. The labor market is the only place the price of labor can be set accurately. Where did you come up with your figure of $2.00 when the local government came up with $.55?

    Lastly, Sean John employees aren’t kicking over, so they do have enough to live, somehow.

  8. Midori, do you work for the UN?

    I have a feeling about this one.

  9. What a bunch of assholes.

  10. “What a bunch of assholes.”

    I assume he meant to post this in the “Fisting” thread.

  11. Julian, you make a good point that P Diddy is paying the workers more than they might otherwise earn, but that does not absolve P Diddy’s clothing company from moral blame. He’s paying them only $.10 more than what the average wage is, so he’s not paying them that much more than what they might otherwise earn. Why not pay them, oh, a buck fifty an hour? Then he still gets mighty cheap labor, and he actually improves the lives of his workers. Still a lot of profit, I suspect, if he doesn’t go the damn-dirt-cheapest route, and instead takes the pretty-damn-dirt-cheap route.

  12. Midori,

    Wow. They make $43 a shirt. Wow, that’s just amazing. Clothing retailers must be making HUGE PROFITS. Oh, what, they’re not. Hmm. Well, maybe there is actually more too retailing clothes than material and labor costs. Maybe there are transportation costs, distribution costs, taxes, other labor cost in retailing, advertising/marketing costs, and I-can’t-even-think-of costs. If it’s so easy, as you imply, anyone would be a fool not to get into the clothing business.

  13. I’m not sure the comparison to “the West’s” development during the Industrial Age applies. The profits made by American factories went to Americans, creating wealth/demand among Americans, even the low-paid factory workers. In a globalized economy, most of the wealth created by these factories flows out of the country. Second, the demand created by this new American wealth was largely satisfied by domestic products, allowing this wealth to circulate and multiply within the country. In a globalized economy, the demand that these third worlk industrial workers create will largely be satisfied by buying products whose profits, once again, largely flow out of the country.

    Obviously, this argument does not prove anything, so much as punch a hole in the “the industrial misery you see is actually a good thing, because it will bring about development, and we shouldn’t interfere” thesis.

  14. Let’s see now… if it’s not good for rich and poor countries to trade, then it’s probably not good for rich and poor states to trade, in which case it’s probably not good for rich and poor counties and cities to trade, probably bad for rich and poor neighborhoods to trade and even worse for rich and poor individuals to trade.

    So let’s all be entirely self sufficient! *That’s* the ticket to wealth and happiness!

  15. “Obviously, this argument does not prove anything, so much as punch a hole in the “the industrial misery you see is actually a good thing, because it will bring about development, and we shouldn’t interfere” thesis.”

    I don’t know if that is a thesis that is being floated. The thesis is “the industrial misery you see is a good thing because it is a lesser misery than the one it replaced.”

    Good point about the destination of profits, though. The development parallel is less than what I was at first thinking. Profits would have to be reinvested in the area where the labor is working for the normal development arrangements to hold up.

    The argument for benefits should probably be based more along the lines of Ricardo and also the ability of business to marginally push up wages and introduce labor options that would normally not exist until much later in development.

  16. Um, what’s “Ricardo?” Are you suggesting Hondorus move towards a Fantasy Island economy? Da plane, da plane!

    And read Julian’s comment, above. The “sweatshops will lead to prosperity” theory is very much in play.

  17. Wow, Puffy goes in and provides jobs that would not otherwise exist and oays people more than they would make in other work. That bastard!

  18. I’m not criticising Puffy, BTW. Nor am I arguing for economic nationalism, or anything else, really. I’m questioning our government’s policies and the assumptions behind them. You gotta problem wit dat?

  19. Didn’t know we were governed by PDiddy.

  20. I honestly don’t understand the big taboo against using third-world sweatshop labor. I’d say all things being equal, buying clothing made by third-world labor does more to improve general global welfare than that produced locally, because it provides employment to more people, who are more in need of the wages, as piddling as they may seem by our standards. If the factory involved some kind of forced labor, where workers are made to stay on the job or face violent reprisals, then that would obviously be a different case. But from what I understand that’s not the issue here.

    Why is Sean Combs responsible for the welfare of Honduran workers just by virtue of being their employer? Anyone posting here could help out these same people just as well if they wanted to; I know there are a fair number of charitable organizations willing to pass along your donations to the good working people of Honduras if you so desired.

