The Economist has a blog entry today concerning the role of America's relatively abundant resource base (relative to Europe) in creating a powerhouse economy. Our growth (think of a production possibilities frontier shifting out time and time again) came from:
Enthusiastic exploitation of America's plentiful mineral reserves
Abundant land and relatively scarce labour
A unified domestic market with relatively common tastes
The underlying message in The Economist piece is that our comparative advantage has eroded over time as others adopt our technology and our resources became relatively more expensive. I often think about comparative advantage in international trade as being built on cheap labor. What happens in a world where no one willingly offers their labor in a sweatshop setting?
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Well, there was a time before sweatshops (and, if you think about it, the industrial revolution is recent compared to the span of human history). What would happen without cheap labor, in lets say clothes, would be that clothing and the materials to make it would become much more expensive. Before ready made clothes, there were two routes one could go: you either made it yourself or hired someone with expertise to make it for you. Pre-industry favored quality over quantity, meaning most people bought fewer, better made clothes which they took much better care of. The industrial revolution gave us technological advances like machine weaving and chemical dyes, which produced more regular and often finer clothes, but with cheaper labor, the industry stopped innovating. I would think that without cheap labor, a country's comparative advantage would switch to the human resource of expertise or the technological resource of robotic manufacturing, both of which require an educated and motivated populace.
ReplyDeleteThat is defiinitely a question to really think about. On the one it would be great to eliminat all the unfariness and suffering, but at the same time, sweat shops employ people who usually don't have any other options...wouldn't the elimination of sweatshops leave them unemployed? Also, the prices of a lot of goods would go up...whether that would be good or bad in the long I don't know, but it would certainly take some getin use to.
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This is kind of the type of question America had to go through when abolishing slavery. Who will do the work for free now? How will we get all the chores finished? Is human rights for others really worth making MY life a little harder? Now other countries (most notably China) have to go through this question as well, however now it is a global issue, not just a national one. w
ReplyDeleteIn order for some people or countries to be rich, others must be poor. People talk about the horrors of sweatshops and how they should stop using them. But then they, myself included, are thrilled when they see cheeper clothes. In order to improve working conditions, we would have to raise costs, and raise prices. However, that is why people do not really act on their feelings about the unfairness of sweatshops. In order to have equality, and raise people out of poverty, we must be willing to lower ourselves and meet them near the economic middle.
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