No. And if you measure across time rather than across space, you’d realize that people don’t remain poor. The poorest people in the world today are wealthier than privileged people were a thousand years ago. By the standards of a thousand years ago, nobody in the world is poor outside of a few isolated areas (most of which are actually suffering from war not poverty).
Essentially, yes. The issue of national corporations vs local independant businesses is a whole seperate argument.
I wouldn’t go that far. I daresay a peasant in North Korea is a little worse off than a nobleman in the 1500’s.
There are still a lot of places in the world that are desperately poor, where people live in packing crates and plant subsistence crops with sticks and their bare hands. The average income in the 3rd world is still under $1000/yr, and some countries have average incomes much lower.
The thing is, this isn’t an argument against capitalism or industrialization, because the reason those countries are so poor is because they lack those very things.
If there comes a time when it is no longer profitable to manufacture overseas, then wouldn’t the price of goods increase, thus decreasing surplus production (and wealth)?
Why? Couldn’t it be viewed in the same light considering that the profit of national corporations returns to a central hub, say the US rather than staying in the country where the product is manufactured?
I think you’re confusing prices and wealth.
The only reason prices will go up in these countries is because the products they are making are more valuable. The price of labor goes up because the labor is more valuable, generally because an infrastructure is in place that magnifies the value of labor.
An increase in the price of labor means that the labor is more valuable. That’s a good thing - it means people in that country are now more productive in a given unit of time than they were before. They are able to make more things.
Now, sometimes the price of labor increases to the point where some products are no longer worth making. If something absolutely requires 10 hours of labor but is only worth $50, then if the price of labor goes above $5/hr, that item will no longer be made. But that’s okay, because the reason the labor is that expensive is because other people are willing to pay more for it, because it’s got more value elsewhere.
You can see these kinds of transitions all the time. For example, it used to be quite common for middle class homes to have a lot of custom craftsmanship in them. You can see homes from the 1920’s that have hand-carved balustrades, fancy coffering on the ceiling, etc. But the price of carpentry has risen to the point where people can no longer afford that kind of custom work. So we build houses with drywall walls and prefab baseboards and the like. And what are the Carpenters doing? Well, they’re making more money, because a lot of the stuff they used to do by hand is now available pre-fab for them. Baseboards, mouldings, etc. So one carpenter can finish five houses in the time it used to take to do one. So he makes five times the income, we get five times the number of houses, and the tradeoff is that we dispense with some of the custom detailing we used to get. But overall, the productivity of carpenters has increased dramatically, which allows them to build more stuff, which makes us all wealthier, and in turn they receive a higher wage.
Surplus production isn’t wealth. Total production equates to wealth.
The profit returns to the business, however corporations still spend a great deal of money locally - salaries, vendors, transportation, etc.
Perhaps total production per capita is a better explanation of wealth - maybe. If we double production and triple the population wouldn’t wealth go down? Or is that wealth per capita and not world wealth?
I think something that should be stressed here is one simple truth: money does not equal wealth. Money is nothing more than an accounting system for tracking wealth. If I have a 10 dollar bill its value as ‘wealth’ is one slip of linen/paper. If I trade it for 10 dollars of Coca-cola then I know have converted my accounting shortcut into wealth. I know it sounds arcane but it’s true.
Lord above, Sam! You just defined a special circle of hell for me. I admit I’ve got it easy posting from my upper middle-class business owner stratum but I’ve always thought those bits of custom work and such are what makes life worth living. Prefab, mass-produced houses, cars, and other items revolt me. It’s that sort of market-driven life that pushes people into conformity and sameness. shudder
But hey, the last two homes I’ve purchased have been more than 100 years old and have all those cool hand-crafted stuff. And when I the current one worked on I have it done by hand. Good times all around.
It’s not an either/or situation. Building a house from scratch is a more demanding task than building one from pre-fab materials, so it costs more. But it is an option; if you want a scratch built home and are able and willing to pay the extra cost, you have that option. The good part is that you now also have the option of having a pre-fab built home for the lesser cost as well. This is an example of the point many of us have been making; new technology has made it possible for poorer people to be able to afford things (like houses) that they couldn’t have afforded in the past.
It’s really a tough call to make. Society has changed so much that it’s like comparing apples and oranges. But even that North Korean peasant has some things that the Baron of Upyourshire didn’t have; access to medicine and electricity (both admittedly intermittent), literacy and access to printed material to read, mass communications like radio and television, a fairly steady supply of rice year after year, and all the other benefits of five hundred years of industrial progress.