  21. joe – what you seem to be saying is that the same thing that happened in the West during the Industrial Age is now happening (albeit on a global scale instead of just a national scale) in Third World countries today.

  22. Yaron,

    Charity is wonderful. Changing conditions so that charity isn’t needed is even better.

    BTW, they happy happy “industrial workers earn more than farm workers” argument has a problem with it. During the industrial era in America, it started out that way. Then, once a large number of people had left the farms of America and Europe to work in factories, wages began to fall. After a certain point, industrial workers/urban proletariat was earning considerably less than they were are farm workerss. But by then, they did not have the opportunity to return to the farm, since the advancement of technology had rendered them redundant as farm laborers. Given the land policies of most central American governments and land the landowning oligarchy that control them, this is likely the case there, as well.

  23. Another example of this terrible explotation of employees by a heartless corporation:

    Experts here in the United States tell us that workers recieve between $240-$280 for a 40 hour workweek, or $6 to $7 an hour. This is higher than the $5.15 an hour minimum wage but far lower than the minimum amount of money needed for a person to live off of.

  24. What really gets me is all the people who are second-guessing the workers who voluntarily took these jobs.

    The implication here is that people need to be protected from their own decisions. Just above me, Joe wants to protect workers from the case where the jobs end up vanishing in the long run. Is government supposed to save these people? Is that what you think?

    Government intervention in labor markets has destroyed jobs, every time, for at least 50 years.

  25. Joe,

    To paraphrase Buckley, then why aren’t we all poor?

  26. Seriously, how can anyone conclude these poor exploited workers would be better off not being exploited, i.e. employed.

    Anyone who thinks they should be paid more should hire them and pay them more.

  27. fy,

    Because the wealth generated by industrial-era American factories was reinvested in the American economy.

    WRGM,

    I’m not suggesting anything, just analyzing and questioning. The site’s called REASON, after all.

    Brad S, the greater mobility of capital means Capital ends up investing/donating/spending a lower portion of its profits in the industrial communities than was the case during the industrial era.

  28. There are other examples of development besides the west. Ever heard of Singapore? Hong Kong? Taiwan? They sure got screwed over when westerners opened factories that paid low wages.

  29. I’m not criticising the people who took the jobs, I’m questioning the efficacy of a low-wage (even by local standards), low-reinvestment business model to bring about development.

  30. joe-
    I suppose what you’re saying is accurate in a sense, but I think the reason for it cuts against the point you’re trying to make. Yeah, less of the return on capital “stays” in a given region… but only because it’s foreign capital that wouldn’t have been available in the first instance (in anywhere near the same volume) two centuries ago. If this were actually worse on net, developing countries could always eschew foreign investment and work exclusively with internal capital (as was necessary pre-globalization to a greater extent). I notice that this doesn’t seem to have been a fantastically successful strategy where it’s been tried.

  31. I dunno, Julian. The capital that created the industrial revolution was largely accumulated through internation trade – which is (one reason) why the IR took off in places like Massachusetts, England, New York, and Rhode Island, which were leaders in the shipping trades, and not in agricultural and mining centers.

  32. joe:

    ‘”Um, what’s “Ricardo?” Are you suggesting Hondorus move towards a Fantasy Island economy? Da plane, da plane!’

    That would be David Ricardo, not Ricardo Montalbon (sp?). He developed the theory of comparative advantage in trade. Exchange is good for all parties even if one party seems to be more efficient at everything than the others. This includes labor.

    http://internationalecon.com/v1.0/ch40/40c000.html

    ‘And read Julian’s comment, above. The “sweatshops will lead to prosperity” theory is very much in play.’

    Since Julian’s point was that growth led to prosperity in the west, the question you are getting at is, does the availability of factory jobs paying more than prevailing wages lead to growth if the profits from the factory aren’t necessarily reinvested locally? Off the cuff, I’d say that comparative advantage says this will tend to be the case.

    Additionally, the local transport industry gets a boon, local cotton gets a boon, and people have more income than they had previously. I don’t see any forces pushing in the other direction.

  33. I have this odd feeling that the foreign capital argument is distinctly un Keynesian. If you are a good liberal economist, shouldn’t you be arguing for an increase in demand, and capital be damned?

    What if the only capital for labor to use is foreign capital? If the wage is above the prevailing, demand should be increased, and you had no option to take the money from anyone else to stimulate it like you would in the States, right?

