Talk:Race to the bottom/Archives/2013

removed this paragraph

I've removed this paragraph from the text, until someone is able to explain or rewrite it:

Global money laundering, terror finance, tax evasion and drug dealing also tend to gravitate to jurisdictions where local laws permit them to thrive.

While it is possible that such "gravitation" may be associated with races to the bottom, this text makes no attempt to demonstrate or explain why regimes would compete for these activities. Maybe states with no other sources of finance may find some of these industries to be better than nothing.-- pde 02:24, 15 Dec 2003 (UTC)

Industries make profit. Governments take a portion of that profit. The government that offers to take the least amount will be more successful in attracting those industries, generally speaking. The government can take their portion either in taxes, bribes or some other mutually beneficial arrangement. So for example, there is an incentive for a country to allow activities that are normally illegal in other nations. This is because they can take a portion of the profits in return for providing sanctuary. So I don't see what's wrong with that statement. Timofmars 17:56, 20 June 2007 (UTC)

This doesn't make sense to me

"The positive argument for free trade rests on the economic theory of comparative advantage, which in turn depends on the necessary condition of "capital immobility." If financial (or labor) resources can move between countries, then the comparative advantage theory erodes, and absolute advantage dominates. Given the liberalization of capital flows under free trade agreements of the 1990s, the necessary condition of capital immobility no longer holds. As a consequence, the economic theory of comparative advantage no longer supports free trade theory. Because labor is fairly immobile, financial capital is moved across international borders seeking the least cost labor. Because a huge pool of labor exists in the world, this process is often cited as another example of the race to the bottom."

This doesn't make sense to me. Cooperative advantage is about the relative efficiencies in making certain products, labor plays a part in that but only one part. Labor and financial mobility might destroy some cooperative advantages but not all. 18 October 2004 —Preceding unsigned comment added by 67.180.61.179 (talk • contribs)

I agree that the paragraph doesn't make sense. The principle of comparative advantage works on all levels: from the level of monolithic Gosplan-type economies that trade with each other, to the level of an individual person in a global labour market. There will always be comparative advantages at the individual level, regardless of how easy it is to move capital across national borders. I suggest that the whole paragraph is removed. I will remove it myself unless someone can rephrase it into something that makes sense... --Shastra 17:59, 23 August 2005 (UTC)

Can someone provide a reference for the "in practice, it's not a big a problem as..." bit? -- 6 April 2006 User:davidnwelton

Not true at all, in fact comparative advantage thrives even more with greater capital, good, and labor mobility. Perhaps mobility makes the advantage less distinguishable but the comparative advantage always exists. 4 September 2006 —Preceding unsigned comment added by 66.169.212.63 (talk • contribs)

Minor POV problem

The following has NPOV problems and needs to be backed up and reworded to conform to NPOV:

Mainstream economists argue that strict environmental and labor rules hurt the economy, with developing countries bearing the brunt of the adverse effects. There is solid economic theory behind this argument.

"Mainstream economists argue..." implies all mainstream economists which should be backed up if it is to remain in it's current form. Also the use of the term mainstream, a debatable classification in this case seems problematic. Also the part about solid economic theory needs to clarify who says it is solid since certainly not everyone accepts this as fact. --Cab88 16:28, 19 May 2005 (UTC)

Profit margin query

I wonder about this statement: "Some economists believe, however, that "races to the bottom" can help ameliorate poverty, for if businesses can operate for less money, they can cut prices while maintaining their profit margins."

Isn't today's American economy based wholly on growth of profit margins? If so, wouldn't there be as much evidence that a race to the bottom will only help to maintain poverty, while increasing the economic conditions of those who can and do invest in the Amerian economy? Or is it more complex than that?

