Third World contributions to First World living standards

[RickJay]

@Le_Jacquelope

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?

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.