I knew you guys were wrong!!

[Drace]

:crying:

The Austrian School has owned us once again.

http://mises.org/story/3218
MOMMYYYYYYYYY :(

Seriously, does anyone take them seriously?

[Dr Mindbender]

i love the way they accuse third world workers of being lazy and unproductive, yet back up their claims with no figures or case studies instead choosing to back up their ideas with assumptions pulled from their arses.

If anything, i'd have thought western workers being the least productive owing to our numbing culture.

Typical unmaterial lassaiz faire-ists.

[ZeroNowhere]

The relevant question for those concerned about the very poor is not "how do we convince (or force) multinational corporations to pay more" but "how can we improve the productivity of the world's poorest workers?"
Touche.
I think that they take themselves seriously.

[Self-Owner]

Touche.
I think that they take themselves seriously.

That quote makes absolutely perfect sense if you actually know a little economics and realise that workers cannot be paid, in the long run at least, more than their marginal productivity. No rational employer will hire them. So the only way to raise wages and thereby raise living standards is, like the Mises article says, to raise worker productivity.

I don't expect this point to make much impact around here though.

[Plagueround]

That quote makes absolutely perfect sense if you actually know a little economics and realise that workers cannot be paid, in the long run at least, more than their marginal productivity. No rational employer will hire them. So the only way to raise wages and thereby raise living standards is, like the Mises article says, to raise worker productivity.

I don't expect this point to make much impact around here though.

What does Mises have to say about people who aren't being paid enough to live on in the first place? Let me guess, it's their fault?

[Demogorgon]

That quote makes absolutely perfect sense if you actually know a little economics and realise that workers cannot be paid, in the long run at least, more than their marginal productivity. No rational employer will hire them. So the only way to raise wages and thereby raise living standards is, like the Mises article says, to raise worker productivity.

I don't expect this point to make much impact around here though.
It is ridiculous in the truest sense of the word to say that lower pay is due to lower productivity. For identical work, I will be paid around twenty times what a person in India is paid on average and I am not twenty times more productive.

Many third world workforces are highly productive and the reason multi-national companies love to get work done there is that they have access to a productive workforce without the strength to demand better wages, whether it be from unemployment or simply the outlawing of collective bargaining.

Low pay more than anything else comes down to lack of labour rights and weak organisation amongst workers.

[Drace]

They don't give any source of how third world workers are so unproductive. They are free to just make up numbers.


If the American worker can produce 120 units of output in an hour while the Chinese worker can only produce two, then producing the good in the United States is actually cheaper. Each unit produced in the United States costs twenty-five cents, while each unit produced in China costs fifty cents.Oh yea the American worker can produce 60 times as much...? Lol. Total bullshit. Maybe Chinese workers are less productive because they have to feed themselves and their families with $1 a day?

And if hiring Chinese workers is costing you more money, why would you give them jobs in the first place?


In a study of wages and working conditions in developing countries, economists Benjamin Powell and David Skarbek found that the textile sweatshops derided by rich westerners offer higher wages and better working conditions than the alternatives in very poor countries. People in developing countries need more sweatshops rather than fewer.

LAWL

[RGacky3]

So the only way to raise wages and thereby raise living standards is, like the Mises article says, to raise worker productivity.

This is the dumbest article I've read in a long time, and I read newsweek.

The Austrian school is all theory, that they continue to uphold, irrespective of the real world and facts.

Employers will NEVER pay more than they can get away with paying, productivity has nothing to do with it.


That quote makes absolutely perfect sense if you actually know a little economics and realise that workers cannot be paid, in the long run at least, more than their marginal productivity. No rational employer will hire them. So the only way to raise wages and thereby raise living standards is, like the Mises article says, to raise worker productivity.

I don't expect this point to make much impact around here though.

The reason it wont make impact is because most of us around here advocate the workers taking control, not leaving up to the employers to grant them a living.

This article is'nt even worth discussing because it does'nt even mention any facts, statistics, numbers, nothing, so its worthless to begin with.

[Dimentio]

I think these articles would be funny. Its like a parody on right-wing libertarianism.

