Modern Slavery, and Thoughts Thereof.

Boy Drinking Tea near Brickmaker.  Helmand Province, Afghanistan

When I was reading about modern slavery, the author mentioned slavery amongst some brickmaking families in Pakistan.  The way it works is this: someone comes and offers a great job.  "Come work here, the pay is great!".  When someone takes the job they will find that they 'owe' money for transportation to the work site.  Plus the site is so remote that it's hard to buy food and living essentials.  Those are provided by the business, at a higher rate than normal. 

The worker soon finds that he (primarily a 'he') keeps sinking into debt.  This might be the case regardless - some brick making businesses are better than others -  but dishonesty on the part of some managers makes it worse.  These workers can't read or write, and so they have no way of verifying that their debts are being documented correctly.  Or that attempts to pay if off are counted correctly.  So even the hardest workers, ones who have no family emergencies to pay for, don't go into further debt because of unexpected illnesses or a planned wedding, will sometimes wind up deeper in debt because of this dishonesty.

While in debt the worker can't leave.  Can't quit and go find a better job.  Can't take out a loan and go to school.  The business might trade his debt (and thus his labor) off to someone else, but it never truly goes away.  If the worker causes trouble or tries to leave, the owner can try to call in the debt right then and there.  As long as the worker keeps working, the owner may let the debt ride.  This debt can also be passed on from generation to generation.  So someone might be making bricks simply because their father or grandfather took a job that promised great wages and wound up sinking into debt.

While I took the picture above in Afghanistan (and not Pakistan), I wonder if there were some other questions I could have or should have asked when we visited this brick maker.  I somehow assumed it was a mom and pop business, though in this culture the mom wouldn't be an owner.  It just looked like a family run business, since the kids were clearly part of a family working here.  Now I wonder who actually owned the business, and how well the family was paid.

As I've been reading up on this, I find myself wondering "How can people do this to each other?"  How can you be so divorced of empathy, compassion, respect for life and human dignity...how can you be so blocked off from our natural desire for connection...that you would create a system that depends so much on making other people's lives miserable?  And not just the worker's life, but the lives of his or her children?  The entire family?

I know enough to say that it's not exclusive to any one group or culture.  Our own history of company towns show some eerie similarities, though some of the companies had high ideals for creating a town like this.

What Kevin Bales indicates in his book Disposable People is that our modern economy makes it hard to know where and how such practices makes it into our modern economy.  It's made me think about what a fair cost is for a lot of things.  He mentions that oftentimes the business owners are divorced from the day to day running of that business, they just put pressure on the middle managers to save money...and some of those managers find the only way to make profit is to "reduce expenses" i.e. find ways of paying less for labor, since other expenditures are fixed.  And so we have charcoal burners in Brazil working in a similar fashion.  (I have carefully avoided talking about the sex trade, as there are other factors involved there...but some of the same dynamics are at play.)

What is a fair cost?  Maybe we really should be paying a couple of dollars more for those chocolate bars, as one example, that claim fair pay for the workers.  Or (to bring this closer to home) maybe an extra 17 cents for a Big Mac isn't such a big deal, if it allows workers to make enough to raise a family without food stamps and welfare.  And Walmart, which is one of the largest employers, shouldn't pay a wage that also requires welfare to raise a family.

"But what about the free market?" you might ask.  Aren't these the wages dictated by supply and demand?

And how can we expect these companies to compete if they raise our wages, when companies can go elsewhere to pay even less?

If companies were barely breaking even I would think that's a valid point.  Can't expect somebody to stay in business if they're not making any money.  Yet this concept of 'rents' interests me, because the difference between the sale price and the cost of making something can sometimes be substantial...and who gets what portion of that 'rent' says a lot about our economy today.

Shifting gears a bit,  I want to throw something else out there.  Back when Spain was extracting a lot of gold from the Americas most nations thought wealth came from hoarding gold.  The more gold you had in your treasury, the better off you were.  Part of Adam Smith's genius was pointing out that a good economy did not come from hoarding gold, but from a free market economy.  (btw, he also thought the government should be responsible universal education and public infrastructure).

I would love to see some studies asking whether the modern equivalent of 'hoarding gold' is doing the same thing.  That is, just as I've seen article after article talk about how wages are stagnant and the middle class is shrinking I've also seen repeated articles mention that various groups (large corporations, the 1%, etc) are sitting on piles of money.  Some of that is probably  necessary.  No business wants to go under because they lack liquidity during a crisis (that's happened to a couple big names already).  Yet how much of that is good business practice, and how much of that is the equivalent of hoarding gold?

As for the free market economy, I'm not entirely sure we're seeing it at play here.  Certain groups seem to have captured the market, to the point where they're able to influence the economy more than would happen otherwise.  For example, could Walmart seriously find workers if those workers were unable to get welfare to make ends meet?  At some point people will say 'it's not worth working my butt off when I can't make ends meet on the wages I'm getting'.  Or even "why should I work hard just to make sure some CEO or shareholder can buy a private yacht?"

