Partly inspired by this thread, but I think it would be a hijack in the other thread.
To what extent is the standard of living in the First World dependant on the Third World having a lower standard of living?
Or, to put it another way, suppose by next year all countries who don’t currently have a GDP per capita equal to a First World nation managed to acheive this feat. What would be the consequences in the existing First World nations?
It looks to me like exactly the same question asked in the other thread.
A very valid question.
If all third world nations became prosperous that would mean their standard of living would increase. As a direct result of this so would their wages. If their standard of living approached America’s then the cost of labor in those countries would become too high to send jobs there. This means that the cost of, say, iPods 
would go right back up because there’d be no place left to find cheap labor. The cost of labor would go up.
Oh, my. If you couldn’t find cheap labor anywhere in the world because the whole world has been brought up to America’s standard of living… what would become of America’s living standards?
Of course the alternative is that these other countries remain quite poor so the cost of their labor remains very low. Which means that if you accept the pro-offshoring argument… first world living standards cannot survive without the third world having low standards of living. I mean, really. We’re already seeing the cost of labor in third world countries rise because their standard of living is increasing.
RickJay? Msmith? John Mace? Emacknight? Your take on that?
Not one whit. We don’t steal from the Third World; we trade fairly with them. Or try to: the level of corruption in such countries is often staggering, but that is a problem for that country, not us.
He didn’t say we steal from them.
If third world nations do away with their corruption (to the extent that we have) and their standards of living increase, how do we continue to remain prosperous? After all, it would mean that their wages would increase and we as Americans would no longer be able to find cheap labor to exploit.
Without cheap foreign labor how do we maintain our standard of living? Everything gets more expensive then, does it not?
Could you tell me where your opinion comes from because it completely opposite to the information I have?
The last point of your statement is that even IF the USA is stealing from or trading fairly, that is only the problem of the nation that is the victim of it. Does that also translate into interpersonal affairs? That if you rob or extort me, that’s my problem, not yours?
To the OP:
Perhaps you’d get a surge in prison population. Harsher laws, limited parol opportunities, less rehabilitation, perhaps jail-time for littering and jaywalking. That should make sure there is cheap* labour available.
If the wages in the 3rd world rise to the level of the first world then productivity will have gone up commensurately. This explosion in productivity will mean more goods for everyone and more prosperity. It will mean more markets for our goods and more goods for our markets. There would be a period of adjustments as comparitive advantage goes back to equilibrium and there might be a recession in certain industries and the regions that depend on those industries, but as a whole it would be a boon for the first world economies. It would mean millions of more research scientists and product developers. The only downside could be if one of the newly rich nations decided it wanted to take over its region of the world and spend its wealth on war instead of commerce.
I’d say very little (today) is dependent on lower standards of living in third world nations. I suppose the brain drain effect that countries like the US and Europe gets from third world countries has had a non-zero effect on our standard of living. In addition, lower wages in third world countries have allowed for manufacturing and low skill high volume manufacturing to be outsourced there, which has had a non-zero effect on the standards of living in 1st world countries (since goods and services can be sold at lower rates than if they were made in the 1st world country in question, where wages would be substantially higher).
In the end, though, a better question would be…how dependent on rising standards of living are 3rd world nations to 1st world nations. THAT is a much more interesting question, IMHO…and the answer is ‘very’.
While I’m sure it would be non-zero, I doubt it would have a large effect…and that at least some of the effect would be positive, because that would mean that those first world countries would have new markets to service that don’t currently exist. If every nation on earth suddenly (by magic) could achieve first world prosperity it would be a large increase in the marketing of goods and services across the board…which would mean that everyone would be going flat out to try and penetrate those new markets and sell them all the stuff they would now need. It would probably put a huge strain on manufacturing across the board, as well as raw materials, which would probably spark whole new realms of innovation for getting raw materials and manufacturing processes and business models.
Of course, that’s all fantasy, and it will take years, decades even before a large percentage of the worlds countries are up to those standards (I think it will happen eventually and is moving that way now, though I doubt they all will be at the same level).
-XT
Quartz is from the UK, so I presume he is not talking about the US when he says “we”. I think it’s a bit of a stretch to say any western state trades fairly with the third world though.
The increased demand on natural resources is just ONE problem that’ll negate that. See: oil.
That is, unless natural resources are an infinite thing.
Or unless they use less oil. Rising oil prices will do more than any other thing to spur investment in alternative fuels.
Living standards have been going up for the last hundred years and natural resources have been expanding during the same time. As prices rise alternatives become available. Natural resources are not what drive modern economies, human productivity is. As the productivity of 3rd world workers improves standards of living will improve right along with it. Once low wage labor becomes productive enough to be high wage labor it can be replaced by automation.