[wigsa]

What a load of bollocks.I had to laugh reading that to some extent,but at the same time was quite depressed that there are obviously a large number of people in the world with those opinions.How can they say something like:

'Can these companies afford to pay more?No.'

[Dean]

In his 2007 book The Myth of the Rational Voter, economist Bryan Caplan proposes an interesting thought experiment which suggests that people implicitly accept the results of competitive markets. Caplan asks if those who criticize companies that pay low wages overseas feel that they could get rich quick by investing all of their resources in overseas enterprises — specifically, enterprises in poor countries. After all, it stands to reason that if workers in developing countries are underpaid and exploited, a profit-seeking businessperson would be able to reap immediate profits by hiring the workers away from their current occupations and re-employing them elsewhere.

If people pass on the opportunity, Caplan argues, then they implicitly accept the tragic-but-nonetheless-real fact that workers in very poor countries simply are not very productive. Low wages, then, are not the product of exploitative multinational corporations but of extremely low productivity. The relevant question for those concerned about the very poor is not "how do we convince (or force) multinational corporations to pay more" but "how can we improve the productivity of the world's poorest workers?"

Right. This man claims that people divest in oppressive companies because "3rd-world workers are unproductive." Besides the very sinister prejudice inherent there, there is the obvious deficiency that is his inability to see outside of his one-dminesional, "rational economic self-interest" notion of human drive. Guess what Caplen: human beings are driven by social values, too! I know, right? It's a shocker!

These mises boneheads will stop at nothing to prove how an alienating profit-worship is "freedom" whereas any attempt for the mass application of wealth and plenty to the poor is intrinsically opposed to "freedom."

Trivas7, take a hint and look at these values you are aligning yourself with. I know that you know better than this.

[turquino]

Maoist-third worldists have dealt with these arguments before: http://monkeysmashesheaven.wordpress.com/2008/09/18/dear-maoist-third-worldist-are-first-worlders-more-productive/
Similar claims have been made by social chauvinists defending the superwages of Western workers and the theory of the productive forces.

[KC]

That quote makes absolutely perfect sense if you actually know a little economics and realise that workers cannot be paid, in the long run at least, more than their marginal productivity. No rational employer will hire them. So the only way to raise wages and thereby raise living standards is, like the Mises article says, to raise worker productivity.

I don't expect this point to make much impact around here though.

Whenever there is an increase in productivity the increase in revenue is generally applied to either a decrease in the price of the goods, pocketed by the employer or reinvested as capital. Worker productivity generally doesn't have much to do with how much they get paid.

[Kwisatz Haderach]

In industries based on manual labour, the only way to significantly increase worker productivity is to be more capital intensive - in other words, buying more advanced machinery. Thus, worker productivity depends on the company, not the workers.

Of course, companies prefer to hire "unproductive" workers in the developing world simply because it's cheaper than investing money in better equipment.

[Demogorgon]

In industries based on manual labour, the only way to significantly increase worker productivity is to be more capital intensive - in other words, buying more advanced machinery. Thus, worker productivity depends on the company, not the workers.

Of course, companies prefer to hire "unproductive" workers in the developing world simply because it's cheaper than investing money in better equipment.
Indeed, and branching out slightly, if the company does choose to make production more capital intensive it can either produce more with the same labour, the same with less labour or in practice somewhere in between. When labour is reduced it is almost always in terms of unemployment rather than reduced hours for existing workers.

There is no particular reason why it would not be possible to reduce the time spent at work by current workers other than the general trend of capitalism to use extra "leisure time" generated by increased productivity to reduce the workforce rather than hours worked for the same workforce due to the fact that you can get away with paying a smaller workforce working longer hours less money as the threat of unemployment will stop them taking industrial action. According to Austrian theory the reason this happens because it is he "mutually beneficial" result that the market has arrived at. That stretches credibility somewhat.

[Robert]

Just out of curiosity, why do you guys read so much Libertarian crap if you believe it is utter garbage?

Do you read Mein Kampf too?

