Of course it's not a fucking joke. Look, let me spell it out in words of one syllable or fewer:
* a factory in Pooristan employs a hundred workers on, say, £1 a day.
* The wage cost, to the company that owns the factory (or sub-contracts to the factory or whatever, it's not an important distinction), is therefore £100 per day.
* The shareholders of Company PLC go collectively mad and threaten to sell all their shares unless the workers are paid £2 a day, without any redundancies being made.
* So the wage costs rises to £200, which is bourne by the shareholders themselves, as Company PLC is making less profit - or they persuade consumers to spend a tiny bit more on each Product (since a single worker can make many Products in a day).
Thanks for putting this into words of one syllable or less, but I think there are still a few problems.
First let's imagine we decide to up the pay to your workers in Pooristan. There are three levels at which the increased costs could be born:
1. The factory owner, i.e. the firm directly responsible for hiring the labour and making the exported goods.
2. The MNC, i.e. the firm responsible for importing and selling the goods from Pooristan.
3. The consumer, i.e. the individual responsible for buying the imported goods from Poorsitan.
(You might claim that these are not important distinctions. Obviously they are, and you are weakening your argument by trying to confuse matters as you blend different groups together. The importer doesn't pay the wages of the labourers, he pays for the goods he's importing).
So, if the factory owner pays the increased wages directly out of his own pocket, his labour costs (what Marx would call "variable capital") increase twofold without any concomitant rise in profit. (The cost of labour, by the way, is very closely related to its productivity. Developed world workers get paid a lot more than those in the developing world, but they are also a lot more productive). Will the factory owner simply double his outgoings to labour, and not reduce his workforce? No, obviously not, because he won't be able to afford to, unless you believe that he has unlimited amounts of money and is not really driven by the "profit-motive" at all. The idea that as labour costs go up, labour intensity goes down (because the amount of labour that people can afford to buy is less) should be non-controversial. It's the standard argument against the minimum wage. You might not think that it's sufficient reason to abolish the minimum wage, and argue that the benefits outway the losses, but you should at least acknowledge that it's there.
If the MNC (or whoever) agrees to pay more on every item to cover the rise in labour cost to the sector or firms in question, because the marginal cost of producing said items will have gone up, then
its own costs will have risen dramatically without any increase in profit. Do you think it will just continue to buy the same amount of goods from the same producer, even though they now cost a lot more? Of course not, as with the local factory owner, the MNC doesn't have unlimited amounts of cash lying around and maximising profit is its
raison d'etre. The company will have to incorporate the price rise. It will say item
x now costs whatever it did
plus the rise in labour costs. Our returns on every item sold are now much less (economy of scale), so we are less interested in selling them. Other things make more money, so they are our focus. The "fair trade" products might be a nice bit of personalised feel-good fluff for our customers, but they are not profitable and will not be making very much money for the company. There is less incentive for the company to sell them, and so there is less incentive for the company to buy them. Therefore, and quite naturally, the company orders less products from the more expensive protected industry because the potential profits are less. Because labour has risen in price, demand for it, again quite naturally, has fallen.
Or the MNC might decide to pass the increased cost on to the consumer (which is, of course, what normally happens when a company's costs rise. Incidentally, by the same logic, the importing companies or MNCs could choose to do this at any time, regardless of the issue of labour standards - "I know, let's make
less money by paying more for everything than the market rate, and sell them all at a cheaper price"). So, the consumer has to pay a higher price for the goods than he did in the past. Will the consumer continue to buy the same amount of the same good at the newly inflated prices? No, he won't, which is why we are in this situation in the first place. People want more for less, and the way that big retail companies work is by selling lots of items really cheaply with little individual profit, but adding up to hopefully large turnovers. People will buy less of the good because it is not as affordable, so the company will buy less from its producers and the producers will be able to afford to employ less labourers in the factory.
There is also the issue of profit. Let's say you are this factory owner, and your profits have gone down because the cost of labour has risen dramatically. Your factory is, in effect, much less productive. And in the absence of profits, you have nothing (or a lot less) to invest back into your firm. How will you be able to reach the same level of productivity you hit before the imposition of foreign labour standards? Profit feeds back, so that as you make more money, you can invest it in technologies or methods that help you to up your productivity and so to increase your profit. This is presisely how you fight poverty, by increasing the size of the pie (more outputs for your inputs) and developing your industries to make them more competitive in the market. The same is also true for the foreign MNC or importing firm. Perhaps a firm is expanding on the basis of its cheap third world goods. If it keeps expanding by increasing its producitvity (doing more for less), it will be able to grow its organisation and buy even more cheap third world goods, helping the economies of those countries, to say nothing of its own. If you create a protected sector, you de-incentivise this because the sector in question knows that it is protected. Obviously, here we're talking about labour in a particular industry, not the industry as a whole, but the point still stands. The sector will be made to depend upon the developed world to pay premium prices for its goods. It will not be able to sell them in its own internal markets, because the costs of production will be too high. And when the market changes and they're left looking anachronistic (for whatever reason), they'll be screwed. Things like fair trade are fine for the lucky few (members of the cartel) in the short term, but bad for anyone else trying to compete. Good for price distortions, inefficiency, overproduction, bypassing real market reform and creating an insider/outsider economy. Bad for the long term economic future of the country.
Is that an idealistic argument?
Your problem is you're so wedded to the capitalist ideal that you can't even imagine a company that would voluntarily reduce its profit margin in order to fork out higher wage costs.
I find this line from you and IdleRich to be both pointless and annoying. "The problem is you're so wedded to the mixed-market ideal and your wrong-headed notions of incentives and effects that you can't imagine that foreign intervention into a country's economy to artificially set prices could have a detrimental effect." If you have an argument, make it. Either your idea is better, or mine is. It's not a question of who has the biggest capitalist cojones - you're the one talking bollocks here, mate.