    Just thinking out loud …

  34. I think my point is that low wage, low-reinvestment industrial activities will be a very limited force for development, compared to the low wage, high-reinvestment model that prevailed during the industrial revolution (or even a medium wage, low reinvestment model), and that direct comparisons between the two, and the resulting optimism about Latin American sweatshops, are facile.

  35. He’s paying them only $.10 more than what the average wage is, so he’s not paying them that much more than what they might otherwise earn. Why not pay them, oh, a buck fifty an hour? Then he still gets mighty cheap labor, and he actually improves the lives of his workers.

    First of all, if the average wage is 55 cents per hour, 65 cents per hour is 18% higher, and 98 cents is nearly double. I’d say that 18% – 78% over the average wage is “much more than they would otherwise earn.” Strictly speaking.

    Secondly, do you suppose there might be some negative inflationary effects caused by paying a large number of people triple or quadruple the average wage? I think there might be, but I’m just a simple unfrozen caveman.

  36. Joe,

    Well sure, high-reinvestment is better than low reinvestment. But so what? All that matters is our available alternatives. Either Puffy gets to have “his” clothing manufactured in third world countries or he doesn’t. Which is better? Perhaps you’re not suggesting anything, but I will: allowing him to is better. Even if it’s a “limited force for development,” well, better a limited force than no force at all.

  37. “Secondly, do you suppose there might be some negative inflationary effects caused by paying a large number of people triple or quadruple the average wage?”

    Well, if we buy the standard Chicago line that inflation is “always and everywhere a monetary phenomenon,” then no, it wouldn’t work that way. Unless the companies are paying wages with cash they’ve printed, anyway.

  38. “Why not pay them, oh, a buck fifty an hour?”

    The thing about paying people more than you have to just for the sake of being nice is that it’s nothing more or less than philanthropy. Not that there’s anything wrong with that per se (objectivism’s objections notwithstanding), but once you understand that that’s what it is, a few things come up. First, what right do you have to insist on another being philanthropic? Next, even if we grant that philanthropy is a good thing, what makes you think this would be the best way for P. Diddy to be philanthropic? Assuming any particular rich person has a certain amount budgeted for giving to others less fortunate, why should overpaying workers necessarily be the best way to spend that budget? And since there is time and energy expended on suggesting P. Diddy do dis (couldn’t resist), who’s to say there aren’t an infinite number of other ways that rich people could be cajoled into helping those less fortunate? And on and on. Ultimately, it’s easy to say what others should do. But the investment is being made to make money, not to be philanthropic. And either it’s going to be made or regulations or bad PR is going to stop it from being made. Among the available alternatives, the former is better.

  39. fyodor,

    One possibility would be to require or encourage companies exporting to America to pay their developing-world employees a livable local wage. If you start in with “violating the rights of businessowners,” I’ll raise you millions of children no longer suffering from malnutrition, raise you again millions of children attending school, and call. So let’s set aside moralistic proclaimations, and focus on practical results.

    Such a policy would ultimately be in our self interest, since the greater amount of money remaining in the developing countries would hasten their development, creating larger markets for our goods and services. The cost, obviously, would be an increase in consumer costs for Americans. However, raising Puffy’s labor costs from 55 cents to 70 cents or so would create only a tiny increase in the overall production costs of each shirt, while dramatically increasing the buying power of the employees, and therefore the size of the consumer markets within those countries – markets that would largely be filled by out stuff. What’s more, the increase in education levels over the next generation would dramatically hasten these nations’ development of modern economies.

  40. joe,

    “I’ll raise you millions of children no longer suffering from malnutrition…” isn’t a moralistic proclamation? You sneering hypocrite.

    One man’s need is not another’s obligation. As others have said, no one is stopping you from donating *your* time and money as you see fit. It’s your generosity with others’ property that makes you a ripe target for moral ire.

  41. How is a country ever going to develop if the kids have to work instead of going to school?

  42. How is a country ever going to send it’s kids to school if the economy is so in the toilet that there’s no way to pay for it?

  43. Well, it more or less worked that way in the West: child labor was widespread, growth increased incomes, and child labor laws were put in place after the practice had become far less prevalent. In any event, this article is talking about low wages, not young children working, so I don’t even know whether that’s at issue here. (The woman quoted in the piece is 19, suggesting she was at least an older teenager when she worked at Puffy’s maquila.)