[Die Neue Zeit]

Right. This man claims that people divest in oppressive companies because "3rd-world workers are unproductive." Besides the very sinister prejudice inherent there, there is the obvious deficiency that is his inability to see outside of his one-dminesional, "rational economic self-interest" notion of human drive. Guess what Caplen: human beings are driven by social values, too! I know, right? It's a shocker!

These mises boneheads will stop at nothing to prove how an alienating profit-worship is "freedom" whereas any attempt for the mass application of wealth and plenty to the poor is intrinsically opposed to "freedom."

Trivas7, take a hint and look at these values you are aligning yourself with. I know that you know better than this.

You should double-post this in the LTV thread.


There is no particular reason why it would not be possible to reduce the time spent at work by current workers other than the general trend of capitalism to use extra "leisure time" generated by increased productivity to reduce the workforce rather than hours worked for the same workforce due to the fact that you can get away with paying a smaller workforce working longer hours less money as the threat of unemployment will stop them taking industrial action. According to Austrian theory the reason this happens because it is he "mutually beneficial" result that the market has arrived at. That stretches credibility somewhat.

I wonder how closely related your remarks are with the productivity paradox:

http://en.wikipedia.org/wiki/Productivity_paradox

[Self-Owner]

Right. This man claims that people divest in oppressive companies because "3rd-world workers are unproductive." Besides the very sinister prejudice inherent there, there is the obvious deficiency that is his inability to see outside of his one-dminesional, "rational economic self-interest" notion of human drive. Guess what Caplen: human beings are driven by social values, too! I know, right? It's a shocker!

3rd world workers are unproductive compared to 1st world workers. I'm sorry, but that is simply a cold hard economic fact. Of course, this requires a notion of productivity (and value) which is a little more sophisticated than the devotees of the LTV realise, but it is the truth. When it comes down to making things that other people want, 3rd world workers do it less efficiently than 1st world workers.

One of the reasons for this, of course, is nothing to do with the workers being lazy or anything like that (it's much easier to imply that I'm racist than to actually engage my arguments, I guess). It's due to the fact that less capital has been invested in these countries. An American manufacturing worker uses the latest machinery, provided by capital investment, which means he produces much more than his equivalent in Bangladesh.

The other main reason is access to markets: and this is a real problem. The mass of immigration restrictions (put in place, of course, by the friendly state in order to raise the wages of domestic workers) have a hugely restrictive effect on 3rd world labour prices.

Funnily enough, Caplan (and the 'misoids') realize both of these facts, which is why they end pretty much every essay on the topic with something along the lines of 'if you want to help out the 3rd world, invest your capital there so that technology can be improved which increases worker productivity and therefore wages.' Caplan, if you're familiar with his work - which, let me guess, you're not - actually is in favour of unrestricted immigration because he also realizes that this would make a lot of people better off. But hey, I guess that's hard to mesh with the 'everyone who disagrees with me is racist' narrative you've got going on.

[Self-Owner]

In industries based on manual labour, the only way to significantly increase worker productivity is to be more capital intensive - in other words, buying more advanced machinery. Thus, worker productivity depends on the company, not the workers.

This is exactly right, which is why anyone who gives a damn about the actual workers would be all for as much capital investment in their countries as possible.

[Dean]

3rd world workers are unproductive compared to 1st world workers. I'm sorry, but that is simply a cold hard economic fact. Of course, this requires a notion of productivity (and value) which is a little more sophisticated than the devotees of the LTV realise, but it is the truth. When it comes down to making things that other people want, 3rd world workers do it less efficiently than 1st world workers.

One of the reasons for this, of course, is nothing to do with the workers being lazy or anything like that (it's much easier to imply that I'm racist than to actually engage my arguments, I guess). It's due to the fact that less capital has been invested in these countries. An American manufacturing worker uses the latest machinery, provided by capital investment, which means he produces much more than his equivalent in Bangladesh.

The other main reason is access to markets: and this is a real problem. The mass of immigration restrictions (put in place, of course, by the friendly state in order to raise the wages of domestic workers) have a hugely restrictive effect on 3rd world labour prices.

