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Creating Unemployment for the Sake of Private Profit;
Multinational (Global) Operations and the Exporting of Employment


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Creating Unemployment for the Sake of Private Profit;
Multinational (Global) Operations and the Exporting of Employment


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 enterprise.

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 the community.

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 members.


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 different.

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 produces balance.
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.


Sources

See report
Exporting and Importing of Employment and Unemployment
from which this theme's information was reproduced here.

Also see
See   Community Economics: Principles


Descriptions of Sources

Title   Description
     
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 socially responsible.

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

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.


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