Thursday, March 03, 2005
Globalization and Wal-Mart
There are some implict trade-offs involved in globalization. People in the U.S. get cheaper goods while the Chinese and the Indians get jobs. At the same time however, workers in the U.S. get squeezed as more jobs head overseas. It has been my position on this blog that the benefits of globalization far exceed the downsides, especially when you look at it from an Indian perspective. A few days back, former labor secretary Robert Reich wrote one of the most thoughful op-eds I have seen on the subject of trade-offs, using Wal-mart as an example.
Wal-Mart has lured customers with low prices. "We expect our suppliers to drive the costs out of the supply chain," a spokeswoman for Wal-Mart said. "It's good for us and good for them." Wal-Mart may have perfected this technique, but you can find it almost everywhere these days. Corporations are in fierce competition to get and keep customers, so they pass the bulk of their cost cuts through to consumers as lower prices. Meanwhile, many of us pressure companies to give us even better bargains. I look on the Internet to find the lowest price I can and buy airline tickets, books, merchandise from just about anywhere with a click of a mouse. Don't you? The fact is, today's economy offers us a Faustian bargain: it can give consumers deals largely because it hammers workers and communities.
We can blame big corporations, but we're mostly making this bargain with ourselves. The easier it is for us to get great deals, the stronger the downward pressure on wages and benefits. Last year, the real wages of hourly workers, who make up about 80 percent of the work force, actually dropped for the first time in more than a decade; hourly workers' health and pension benefits are in free fall. The easier it is for us to find better professional services, the harder professionals have to hustle to attract and keep clients. The more efficiently we can summon products from anywhere on the globe, the more stress we put on our own communities. But you and I aren't just consumers. We're also workers and citizens. How do we strike the right balance? To claim that people shouldn't have access to Wal-Mart or to cut-rate airfares or services from India or to Internet shopping, because these somehow reduce their quality of life, is paternalistic tripe. No one is a better judge of what people want than they themselves.
Reich then lists some possible solutions to this conundrum.
The only way for the workers or citizens in us to trump the consumers in us is through laws and regulations that make our purchases a social choice as well as a personal one. A requirement that companies with more than 50 employees offer their workers affordable health insurance, for example, might increase slightly the price of their goods and services. My inner consumer won't like that very much, but the worker in me thinks it a fair price to pay. Same with an increase in the minimum wage or a change in labor laws making it easier for employees to organize and negotiate better terms. I wouldn't go so far as to re-regulate the airline industry or hobble free trade with China and India - that would cost me as a consumer far too much - but I'd like the government to offer wage insurance to ease the pain of sudden losses of pay. And I'd support labor standards that make trade agreements a bit more fair.
I personally don't have a problem with Reich's suggestions as long as they stay within the borders of the United States. The minute he talks about labor standards, that becomes a problem because he's effectively proposing that trade barriers be errected. I think the issue of domestic labor standards are best decided by the people and governments of China, India, Mexico etc just as they're best decided by the people and govt of the U.S. within U.S. borders.
Wal-Mart has lured customers with low prices. "We expect our suppliers to drive the costs out of the supply chain," a spokeswoman for Wal-Mart said. "It's good for us and good for them." Wal-Mart may have perfected this technique, but you can find it almost everywhere these days. Corporations are in fierce competition to get and keep customers, so they pass the bulk of their cost cuts through to consumers as lower prices. Meanwhile, many of us pressure companies to give us even better bargains. I look on the Internet to find the lowest price I can and buy airline tickets, books, merchandise from just about anywhere with a click of a mouse. Don't you? The fact is, today's economy offers us a Faustian bargain: it can give consumers deals largely because it hammers workers and communities.
We can blame big corporations, but we're mostly making this bargain with ourselves. The easier it is for us to get great deals, the stronger the downward pressure on wages and benefits. Last year, the real wages of hourly workers, who make up about 80 percent of the work force, actually dropped for the first time in more than a decade; hourly workers' health and pension benefits are in free fall. The easier it is for us to find better professional services, the harder professionals have to hustle to attract and keep clients. The more efficiently we can summon products from anywhere on the globe, the more stress we put on our own communities. But you and I aren't just consumers. We're also workers and citizens. How do we strike the right balance? To claim that people shouldn't have access to Wal-Mart or to cut-rate airfares or services from India or to Internet shopping, because these somehow reduce their quality of life, is paternalistic tripe. No one is a better judge of what people want than they themselves.
Reich then lists some possible solutions to this conundrum.
The only way for the workers or citizens in us to trump the consumers in us is through laws and regulations that make our purchases a social choice as well as a personal one. A requirement that companies with more than 50 employees offer their workers affordable health insurance, for example, might increase slightly the price of their goods and services. My inner consumer won't like that very much, but the worker in me thinks it a fair price to pay. Same with an increase in the minimum wage or a change in labor laws making it easier for employees to organize and negotiate better terms. I wouldn't go so far as to re-regulate the airline industry or hobble free trade with China and India - that would cost me as a consumer far too much - but I'd like the government to offer wage insurance to ease the pain of sudden losses of pay. And I'd support labor standards that make trade agreements a bit more fair.
I personally don't have a problem with Reich's suggestions as long as they stay within the borders of the United States. The minute he talks about labor standards, that becomes a problem because he's effectively proposing that trade barriers be errected. I think the issue of domestic labor standards are best decided by the people and governments of China, India, Mexico etc just as they're best decided by the people and govt of the U.S. within U.S. borders.
