Open Left

Labor Arbitrage

Only those firms which move first can actually make money on the transaction.  Once the dollar begins to fall relative to foreign currencies, the wage differential begins to even out.  In an honest world, a currency like the yuan or RMB would have appreciated such that outsourcing would have made no sense, because the exchange rate would have equilibrated the wage differential.  The first movers steal a jump on competition and have disproportionately better profits temporarily.  That's why fixing the exchange rate issue with the Chinese is so important.  They know they're milking a temporary advantage, something nobody in our government seems to have a clue about, to the detriment of large groups in our society.  If all of the pain being inflicted were spread evenly throughout our society, you can bet globalization would have gone nowhere.

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by: PrahaPartizan @ Wed Jul 08, 2009 at 16:53:06 PM CDT