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Black writes: "The only strategy left in the tool chest for a nation that adopts the euro and is mired in recession or depression, therefore, is to become a substantial net exporter. There are two obvious problems with this sole remaining strategy. One, not all nations can be net exporters. One nation's export is the other nation's import."

People wait in long lines for food in Bangladesh. (photo: Jewel Samad/Getty Images)
People wait in long lines for food in Bangladesh. (photo: Jewel Samad/Getty Images)


Free Trade's Murderous Role in Bangladesh

By William Black, Reader Supported News

30 April 13

 

wrote yesterday about the "control frauds" (in which the person controlling a seemingly legitimate entity uses it as a "weapon" to defraud) that target purchasers of bad quality goods ("lemons") and employees. The example I used to explain these concepts was the collapse of the building housing garment factories in Bangladesh.

As I write, there are terrible reports indicating that the death toll is far greater than currently reported. Again, the initial reports from a disaster often prove inaccurate in important ways so I urge caution and the need to confirm whether the newer reports are accurate.

The higher death toll is not what prompts this article. I write to discuss the intersection of control fraud, austerity, globalization, labor "reform," and economic development.

The Road to Bangladesh

The most interesting event I have participated in is the Kilkenomics Festival in Kilkenny, Ireland held in early November. It is an economics festival in which people with expertise in finance (dressed in jeans) partner with professional comics (dressed in suits) to discuss serious economic issues. The organizers sell roughly 3,000 seats to non-wonks from Ireland and Europe. The comedians keep us honest and minimize the jargon.

I appeared in six or seven events last November, including interviews with the BBC and Ireland's Pat Kenny on RTE. One of the subjects we discussed repeatedly was the intersection of austerity, "free trade" and labor "reforms." I made the point that the EU had a single game plan for the Eurozone's southern periphery. They inflicted austerity, forcing the Eurozone into a gratuitous second recession and the southern periphery into an über-Depression with unemployment rates significantly worse than the largest European economies generally suffered during the Great Depression. (Cynically, and the EU is a past master in cynicism, the EU refers to the result as a "mild recession." It also avoids the word "austerity" like the plague and calls it "pro-growth.")

What is far less well known in the United States is that Berlin has also demanded (successfully) that the "troika" (European Commission, the European Central Bank (ECB), and the IMF) insist that the nations of the periphery engage in labor "reforms." "Reform" is a word chosen for its positive connotations and its generality. There is certainly some variant of a labor "reform" that would be desirable in any nation. Unfortunately, what the troika means by labor "reform" is sharply lower working class wages.

The excuse for forcing lower working class wages is that doing so is essential to increase exports. The troika's recipe for the periphery's recovery is for every nation of the periphery to become a significant net exporter.

A nation with a sovereign currency can use three strategies to speed its recovery from a recession or a depression. The three strategies are not mutually exclusive. The nation can adopt fiscal stimulus, an aggressive expansion of the money supply, and it can devalue its currency (which makes it far easier to become a net exporter). A nation that adopts the euro, however, must give up its sovereign currency and its ability to employ any of these recovery strategies. It cannot employ a significant stimulus program because doing so would violate the (oxymoronic) "Stability and Growth" pact. It cannot expand the money supply because the ECB is controlled by German principles, which are based on the assumption that hyper-inflation lurks behind every corner. It cannot devalue its currency because it no longer has a sovereign currency.

The only strategy left in the tool chest for a nation that adopts the euro and is mired in recession or depression, therefore, is to become a substantial net exporter. There are two obvious problems with this sole remaining strategy. One, not all nations can be net exporters. One nation's export is the other nation's import. The more Germany is a net exporter the harder it is for other euro nations to be net exporters.

Two, the way for a nation to gain a competitive advantage in exports and increase its chances of becoming a net exporter is either to have a far more skilled workforce producing high value exports or to slash working class wages. Northern Italy can export luxury goods created by skilled craftsmen and designers. Spain, Ireland, Portugal, Southern Italy, and Greece have to out-compete poorer nations with far lower working class wages. The troika is actively encouraging each of these nations to lower working class wages. The problem I pointed out when I was in Kilkenny is that Ireland is trying to cut working class wages enough to out-compete Italy, but Italy is trying to cut working class wages to out-compete Spain, which is trying to out-compete Portugal, which is trying to out-compete Greece, which is trying to cut wages to out-compete Turkey. I argued that slashing working class incomes makes recessions worse, that it was impossible for everyone to be a net-exporter, and that this "race to the bottom" of working class wages would produce grotesque inequality and poverty in what used to be the developed world. I called the race to the bottom strategy the "Road to Bangladesh."

