There is a demand for capital by nations with increasing budget deficits like the United States, Europe, and Japan who suffer from a reduced amount of available capital needed to sustain their economies at a time when they are emerging from a recession.
Competition has become increasingly more intense and some countries have been forced to lower wages or extend working hours to attract these capital flows and provide a profit while keeping the costs of production at a reasonable level. This clearly demonstrates the average worker’s position at the bottom of the capital-market totem pole. A primary driving force behind this inability to prioritize the needs and overall welfare of workers, as was the common practice in the “Golden Age”, is the essential element of time inherent in this type of global competition. All of the developing countries are attempting to establish their capital market infrastructure at the same time.
The essence of this issue is that the international circulation of capital has wrestled control from governments who are therefore unable to control their budgets. They are increasingly dependent on directors of companies, multinational financiers, and managers of private funds who can influence the direction that their client’s funds are invested. Previously, because governments feared a loss of their natural capital and control over domestic economy policy, they attempted to regulate the international monetary system until the early 1980’s but failed. As a result, governments today have been compelled to reduce the amount of tax deducted on foreign investments and reduce the barriers to capital movements because financial markets will always favor the most welcoming political centers. Foreign capital reserves the right, or the privilege, under globalization of withdrawing from any economy that presents unfavorable fiscal policy. Therefore, governments are perpetually engaged in finding an appropriate balance between the taxation of capital flow and the maintenance of favorable economic conditions.
Outsourcing, therefore, remains a controversial issue because of its role in the increasing gap between rich and poor. Because the essential nature of business is to take whatever necessary means of maximizing profit, corporations in today’s globalized economy are somewhat expected to outsource jobs to developing nations that offer more flexible wages as opposed to continuing the practice of employing full-time workers at a social wage, which went out of fashion at the end of the “Golden Age”. While some critics accuse companies of turning profits by exploiting the labor of workers in poor, developing countries in an ethical argument, the fact is that in the economic environment today, capitalizing on cheap labor is an essential means of a company maintaining a competitive profit margin. If an enterprise is operating in a competitive environment and elects to maintain the “Golden Age” status quo in terms of sharing economic gains with its suppliers, workers, and customers in a gesture of social responsibility, it will lose profits. On the other hand, if they choose not to, their suppliers, workers and customers will go else where and the enterprise will fail.
The argument here is that exploitation is a two-way street, although companies may benefit from the cheap labor of workers in poor, developing countries, these workers are in turn benefiting from exploiting, or perhaps it is better said that they are capitalizing on, the opportunity to earn money that international companies are offering.
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