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Is it any surprise that these are all multinational corporations? I have read books such as Naomi Klein’s No Logo and Michael Moore’s Downsize This, and others, so I’m familiar with the concept of Globalization and its consequences, but I’m wary of classifying all Globalization as evil. (By the end of No Logo, Klein appears to be advocating a socialist world government to “level the playing field”.) Globalization seems, to me, to be a natural consequence of relaxed trade barriers and the increasing availability of international travel and shipping. I can recommend those books, even though I don’t find myself agreeing with the authors’ conclusions in all respects.

The prime mover behind globalization, we all agree, is the high cost of people. Not just salaries, the additional costs include taxes, pensions, facilities, even transport. The costs involved can far outweigh the costs of obtaining and transporting the materials in the products, and so the manufacturers naturally go where the costs are lowest and the profits are largest. This is obligatory, especially in the USA, where failure to maximize profits can lead to a class action lawsuit by shareholders and a SEC investigation.

The infamous maquiladora system, of Mexican sweatshops producing products for the American market, is a good example. Most maquiladoras are close to the border, so the lower cost of labour is the prime economic reason for their existence. Is it exploitation? The Mexican government, which is supposed to protect the interests of the workers, doesn’t think so: the companies enjoy tax breaks, in the interests of keeping the factories, and the jobs, in Mexico.

The process needs to be managed, of course, and the corporations involved need to be aware of the effect they’re having on people and economies, but (unlike Klein and Moore) I don’t think government regulation will help here. If individual countries can be taken advantage of in this way, what does that say about the countries? In a democracy, people can make informed choices about the kind of work and the conditions they do it under, and I’m not at all surprised that the victims of Globalization are workers under harsh or incompetent regimes.

What effect will international labour regulations have on the dictatorships behind the exploitation? Very little; at best, the employers will just stay away. This is what happened in the USA, prompting the exporting of the jobs in the first place. If there was nowhere to run to, the multinationals might just learn to live with the needs of their workers.

My presence here in Ireland is the result of Globalization, since the former Compaq opened up a EMEA-wide support centre to take advantage of Ireland’s relatively high education level and low wages. Others, such as HP, Dell and EMC, went even further, opening up manufacturing plants too. EMC may not be a widely-known name, but their Storage products once dominated the market. (I work in that field for HP, which was largely responsible for cutting EMC down to size.) EMC’s contribution, to the Cork area in particular, was recognized by the appointment of EMC founder Richard Egan as US Ambassador to Ireland a few years ago, though he has since retired.

As time went by, and the workforce became more accustomed to higher living standards, inflation kicked in. Ireland has had the highest inflation rates in Europe for several years now, particularly in house prices, which are quite insane in the Dublin area. Because the infrastructure is so poor, houses near public transport are vastly overpriced, and the roads are clogged. The confusion caused by the Euro currency change was used by retail businesses as a cover for inflation-busting price increases, despite government regulations to the contrary.

This why I don’t view my stay here in Ireland as permanent: the same corporation that brought me here could just as easily leave, since the business is slowly falling out of profitability. I will probably go back to England, though we also have offices in the Netherlands that are a possible destination for me. In general, though, there are two main destinations for work that is uneconomical in the USA or Western Europe. I will use the musical instrument industry as an example of what is happening to manufacturing:

  • The Fender corporation started making guitars near Los Angeles in the 1940s, and this was the primary centre until the 80’s. They introduced the “Squier” range in the 80’s for cheap instruments manufactured in Japan and Korea. The Squier range is still made in Korea (I believe), but instruments made in Japan have increased in quality and now carry the Fender label. We now see mention of Japanese Stratocasters, Mexican Telecasters, and the USA range is the most expensive.
  • Japan itself has come on in leaps and bounds, with Yamaha and Ibanez in particular enjoying success with their original instrument designs. (I would still like a Yamaha SG2000 some day.)
  • The Czech Republic is an increasingly popular destination for smaller instrument manufacturers such as Spector and Ernie Ball Musicman, and more will surely follow to other parts of Eastern Europe.
  • Only the smallest custom shops are still in their native countries. Carvin might look like an exception, since they’re USA-based, but they assemble guitars from parts manufactured elsewhere. Even Peavey, whose founder Hartley Peavey was once outspoken against the exporting of musical instrument manufacturing, has succumbed to economic realities.

Scotland also enjoyed some of the benefits of the Celtic Tiger – but these are vanishing. Compaq closed its PC assembly facility in Erskine and sent the business to the Czech Republic. IBM manufactured hard drives there, but they have now pulled out of the hard drive business altogether. Eastern Europe now appears to offer the same advantages that Ireland offered less than a decade ago: educated people who can manufacture decent products at a low price.

The same can not be said of “information worker” jobs such as mine, though, since English is not widely spoken in Eastern Europe. India is the destination of choice, since its post-Colonial school system produces large numbers of English-speakers, even though higher education is still rare. Call centres are compared by cost per call, and programming projects by cost per line of code, both of which mean that India is getting a lot of work. Quality, or lack of, is a hidden cost that does not factor into such calculations until it is too late, but I don’t think it’s an accident that we have Indian visitors in our building at the moment. It’s all heading up the Ganges.

Written by brian t

June 15, 2003 at 11:45 am

Posted in economics, music, politics

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