Think Globally, Yeah Right

I predicted this story about Ethiopia becoming the next China nearly twenty years ago after living there, traveling in other sub-Saharan African countries, and becoming a student of globalization.*

Long story short, the outsourced manufacturing race to the bottom has entered it’s final stage. China’s average manufacturing wage is 3,469 yuan ($560) per month. Pay at Ethiopia’s Huajian shoe factory (18 miles outside of Addis Ababa) ranges from the basic after-tax minimum of $30 a month to about twice that for supervisors.

A paragraph to ponder:

Huajian’s 3,500 workers in Ethiopia produced 2 million pairs of shoes last year. Located in one of the country’s first government-supported industrial zones, the factory began operating in January 2012, only three months after Zhang decided to invest. It became profitable in its first year and now earns $100,000 to $200,000 a month, he said, calling it an insufficient return that will rise as workers become better trained.

Meanwhile, last week, George Mason economist and blogger extraordinaire, Tyler Cowen, wrote in the New York Times about income inequality. The title is the thesis, “Income Inequality is Not Rising Globally. It’s Falling.

Here’s the gist of Cowen’s argument:

We have evolved a political debate where essentially nationalistic concerns have been hiding behind the gentler cloak of egalitarianism. To clear up this confusion, one recommendation would be to preface all discussions of inequality with a reminder that global inequality has been falling and that, in this regard, the world is headed in a fundamentally better direction.

The message from groups like Occupy Wall Street has been that inequality is up and that capitalism is failing us. A more correct and nuanced message is this: Although significant economic problems remain, we have been living in equalizing times for the world — a change that has been largely for the good. That may not make for convincing sloganeering, but it’s the truth.

A common view is that high and rising inequality within nations brings political trouble, maybe through violence or even revolution. So one might argue that a nationalistic perspective is important. But it’s hardly obvious that such predictions of political turmoil are true, especially for aging societies like the United States that are showing falling rates of crime.

I’m positively predisposed to counter-intuitive thinking, but Cowen was hopelessly naive if he thought his NYT readers might concede even some aspects of his argument.

Here’s the comment Cowen’s readers most liked:

You’ve Got to be Kidding

This article is a classic example of a divide and conquer strategy. The gist is that less educated and skilled people in countries like the U.S are suffering but those in other countries are gaining. Hence, the world is equalizing. So, if you complain about the U.S., you are essentially wishing harm on others. In reality, what the “miracle” of capitalism has done is what it always does — it enriches owners of capital and exploits labor. Developing countries are, of course, better off; they started from nothing, and so anything is an improvement. So production is moved to places where people are desperate, and profits rise because of poor wages, no attention to work place safety, no regard for environmental concerns, etc. Yet, we are to celebrate because the workers in the poor countries are no longer earning zero. This logic then absolves companies from any criticism about the horrendous working conditions. After all, global inequality is falling!

The author also glides over the fact that people live in particular societies and their own inequality is most important. It matters for the distribution of political power (Citizens United, anyone?), for health (see, e.g., studies by Richard Wilkinson), for education, for housing and for a host of other things.

Finally, the author predictably criticizes redistribution (what, not unions?) But the real issue is changing the rules of the game so things aren’t rigged for elites. If so, redistribution will be less needed.

The other most highly rated reader responses were similarly critical. Taken together, they illustrate people’s unwillingness to compare themselves to foreign people in distant places. It’s no surprise that economically secure professionals like Cowen and myself choose cosmopolitanism, but for anyone else who lacks economic security, its a luxury they can’t afford.

It’s the same reason the well-to-do, who can afford higher prices elsewhere, brandish “I Don’t Shop at Walmart” bumper stickers. Cowen embraces cosmopolitanism because his university and book publishers and blog sponsors pay him handsomely; and his university provides his health care; and, like me, he has extraordinary job protections as a tenured professor; and he travels the world doing research, lecturing, and teaching.

I don’t begrudge him his professional success, but for him to assume others will embrace cosmopolitanism based upon his logic suggests he’s woefully out-of-touch with those that are struggling to get by.

Cowen might respond to that criticism by insisting that it’s in everyone’s best interests to think more globally, and I’d agree, but it’s going to take far more than abstract New York Times essays to get people to think beyond their household, community, state, and nation.

imgres * Rest assured, normally my predictive skills are nothing special. For example, I was sure Jay-Z and Beyonce would live happily ever after.

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