  44. If they aren’t already being paid a livable wage, why aren’t they dead?

  45. Hopefully Joe will be back to respond to Phil, whose succinct post — closing with “It’s your generosity with others’ property that makes you a ripe target for moral ire” — says it all.

    Come on back, Joe. Let’s hear it. Why are you so generous with others’ property?

    Or better: Why do you give a rip about a voluntary transaction between a guy in New York and some people in Honduras? They’ve made a deal with each other — he’s agreed to give X, and they’ve agreed to give Y. Why in the world is any of it an issue to you, any more than I care about the sort of music you buy, or brand of pretzels you eat? Nobody’s in the scenario is being forced to do anything… so why do you care?

  46. And oh yeah, Joe — please respond to the recurring “why aren’t they dead” question that’s been posed over and over.

  47. Re suggestions to pay far above the local wage; what would inevitably happen is that the formen of the factories (or whomever does the hiring) would collect the excess from the workers as a condition of employment. In fact, I’d be surprised if this doesn’t happen already just on the 98 cents per hour difference between the P Ditty rate and the prevailing local rate.

  48. “Bad joe! Bad!” Yawn. No one can come up with a defensible argument why the economics don’t work out the way I’ve described? I challengy your understanding of the operation of global markets, and all I get back are Randroid outburts. I’m disappointed in you guys.

    “Why aren’t they dead?” Because instead of sending their kids to school, they send them to work, in order to bring in more income. As I’ve said repeatedly. Combine this with abysmal living conditions, and you end up with a family that manages to barely eke out a living just above the level of malnutrition. Hooray!

    Why do I care? Because I don’t like to see other people suffer. Because decent human beings recognize a responsibility to alleviate the suffering of others. Because greater and faster development of the econonies of poor nations means more markets for our goods, and thus more and better jobs for our people. Because, as the global superpower, we get blamed for conditions of widespread poverty, leaving those in that poverty vulnerable to anti-Americans ideologies, from Marxist revolutionaries in Central America to Islamists in Asia and North Africa.

    Why am I so generous with other people’s property? Because the concerns I outlined above are more important than paying twenty cents less for a t-shirt. Duh.

    Why do I want to alleviate poverty? Are you freaking kidding me?

  49. Joe says…
    “The capital that created the industrial revolution was largely accumulated through internation trade – which is (one reason) why the IR took off in places like Massachusetts, England, New York, and Rhode Island, which were leaders in the shipping trades, and not in agricultural and mining centers.”

    and…

    “The bottom line is, the profits earned at these factories do not recirculate through the local economy, as they did in America and England during their early industrial periods.”

    Now, which is it? I would say that Sean Combs is practicing international trade.

    America and England were trading partners, but the bulk of capital investment and finance was provided by London. Profits earned in trade, or in these factories, accrue to the owner, i.e. the provider of capital. Wage income accrues to workers. And it is out of the saving of income that investment capital is created. Whether profits from capital investment “re-circulates” through a specific local economy, or not, is hugely suspect, as an argument, much less as a statement of fact.

    Conveniently forgotten (at the top) is the huge agricultural trade, especially cotton, from the southern US, to England for use in the manufacturing of…wait…clothing! And what was the watershed event that triggered the Industrial Revolution? The steam engine? Which enabled automating factories, including weaving mills, and sewing machines…for making…clothes! And where does the term Luddite come from? Clothing factory workers in England that went on strike to prevent/protest the automating the factories because it would put people (naturally) out of work! But, what happened? Automation improved the product and decreased the cost and price, such that it increased the demand, resulting in higher employment (in the industry) and wages. All the result of capital investment (because higher wages could not produce higher productivity, only higher costs).

    Sean Combs’ (who most certainly does not own the factory–the industry is based on contract factories) clothing business employs third world workers at a wage above the prevailing rate for similar low skill work. What is the scandal?

    The only scandal is that some people think that if the workers were paid some arbitrarily higher amount, then there is no scandal.