Actually, I think people are already saying that...which is why this ties in a bit with immigration.  Illegal immigrants sometimes take the jobs that Americans don't want, because those jobs pay too little to appeal to someone who grew up here.  Businesses, rather than increasing their wages, hire illegals instead.

A few final thoughts.  I don't believe businesses should be charities.  Keeping unproductive people on the job hurts everyone.  At the same time, I think we've already made the decision (as a society) that we don't want people fired for lack of jobs to wind up homeless and dying on the streets.  Hence the social safety net, such as it is.

We're facing some major transitions today.  Automation - and globalization in the more industrialized economies - is taking away a lot of the jobs that used to be there for what's called an 'unskilled' population. (Even though it's called unskilled, experience and skill can make a big difference in improvement, so it's technically not.  I've seen this at work, where we have some pretty simple jobs anyone is capable of doing...and yet it's hard to find the right person for the role.)  I don't want to be a Luddite, and throw away this technology just to keep people employed.  I think that's a waste of resources.  I also think that very few people enjoy doing the boring, monotonous jobs that are best suited for automation.  (It seems sad to say that all a thinking and feeling human being is capable of is to do some repetitive and brainless task.  I kind of feel they should be paid more not because it requires a special skill, but because it's such a waste of human potential.  Reminds me of a science fiction book that had a restaurant that was considered classier and more expensive because it used real human servers.) 

And so I wonder what an economy like that would look like.  One where most people have the skills to do the higher level jobs, where only a few people work the 'unskilled' ones that can't be automated - and are paid well for it - and where our products cost what they 'should' in so doing.

Some things would probably be much more expensive, but if it's made using the charcoal  made by the Brazilians I mentioned above, isn't that an artificially low cost?  Or if a t-shirt is now twice as expensive, but the price we're used to came from ]mistreated garment workers, is that truly a fair price?

And how much would truly destroy a business, versus just changing what portions of the pie everyone gets?

Modern America

Some days it seems like the rich get richer, the poor get poorer, and anything we try to do will just make things worse.  (There are assumptions in that statement, such as that it's bad for the rich to get richer and the poor to get poorer.  Let's not digress into whether these things are good or bad at the moment.)


I do, however, keep remembering that history often winds up surprising us.  That just when it seems like the powers-that-be have gained some sort of lock on control, the unexpected happens.  Consider how ruling families in Europe regained control after Napoleon, only to lose it again almost 100 years later.  Or the labor movement, which somehow managed to create a 40 hr workweek (with 1.5 pay for overtime) even though the odds seemed stacked against them.  You could make a similar story regarding Tammany Hall, and other situations where the powerful seem to have everything in their favor.


So all hope is not lost, even when things seem darkest.  A reminder I feel I need to make, particularly in this day and age.


I bring this up because the America I know and love seems threatened by a variety of factors.  This is probably not a controversial statement, as survey after survey shows that Americans are unhappy with the direction we are going.  What makes my statement different, I think, is that I disagree on what those threats are.  It's not Islam, it's not our growing diversity, it's not gay marriage.  It's not globalization, or immigration, or the loss of manufacturing jobs in and of itself (though all of those things contribute to the hard times faced by many in America today.)


I have had a fascination with history, with what helps a nation rise or makes a nation fall, in part because I feel America is at a crucial point right now.  The decisions we make now can hasten or halt our decline.


Again, on the generic level, I think a lot of people agree with me here.  It's the specifics that differ.  I think I'll do a couple posts to discuss those specifics, with the caveat that I'm by no means a professional historian.  These are just some thoughts or trends I've noticed in the course of reading up on things, and should not be considered rigorous by any means.

Globalization, Greek Crisis, Finance, Currency, Etc.

I've been following the Greek crisis, thinking about the global economy, and got a lot of thoughts percolating through my head.  Only problem is, I think I need a better understanding of the global economy, finance etc. 

I wanted to lay out some of the influences on my thinking before going deeper into this.  Some of it is coming from that new app - Brigade.  It's nice to read some of the comments, and can be thought provoking.

Some of it comes from this article, which said a couple of things I want to know more about.  It discussed the importance of letting a currency float, which was somewhat interesting...and reminded me that I'd like to know more about currency exchanges and global finance.  It seems odd that a business can be doing the exact same thing it was the month prior, making a product that is just as good as it was the month before...but because it's debt is in one form of currency and it's business is in another it may suddenly be in danger simply because the rate of exchange changes. (Suddenly, it's debt is considered greater than before because the currency it operates in is devalued, so the debt is now worth more of the equivalent local currency.  Nothing changed in the way it did business, but now it's in trouble.)