No, the idea is that when profit margins increase, the optimum price to set for maximum profit is lower. Here's an extreme example. Imagine that it costs $1000 to make a widget, and you'll only find 1 buyer when selling at $1100, and 500 buyers when selling at $500. Selling at $500 would be operation at a huge loss, while selling at $1100 make $100 profit. But if costs are somehow reduced to where it costs $400 to a make a widget, the profit margin has increased greatly. But the optimum price is no longer $1100 to sell 1 widget and make $100 profit. Instead, it is to sell at $500, selling to 500 buyers, making $50,000 profit. However, I'm not sure the wording is correct. Business won't necessarily maintain their profit margin. They'll still try to maximize profit, but may find the optimal price to be below the price that they had been charging. Timofmars 18:06, 20 June 2007 (UTC)

Removed paragraphs terrible article

I moved a couple of paragraphs on this talk page, to the respective users talk pages. These paragraphs which has nothing to do with the article itself. People need to realize this is not a web blog. I can pull up the wikipolicy if too many people shout bloody murder.

I need to come back and rewrite this terrible article, problem is I don't care that much about the topic...sigh...

There are a few redeming parts to this article, but they are overshadowed by the really bad...Travb (talk) 12:30, 2 October 2006 (UTC)

Downplaying

This article seems to be mostly from the viewpoint of mainstream Marginalist economists who are unconcerned about this phenomenon because of their ardent faith in Neoliberal globalization. It claims that labor migration and poverty is higher in more protected areas, but seems contrary to reality as there is less poverty in Europe (which largely have protected capitalist systms) than there is in less protected states such as Niger, Congo, Zimbabwe, Zambia, Eritrea, Uganda, Columbia, Mexico, Cambodia, Vietnam, etc. Most of the immigrants from Mexico to the US leave unprocted ares deregulated by NAFTA reforms to the more protected US system. Full Shunyata 14:08, 20 October 2006 (UTC)

True, but I'm not sure that matters. Some of the countries you mention come close to being failed states. Others greatly interfere in their economy. The Mexican/USA example is more one of peasants coming North... and that's an issue of industrialization forcing populations to urban environments. Tall_DanTall Dan 05:00, 18 November 2006 (UTC)

It has nothing to do with protected areas leading to less poverty, more protected areas leading to more poverty. Instead, it's that less protected areas are less protected because they benefit the most from less protection. They have high unemployment, low wages. All things being equal, businesses would see lower costs by relocating or outsourcing to utilize the low labor costs (low wages). This would cause wages to fall and unemployment to grow in the high-wage countries. But these countries with strong economies, high wages, low unemployment, will use protectionist measures such as tariffs on imports in order to make it less profitable for businesses to relocate to utilize the cheap labor, since the goods they export would now cost more after the tariff is applied. With free trade, the high income workers in the high wage countries will lose income, the low wage workers in the low wage countries will gain income. Some of the lower cost of labor is passed on as lower prices. Everyone gains from the slightly lower prices, but the wage earners overall don't recoup the sum of their wages from these lower prices. But the investing class sees the most concentrated benefit in better profits along with the lower prices.

Now so far, this all has to do with free trade more than a "race to the bottom", in my opinion. Race to the bottom has to do with the game theory idea of prisoner's dilemma, where the optimal outcome results when both parties compromise, but the best outcome for an individual is when they don't compromise while the opponent does compromise, and finally, the worst outcome is when both parties don't compromise. A tax rates on profits, which is a way to make it so that the investor class does not continuously gain more and more wealth simply for having the investment money. The tax on profits (or income tax and other non-regressive taxes) helps to reduce the gap between the rich and poor. The race to the bottom refers to the idea that if all countries had the same or similar tax rates, there would be no advantage to investing in one place over another except for differences in production costs. But a country can attract business from other countries by having a low tax rate, but this relocation is not economic growth on the whole. It is simply relocation of growth. But to maintain the status quo, other countries must match the tax cut. And whether countries cooperate or not in this respect does not effect global growth, only the gap between investor class and working class. Timofmars 19:04, 20 June 2007 (UTC)

POV

The "Counter-argument" section should be deleted. It is a total POV rant (please read it before responding). 72.139.119.165 17:46, 10 December 2006 (UTC)

I agree. The assertions made there are unsubstantiated, circumstantial, and debatable, and it doesn't even try to put forth any reasoning as to the mechanisms that might have caused those supposed events. I'll delete it. I hope that's okay.

