Tuesday, September 18, 2012

A Humbling Lesson About Critical Thinking

I am going to be offline for a few days as I join two of my fellow retirees on a trek to Algonquin Park, so I leave you with the following rather lengthy blog post:

While I am always mindful of the vital importance of critical thinking, logic, and clear writing, and try to practise all three, I also know that I regularly fall short of those ideals. Recently, I had a humbling reminder of my shortcomings.

It began innocently enough with an email from my son, who works in Alberta, about the IPhone5 that was just announced. I sent him an email I received about how, despite earlier promises by Apple, the conditions and wages under which the phone are assembled at Foxconn in China have not improved. Here is a link for further details on those conditions.

In response, my son sent the following:

Ya, I remember when the Foxconn head told the media that managing his one million animals (his employees) gave him a headache.

It's a trade off. If you mandate higher wages, that will be passed along in the price, making goods in Canada more expensive, which disproportionately lowers the standard of living of poor people here, which pushes them back into poverty living conditions. It's like what my policy ethics professor was saying about while its true lower class wages are stagnant, poor people are still much better off than ever before when almost every poor person now can afford a flat screen tv with Blu Ray, and a computer, and a smart phone, etc. These things used to be available to only the high income earner, but because of goods made cheaply in China, everyone can afford electronics today. I'm not saying increasing Chinese wages is the wrong choice to make, but keep in mind that it will contribute to poor people in Canada having a lower standard of living. But maybe from a big picture perspective higher prices are worth it.

One thing I learned from the MPP [Masters of Public Policy] degree is that what seems like a good policy on the surface often has devastating unintended consequences. An example is in Greece currently, where people weren't paying property taxes, so the government added it onto home electricity and gas bills to ensure people pay. A lot of people stopped paying their natural gas bills, and a court ruled it was illegal for utility companies to cut off people's gas, resulting in utlility companies being unable to pay for their gas, resulting in threats by the gas company to cut off all gas to utilities. Ultimately, the government stepped in to avoid this with a huge payment, and now it basically pays everyone's gas bills, AND still no one pays their property taxes. Let me know if you want me to send you an article on this.

Another example we were taught is in medieval England where rats were out of control. The King stated that you'd get paid a lot of money for each rat corpse you turn it. The end result for people started breeding rats, and the rat population exploded, and rats were everywhere. I can think of a dozen examples of unintended consequences.

My point is that on the surface the Apple situation seems difficult to oppose; who doens't want better working conditions? But unfortunately the people who are starting this petition probably aren't economists or public policy analysts, and cannot begin to predict the cascading and potentially devastating effects such a policy might result in. I'm quite skeptical these days of any publication which promotes a certain policy. That's why government is so slow moving, because they have to consult with every stakeholder to ensure they understand every possible implications, and be prepared for it.

Sorry for the long email, it just bothers me when everyone on the internet thinks they're a policy analyst these days. Saying "I think higher wages in China are a good idea because poor people need more money" is far too simplistic an analysis for me to accept as valid. But as I type this I realize that it may be geared at Apple voluntarily increasing wages, not the Chinese government mandating it, which is quite different.

To which I replied:

You have obviously given a lot of thought to the issue, Matthew, and what you say makes a lot of sense, but when all is said and done, the cheap labour is being exploited by Apple to maximize its profits, something I know that benefits their shareholders.

Ultimately, a balance between the competing interests needs to be struck, in my opinion.

He replied:

There are many large electronics manufacturer that manufacture through Foxconn; [as a result of wage hikes] their prices would go up as well. It's not just about Apple; other companies' share prices would go down.

How does this affect pension plans, and people retirement savings since a lot of people's nest eggs are in these stocks? There was a story yesterday about the iPhone 5 potentially propping up the US economy up to 0.5% annualized. What happens when all electronic sales go down due to higher prices? Will be have a recession? Probably not, but it will have an effect. Will the jobs go to Bangladesh instead? How much would this hurt the Chinese economy where growth is quickly falling? Could we have a global slowdown because of it?

It's a complicated issue is my point, and there is a lot to analyze before one can say it's a good idea or not. Where is the economic analysis with this policy suggestion? It seems to be missing.

And so the debate goes on. While I still hold that a balance needs to be struck, the correspondence with my son reminded me of how complicated issues are once one delves beneath the surface, and that all of us, manufacturers, corporations, shareholders and consumers have roles to play in the matter of workers' rights, working conditions, and wages.

And so I shall end as I began. Critical and logical thinking are ideals to which I aspire, but I do realize that the ideal can never be consistently attained. In the end, I guess, as with most worthwhile endeavours, all we can do is to consistently try our best.

See you in a few days.

6 comments:

  1. If we've taught our children well, Lorne, they will point out the weaknesses in our arguments.

    That's what I tell myself when my children point out what I have missed.

    Have a good trip.

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  2. So it is okay to exploit and abuse workers in another country in order for the poor to have cheap electronics? These electronics are cheap in more than just initial cost- they are not made to last, and they are often technologically obsolete in a matter of months after purchase, which necessitates repair or replacement. And, while I don't know anything about profit margins on electronics, I distinctly remember a huge stink when Nike began making running shoes in China because labour was cheaper. The price of shoes certainly did not go down.

    I am suspicious of an argument for unintended consequences that privileges economy over human well-being. The economy is entirely man made and we can decide to use it to improve things for all of us, or we can let a small number of people enslave the rest of us to it, driving a greater number of us into poverty while they tuck masses of profits away for their personal rainy day.

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    1. You make an excellent point Karen; however, I guess the problem is in deciding that the economy should serve us, rather than the other way around, a rather daunting task given our collective appetite for low-priced goods made overseas.

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  3. Truly a fantastic post and exchange between you and your son! It is such a great dialogue about the complexity of policy and economics. I plan to link to it from my blog Critical-Thinkers.com. Thank you for sharing!

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    1. Thanks for your kind comments, Breanne.

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