Quite so, quite so

What may seem like poverty pay to a Guardian reader need not be so for a worker in Bangladesh (Revealed: the poverty pay behind the charity slogan, 21 January). A pound is worth roughly a hundred taka, so 35p is 35 taka. If someone works 40 hours a week, she would make £14 a week. The per capita income of Bangladesh is £1,400 (£3,650 in purchasing power parity). If she were employed for 50 weeks she would make up to half the per capita income – not rich, but not poor by local poverty standards.

Wages in Bangladesh are not determined by Comic Relief but by average productivity of labour. Bangladesh could use the employment provided by Comic Relief. If the “radical anger” of Guardian readers leads to cancellation of the contract, the Guardian readers may be happy, but not the Bangladeshi workers.

Wages in Bangladesh will take another 50 years to catch up with the UK. The economy is growing healthily. It can grow because its low wage attracts orders and helps exports. Leave it alone to grow.
Meghnad Desai
Labour, House of Lords

36 comments on “Quite so, quite so

  1. Hear hear Meghnad. Hope to hear from your ladyship again when/if UK gets to decide what the WTO tariffs should be.

  2. Odd that you agree that exports help Bangladesh get wealthier. Surely you should be telling them to import more? That’s what you keep telling us makes us wealthier, right?

  3. With these campaigns for “fair pay” by Guardian readers, could you imagine their horror it another country paid factory workers in the UK more than the Guardian-reading middle-classes, enabling them to buy up houses in the nice areas and price the middle-class out? They’d be horrified and furious.

  4. Hallowed Be said:
    “Hear hear Meghnad. Hope to hear from your ladyship again”

    Actually that’s Lord Desai; I don’t think he has ever identified as a woman.

  5. But I’m impressed; wasn’t he a Marxist LSE lecturer? If he can be converted to the benefits of free markets, and lecture the Guardian on the same, then there may be hope.

  6. If someone works 40 hours a week, ****THEY**** would make £14 a week. There’s no “she” in “someone”.

    I end up regularly exhorting the Guardian. Learn. Bloody. English. I can’t be arsed to check, but I bet there’s no comments allowed on the article.

  7. Jim,
    Exports raise the readies these folks need to buy the stuff they want (whether imported or not). If imports are artificially expensive because of tariffs then they are that much poorer because of restricted choice.

  8. @Geoffers: well exactly. As I put it in another thread, exports make a country wealthier in the way that working overtime makes an individual wealthier – there is more income to spend on what is wanted.

    Our esteemed host on the other hand says that a factory exporting stuff make the country in question poorer, but he’s an economist so he must be right.

  9. Our esteemed host can speak for himself but, to my mind, we are richer when we have more available to consume. Restricting or inflating imports therefore makes us poorer.

  10. Isn’t the most astonishing thing about this that a labour peer groks a bit of real economics?

  11. BiG, yes. And not just a Labour peer but (as I said above) one who was a Marxist LSE lecturer. Amazing.

  12. People trade with each other. Sometimes people trade with people in other countries.

    Whether it “makes their country wealthier” is of no concern to them.

  13. Jim, why not read the latest post on Contin? It seems to explain quite succinctly what you are arguing against

  14. Love to hear what Richard Murphy has to say about this (I’m sure it would be amazing), but presently he’s having fat man orgasms because some French Socialist cunt named Pierre Moscovici (who works for the EU, no less) has used Murphy’s newest tax gap calculations to pat himself on his French Socialist back. Evidently Murph’s more than happy with even a tepid endorsement these days.

    There’s a poem in there somewhere… where’d I put my rhyming dictionary?

  15. Ritchie is telling the EU what they want to hear – that there is a magic money tree of €825billion for all their pet projects. His EU funded job ends later this year so I expect we will see a lot more of this to try and get more funding from them.

  16. @Sam,

    Er, except, if the EU believed in the magic money tree it would have used it to make Greece rich, wouldn’t it?

    I can only conclude that an organisation cursed as socialist by the right and neoliberal by the left is doing something correct.

  17. “People trade with each other. Sometimes people trade with people in other countries. Whether it “makes their country wealthier” is of no concern to them.”

    So if Mr Bamford exports hundreds of excavators and with the profits makes all manner of purchases from UK businesses and contractors, thats of no interest to those people whatsoever? And the taxes he pays on those profits to the UK Treasury are of no interest to the general population who benefit from them?

    Whereas if he put all his money into a super yacht built Korea and spent all his time criss-crossing the world in it sipping pina coladas the people of Daylesford would be oh so happy that he’s spending all his money abroad?

  18. Richard- “Actually that’s Lord Desai I don’t think he has ever identified as a woman.”

    Ah…. ok…. Sorry about that Meghnad.

  19. Bloke in Germany said:
    “I can only conclude that an organisation cursed as socialist by the right and neoliberal by the left is doing something correct.”

