A Well Underreported Story Of Globalization - Widespread Pollution, Corruption And Disease
One of the appeals of doing business in China and other emerging markets is being able to skirt protection laws found in developed countries such as Japan, Europe and the U.S. The lack of such laws provides a substantially greater cost advantage than the comparative wage myth falsely perpetuated by people who don't understand lean processes and manufacturing. Want to open a factory that dumps lead out the back door and poisons an entire city? No problem. Simply find a local communist official to bribe. Dump mercury in the local lake? Have at it. Dump your textile waste in local sources of drinking water or wildlife killing anything in its path? Go for it. We see the consequences of these actions with the lack of regulatory oversight and unsafe products coming to the shores of developed economies. But what we don't see is the path of devastation created in developing economies.
The benefits gained by these practices of corruption are substantially greater than any possible wage arbitrage. For wages must also be calculated with the additional costs of a wider supply chain costs and potential for lost improvements gained by instituting an often semi-slave labor workforce. Add in comparable protection laws and the cost of labor arbitraging most assuredly would have a negative ROI in most or all circumstances. Something lean experts could have easily told us. Something we wrote of when the mass media and financial community were telling us more lies - that American or European firms could not compete due to higher wages. Obviously, these statements were made out of ignorance or with a hidden agenda or both. But then what does Wall Street know about running a business? This is a major reason why politicians should not be meddling in economic trade but should instead be focused on protections for citizens.
As we wrote in our manufacturing series quite a few years ago, paying marginal wages does not provide a sustainable comparative advantage in manufacturing for many reasons. If nothing else, as Shigeo Shingo and others have taught us, the art of continuous improvement and operational excellence is predicated on a highly-trained workforce capable of identifying and instituting said practices and their improvements.
The benefits gained by these practices of corruption are substantially greater than any possible wage arbitrage. For wages must also be calculated with the additional costs of a wider supply chain costs and potential for lost improvements gained by instituting an often semi-slave labor workforce. Add in comparable protection laws and the cost of labor arbitraging most assuredly would have a negative ROI in most or all circumstances. Something lean experts could have easily told us. Something we wrote of when the mass media and financial community were telling us more lies - that American or European firms could not compete due to higher wages. Obviously, these statements were made out of ignorance or with a hidden agenda or both. But then what does Wall Street know about running a business? This is a major reason why politicians should not be meddling in economic trade but should instead be focused on protections for citizens.
As we wrote in our manufacturing series quite a few years ago, paying marginal wages does not provide a sustainable comparative advantage in manufacturing for many reasons. If nothing else, as Shigeo Shingo and others have taught us, the art of continuous improvement and operational excellence is predicated on a highly-trained workforce capable of identifying and instituting said practices and their improvements.
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