Re: mechanisms of core wealth

gernot kohler wrote:

> if the Third World worker gets US$ 3.00 for the same work for which the
> First World worker gets US$ 15.00, how much of this wage differential is due
> to "market" and how much is due to "institutions" (including historically
> grown racism embedded in the world system)? [i am thinking of car assembly
> workers in Mexico and Canada. if i would compare a Turkish or Caribbean
> fruit picker and a Canadian car assembly worker, the situation would be more
> difficult to evaluate. the Mexican and Canadian car assembly workers perform
> the same quality work in the same type of branch plant of a global car
> manufacturing company.]

I assume that other conditions, which may contribute to a wage
differential, are similar (i.e, working conditions, taxes, government
services, infrastructure, transportation costs, the natural environment,
etc.) The answer from an economist is that the institutions
(specifically, national governments) have served to restrict free trade
and, accordingly, to have caused or maintained the conditions under
which such a huge wage differential is possible. Free trade ("the
market") serves to equalize wages as well as profit, other things equal.
This is one of the "core" principles of the economic theory of
international trade that is found in practically every textbook on the
subject.

But perhaps this is not what you mean. Businesses ordinarily pay the
lowest wages they can, just as they pay the lowest possible prices for
raw materials, equipment, and loans. You may believe that the "global
society" would be better served if they paid the Mexican workers more.
Another way to achieve wage equality would be for the Canadian unions to
accept cuts in pay for their workers.

-- 
Pat Gunning, Sultan Qaboos University, Oman
Web pages on Subjectivism, Democracy, Taiwan, Ludwig von Mises,
Austrian Economics, and my University Classes
http://www2.cybercities.com/g/gunning/welcome.htm
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