    Both sides complain about it, but which side (mostly) wants to leave it? Same as the BBC; the Left may claim it is a right-wing neo-liberal pro-Brexit brainwashing, but it’s the Right that wants to defund it.

  20. ““I can only conclude that an organisation cursed as socialist by the right and neoliberal by the left is doing something correct.””

    Thats an utterly specious argument. The fact that someone is getting abuse from two sides of the political divide tells us nothing about the actual political position of the abused, merely that they are positioned at some point between the two. Even being equidistant could mean that the middle point is still objectively Left or Right, if one of the groups doing the abusing is more far out than the other.

    A government who introduced a strict immigration policy (that nonetheless still allowed some immigration) could be criticised by both the pro-immigration lobby (for being too strict) and by the Far Right (for letting too many foreigners in – they want the foreigners already here sent home), but that would not mean that government was a middle of the road one, by any stretch of the imagination.

  21. @Jim, you have to look at the context to see where the target of the abuse sits. The left are typically snowflakes, the right a bit reluctant to say something. So when both sides complain, take into account that the left complain about the smallest most minor things whilst the right only complain over big things.

  22. @Jim

    When you put £10,000 in the bank, they call it a liability. When the bank lends you £10,000, they call it an asset. These terms seem arse backwards to us out here in non-specialist “common sense” land, but make sense when looked at through the bank’s financial lens.

    I think economists have similar understandings.

    When someone has a job and goes to work, it makes them poorer. Not only do they have to spend time doing something they don’t want to do, they also can’t use that time doing something they do want to do. Their family is also made poorer because they are deprived of that person’s time (and other input).

    That’s the sense that exports make us poorer. Time and resources are utilised that then can’t be used for something else locally (an opportunity cost), plus any useful output goes to people in other countries. A total loss.

    Of course, one goes to work to get paid (and spending the pay on goods and services is what makes one rich in compensation for the costs of working). In a more indirect way, the only benefit of exports is that they enable imports.

    Tim and the economists are not saying that trade makes us poorer (they say the opposite), but they do rightly point out that in terms of accounting a cost – benefit analysis of economic activity, you have to regard the giving part of a trade as a cost; a loss; something that (in isolation) makes us poorer.

    We have to understand that our part of a trade makes us poorer, and by how much, in order to ensure that what we receive in return is worth more to us.

  23. SadButMadLad

    +1

    It’s also usually the left shouting loudly about how businesses ought to be run while the right are quietly getting on running them.

  24. “Tim and the economists are not saying that trade makes us poorer (they say the opposite), but they do rightly point out that in terms of accounting a cost – benefit analysis of economic activity, you have to regard the giving part of a trade as a cost; a loss; something that (in isolation) makes us poorer.”

    Living has non negotiable requirement, its called eating. So any work done to enable you eat, whether hunting your own food, or doing work so you can buy food, is not something that has an alternative. There is no opportunity cost to the time spent filling your belly. Its ludicrous to apply the idea of OC to such basics of life. The idea that the opportunity cost of a sweat shop in Bangladesh exporting T shirts is that all those people can’t now be baristas or artisan bakers is bonkers. They don’t have the basics in life, anything that enables them to get them is a good thing, not a ‘cost’.

    If a car plant sells 100% of its cars domestically, and cannot sell any more at home, but manages to sell lots abroad as well, how has the country suddenly got worse off? They’ve got all the cars they wanted, now the owners of the car plant have extra profits to spend, the government has extra tax to spend, the workers have extra wages to spend. This is bad how?

    “Their family is also made poorer because they are deprived of that person’s time (and other input).”

    Not in all families…….

  25. “So if Mr Bamford exports hundreds of excavators and with the profits makes all manner of purchases from UK businesses and contractors, thats of no interest to those people whatsoever?”

    Mr Bamford (sic) sells excavators to people in other countries. He does it to make money. “with the profits makes all manner of purchases from UK businesses and contractors” has fuckall to do with it. There is no altruistic domestic intent.

  26. “Our esteemed host on the other hand says that a factory exporting stuff make the country in question poorer, but he’s an economist so he must be right.”

    It does and he is. But every export is also associated with an import. You trade. You export goods and import money, so that later you can export money and import goods. Or to cancel the money out of the equation, you export goods so that you can later import goods of greater value to yourself. The export is a loss, exceeded by the gain you get from the import it allows.

    It’s like asking whether paying bills is a profit to you or a loss. The payment itself is a loss. But the overall transaction – paying money for goods – is a net gain. Should we therefore be happy when we receive bills through the post demanding payment?

    Exports are like paying the bill. Imports are like receiving the goods paid for. The former enables the latter, but are still a cost, and still unhappy events. Only when the two are considered together does the transaction become net beneficial.

  27. “So any work done to enable you eat, whether hunting your own food, or doing work so you can buy food, is not something that has an alternative. There is no opportunity cost to the time spent filling your belly. Its ludicrous to apply the idea of OC to such basics of life.”