Wow... where do I start

Almost every country to try neo-liberal economics has seen it's Gini index and infant mortality rate rise. Numerous studies have linked Union penetration to a lower pre-tax pre-transfer gini index and left governments to a lower post-tax post-transfer gini index. See: [1] which calls the first important but not over whelming and the second over whelming, and then goes on to say how these findings are consistent with several previous studies, but also says countries without this are high GDP per capita, and low unemployment. Second many countries to institute neo-liberal reforms to make their economies more attractive have introduced user fees for education and scaled back public health spending. School enrollemtn exploded upon the elimination of user fees in Uganda, and user fees used to be a neccesity for IMF/Worldbank education loans[2] - this could hardly have a 'positive' effect on literacy. There evidence however to suggest that the most neoliberal first world countries have lower long term unemployment[3] - NZ Can USA are in top 5, France, Germany, or Sweden are not - and I imagine this works too for LDC. Also any statistics on povery rates decerasing, quality of goods *increasing*? Jethro 82 19:56, 6 April 2007 (UTC)

Misinterpreting race to the bottom

I think some aspects of free trade are being interpreted as a "race to the bottom" argument, when they really shouldn't be. When trade barriers are lifted and thus cheaper labor is easier to utilize, it will provide pressure to both raise the wages of the low-wage countries and to lower the wages of the high-wage countries. This is not a race to the bottom... Perhaps a race to the middle, but not the bottom.

The idea of race to the bottom in this argument should be only be used in cases like the following:

1. Low wage earners did not improve their wages, which is not the case in economic theory (but could possibly occur for reasons unrelated to this specific aspect of free-trade).

2. If the low-wage country has low human rights standards, workplace standards, environmental standards, on so on, which provide an unfair advantage in attracting business that do not result simply from the lower wages. In this case the only way for the high wage country to compete would be if it dropped its standards as well. So if there was an agreement between the countries to have the same standards, then the remaining free-trade issue regarding wages wouldn't be a "race to the bottom". Timofmars 20:55, 20 June 2007 (UTC)

NPOV Currently

From what I can see. This is my first review of the Article and there doesn't seem to have been any discussion in four months although there has been working of the article. This suggests the discussion and process complete and the NPOV flag can be removed. Lycurgus 00:20, 8 October 2007 (UTC)

Removed norefs as there are now 4 in-text refs. Can't see a problem with the article as is now so will remove the POV flag if no further discussion. Lycurgus 00:25, 8 October 2007 (UTC)

Brandeis did not COIN the phrace "race to the bottom."

While Brandeis' dissenting opinion in Liggett is widely recognized as the first discussion of the race to the bottom theory, he did not coin the phrase. His words were, "[t]he race was not one of diligence but of laxity." —Preceding unsigned comment added by 128.255.8.45 (talk) 01:26, 4 November 2007 (UTC)

removed sentence about greatest common divisor

I removed the sentence "The phrase may be used also in a more general sense of evolutionary trends gravitating towards the greatest common divisor." I don't think it makes any sense; if it does, it needs to be explained. In contrast to "lowest common denominator", "greatest common divisor" is not, as far as I know, used figuratively, and it's not clear how it could be meant mathematically here. The revision history of "race to the top" (which was merged into this article) shows that "greatest common divisor" was the result of several consecutive changes made by the anonymous author who started that article, going through "highest common denominator" and "greatest common denominator", so it seems pretty safe to assume that they weren't really sure what they were talking about themselves. Joriki (talk) 15:52, 5 August 2008 (UTC)

Definition shift?

I agree with the other comments that this article is terrible, but I think that there's an additional problem -- "race to the bottom" is frequently used to refer to the tendency of businesses to compete by lowering prices and reducing the quality of service (or unbundling features, if you want to look at it that way.) An example from fivethirtyeight.com, in a post saying that Rasmussen produces its polls more cheaply than its competitors: "But this discussion shouldn't be about the results that Rasmussen produces, either past, present or future. It should be about the state of the polling industry as a whole, an industry which is increasingly becoming a race to the bottom, and Rasmussen plays a big part in that." The article's focus on government policy doesn't seem relevant to this use of the term.