As long as everyone’s productivity is high enough, I don’t see the problem. The only way third world nations reach our standard of living, is if they become more productive. How much more expensive do you think an iphone would be if produced in the USA or Europe instead of in China?
Perhaps you’d like to reveal this information?
Uh, how do you reckon natural resources have been expanding? We’ve discovered sources we didn’t find before but that doesn’t mean that resources have been expanding. How plentiful is light sweet crude now, by the way?
So if oil goes up from $20BBL to $70BBL that has zero economic effect. Uhm, can you tell that to the Big Three automakers, because they were primarily sunk in 2008 by a sudden drop in consumer interest in gas guzzlers.
Also, you can bring the United States economy to a dead halt if you embargo oil shipments to this country. Well, maybe not a dead halt; but the gasoline lines will be quite long. I’m sure I can find a cited historical event where both the rise in prices of natural resources or its outright embargo has hurt a modern economy.
BTW oil isn’t the only non-renewable natural resource nor is it only used for fuel. Plastics, anyone?
Really, now? Exactly how are you going to automate customer service? Is C3PO gonna come along and do tech support? I’d be quite interested in knowing what machines can perform biotech research without the help of people. Hell I’d love for a computer to design websites for me and answer my insurance customer calls for me. When’s that coming along? I certainly can’t wait for computers to design clothes. It’ll save me from having to deal with my wife forcing me to watch Project Runway.
Emacknight posits it’ll be $1500.
But if other nations raise their standard of living via increased productivity then their wages will be up, too. Their labor will make iPods cost $1500, too. iPod production will be up, driving prices down, but so will demand, which drives them right back up.
The thing is, when everyone’s productivity is up, and thus their wages… why would you continue to send jobs overseas? There is no longer any savings to be had.
No it’s only yours I am interested in.
Probably because he knows what ‘proven’ or ‘proved’ resources means…something that you apparently don’t. While it’s true that natural resources haven’t expanded, our ability to get at (economically) wider pools of resources means that, from a practical perspective, our access to natural resources has indeed expanded.
According to Wiki, as of 2009 Iran, Iraq and Kuwait all claimed to have over a hundred billion barrels in proven reserves, and Saudi had over 200 billion barrels. It’s interesting that you only asked about light sweet crude though…why not heavy oils, tar sands and the like?
Not that I’m holding my breath in hopeful anticipation of your answer, mind.
Well, that’s your strawman…that’s not what he said though. In fact, it’s not even what he was talking about. Perhaps you should go back and re-read what he actually said, then comment? It’s just a thought…
That big recession thingy couldn’t have had any effect on US consumers buying SUVs, right? I mean, you don’t seem to acknowledge that the recession had any effect on the unemployment, the economy, trade, etc, so why should it have had an impact on SUV sales, right? You got a cite that the price of oil went from $20BBL to $70BBL in 2008? No…of course you don’t. Because that’s not what happened, is it?
You could do it if you unleashed monkeys out of your ass that would eat all of the food, too. I think the monkeys are more likely. Embargo the US? Good luck with that.
There were long lines in the 70’s (which is what I presume you are nearly talking about) because there was rationing by the government. Not because the price went up.
Corn and other biomass is non-renewable now? Oh I get it…you think that all plastics are made out of oil! :smack:
He posits that if your mad plan to apply across the board tariffs goes into effect and you force US manufacturers to relocate back to the US. The devil is in the details and the straw is in your argument. Frankly, I think emack was being generous…personally I don’t think there will BE iPods sold in the US if anyone is crazy enough to implement your plans. Luckily I don’t think anyone who matters is that mad.
And if their wages go up then they will want electronic goodies too…as well as all the other stuff that citizens in wealthy, stable countries want. And the US will sell a non-zero percentage of those goods and services to them. Something you just don’t seem capable of grasping.
Um, no…they won’t. Perhaps if you actually read what emack was saying instead of bringing out your snark you would grasp this. However…
(the ‘not holding my breath’ smiley)
Because there will most likely always be places where people are willing to get paid less for their labor. In some future utopia perhaps everyone will be rich, and everyone will demand the exact same thing for their labor (:dubious:)…in which case companies will probably use automation or other means to compete on price. Labor, contrary to what you seem to think, is only ONE of the costs associated with producing a good or service. There are other factors as well.
-XT
They would improve.
A change in labour rates would be far offset by the fact that Americans would suddenly have billions more consumers ready to use American products. The same would be true of everyone; the entire world would be much richer.
Competitive advantage isn’t comparative advantage. Someone would make affordable iPods. What the price would be you can’t say for sure, but if they’re, say, $600 in this amazing new world, nobody will care if their income triples - which is something it might if everyone else in the world was as rich as we are now.
Yep, although the Pit allows more colorful language. 