    If it was ludicrous, we’d all still be hunter-gatherers or serfs on the land. Oddly enough, given the opportunity of a better alternative, people regard that existence as pretty costly. See: industrial revolution.

    “They don’t have the basics in life, anything that enables them to get them is a good thing, not a ‘cost’.”

    They (or their immediate predecessors) evidently did have the basics in life. They could have continued in that vein. To do so would have had an opportunity cost – for instance, that of not being available to work in a sweatshop.

    Again, you’re confusing part of the picture with the whole picture. If you believe Tim thinks Bangladesh as a whole doesn’t benefit now from being a low-wage export economy, you’ve not been following his blog(s) too closely.

  28. Jim, you’re either confused or adamantly not getting the point. Of course a job is a cost to us. Because they have to pay us to go do it. The pay, the income, being the benefit. Exports are a cost. We labour to make stuff for others. Sure, thy pay us for them – that’s the benefit. We wouldn’t export if they didn’t pay us, would we? Thus it’s the income which is the benefit, the labour in making the exports the costs, just as with a job.

    The cars? But we could have used that steel, that labor, to do something domestically – build HS2. The cost to us of the exports is HS2, the benefit the income with which we can buy Airbus so we don’t need the train set.

    No one’s saying exports aren’t a good idea. Only that they’re a cost along the way to gaining what we want, the imports.

  29. Surely, the point is that conducting trade proves there’s a comparative advantage in doing so. Or you wouldn’t be doing it. The maximising of imports & exports maximises the comparative advantage. You do the exporting because that’s where you have the comparative advantage. The cost is minimised. The goods imported are relatively cheaper because you’re benefiting from the exporter’s comparative advantage.

  30. “Of course a job is a cost to us. Because they have to pay us to go do it. The pay, the income, being the benefit. Exports are a cost. We labour to make stuff for others. Sure, thy pay us for them – that’s the benefit. We wouldn’t export if they didn’t pay us, would we? Thus it’s the income which is the benefit, the labour in making the exports the costs, just as with a job.”

    I work to pay my bills . If I didn’t I’d starve. Ergo when you weigh up the costs and benefits of working, I’m ahead of the game, because I have food, and a house to live in. Ergo working is a net benefit to me. The more I work the more net benefit I get. And the same goes for a country – the more they export, the more they can afford and the better off they are. Its the exports that drive the imports not the other way around, so any country that wants to be wealthy better get exporting. As you accept is the case for Bangladesh. Exports have driven the Chinese economy to grow massively. And an over reliance on imports has made the Western economies stagnate.

    Exports allow imports, imports do not create exports. A country that exports loads will soon find some way of spending it on imports, a country that imports lots will not necessarily suddenly manage to exports lots to pay for it.

    Ergo exports are ‘better’ than imports and what we should as a nation encourage people to do. Just as its better for an unemployed person to be encouraged to work, rather than just sitting on his arse eating crisps paid for by the dole.

    Calling exports ‘costs’ sounds like its something we’d be better off not doing, which is just not the case. Without the exports the Bangladeshi sweat shop workers would be worse off, so why make out their work is a negative?

  31. “a country that imports lots will not necessarily suddenly manage to exports lots to pay for it”

    Actually it will. If I pay a foreigner £1 for something, there are only four things they can do with it:

    1. Keep it (which unless they’re planning to hold onto it forever leads to them doing one of 2, 3 or 4 later on).

    2. Use it to pay another foreigner (which is only possible if said other foreigner believes it to have value, i.e. there is value to them in doing one of these 4 things). By induction, 1 and 2 are only possible if there is a belief that 3 or 4 are possible.

    3. Invest it in productive UK assets; i.e. they believe they will get more £ in the future for the £ they have invested. They’re still holding £, so the only thing they can do in the long run is:

    4. Consume goods or services from the UK. This could include ‘invisible’ exports such as tourism, buying real estate for personal use (e.g. a holiday home) as well as the purchase of physical goods or services.

    If foreigners generally do not believe that the £ they are being paid by Brits buying their stuff will be useable, then the exchange rate falls until £-denominated assets, goods or services do become good value; this is how comparative advantage sorts itself out.

  32. @ Jim
    Work is *not* the benefit – the benefit is the pay you get. If the boss decides not to pay you at the end of the week you are worse off than if you had stayed at home.
    Yes, bad debts do occur (mostly for the self-employed).

  33. @Jim

    UK became rich by importing in C15-C19

    Abolishing Corn Laws in C19 made UK richer

    The export/import & tariffs does seem counter intuitive until one drills down and sees the real results.

    Example: Jim’s UK carrots in Tesco are £1/kg, Pedro’s Moroccan Carrots 50p/kg – I’m richer by buying Pedro’s Carrots.

Leave a Reply

Name and email are required. Your email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.