Comparative advantage
As I've mentioned in some previous posts, the ShaMao is concerned about globalization, particularly since his job involves facilitating the process. I understand both the macro-economic forces behind it and the micro-economic business factors that drive individual companies. Proponents of unrestricted free trade will talk about comparative advantage and argue that the rising tide caused by efficient allocation of resources will lift all boats. That is where my problem comes in, is this really true? Will the short term pain of job loss lead to long term benefit?
I like to listen to James McMurtrey's song, We Can't Make it Here Anymore. It is a powerful song, even if the understanding of economics is clearly lacking. A few lyrics from the song:
That big ol' building was the textile mill
It fed our kids and it paid our bills
But they turned us out and they closed the doors
We can't make it here anymoreSee all those pallets piled up on the loading dock
They're just gonna set there till they rot
'Cause there's nothing to ship, nothing to pack
Just busted concrete and rusted tracks
Empty storefronts around the square
There's a needle in the gutter and glass everywhere
You don't come down here 'less you're looking to score
We can't make it here anymore
Now I come from Southeastern Massachusetts, so when I heard those lyrics I thought to myself, he is talking about Georgia or Alabama or somewhere in 2004, but he could just as well be talking about New Bedford, MA in 1935. That's where all of those textile mills that he is crying about came from. They all moved to the South in the 1930's-1950's for the exact same reasons that they have moved from the South to overseas in the last 25 years.
I found a book the other day (in my mother's inventory at the book fair again), called A Study of 81 Principle American Markets published in 1925. It is basically a survey of retail activity in larger cities throughout the US at the time. Here is an excerpt from the section on New Bedford:
It is the center of the largest group of fine textile mills in the world and includes such varied manufactures as fine tools, silverware, cut glass, cordage, shoes, soap, and biscuits.
New Bedford's prosperity may be judged by the fact that in telephone installations it is the third largest in percentage in the world.
This city is, from the point of view of population, prosperity, home owning, rapid growth and industrial activity one of the most worthwhile markets in the country.
Now I grew up about 30 miles away from New Bedford and I can tell you that the reputation of city is absolutely nothing like the above. It is thought of as a model of urban decay, economic stagnation, drug abuse, crime, and general nastiness. Just 3 years after the above was written, a large, long lasting, worker strike took place in the mills. The next year, the Great Depression hit and these factors, combined with logistical improvements in the South, resulted in the relocation of the vast majority of manufacturing to the South over about a 20 year period.
This movement of jobs to the South made perfect macro-economic sense as a trend, and made perfect business sense to the corporations involved. So what happened to New Bedford? Did its economy readjust itself to leverage its own comparative advantage? No, it became a shithole. The city lost about 1/4 of its population since the above blurb was written in 1925. Its unemployment rate over the past 10 years has consistently been about 25% higher than Massachusetts as a whole; crime rates in most categories are more than double national averages; test scores are far lower than state averages, etc...
Maybe some places just don't have a comparative advantage?
