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The Hypocrisy of ‘Helping’ the Poor – The New York Times

2015-10-04

China has been enriched by American-supplied jobs, making most of the destined-for-the-dump merchandise you find on store shelves all over America, every piece of plastic you can name, as well as Apple products, Barbie dolls or Nike LeBron basketball shoes retailed in the United States for up to $320 a pair. “The uplifting of impoverished people” was one of the reasons Phil Knight, Nike’s co-founder, gave in 1998 for moving his factories out of the United States.

The Chinese success, helped by American investment, is perhaps not astonishing after all; it has coincided with a large number of Americans’ being put out of work and plunged into poverty.

Source: The Hypocrisy of ‘Helping’ the Poor – The New York Times

Paul Theroux has written a provocative essay, published in the NYT online October 2, 2015, that links the impoverishment of the American “middle class” to “offshoring” or moving manufacturing jobs from the US to China and Vietnam.  A few American investors have become immensely rich by taking factories from American cities and moving them to China and other Asian venues.

This move is the logical extension of the manufacturers’ previous move, from the Northeast to the South in the early part of the 20th century.  This move imposed the same mass unemployment on Northeastern towns back in the 1920’s that was imposed on the South in the late 20th century.  The earlier move was motivated by the same reasoning, the search for cheaper labor, as the later move.

Asian workers are cheaper, out of desperation; they are recruited from the terribly poor and hungry, usually rural, lower class of Asian unemployed.  American workers are more expensive; they require union representation, workers compensation, overtime, sick pay, vacations.

Mexican workers in maquiladoras are almost equally economical and they are available close by, manufacturing goods cheaply with minimal interference from worker’s rights agitators.

There is a counter-example, however: the German model.  In the German system, there are exports of expensive, high-quality manufactures, and the workers are fully protected and given complete health coverage.  The difference is that the goods manufactured for export in German factories are known for their superior quality and durability, making them well worth their extra cost.  This higher-cost, higher-quality manufacturing system supports premium worker’s rights protection and health care coverage.  The result is a highly paid, well satisfied worker population and a higher standard of living.

In order to get out of the trap represented by mass production of medium quality low priced goods imported from countries that are in the process of developing themselves, emulating the German system would be a better way to go.  It would be quite straightforward to design a manufacturing process that deliberately creates products that are extremely high quality, through precision machining, superior quality control, hand finishing, and so on.  The extra cost of manufacturing would be supported by premium pricing and a deliberate advertising policy emphasizing superior quality.

The alternative would be to legislate made-in-USA manufacturing requirements similar to those that are currently in place for automobiles.  Current laws require a certain percentage of passenger automobiles to be made in the US.  This requirement is the only thing that has prevented the complete destruction of the domestic automobile industry.

 

Another change that has resulted in imposed poverty instead of distributed benefits is the increase in productivity, partially related to automation.  Productivity improvements have resulted in the production of a larger quantity of finished goods with less labor.  Instead of distributing productivity improvements by shortening worker’s hours with the same number of workers, owners have kept the hours the same and reduced the number of workers, creating unemployment instead of prosperity.  This will be further addressed in a later post.

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