What Fools These Mortals Be

The title of this post, taken from Shakespeare's Midsummer Night's Dream, hardly qualifies as a startling insight. Nonetheless, after reading two columns in this morning's Star, I couldn't help but reflect on the mass of contradictions that we are. It has likely always been thus, but stands in especially sharp relief in today's broken world.

My very wise friend Dom pointed out something to me recently. "Lorne," he said, "the genius of the corporate world has been to get us addicted to cheap stuff from China, even though that cheap stuff comes at a very high cost: the loss of good-paying manufacturing jobs, as well as the spread of retail positions (think Walmart) that refuse to pay a living wage."

On some level, I suspect we are aware of this truth, but choose not to ponder it as our search for bargains encompasses an increasingly wide swath. In her column today, Heather Mallick confronts the issue head-on in a meditation prompted by Wall Street's reaction to Apple Tim Cook's recent announcement about bringing a small amount of Apple jobs back from China. What should have been a cause for celebration in the depressed American job market turned out to be anything but:

Wall Street’s instant response was to drop the stock several percentage points. Apple is the biggest company in U.S. history. But despite its might and inventiveness, the market judged it solely on its merits as a behemoth built mainly on cheap Chinese labour.

But it seems that it is not just the stock market that takes a dim view of such a move:

Ten years ago I paid $250 for a coffeemaker. Today I pay $80. Would I pay even $60 more to restore Canadian jobs?

Yes, I say. But am I being truthful? I buy books from Amazon.ca because they offer me 37- to 50-per-cent discounts and free shipping. But I could buy them locally at full price if I were of a mind. I am not.

So yes, we would like to see a return to good-paying jobs, but not if we have to pay more for our goods as a result. While I realize this may be an over-generalization, Mallick really does speak an unpleasant truth about our contradictory natures.

On a separate topic, Dow Marmur writes about the irony of how our best impulses, our philanthropic ones, may have undesirable and unintended consequences. Echoing a concern I recently voiced here, Marmur opines that private efforts to relieve hunger in fact make it easier for governments to ignore the problem of growing and intractable poverty.

He writes about Mazon, a Jewish group whose aim is to feed those in need irrespective of background and affiliation. So far it has allocated more than $7 million to food banks and related projects across Canada.

Its founding chairman, Rabbi Arthur Bielfeld, recently

... challenged the government to render it and all organizations of its kind obsolete. In reality, however, the need continues to increase multifold. A quarter of a century ago there were 94 food banks in Canada; today there are more than 630.

Citing recent data, Rabbi Bielfeld said that some 900,000 Canadians use food banks every month. Last year more than 150 million pounds of food were distributed to families in need; 38 per cent of recipients were children. This year many will have to make do with less because of growing demand and diminishing resources.

Marmur observes the irony of it and many other organizations committed to the reduction of poverty:

... as essential as it is to help those in need, ironically, the relative success of such efforts helps governments to get off the hook. At times it even seems that charities find themselves inadvertently colluding with the inaction of politicians.

And so we have it. Two very good writers making some very relevant observations about the contradictions that define our humanity. On the one hand we want to be oblivious to the economic and social consequences of our propensity for bargain-hunting; on the other hand, even when we allow our better angels to come to the fore, the results are anything but an unalloyed good.

I guess, as always, the answer to this conundrum ultimately does lie in our own hands.

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.