But, wearing my criminology "hat," I added that encouraging the "Road to Bangladesh" is criminogenic. As firms are forced by "free trade" to force lower wages on their workers if they wish to stay competitive with their competitors who manufacture goods in nations like Bangladesh, and as firms in Bangladesh engage in the same competition to constrain wages, the result can be murderous. The least ethical firms that are most willing to steal from their employees (e.g., by failing to pay overtime) and place their lives and safety at risk in the workplace gain market share can produce a "Gresham's dynamic" in which bad ethics drives good ethics out of the workplace. As I explained in yesterday's article, they will also degrade the professions, regulators, and elected officials by suborning them to overlook the unsafe plants and the thefts from workers.

But here's the sting in the tail of my story about Kilkenomics. When I criticized the "Road to Bangladesh" strategy the conservative economists, I was appearing with rushed to praise Bangladesh as the model for successful economic growth through exceptionally low wages. They responded that if Portugal was in fact on the Road to Bangladesh it was actually on the road to success. Neo-classical economic dogma is intensely criminogenic.

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+9 # jmac9 2013-04-30 13:35
Capitalism motto; profit is more important than you.

AS reported: the working conditions are the worst in the world and weekly salary of textile slave workers in Bangladesh is $37 a month.

Efforts at labor organizing to get better conditions or money resulted in the people getting arrested and tortured.
 
 
+5 # Hey There 2013-04-30 14:22
http://www.youtube.com/watch?v=3BaLdFTRlUw&feature=youtube_gdata
To view Video on Bangladesh highlight,left click,right click on go to.

This is one of the best articles which clearly explains how the implementation of profits before people is so destructive to the lives of workers.
 
 
+9 # reiverpacific 2013-04-30 14:24
You start by putting the likes of Walmart under the economic gun and boycotting them (I've been in a WM precisely twice and find them tacky and depressing), who is one of the leading importers of the garments which they get for around ¢10 each -and they were also found to be importers of the goods from the Bangalore. India fire (6 dead) from similar causes as those of the Bangladeshi one -I'm not sure if the death count has risen since I last heard that it was > 220.
We should rename Walmart "Maquiladora-mart".
Of course I don't expect the average Walmart customer to boycott them -and I'm anything but well-off-, as they are probably much the same demographic that watches the stuffing between commercials, including Walmart's, which passes for programming here and most likely don't even know where Bangladesh (formerly known as East Pakistan before the post-British colonial Muslim/Hindu breakups, riots and separations) or India for that matter, nor care as long as they get cheap, tacky goods as directed by their flick'rin' screens.
 
 
+6 # MidwestTom 2013-04-30 14:50
Today's WSJ has an article stating that only the developed world is having unemployment problems. They state that in south America, Africa, and the lesser developed countries in the far East all are experiencing increased employment. What do Europe and America do with the growing number of unemployed people? The difference here is that our financial system is paying billions to people in banking who just move money and look for ways to export jobs. In the developing world the money is being made by business owners and managers who actually employ people. We must somehow eliminate the Fed, and reign in the banks, they are destroying us.
 
 
0 # dkonstruction 2013-05-02 07:20
Quoting MidwestTom:
Today's WSJ has an article stating that only the developed world is having unemployment problems. They state that in south America, Africa, and the lesser developed countries in the far East all are experiencing increased employment. What do Europe and America do with the growing number of unemployed people? The difference here is that our financial system is paying billions to people in banking who just move money and look for ways to export jobs. In the developing world the money is being made by business owners and managers who actually employ people. We must somehow eliminate the Fed, and reign in the banks, they are destroying us.