  50. Wouldn’t paying more than the local competition be a way of attracting the best workers? Even $0.10 more per hour should be very enticing to local workers and allow the management of the factory to pick and choose who they want. There’s a word for this, if only I could think…

    Oh yeah, it’s called “capitalism”. That’s this ideal that big business rarely practices but always preaches, as opposed to avarice, which big business often practices but never preaches. 🙂

    Joe, I think that, on balance, there is a net flow of wealth into these countries, and that is a good thing. This money is re-invested and internal economic development occurs. The fact that the clothing sells to image-worshipping morons in the USA for ridiculous prices in no way changes that. The mark-up is paid for by said morons, really, and the rest of the price is comprised of distribution, marketing, tariffs, etc., none of which is paid by these workers, who get to keep what they make (minus taxes, I guess).

    I agree that benefiting the children in these countries is a good thing, too, and posts to the contrary that are unbecoming even to an unfrozen caveman, or to someone who used to pester people into eating green eggs and ham, should simply be ignored. Why it is wrong to slam Jews, African-Americans, Muslims, gays, etc. but it is perfectly OK to slam kids, I don’t understand. I guess the smaller person you are, the smaller the targets of your attacks have to be. Wouldn’t want to slam anyone who could actually defend herself.

    Phil, do you even know what ‘hypocrite’ means? joe was saying IF you want to make morality an issue, THEN there is this children issue to consider. He did not initialize the morality debate. You sniveling cretin. 🙂

  51. “Joe, I think that, on balance, there is a net flow of wealth into these countries, and that is a good thing. This money is re-invested and internal economic development occurs.’

    I agree. My argument is that more wealth flowing into these countries via higher wages would cause more internal economic development to occur, and that the cost of these higher wages to Americans would be more than offset by the hastening of development (and growth of markets) brought about by greater wealth, and greater eductional opportunities.

  52. Joe, your recent post ignores at least one known fact: P. Diddy’s factory pays a wage rate which is *above* the local prevailing wage. Diddy is, in fact, doing exactly what you prescribe: paying poeple more than he strictly has to. It’s not enough to satisfy complaining activists, but let’s face it, no possible wage rate is going to satisfy these folks. If the folks working at the other factories (the ones that pay less) aren’t starving to death, it means that a family whose workers earn those rates is barely able to scrape by. It stands to reason, then, that the folks who work for Puff are able to live somewhat better. Not well by your standards, or mine, but better than the folks who make half as much. He pays nearly twice the prevailing rate, and the activists are still bitching at him! They ought to give him a damn medal instead.

    Let me give you with two thoughts to ponder. First, you seem to think that the American example of industrialization is inapplicable. I don’t concede that point, but consider this. *Every* country in the world which has gone from being poor to being not-poor has done so through a process of export-oriented international trade. Factories making cheap crap where workers make barefly anything are gradually supplanted by factories making less cheap crap by fairly well-paid workers. It happened a generation ago in places like South Korea and Taiwan; it’s happening now in India.

    Second thought: you may manage to shame American companies into moving production out of the Third World, but I assure you that they’re not going to pay $10.00 per hour for work that they now pay $1.00 per hour for. Instead, they’ll find ways to mechanize the work now done in Third World sweatshops. If that ever happens, the activist types will bitch and moan about that.

    One other thing: please do learn who David Ricardo was. You’ll be able to discuss these issues much more intelligently if you learn some basic economics.

    P.S. Does Julian know how his buddy Howard Dean feels about this stuff?

  53. Please read my above comments about the flow of profits out of these countries, so that you will better understand why I don’t think the industrial revolution model is precisely applicable.

    Of course, the higher wages paid by Puffy are better than the lower wages paid by other factory owners, for the well being of those workers, for the development of the local economy, and for the growth of its markets. Better still would be wages that allowed those workers’ kids to go to school instead of working. WHY DO YOU PEOPLE KEEP IGNORING THIS?

    If the wages demanded were too high, the automation you describe would no doubt occur. But there is doubtless a happy medium above Puffy’s current wage, but below the $10.00 per hour or whatever, at which capital-intensive mechanization would be a rational choice. It would be better for all involved if the wages were within this happy median.

    But obviously, I don’t understand basic economics. I just happened to stumble into 2 separate arguments that none of the laissez faire disciples have been able to refute.

  54. joe,

    The profits did not flow out of these countries; they were never in these countries to begin with.

    Perhaps the activists should get together with all the companies making a particular product overseas in various countries and and get the companies to give all of their employees in the sweatshops a flat out $0.50 an hour raise. In return, the activist organizations can give these companies good PR, or a Seal of Approval, or some such. Of course, that’s a form of collusion, but since it wouldn’t involve one group excluding another from doing business, at least not in the same industry, it might pass ethical muster.