Funnily enough, Caplan (and the 'misoids') realize both of these facts, which is why they end pretty much every essay on the topic with something along the lines of 'if you want to help out the 3rd world, invest your capital there so that technology can be improved which increases worker productivity and therefore wages.' Caplan, if you're familiar with his work - which, let me guess, you're not - actually is in favour of unrestricted immigration because he also realizes that this would make a lot of people better off. But hey, I guess that's hard to mesh with the 'everyone who disagrees with me is racist' narrative you've got going on.

The only evidence you have here is the technological disparity, which is not dramatic enough to justify sweatshop conditions. However, the article did make a very good point - the companies have to compete in a global capital market. So the fact is basically that the individual companies aren't to blame, it is the entire system of capital which justifies the rapid de-investment in human beings in the stead of capital enterprise.

[Demogorgon]

This is exactly right, which is why anyone who gives a damn about the actual workers would be all for as much capital investment in their countries as possible.
What kind of capital investment? The kind that only comes when the Governments agree to put down organised labour and remove corporate taxation that funds such frivolous things as education?

In a country where workers do not have the ability to fight back against powerful corporations with not inconsiderable Government backing, any productivity gains will not translate into improved pay and conditions.

Naturally the third world has to develop, but the kind of investment that is driven by those behaving like locusts, gutting local industry, forcing the Governments to cut back on public services and political freedoms and then moving on as soon as n even cheaper labour market opens up forcing the race to the bottom further and further on is not doing any good.

[Labor Shall Rule]

This is exactly right, which is why anyone who gives a damn about the actual workers would be all for as much capital investment in their countries as possible.

I'd agree that products with a high ratio of variable capital are higher in value - which is your criterion on how to measure 'productivity'. But that occurs after those capital intensive industries receive raw materials for production.

It's because foreign markets are endowed with certain levels of capital more so than others. If they (third world workers) were paid past what was needed for reproduction, then it'd put restrictions on the supply of labor that allows for this process of circulation to continue. It's obvious that individual firms prefer this norm - import raw materials and machinery that were relatively cheaper to make/excavate, and add little additional capital to create the finish-product.

This is a mechanism that is wrought by imperialism, though - export a little capital here to allow them to make parts, then a little here to package it, and then a tid-bit there to transport it here.

[Drace]

I don't see the connection between productivity and low wages. Even if they got an advanced set of machines there and the workers were able to produce twice as much, what would have the capitalist pay more?

As I remember, children and women working in industrialized factories back then still had incredibly low wages.

[la-troy]

http://www.cbsnews.com/stories/2007/09/03/business/main3228735.shtml

This kinda backs up what the self owner guy says. Productivity is not really up to the workers it relies more on the equipment and you need capital to purchase the equipment. So there would need to be a huge influx of capital into these economies. The question has to be asked though whether an increase in capital will actually result in better equipment being purchased. From my experience an influx in capital usually results in more of the same crappy jobs being created. The companies usually use harsh working hours , low wages and terrible working conditions to compensate for the low productivity.

[Self-Owner]

I don't see the connection between productivity and low wages. Even if they got an advanced set of machines there and the workers were able to produce twice as much, what would have the capitalist pay more?

Well, productivity is certainly the upper bound for wages. No employer can pay an employee more than the amount the employee makes for him, at least in anything resembling a long run. So increasing productivity is a necessary condition for increasing wages. Is it a sufficient one? Probably not. The lower bound of wages is the next best alternative that a worker can get, so in some sense there has to be competition between employers for this to happen. Given some of the facts about sweatshops, for instance the average rates of pay compared to the wider economy as a whole, I'm confident that competition does exist to some degree.


As I remember, children and women working in industrialized factories back then still had incredibly low wages.

Probably because the productivity, even with machines, was still not very high. Bear in mind the economy as a whole had extremely low wages too...

[RGacky3]

Thats an Interesting theory Self-Owner, that wages have to do with productivity, that being the case, Capitalists and Bosses should be poor as hell.