One must always consider the source...for anyone to suggest that only the "developed worlds" is having unemployment problems either comes from people who are completely ignorant (hard to believe this even of a WSJ reporter), have a political agenda and thus need to put this out there for popular consumption (now what kind of political agenda could the "objective" Murdoch owned WSJ have) or are on crack. Are you telling me that e.g., China or India don't have unemployment problems? And what about the Eurozone countries that just hit a collective all time high while individual countries like Spain and Greece have official unemployment rates of 25%.

I agree we need to replace the Fed with a genuinely publicly-owned and controlled financial sector but that's another matter entirely.
 
 
0 # MidwestTom 2013-04-30 15:24
At this point roughly 70% if the world's trade is still done in dollars; however, the percentage is shrinking. India, China, and Russia are all slowing growing the acceptance of their currency in international trade. The BRICs would like to create a one world currency, thus taking away the the ability of anybody to print currency. That would be a disaster for the US. I think that the Fed is letting the country slowly sink to prepare us for the day when they can no longer print money.
 
 
+6 # brux 2013-04-30 15:28
Here is something about the author, since he is sort of not introduced of attributed:

William K. Black, J.D., Ph.D. is Associate Professor of Law and Economics at the University of Missouri-Kansas City. Bill Black has testified before the Senate Agricultural Committee on the regulation of financial derivatives and House Governance Committee on the regulation of executive compensation. He was interviewed by Bill Moyers on PBS, which went viral. He gave an invited lecture at UCLA’s Hammer Institute which, when the video was posted on the web, drew so many “hits” that it crashed the UCLA server. He appeared extensively in Michael Moore’s most recent documentary: “Capitalism: A Love Story.” He was featured in the Obama campaign release discussing Senator McCain’s role in the “Keating Five.” (Bill took the notes of that meeting that led to the Senate Ethics investigation of the Keating Five. His testimony was highly critical of all five Senators’ actions.) He is a frequent guest on local, national, and international television and radio and is quoted as an expert by the national and international print media nearly every week. He was the subject of featured interviews in Newsweek, Barron’s, and Village Voice.
 
 
+3 # Adoregon 2013-04-30 16:23
For at least another hundred years we must pretend to ourselves and to every one that fair is foul and foul is fair; for foul is useful and fair is not. Avarice and usury and precaution must be our gods for a little longer still.

John Maynard Keynes
 
 
+9 # Michaeljohn 2013-04-30 16:47
The other very serious problem here, which allows sales corporations such as Walmart to claim innocence in events like the Bangladesh factory collapse, is the clever segmenting of the supply chain with multiple middlemen which provides theoretical isolation from blame: "We're dealing with X and she buys from Y and he buys from Z. We have no responsibility for Z's actions."
 
 
+4 # Rick Levy 2013-04-30 20:05
Walmart's pretense of ignorance about the horrid working and safety conditions of their contractors is akin to the townspeople living near the WWII death camps claiming that they didn't know what was going on there.
 
 
+7 # jwb110 2013-04-30 17:11
In the world today the right to private property supercedes the right to human life.
 
 
+1 # ladypyrates 2013-04-30 18:47
...1)a national raw materials policy 2)a par economy 3) counterveiling tariffs [does anyone understand that a counterveiling tariff is NOT a tax?] 4) a sovereign currency administered by a government of the people...not a central bank owned by private bankers. These are the essentials for almost unlimited prosperity for the PEOPLE...not the oligarch families that consider genocide their rightful business. In reading these accounts of what is being discussed it becomes quite clear that the meaningful grammar of the subject has been omitted and replaced with meaningless poppycock that goes in circles. We have to stop listening to nonsense that's been taught for three generations now because, as Michael Hudson puts it,"...it's simply not true."
 
 
+2 # ChristopherCurrie 2013-04-30 20:01
I don't understand why I-have-no-god-b ut-money economic policies are called "neo-liberal." It appears to me that the people who are advocating such "screw you neighbor" policies are proud to call themselves "conservatives. "
 
 
+4 # reiverpacific 2013-05-01 09:24
Quoting ChristopherCurrie:
I don't understand why I-have-no-god-but-money economic policies are called "neo-liberal." It appears to me that the people who are advocating such "screw you neighbor" policies are proud to call themselves "conservatives."

