Exporting Employment and Importing Unemployment
Take an enterprise owned by British owners, employing
British capital, employing British employees in Britain.
Wage rates are much lower in the Far East because of the
low standard of living of those living there. So the
British enterprise (owners, directors) transfers some or
all of its production (or other) operations to a Far
Eastern country. And this applies to calculators,
computers, television sets, electrical and electronic equipment,
toys, and much else.
Their British employees are made redundant, are
dismissed, become unemployed. But employment increases
in the Far Eastern country. And all this for the sake of
greater profits to owners and directors of the British
Employment increases abroad and decreases in Britain, so
that employment has been exported. Unemployment
decreases abroad but increases in Britain, so that
unemployment has been imported. Employment has been
exported, unemployment has been imported, and all this
for the sake of private profit.
The large additional profits which result from
transferring operations abroad then do not result from
doing a better job, or from providing better, or more
needed, or more effectively produced, goods or services.
These additional profits result from importing
unemployment into the UK, are the result of dismissing
their British employees.
The social costs of unemployment, however, are in the end
paid by the unemployed (who are part of the community)
and to some extent by the community as a whole. So the
enterprise has passed on to the community this part of
its operating costs, is making a profit at the expense of
- It is an accepted principle of economics, that the social costs of an enterprise's operations have to be paid by the enterprise, expressed by the maxim 'The polluter pays'. In other words, the social costs of unemployment have to be paid by the enterprise which caused the unemployment.
- See Community Economics: Principles
To the extent to which an enterprise fails to allow for
the social costs of its operations, to that extent are
its profits derived from passing its operating costs to
the community, is it making profits at the expense of the
community, is it exploiting the community and its
Importing Goods and Services which Originate in a Low-wage Country, Into a High-wage Home-country
It would seem that importing cheaper goods from low-wage
countries results in cheaper goods being made available,
in lower prices. But we need to consider that middlemen
take excessive profits, that unemployment increases, that
wages and living standards decrease. And these are the
social costs arising from such importing operations.
The consumer experiences a small lowering of prices from
such imports, an apparent gain to the community. The
picture changes when the larger costs to the community
are included which the community (including consumers)
has to pay.
Goods and services are bought cheaply in low-wage
countries and sold in high-wage countries, at what seem
to be large and excessive profit mark-ups.
Prices used to be based on 'cost plus reasonable
mark-up', and unhindered competition was meant to ensure that
the mark-up was reasonable. Prices are now based on what
people can be persuaded to pay for what they can be
persuaded to buy. The mark-up between producing in a
low-wage country, and then selling in a high-wage
country, can be enormous.
So imports are priced at what the market will bear, or
just under. Sales of home-produced product reduce or its
prices are lowered so as to compete with the imported
product. The importer can easily afford to reduce his
prices a little further, and so on until, in the end, the
home-country's production facilities are knocked out. In
the home-country we see prices reduced a little as long
as low-wage countries compete with each other, increasing
unemployment and reducing wages in the home-country.
This process looks like the free-market system in
operation. However, what is actually happening is very
- Underlying the free-market system is that unhindered
balancing of supply and demand, that is unhindered
competition, ensures that goods and services are made
available at reasonable prices, at reasonable profit
margins. As supply and demand change so the profit
margin changes and it is this profit change which
- See Community Economics: Principles
The system functions in this way as long as wage rates
and living standard are held at constant level, remain
roughly at the same level.
In practice we see an enormous difference in wages
between low-wage and high-wage countries which results in
large profits. These profits are almost unaffected by
supply and demand changes. Hence there is no effective
competition for this product, the requirement for
unhindered competition has not been satisfied and the
system fails to meet the community's needs.
Profit tends to be the sole consideration, regardless of
the consequences to the community, regardless of the cost
to people. Instead of producing more effectively and
competitively at home, owners and directors find it
easier and more profitable to import from low-wage
countries. Unemployment increases and increasing
unemployment and social need is used to force down wages
and living standards.
Owners and directors in this way profit from the
unemployment and the lower standard of living their
operations cause in the home-country. They will continue
to profit from increasing unemployment and its
consequences as long as they do not have to pay the
social costs of their operations. In other words, as
long as they are allowed to pass this part of their
operating costs to the community.
- See report
- Exporting and Importing of Employment and Unemployment
- from which this theme's information was reproduced here.
- See Community Economics: Principles
|Exporting and Importing of Employment and Unemployment
||Discusses exporting and importing of employment and unemployment, the underlying principles, effect of trade between low-wage and high-wage countries.
Shows what is required to halt and reverse the trend
towards increasing unemployment and falling living
standards in high-wage countries.
Shows what is required to make the
system work, as well as the controls required to prevent
misuse of the system and to protect people.
There are sections about transferring operations abroad,
about importing from low-wage countries, about social
costs of unemployment, about community objectives and
community support for enterprises, about ownership rights
and about ensuring that the behaviour of enterprises is
See 'Press Notices'.
|Community Economics: Principles
||Allows for the needs of the community and for the basic causes of real-world problems and global needs. Includes sections on owners, directors and managers, actual rewards and differentials, social responsibility, social costs and accountability, misuse of the system, irresponsible behaviour, motivation.
There are sections on problems and their causes, on profit motivation. The roles of owners, directors and managers are described and discussed, as are their social responsibilities and the consequences of irresponsible behaviour.
Also discussed are actual rewards and differentials from top to bottom and from young to old. The National Remuneration Pattern is a precise pictorial record of the actual value placed on different kinds of work within the whole community.
The report includes guidelines as well as controls required to prevent misuse and to protect people.
Manfred Davidmann is an internationally well-known and respected scientist and author of a number of books and reports which have had and are having considerable impact. His work usually breaks new ground and opens up new understanding and is written in meaningful and easily understood language. Outstanding is that his work is generally accepted as factual, objective and unbiased.
The Site Overview page has links to all individual Subject Index Pages which between them list the works by Manfred Davidmann which are available on the Internet, with short descriptions and links for downloading.
To see the Site Overview page, click Overview
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