What would seem to be basic here is that a certain amount of money is required
to pay the costs of producing a certain volume of goods. The question then
becomes how that money should be divided. A certain amount of it must go to
paying the unavoidable costs of machinery, the factory building, etc. What is
then left over is divided among the workers and the owners. Reisman appears to
argue that the workers should be paid no more than a subsistence wage, with the
rest going to the owners who would then build and operate more factories, thus
building up the economy. But what if the workers were paid more than
subsistence? Would they not spend what they had beyond subsistence on locally
produced goods? Could they not be building the economy through their spending?
One is reminded of the economic history of Canada and the US in which the
spending power of the unionized middle class was a huge force in building up
industry and keeping the country going. People had to buy or build houses, buy
and operate cars, buy appliances, etc. Now the middle class and unionization
are shrinking, and ordinary people are not as strong a force in the economy as
the were a few decades ago. Meanwhile, the wealthy have become much wealthier.
Are they using their increased wealth to build the economy? I'll leave it
there.
Ed
________________________________
From: Keith Hudson <keithhudso...@googlemail.com>
To: "RE-DESIGNING WORK, INCOME DISTRIBUTION, EDUCATION"
<futurework@lists.uwaterloo.ca>
Sent: Monday, May 27, 2013 6:08:06 AM
Subject: [Futurework] A Deadlier Disaster for the Third World: Unemployment
A Deadlier Disaster for the Third World:
Unemployment
George Reisman
The recent collapse of a garment factory building in Bangladesh,
resulting in the death, at latest count, of more than 1,100 workers who
were employed there, has led to international outrage not only against
the building’s owner but also against the various retailers in the United
States and Europe, many of them prominent, that have sold clothing
produced in that building. It is demanded that they assume responsibility
for working conditions in the factories that supply them and not deal
with factories that do not provide safe and humane conditions and pay
fair wages.
Such demands rest on the belief that, if left free of government
interference, the profit motive of businessmen or capitalists leads them
to pay subsistence wages to workers compelled to work intolerable hours
in sub-human conditions. And, more, that the profits wrung from the
workers in this way exist in the hands of the capitalists as a kind of
disposable slush fund as it were, at least some more or less substantial
portion of which can be given back to the workers from whom they were
taken, or used on behalf of those workers, with no negative effect except
to deprive the capitalists of some of their ill-gotten gains. It is
generally taken for granted that the reason the kind of conditions that
prevail in Bangladesh and the rest of the Third World do not exist in the
United States and Western Europe is the enactment of labor and social
legislation, and that what is needed is to extend such legislation to the
countries that do not yet have it.
Every aspect of this set of beliefs is wrong and its consequences are
highly destructive, above all to the masses of workers in the Third World
who already live close to starvation and who are in danger of being
driven into it by needlessly increasing the cost of employing them either
by arbitrarily raising their wages or by requiring that they be provided
with improved working conditions that must be at their expense and which
they cannot afford.
One of the most elementary propositions of the science of economics is
that the higher the price of anything, the smaller is the quantity of it
that will be purchased. This applies to labor no less than to goods. If
wage rates in Bangladesh are arbitrarily increased, fewer workers will be
employed in Bangladesh. In that case, workers who would have earned low
wages will earn no wages. They will starve. If employers in
Bangladesh are compelled to make improvements in working conditions of a
kind that do not pay for themselves, the cost of those improvements
represents the equivalent of a rise in wage rates. Again, there will be
unemployment. The unemployment could be avoided only if workers’
take-home wages could fall sufficiently to offset the cost of the
improvements. In that case, the situation would be comparable to making
the workers use their already meager wages to pay for improvements that
they simply cannot afford.
These are not outcomes that the advocates of imposing labor standards
want. What they want is higher wages and better working conditions. Their
problem is that they do not realize what is actually necessary to achieve
these results.
What will achieve these results is leaving business firms in Bangladesh
and throughout the Third World alone, to be as profitable as they can be.
(It should be obvious that the loss of a factory building and its
machinery was not profitable and that while it may be legitimate
to denounce the building’s owner for criminal recklessness and
negligence, it is simply absurd to denounce him for seeking profit, when
what he actually achieved, and could only achieve through such conduct,
was total loss.)
The high profits that can be earned in a Third World country, if not
prevented by too many obstacles, will be heavily saved and invested,
mainly in that Third World country. As the experience of Taiwan, South
Korea, and now even mainland China shows, a generation or more of such a
process results in a vast accumulation of means of production in the
countryi.e., numerous new factories, with better and better equipment.
This results in an intensified competition for labor and thus rising wage
rates. As wage rates rise, workers can more and more afford to accept
lesser increases along with improved working conditions of a kind that
must be at their expense.
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