Tuesday, July 27, 2010

Western Mercantilists Take Their Show on the Road

By Joseph Nelson

Evidently, western garment manufacturers, under protest from workers and with the help of local labor unions, have pressured the government of Bangladesh to raise the minimum wage for garment workers.

Not content with fleecing the populations of their respective homelands, western mercantilists have taken their show on the road. In an attempt to stifle competition from entrepreneurs in the developing world, western garment manufacturers have conspired with labor unions and government officials to raise the minimum wage for workers in Bangladesh.

As the BBC reports, “following allegations they were using exploitative labour in the country's factories, some Western companies earlier this year asked the Bangladeshi government to raise the minimum wage for its workers.”

This begs the question, “if you are a garment manufacturer concerned about your worker's pay, why not raise the hourly wage yourself?” The answer: a bright Bangladeshi entrepreneur might come in and undercut my prices. Like mercantilists economic laws of supply and demand are not bound by borders. Unfortunately, these new minimum wage laws will stunt competition, raise unemployment among those whose marginal revenue is less than the new wage and increase prices for consumers. The benefits, of course, will be for a few western companies and the local labor unions.  Disappointing news from an already struggling country.

Joseph Nelson is studying for his MBA at NYU's Stern  School of Business.

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