Critics of comparative theory: Exploitation of workers of poor countries

Critics of comparative theory: Exploitation of workers of poor countries 1

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Critics of comparative theory: Exploitation of workers of poor countries

Critics of comparative theory: Exploitation of workers of poor countries

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Based on evidence, I am in agreement with the notion that comparative advantage has a direct negative effect on workers’ wages. The essence of comparative advantage is that a person, a firm or a country can produce products and services simply by focusing on lowering their opportunity costs and marginal costs in their cycle of production. This means that different countries specialize in different products/services, each producing them as efficiently as possible. Productivity is increased only when because each country is producing more output with the same inputs it had before. International trade causes a sense of competition and countries will always strive to lower their production costs. Employees who work in these companies will definitely bear the brunt of such moves especially if they are working in developing countries.

In third world countries the government, organizations and individuals traditionally pay their staff low wage-packages because of the state of their economies. With globalization and the advancement of technology, international trade has improved. Global trading has `leveled’, in a sense, the ground for countries in different tiers of wealth production to compete. This means that for a developing country to improve their economy, they must gain comparative advantage over other nations in their industry of specialization. The staff in these industries is usually the last to be targeted after other quality improvement measures have been executed.

A good manager would always want to achieve the company’s goals by spending less to earn more. So he/she would want to review all the factors of production e.g. capital (money), land, labor etc and their budgets versus performance. In January 2004 an exciting article (Exporting jobs is not free) was published in the New York Times and the International herald tribune by Paul Craig Roberts and Charles Schumer. One important assertion they made is “Comparative advantage is undermined if the factors of production can relocate to wherever they are most productive: in today’s case a relatively few countries with abundant cheap labor”. In developing countries, firms would participate in international trade by exploiting their workers basing their wages as low as possible. Consequently, multinationals usually take their businesses (or part of their businesses) to `cheap labor destinations’ to get comparative advantage. This only results in making the purchasing power of a poor nation’s populace to stay low thereby leaving their poverty levels much higher than what international trade was intended to alleviate.

References

Retrieved from www.nytimes.com/ comparative advantage, our comparative advantage, room for debate. Can US compete with China on green tech?

www.heraldtribune.com/ comparative advantage, comparativeadvantage, trade and their criticsnovember 2004

Jones,R.W.(1961) "Comparative Advantage and the Theory of Tariffs: A Multi-Country, Multi- Commodity Model" The Review of Economic Studies 28 (3): 161. https://www. wikipedia.org/