And, yes, there are still desperately poor people in the world. But it’s really not longer an economic problem. If you starve to death in the middle of Manhattan or Paris or Tokyo, it’s because you have a psychological problem. If you starve to death in the middle of Ethiopia or Sudan or North Korea, it’s because you were the victim of a political problem.
In general, yes. Per capita GDP is a pretty good indicator of relative wealth. If the population doubles but you are producing the same amount of goods, in practical terms that means there’s less housing, clothes, food, etc to go around.
msmith touched on the point in Post#15, but I want to emphasize: production and GDP are income statement measures, while wealth is a balance sheet measure. Your wealth equals the sum of everything you’ve produced (or been given) in your life, less what you’ve consumed, plus or minus anything that you’ve gained or lost by investing the difference. Producing more won’t necessarily make you wealthier if you also consume more, but it will give you a higher income and a higher standard of living.
And in either case, yes, a per capita measure is better–per capita GDP for income, per capita wealth for wealth.
Ah. This is a common half/misconception. Global business is not neccessarily good for a given community. It is, however, good for the individuals within said community. Some communities with tight identities may resist or adapt better than those with weak identities.
Profit is illusory. It is always turned into more production or investments somewhere. Thus, even the most money-hungry corporation cannot help but provide an economic service. In fact, just by being money-hungry, they become useful. Thus, the money which goes into the seemingly-mysterious bowels of the corporation comes out again in some other form. You simply don’t see the money coming out.
But it’s equally wrong to automatically assume that a corporation will always be a benefit. It’s true that the corporation is providing an economic service. But the independant businesses that closed were also providing economic services. It can only be determined on a case-by-case basis whether the economic services provided by the corporation are better than those provided by the indpendant businesses. (And only a simpleton assumes that the fact that the corporation replaced the indpendants proves their services are better; economics is a lot more complicated than that.)
It’s always an issue of weighing the alternatives. Everything in economics is about making choices and considering the pros and cons of those choices.
Part of the problem is that 19th century socialists were fond of the labor theory of value, which wasn’t formally refuted as a valid economic theory until the end of that century, and which even then continued to influence socialist and anti-capitalist thought.
The labor theory of value goes that since all material wealth requires some human input to produce (even an unskilled laborer directing an otherwise automatic machine), value is directly related to a product’s labor content. While the 19th century saw a tremendous increase in the output of material goods, socialist critics of capitalism looked at the misery of the working class and concluded that measuring wealth in material terms was misleading, along the lines of the following argument:
[socialist argument]While mechanization made it possible to produce much more products for the same amount of labor, paradoxically it made those products less valuable for the worker to produce; since those products were cheaper they earned the laborer much less per unit, yielding a zero net increase in the worker’s wages for a day’s work. A craftsman who made sewing needles by hand could only make so many, so needles used to be expensive. Automatic machinery made producing needles faster and easier, but since they now sold for less, the worth of a needlemaker’s time and labor remained unchanged. Industrialization made material goods more common, but anything that required a hour of a worker’s labor to produce would ultimately still cost an hour of another worker’s labor. Compared to a medieval serf, a modern worker might live in a brick and sheet metal tenement instead of a thatch hut, and wear cheap shabby machine spun clothing instead of sackcloth, but in terms of how desperately they had to struggle to obtain the minimum necessities of life, the modern worker was little better off.[/socialist argument]
So according to the socialist labor theory of value, in terms of how much people had to labor to obtain anything worth having, “wealth” in that sense was a zero-sum game. Capitalism was simply a more efficient way for the elite class to direct the labor of the working class into providing the elite with more leisure and luxuries, leaving the workers awash with more junk but no better off in standard of living.
Needless to say this view has been largely refuted. For starters, labor does not automatically equate to value- garbage that required a lot of labor to produce is still garbage. Secondly, even buying into the “hours per day of labor to obtain necessities” argument, having more material goods is desirable in itself, despite what critics of materialism might claim. Thirdly, people in developed countries are truly physically better off; they’re better fed, warmer, more rested, and healthier. When it became impossible for even the most strident socialist to deny that people in the first world were better off due to industrialization, they changed their argument to say that whole countries were better off but only because they exploited poorer weaker countries- the “class” argument was changed in scale to international.
But of course, if you were a carpenter back when those houses were made, you couldn’t have afforded to live in one of them. Home ownership among the working classes was nowhere near as common then as it is today, because those working classes made little money, which is why people could afford to have them make custom balustrades for their homes…
In 1920, only 46% of the population lived in family owned homes. In the 1940’s homes were approximately half the size they are today, and held twice as many people. That means that each of us today has about four times the square footage of living space than our parents or grandparents did, and far more of us actually own our own homes in the first place.
So overall, the revolution in housing construction has been a huge benefit to us, even if we did have to give up some customization.