I also found the whole section on "The eurozone doesn't treat Greece the way America treats Kentucky" worth learning more about.  Except I'm not really sure where to go for that.  I'd like to read more about our national economy.  About this claim that Massachussetts transfers money to Kentucky, but because it's all part of our one nation/state we aren't upset about it the way the eurozone is with Greece.

I wish there was something on public finance...I pick up drips and dribbles here and there, might be nice if I knew a PhD in economics. :)

So I've got some thoughts going on, but I know I don't actually know enough to make them solid.  Picked up a few books I'll try to read at some point, not sure when I'll get these down in a blog post.

Globalization - Difficulties

There are a lot of challenges involved with reaching a globalized endstate, and the biggest of them is fear.   Given our history, some of it is quite valid.  Some, less so.


Fear that some outside force would dictate terms.  Fear of job loss.  Fear of change.  Fear that we would lose our identity. 


Fear that the UN could come in and force us to change our gun laws.  Fear that the United States would overwhelm a smaller nation.  Fear that the United States would lose it's identity in a flood of immigrants.  Fear that Europe would lose it's identity in a flood of immigration.  Fear of financial disaster.  Of being stuck paying for some 'other' like Greece and the EU right now.  Fear of having our lives affected by strangers we don't know, understand, or care to give such power to.


Funny, though - I sometimes wonder how those proud Virginians, New Yorkers, etc would feel if they saw where we were today.  Our states are about the size of many nations, and those early colonies felt more loyal to their own state than to some new and fuzzy notion of our nation.  Just think of the word change between 'these united states' and 'The United States'.


I think most of those fears are tied up to world history.  That is - in the past, nations were bound together either through conquest or marriage.  Sometimes both.  Since we don't really do dynastic marriages any more, that pretty much leaves conquest.  And nobody wants to be the conquered.


This is, again, part of why I find the Articles of Confederation, the US Constitution, and the European Union so fascinating.  The United Nations to a certain degree, too.  (Though since I'd put it on par with the Articles of Confederation in the inability to enforce decisions, it's not as interesting as the EU at this moment).


I think the only type of system that would gain support would be a system that created another layer of government, so nations would operate sort of like states do in the US today.  (Sure, for simplicity's sake I wonder what it would be like if anyone invoked our laws to apply for statehood.  Given the fears of US dominance as it is, I doubt anyone not already in our sphere would try it.  Though the fuss it would create, the upset it would do to various interest groups, that'd be fun to watch!)


There would be all sorts of questions raised.  One currency?  Taxation?  Executive powers?  National sovereignty? 


Most of those are questions that could be answered, addressed.  Compromised on.  The one thing that can't, the true obstacle, is the first one -


Fear.

Globalization - Opportunities.

I was trying to decide if I should start with the potential positives, or address the pretty hefty fears of globalization. I think the subject of this post makes it clear which one I decided to start with.

I've done a short little search online, trying to track down a reference that is unfortunately lost.  It was to the National Screw Thread Commission.  A commission created in the United States to help standardize screws.  The reference I recall mentioned it as one of the most successful commissions in our history.  It seems a little silly, to talk about the importance of a standardizing a screw.  Yet all it takes is a few moments of thought to realize just how critical it could be.  How much do we take for granted, that if we lose a screw - or ruin one by stripping it - that you can just go to a hardware store and find one that's the right size?  That the threading is the same, and will do exactly what you need?

Something similar happened with train tracks.  Imagine what a disruptive mess it would be if every train track was a different width.  Each train would have to figure out which tracks could support it's design, or you would have to create a one-size-fits-most design that could adjust to the different sized tracks.  Aren't we all better off by having a standardized system for building train tracks?

This does come at a loss, of course.  Nobody could build a monopoly by insisting on their own unique system (the way cell phone companies create phones with their own unique chargers).  There is less room for individuality, less of a chance to distinguish yourself with a unique screw design.

This is the strength and weakness of centralization, standardization, control.  In some situations (like screws and train track widths) it's fairly obvious which one has been better.  In others?  Not so much.

So to get back to globalization - right now each nation has their own way of doing things.  Almost as though they all have a unique train track width, and multi-national companies have to adjust their trains to each different system.  How much do we waste on this?  I see this where I work.  Somewhat.  Now that I'm at our returns center, I occasionally deal with returns from India and China...and sometimes find myself wishing I had a Chinese or Indian customs expert on speed dial.  And labels!  How do we put labels on our parts in all the local languages?  Covering the legal requirements of every nation?  We could wind up with labels larger than the parts themselves!

In addition to consistency, there's an opportunity to simplify, simplify, simplify.  I again did a quick search on a vague reference, and didn't quite find what I was looking for.  I remember hearing about the Code of Hammurabi, which apparently helped consolidate and simplify the laws of that region.  So much of our current system has grown haphazardly, over time, as the world has continued to change.  Sometimes the thought of cleaning it all up, codifying it, and simplifying it appeals.  (Almost too much...I try to remember the downsides, try to appreciate the little quirks, foibles and complexities that have developed over time.)