    Hell, for that matter, why not just pick a country, go in and give every single person a one time gift of $500 or $1000 and let the economy grow from there?

    OK, there are a few problems with that one. I’m just riffing now….

  55. “The profits did not flow out of these countries; they were never in these countries to begin with.” Whatever. The bottom line is, the profits earned at these factories do not recirculate through the local economy, as they did in America and England during their early industrial periods.

    I like the seal of approval idea. However, that sort of thing is mainly useful at influencing consumer behavior, as opposed to the retailers and wholesalers who do the purchasing from the factories, so its usefulness may be limited.

  56. Does anybody else think that joe sounds like Rev. Lovejoy’s wife?

    “What about the children?! Will somebody think of the children?!”

  57. Another problem with the “free market” approach is that it assumes the prevailing wage is established by free negotiations between business and workers. It would require an enormous ignorance of Honduran history to believe this to be the case.

  58. Joe-
    Let’s call the artificial wage raise what it is, foreign aid. You believe this aid would “ultimately be in our self interest, since the greater amount of money remaining in the developing countries would hasten their development, creating larger markets for our goods and services”

    I am not so sure. What creates markets for our products is rising productivity. If P. Diddy took his profits, gave it to the workers, then the workers just bought back his clothes with his own money, was any wealth created? Is this a new market or just a shell game? I believe that workers that buy with whatever they earn at prevailing wages is the new market, not this passing $ from the left hand to the right hand stuff. It just sounds like workfare. Getting paid more than you are worth. Perhaps you can argue that workfare has worked before, and it can work again.
    I don’t think so. We must have an eye toward value-creation if we are truly talking about healthy sustainable growth, not dependant on int’l capital ignoring labor markets(good luck). A forced payment system may be sustainable, making Hondurans better off, but I don’t see a net benefit to all involved(P.diddy). This is just zero-sum pie slicing, not pie-making.
    So in the end, we must come back to the “Randroid” preoccupation with deciding when, why, and how and if we should favor Hondurans over P.Diddy. Because what you propose would just be “favoring” Hondurans, not “investing” in win-win situation. If there was an “Honduran economic Tiger” waiting to pounce, I would expect foreign philanthropy to be the last thing to recognize and harness it.

    rA

  59. Joe-
    On economic analysis, I am a little rusty, I don’t know what effect the velocity of $ would have in Honduras, it probably isn’t as simplistic as the shell game I proposed earlier. The $1 extra given by P.Diddy may be spent more than once in Honduras(but I think that effect would be the smae in the U.S. so perhaps it isn’t important).

    On freeing up children in Honduras, (warning government intervention ahead) if this would have suh a beneficial effect, it would be the government’s, if anybody’s, place to invest in the children (not P.Diddy’s). After all, that is what education is, not a philanthropic endeavor, but the training of the next generation of producers. One reason most corporations don’t underwrite schools is because they can’t be sure to recapture the benefits. (All the Coke school grads go work for Pepsi). It should be the government that invests in the kids, like in other countries. Hopefully, the government is informed enough to do reliable cost/benefit analysis on the costs of less int’l investment versus the benefits of a more educated and skilled child citizenry.

    I usually shy away from such top-down government macro-management, but if fortune 500 companies can do such planning on such a scale, in theory Honduras should also be able to. These cost/benefit exercises have so many factors that they may not be very reliable. Seriously, I don’t know if there is an answer to bringing the third world closer to our standard of living. Absent forced global redistribution of wealth, I think the chances are not good. But whatever small hope these countries do have probably lies in the global freedom of capital to flow where it is most useful (so that it may create the most wealth). I do not hold to dependency theory, that for the first world to be rich, requires the third world to be poor, but I don’t see the way for the 3rd world to come out of it’s hole (absent force or charity). Perhaps I am just a pessimist.

    rA

    P.S. On freedom of contract, I don’t see how P.Diddy or anyone can change those kind of internal oppressive conditions. perhaps some type of united international and business pressure not to use “exploited” labor. By exploited, i mean truly oppressed by their government or caudillo, like real human rights abuses… not the bastardized version of the word. Or abuses of invented rights.

  60. Forbes, rA – good stuff! This is what I’ve been trying to get at. Let me mull…

    BTW, still no thoughts on the benefits of freeing up children to attend school?

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