Global Inequality

SOC-101 401

Extra Credit Paper:

There are many factors contributing to global inequality; perhaps the most dominant is the role in which the rich nations have adopted. The rich nations are exploiting the poorer nations and the subsequent repercussions are numerous and detrimental. The developed countries grow richer by selling capital-intensive (thus cheap) products for a high price and buying labor-intensive (thus expensive) products for a low price. This imbalance of trade expands the gap between the rich and the poor. More than fifty developing countries depend on three or fewer commodities for over half of their export earnings. Twenty countries are dependent on commodities for over ninety percent of their total foreign exchange earnings.

At first glance it may seem that the growth in development of export goods such as coffee, cotton, sugar, and lumbar would be beneficial to the exporting country, since it does bring in revenue. In fact, it represents a type of exploitation called unequal exchange. A country that exports raw or unprocessed materials may gain currency for their sale, but they lose it if they import processed goods. The reason being, processed goods (goods that require additional labor) are more costly. Therefore, a country that exports lumbar but does not have the capacity to process it must then re-import it in the form of finished lumbar products, at a cost that is greater than the price it received for the raw product. The country that processes the materials also gets the added revenue contributed by its laborers. As an example, if a society spends one hundred dollars to manufacture a product within its borders, the money that is used to pay for materials, labor, and other costs, is reallocated through the economy as each recipient spends it. If money is spent in another country, circulation of that money is within the exporting country. This is one of the leading reasons an industrialized, product-exporting, commodity-importing, country is wealthy; and an undeveloped, product-importing, commodity-exporting, country is poor. In addition, with laborers being paid less than their fair wages in the poor nations, wealth is still accumulated by, and concentrated in, the richer nations. A major source of social tension is that this type of globalization is fundamentally transforming employment relationships. The labor of ordinary workers in one country can now be more easily substituted for the labor of workers in other countries. This is affecting almost everyone across the world; ironically it even has adverse affects on the rich nations, the ones who initiated and perpetuate this problem.

A case in point where the rich nations also suffer the consequences of the fragmenting and allocating of commodity production is evident by what is happening with the Levi Jeans factories. Levi Strauss, a Bavarian immigrant who settled in San Francisco to outfit the gold miners, founded the 4.2 billion-dollar company one hundred fifty years ago. It has turned out more than 3.5 billion pairs of the sturdy denim jeans with the trademark rivets at the seams and the red pocket tab, which has become an American icon. But at the end of the year, 2003, the last pair of Leviís made in America rolled off the sewing and finishing lines at the factory in San Antonio. This was just one more casualty of the shrinking homegrown apparel industry that since 1995 has halved its domestic work force, in favor of cheaper foreign labor. It will be a setback too for San Antonio, home to the Alamo. The city draws a throng of tourists every year, but it is suffering from a string of factory closings. Levi Strauss & Companyís last three Canadian plants will be closing this year. Thatís part of a restructuring that will cut the companyís payroll to $9,750 by next year, the peak was $97,000 in 1996. It will be leaving not of its jeans production in North America. The work is being contracted to suppliers in fifty different countries; which include the Caribbean, Latin American countries, and Asia. Competitors, with few exceptions, have shifted their manufacturing to those regions as well, if they were not already there.

After seeing what happens, it is amazing that the main thing that the powerful nations prescribe is that the developing nations should open up to allow more imports in while exporting