"Neo-liberalism " is a set of economic policies that have become widespread during the last 25 years or so. The word is rarely heard in the United States except in progressive writing or the limited broadcasting progressive speakers are afforded but you can clearly see the effects of neo-liberalism here as the rich grow richer and the poor grow poorer.
"Liberalism" can refer to political, economic, or even religious ideas but is historically associated as slightly left of center; The "Liberal party was founded in Britain in 1859 growing out of the whigs led by Gladstone and become the ruling party, competing with the Tories and in coalition with them during WW1. They were replaced by the Labor Party as one of the top two in the early 1920's and is associated with centrism.
In the U.S. political liberalism has been a strategy to prevent social conflict. It is presented to poor and working people as progressive compared to conservative or Right-wing. Economic liberalism is different.
Conservative politicians who say they hate "liberals" -- meaning the political type -- have no real problem with economic liberalism, including neo-liberalism if it represents "Corporate Socialsm".
 
 
-1 # The Voice of Reason 2013-05-01 09:45
Amazing. 5,000 years of recorded history and we still hearken to the economic model of Pharaoh and his people. But who will deliver us this time -- RS-inners?

What plan do you have to offer that will work and transform the m-asses of humanity from greedy murderous avenging lying anti-Jew terrorist criminals into altruistic 'let me help you first', selfless, generous and some would say spiritual beings?

Not even on the radar, eh? Or do you really think rehashing what we have and bickering and supporting supporters of Muslim extremists will work?

You guys are like the Christians who pray for the return of Christ but insist on controlling how it will happen. As if.

Oh well, good luck to you. You seem so hell bent on doing it your way. Let me know how it's going. Every day brings us one step closer to WWIII. But you have it all under control. Way to go. You are the greatest people on the earth. (Meanwhile, in the time it took to read this, the Global Oil Criminals and the crooked politicians they own just stole several billions from you while you were looking and offering to pay more. That oughta show em!)
 
 
0 # dkonstruction 2013-05-01 11:01
Quoting The Voice of Reason:

You guys are like the Christians who pray for the return of Christ but insist on controlling how it will happen.


So, the "masses of humanity" are "lying anti-Jew terrorist criminals?" does that include the "Global Oil Criminals" or is that a different "mass" and if so what's the connection.

And, it's not only the Christians who "insist on controlling how it will happen" as Moses clearly shows us in Exodus when he tells his followers to kill all those that disagree with his interpretation of God's law i.e., those that are partying to the Golden Calf when he comes down from the mount with the 10 Commandments (God does not tell Moses to do this in the Bible...it is the Movie that has God tell Moses to do this but it is not in the text).


Then he said to them, “This is what the Lord, the God of Israel, says: ‘Each man strap a sword to his side. Go back and forth through the camp from one end to the other, each killing his brother and friend and neighbor.’” 28 The Levites did as Moses commanded, and that day about three thousand of the people died.

Exodus 32:28
 
 
+1 # Martintfre 2013-05-01 14:26
What a whining sniveling pile of drool.

So Consumers have no rights? say the best goods for the best price?

oh -- I see consumers are not mentioned at all.
 
 
0 # robcarter.vn 2013-05-02 01:03
The whole thing is b/s 1% rightist cover-up. refusing to recognise the lies of "Trickle down" from 'stimu;lus' which is really 'trickle out' profit growth to the 1% while usa 60% lower sector fell to a growth loss, the 1% grabbed a growth 11% 2012 growth. Corporate greed and hoarding allows zero trickle down.
Austerity and stimulus are best simultaneous effected. Fix infrastructure lag (USA $5.6tr)use fed funds to Local govt, use their underworked engineers and machines, employ from the 47% unemployed Yankees, or better yet from the Unemployment benefits list, that will trap the $3bn double dipping frauds in employment and welfare scams as well. Just stop the war waste on trying to foster more profit for Corp war machine etc. Bullying other Nations to cause 9/11 and Boston. Listen to army who demand they can't use more tanks, they are no0t a land war mob now. Drones have taken over with Navyand air support.

Most of all kick these rightist disinformation people off left RSN.
 
 
0 # Interested Observer 2013-05-10 11:09
These events are the Triangle Shirtwaist Fires of free market globalization with a greater toll proportional to the capital and scale of the operations. Such are the blessings of non-regulation that the free market religionists wish to maintain offshore and restore in America.
 

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