[Sendo]

Well, productivity is certainly the upper bound for wages. No employer can pay an employee more than the amount the employee makes for him, at least in anything resembling a long run. So increasing productivity is a necessary condition for increasing wages. Is it a sufficient one? Probably not. The lower bound of wages is the next best alternative that a worker can get, so in some sense there has to be competition between employers for this to happen. Given some of the facts about sweatshops, for instance the average rates of pay compared to the wider economy as a whole, I'm confident that competition does exist to some degree.



Probably because the productivity, even with machines, was still not very high. Bear in mind the economy as a whole had extremely low wages too...

This is a faulty leap of logic. As the pie gets bigger we all get bigger slices. Too bad empirical evidence often indicates, if anything, the exact opposite.. The wealth of the masses in relation to the rich gets lower as capitalism grows. That's been the case with capitalism for a while and especially with the freer markets.

[Jazzratt]

Thats an Interesting theory Self-Owner, that wages have to do with productivity, that being the case, Capitalists and Bosses should be poor as hell.

Efficiently producing misery, apparently, has a high market value.

[Self-Owner]

This is a faulty leap of logic. As the pie gets bigger we all get bigger slices. Too bad empirical evidence often indicates, if anything, the exact opposite.. The wealth of the masses in relation to the rich gets lower as capitalism grows. That's been the case with capitalism for a while and especially with the freer markets.

I don't think I ever made the claim that 'as the pie gets bigger we all get better slices.' But seeing as you attributed it to me, and it's pretty much true, I'll defend it a little.

First of all, you're overstating your claim massively: I'm aware of the studies which say inequality is rising, but virtually none of them say the poor is actually getting poorer. Just that the rich are getting richer at a faster rate.

Secondly, I think there are problems with these studies in that they don't take into account (necessarily) the massive increases in the quality of goods over time. For instance, check out this paper: http://faculty.chicagogsb.edu/christian.broda/website/research/unrestricted/Broda_TradeInequality.pdf - it says that the goods the poor tend to purchase have actually gone down massively in price, leaving real inequality almost intact. The reason? Globalisation and Wal-mart.

[RGacky3]

I'm aware of the studies which say inequality is rising, but virtually none of them say the poor is actually getting poorer. Just that the rich are getting richer at a faster rate.

Also that more people are becomming poor at a much faster rate than people are getting out of poverty or getting rich. Also with higher living cost its harder for poor people to be poor.

Your argument about the quality of goods is debatable at best, because most money in luxry items is made by selling to the wealthy.

Also the whole "as the pie gets bigger we all get bigger slices" goes against the very essence of Capitalism, the profit motive, you always must maximise profits, which means paying the least amount possible for the most output, which for workers is very little. The fact is none of this justifies Capitalism, even if it was true, which it is'nt.

[Self-Owner]

Also that more people are becomming poor at a much faster rate than people are getting out of poverty or getting rich. Also with higher living cost its harder for poor people to be poor.

Forgive me for being sceptical, but do you have any evidence whatsoever that 'people are becomming poor at a much faster rate than people are getting out of poverty?' Because all the evidence I've seen is to the contrary: in absolute terms, even the world's poorest are getting richer. For instance, http://papers.nber.org/papers/W8933 - We estimate poverty rates and headcounts by integrating the density function below the $1/day and $2/day poverty lines. We find that poverty rates decline substantially over the last twenty years. We compute poverty headcounts and find that the number of one-dollar poor declined by 235 million between 1976 and 1998. The number of $2/day poor declined by 450 million over the same period.



Your argument about the quality of goods is debatable at best, because most money in luxry items is made by selling to the wealthy.


This doesn't make sense. The argument is that the prices of non-luxury goods have gone down or stayed constant, while the prices of luxury goods have increased. So although the gap between the rich and the poor has been widening in terms of the number of $ they earn, what they can actually buy with those $ is very different.


Also the whole "as the pe gets bigger we all get bigger slices" goes against the very essence of Capitalism, the profit motive, you always must maximise profits, which means paying the least amount possible for the most output, which for workers is very little. The fact is none of this justifies Capitalism, even if it was true, which it is'nt.

Well, that's not what the empirical facts seem to be saying. In a free market, companies make profit by selling people things they want at a cheaper price than their competitors. It's hard to sustainably make a profit if you screw over your customers on a regular basis.

