So, you want to raise wages do you?

Its certainly a valid objective. Raising the wages of manufacturing workers….I\’m all for it, assuming that it\’s not at the expense of others. You know, like price policies that benefit the urban worker at the expense of the rural (like, say, price caps on farm outputs).

So, how might you go about raising those industrial workers\’ wages?

Yup, you liberalise the capital account. You let those filthy foreign capitalist bastards come in and exploit those industrial workers by investing in the companies they work for. You let the running pig dogs grow fat off the expropriation of the workers\’ labour.

For three years after the typical developing country opens its stock market to inflows of foreign capital, the average annual growth rate of the real wage in the manufacturing sector increases by a factor of seven. No such increase occurs in a control group of developing countries. The temporary increase in the growth rate of the real wage permanently drives up the level of average annual compensation for each worker in the sample by 752 US dollars — an increase equal to more than a quarter of their annual pre-liberalization salary. The increase in the growth rate of labor productivity in the aftermath of liberalization exceeds the increase in the growth rate of the real wage so that the increase in workers\’ incomes actually coincides with a rise in manufacturing sector profitability.

So would all those who insist that the problem in poor countries is too much exploitation by top hatted plutocrats please bugger off? You\’re making people poorer than they need to be.


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