I don't think that it even necessarily leads to negative behavior -- it's just a price/value optimization strategy.

76.95.37.90 (talk) 21:48, 1 November 2010 (UTC)

Altered definition for Race to the bottom

The definition for Race to the Bottom has been expanded. Many sources focus only on a race to the bottom in business and state settings. Others, however, go broader than this, for example to include consumers.

In the spirit of ensuring that this term may see its widest possible application I have therefore expanded the definition. This still includes the original definition.

A number of other changes have been made to the page. I hope that anyone making changes to the page will not simply reject all changes, but respect the time taken to update the page on a number of areas.

Tfll (talk) 16:41, 11 August 2011 (UTC)

Can you actually produce a good source which supports your new definition? If not, your new definition should be removed. This is an encyclopædia, and content should be verifiable. bobrayner (talk) 17:23, 11 August 2011 (UTC)

By the way, it's a Bad Thing to cite another wikipedia article - doubly so when that article doesn't support the claim and doesn't even mention a "race to the bottom". bobrayner (talk) 13:51, 12 August 2011 (UTC)

Criticisms section

I created a criticisms section and included a passage from the article In Praise of Cheap Labor by Paul Krugman. From my perspective his article is a strong critique of the race to the bottom concept. The evidence is quite clear that wages and the standard of living in developing countries are converging with those in developed countries. As Krguman argues...this has absolutely nothing to do with efforts by domestic or foreign governments or charitable organizations. It is a consequence of globalization...multinational corporations seeking profits in countries with low wages. However, Spylab recently deleted the criticisms section and placed Krugman's passage in the section on Usage and History. The idea of a race to the bottom is clearly a failed concept which is why this article should have a criticisms section. Thoughts? --Xerographica (talk) 20:14, 17 November 2012 (UTC)

The quote you provided argues that globalization has raised the living standards of underpaid workers in developing countries, but it does not mention the other side of the coin: the decreased living standards of those in developed countries who have either lost their jobs due to outsourcing or who have seen their wages, benefits and job security drop due to the global race to the bottom. I have kept the quote in the article, but gave it some context, and merged it into another section.Spylab (talk) 20:27, 17 November 2012 (UTC)

America takes one step backwards while developing countries take 10 steps forward...

In other words, people will start buying something in large numbers if it solves a big problem for them. But most first-world problems—needing an easier way to record your favorite TV programs or keep track of what’s in your fridge—just aren’t that pressing. In developing countries, on the other hand, technology can transform lives. - Christopher Mims, How a $20 tablet from India could blindside PC makers, educate billions and transform computing as we know it

The huge increase in the total amount of global welfare clearly indicates that globalization is a race to the top...

Rising wages in emerging markets and higher shipping costs are also closing the cost gap between developing markets and the United States. - Scott Malone and Ernest Scheyder, Outsourcing Losing Its Allure As China Costs Soar

Also, it's extremely important to note that the large majority of Americans are the ones who are responsible for American jobs being outsourced...

Wal-Mart can’t charge more; if it does, its customers will go elsewhere. The same is true of Target and Costco. In a sense, Wal-Mart is the elected representative of tens of millions of hard-bargaining shoppers, and, like any representative, it serves only at their pleasure. - James Surowiecki, The Customer is King

Obviously you don't have to agree with the critiques...and you're certainly welcome to offer rebuttals...but there's enough evidence to warrant a section for criticisms in this entry. --Xerographica (talk) 20:54, 17 November 2012 (UTC)

Those are good points - the article definitely needs some work in that direction. bobrayner (talk) 22:12, 18 November 2012 (UTC)

Another relevant passage that I just ran across...

Or look at developing countries, China, India, Brazil. A billion people have been lifted out of poverty since 1990 because their countries moved toward more market-based economies—a billion people. Nobody's arguing for taking that back. - Gary Becker

--Xerographica (talk) 09:55, 18 December 2012 (UTC)