[Anti Freedom]

Hmm... I don't see what the problem is with the assumption made of lower productivity. This is not to say "poor people are lazy" but it is hard to imagine that in a poorer country with less Western values, less training, greater social issues, and where capital does not already exist to a great extent, that the workers will end up showing less productivity. I mean, I've heard the "less productivity" story from tons of people in many fields, and a number of mainstream economists would accept the notion in their paper as quickly as the Austrian did.

In any case, this isn't a terrible article. It is just that the assumptions the author takes as obvious are not shared by this community, and well... that happens, and would be expected to happen. It isn't even strange or terrible, it just is, and frankly, the same comments made about this paper could be made towards any paper except perhaps one published for some peer-reviewed journal. The author was not even completely anti-empirical, as he cited research on sweatshop wages compared to other opportunities in the area. It just would be strange for an Austrian author to go through every foundation for his ideas in a simple article, just as it would be odd for a Christian author to go through every point of Christology in an article on the advent, or even an atheist(or biologist or both) author to go through every niggling detail on evolution or spend a lot of time rebutting Intelligent Design, when all he wanted to do was address one aspect of it in sufficient depth to make a dilettante feel better.

Does this mean that this is a *great* article deserving of all sorts of praise? No. This was really just an article written for the base to help them understand the idea from within a semi-Austrian standpoint. Not to be nitpicked by a group of revolutionary leftists, I would bet libertarians and conservatives do the same thing to essays written by revolutionary leftists, as they go on about how "leftists love mass murderers", and "leftists know nothing about economics", and so on.

[Schrödinger's Cat]

What's a "Western" value? That sounds like a very large generalization. Do you mean traditional Puritan values? May as well condense the overt collectivization of people.

[Hiero]

The arguement of the article is based on a subjective idea of what is productive.

Even if we use their subjective idea of what is productive, we can still see workers in the 1st world who do very little productive work and are paid very high wage. I am sure we have all meet someone in some company who does very little work but is paid a very high wage. Or does a pointless job

But just look at the service sector, which in some 1st world countries is the major part of the economy and we see workers who simply move stock around or putting together ready made parts from 3rd world labour and are still paid more then thoose who do the productive labour.

The aritcles is based on subjective and it could argued racist idea on what is productive. Are we really meant to believe that say someone working in retail is more productive then the worker who actually made the product?

Through their subjective idea of productivity they claim more capital investment is neccassary. This is what has been happening for over the last century, it is called imperialism. All this has done is created a labour apartheid, where the most menial parts of labour are shift offshore to the old colonial countries through usually brutal comprador governments.

Unless the reactionaries state what they think is productive labour the aritcle is worthless. However if they do state what they think is productive labour, then their subjectivity will be shown and then productive can be argued through any perspective and again the arguement losses any weight.

[Anti Freedom]

What's a "Western" value? That sounds like a very large generalization. Do you mean traditional Puritan values? May as well condense the overt collectivization of people.

Are you just giving me crap? There are "Western" values, as much as there is a "West". The entire notion of "the West" is based upon the notion that "Western" values exist. I don't mean traditional Puritan values, not all people in the West were Puritans, that is only a phenomenon in certain parts of America, but rather, I mean the cultural values inculcated in us by adaptation to a wage labor system, and a strongly money, and property based society, with a strong notion of middle class values. I mean.... GeneCosta, I really don't understand how the capitalistic nations of the world, AKA "The West" could *not* be perceived as having a distinctly different culture than the rest of it.

[Anti Freedom]

The arguement of the article is based on a subjective idea of what is productive.

Not so much as market-centric, which is an idea with it's own ideas and assumptions. We can argue that the basis of the acceptance of this is subjectivity, but then again, so is the basis of any acceptance of a system. I mean, I think the notion put forward is reasonably coherent, any neoclassical econ student will learn a lot of the same ideas, just not all the premises are stated. In any case, I think capitalistic economics has an internally coherent framework, that can and should be accepted or rejected based upon it's truth, it's value compared to other possible systems, and the basic principles(as all systems are judged by basic principles).