See the black line? That’s union participation. In the 50s and 60s…. businesses were massively plagued by unions which meant that the cost of labor was really high here in the US.
See the blue line? That’s global poverty. Did it start plummeting because of foreign aid?
These improvements have not taken place because well-meaning people in the West have done anything to help — foreign aid, never large, has lately shrunk to virtually nothing. Nor is it the result of the benign policies of national governments, which are as callous and corrupt as ever. It is the indirect and unintended result of the actions of soulless multinationals and rapacious local entrepreneurs, whose only concern was to take advantage of the profit opportunities offered by cheap labor. — Paul Krugman, In Praise Of Cheap Labor
In 1962 and 1963, Fairchild Semiconductor’s leaders intensified the firm’s movement toward commercial markets and users, even as it continued to address the requirements of their core customers in the military market. To meet the volume and price requirements of commercial customers, Sporck relentlessly pushed for increases in production volumes and a concomitant decline in manufacturing costs. He also played a significant role, with Robert Noyce, in moving the assembly of transistors and integrated circuits to Hong Kong and South Korea as a way of lowering labor costs. System firms serving commercial markets were much more price-conscious than military contractors. — Christophe Lécuyer, David Brock, Makers of the Microchip
As more and more businesses moved to these countries… the logical result was that the wages naturally increased. The wages weren’t arbitrarily increased by stupid laws… they were naturally increased by the increased competition/demand for labor.
Because of Mao Zedong, China wasn’t one of the countries that businesses could flock to. But as the countries around China quickly began to develop and prosper…. the disparity between socialism and capitalism became more and more stark and apparent.
In 1978 Deng Xiaoping managed to persuade China’s leaders to open up their country to foreign investments. Capital started to flow into China and global poverty started to decline at an even faster rate. China quickly caught up to us.
The only proven way to effectively and quickly lift large amounts of people out of poverty is to naturally increase the demand for their labor. Millions and millions of American consumers were more than happy to spends lots of money on products made cheaply in China. This made some capitalists extremely rich but it also increased the demand for labor in China. As a result, labor in China is no longer cheap.
Of course, Americans didn’t grab a product, look at the “Made in China” label and think, “I’m going to kill two birds with one stone! I’m going to benefit from saving money on this product, and I’m going to help lift Chinese people out of poverty!” Most of the time, Americans grumbled about the “Made in China” label. Liberals and unions especially hate on outsourcing. Conveniently, they also hate on sweatshops. For liberals, poverty only matters when its local. Their number one rule is that charity begins at home…. and with other people’s money.
I could be wrong. I’d be really curious what would happen if there was a website like Amazon that only sold products made in developing countries. Personally, I think that would be an awesome website. There are a lot of poor people. If I’m going to give my money to a poor person, I’d prefer to give it to a poor person who is helping to make a product that matches my preferences.
What products match my preferences? Orchids, pictures of orchids growing on trees.
You know what India has? A lot of nice orchids. I’ve favorited 100s and 100s of photos of orchids growing on trees but when I search my favorites for “India” there are only 47 results! That’s way too few results! There should be a lot more results!
Here’s one photo that I particularly like… Foxtail Orchid. It’s a nice photo of a really nice orchid blooming on a tree. Here’s a photo that I might like even more… Acampe praemorsa. Even though the orchid isn’t even blooming… the photo really shows how dry the habitat is. Which is right up my alley! I live in very dry Southern California… so I’m especially interested in drought tolerant epiphytic orchids.
Dinesh Valke took the photo of the epiphytic orchid in a dry habitat… and I’m the only one who fav’d it. I really don’t know much about Dinesh. He lives in India… but I’m guessing that he can’t be the poorest person in India if he’s taking photos of orchids.
But he obviously created a product that I appreciated. And I communicated my appreciation by fav’ing his photo. I clicked the star button on his photo and he got the message that one crazy guy on the other side of the world likes his photo.
The problem is… Dinesh doesn’t know how much I like his photo. Sure, I could have used a lot of words to try and quantify my appreciation for his photo… but it’s really not the most effective or efficient way to communicate the intensity of my preference. What’s the best way to communicate preference intensity? Money! As the title of your story says… “Money Talks”. With Flickr’s current system… I can click the star button to communicate my appreciation to Dinesh… but I can’t click a penny button, or a nickle button, or a dime button, or a quarter button or a fifty cent button to effectively and efficiently communicate the true depth of my appreciation to Dinesh.
What happens if Dinesh doesn’t know the true depth of my appreciation for his photo? Well… if he doesn’t have this information… then his decisions are going to be marginally less informed. If he doesn’t know how much I truly value photos of orchids on trees… then how can he make a truly informed decision regarding whether it’s worth it or not to take more photos of orchids on trees?
Imagine a poor person walking along when he happens to spot some money on the ground. Does he pick it up? Of course. He easily and quickly recognizes the value of the money and he behaves accordingly. Now imagine a poor person walking along when he happens to spot an orchid on a tree. Does he take a photo of it and put it on Flickr? Probably not. Even though it would only take him a few seconds to do so… he’s unlikely to do so because he doesn’t easily and quickly recognize the value of a photo of the orchid. Why doesn’t he easily and quickly recognize the value of the photo? Because I haven’t accurately communicated to him the value of the photo. He’s not a mind reader. No one is.
For sure photos of orchids are niche. And it’s an even smaller niche for photos of orchids growing on trees. But there are 300 members in the flickr group that I created for photos of orchids on trees. The group for photos of all orchids has nearly 10,000 members. Outside of Flickr there are even more people interested in photos of orchids.
Just how many niches are there? How many valuable opportunities are people in developing countries overlooking because we haven’t quite figured out the benefit of using our cash to clearly communicate our valuations?
Facilitating micropayments would eliminate the payment problem… but it wouldn’t eliminate the free-rider problem. The payment problem is when I’d be happy to give Dinesh 5 cents… but I don’t do so because it’s not as easy as clicking the star button. This is the payment problem. Facilitating micropayments would eliminate the payment problem. Once valuing a story is as easy as “Liking” it… then I’m sure plenty of people will be happy to do so.
However, there would still be the free-rider problem. We can reasonably suspect that lots of people would pay less than their true valuations. If the free-rider problem wasn’t a real problem then taxation should be voluntary.
One solution to the free-rider problem would be to implement the pragmatarian model. Let’s take Medium for example. Each month we’d have to pay $1 dollar…. but we could choose which stories we allocate our pennies to. There’d be no point in pretending that you value a story less than you truly do. “Lying” wouldn’t reduce your monthly fee… so you might as well allocate your pennies as honestly as possible.
Anyways, it’s super cool that you started a non-profit focused on helping the poor. And I’m sure that your organization can make a positive impact on their lives. But from my perspective, which might be totally wrong, the biggest bottleneck to development has to do with people not understanding the importance of using their cash to create accurate treasure maps. If people genuinely understood the importance of money talking…. then Medium and a gazillion other websites would already have implemented the pragmatarian model.