There are also some opportunities that have more to do with what I've been calling the endstate of globalization.  While going over this in my head, I realized that most of the perceived downsides have more to do with the start/stop process of globalization, than any real problem with the end result.  Fears of job loss, for instance...are more because of the tremendous imbalance in cost of living, currency, etc. between one region and another.  As I started to say in my response, once we're fully globalized a company is about as likely to move their business from the US to Vietnam as they would to move their headquarters from New York to North Judson, Indiana.  Not saying it couldn't be done, but it would depend on the market, the business, property taxes, etc.  The lower cost of living just isn't enough to justify moving when it takes you away from a key location.

Plus, a globalized endstate has the potential to determine what a truly appropriate cost of labor would be.  In a way, the disparities between industrialized world and developing world are suppressing wages in the industrialized one.  Hard to unionize when the company decides to close your factory and move to Mexico, hard to argue for a pay raise when workers in another country could live comfortably off a third of your income.

This isn't meant  as a 'rah, rah international labor movement'.  I believe the current situation skews what a rational business analysis of wages would be.  The companies that want to pay their workers more have to compete with companies that may not care, which means there's pressure on all of them to do more, cheaper.  Just to stay in business.  If the world economy were more balanced, that pressure would be gone and you could see the companies that invest in their people performing better.

Right now, we see a haphazard and inconsistent movement towards evening out the standard of living.  A company moves part of their business to China, for example.  Labor starts off cheap, but then costs go up.  The business then has to decide whether they're going to keep the investment of resources in China, or look to move to Vietnam. (Or some other country.  Countries are interchangable here, I'm not trying to pick on any particular ones.)  If you do that often enough, businesses on their own will even things out.  But not in any well thought out, planned process.  And it would all be affected by current events, political leadership, etc.

Some of that, btw, is not necessarily about cheaper labor.  I think most businesses want to get their toe in the door of the Chinese market.  In a fully globalized world, they probably would want some of their business over there.  Just as Toyota has factories over here in the US.  But those decisions have more to do with where your market is, etc.

Globalization, Endstate, Ways and Means

I posted a position on Brigade, and then felt like I didn't have a clear enough idea of what I wanted to back it up.  Or that it was too complicated, and not something easily explained.  (Even though there's no limit on text in the explanation for your position.  It's still not right to write pages of material explaining.  And it seems too much like a monologue).

The position was this:

Globalization causes upheaval, but we can have policies to ease the transition and the endstate could be good

Someone asked what those policies should be.  I was thinking about what we'd discussed in my class on globalization (back when getting my MPA).  It's a complicated topic, and a complicated process.  It doesn't seem to be happening steadily, either.  We grow more interconnected, trade grows more entwined, and then we get a recession or financial catastrophe.  Off-shoring becomes re-shoring, or on-shoring, or whatever the term used was.

I was fascinated by the notion of a Ricardian system.  One where the comparative advantage dictated where businesses were built.  Build a factory near the best location to ship raw materials, or best location to ship to your market, or both.  Build distribution centers near the roads and airports that will take your product to your customers...where depends on how many you want to build.  (Only one in the continental US?  You probably want to build somewhere close to where ours is. :)  Two?  Three?  You'd split up the locations to better cover a specific region.)

Getting there from here is daunting, though.  Would it mean giving up national sovereignty?  I think that's the big question, and fear.  Does it mean giving up our identity?

What about currency?  Would we be faced with a crisis, like the Greeks with the euro?

And borders.  We've already got a ton of Americans offended at our current immigration policies.  You'd have to be crazy to consider opening the border.  (Though, funny enough, that's the natural counterpoint to go with free trade agreements.  Funny how willing they are to discuss one and not the other.)

If I were thinking long term, strategically...I'd work at breaking down those barriers between the US and Mexico.  There's a certain amount of distrust and dislike, on both sides.  Yet I think integrating all of North America would be a pretty powerful and amazing thing.

Which also heads straight into everyone's fears.  How would you do it?  Nobody wants an invasion, which generally means treaties and diplomatic arrangements.  Yet those can be slow, tedious, and sometimes more about appearances than reality.  (Is the EU really powerful enough?  NATO seems to be run by committee, which raises the question of how well they'd fight.)

Some of those issues remind me of our early American history.  It's hard to remember, before the Civil War, how much individual states really mattered.  How much saying you were from Virginia made a difference.  Now, sure it says something.  Kind of.  But not to the extent it did when we started.  And so much of our Constitution (and the Articles of Confederation) were tied up with allaying fears that individual states would lose out to a powerful central government.

Wait - where are we today?