Monday, May 23, 2016

Capitalism, Labor and the proposed Indo Lanka ECTA

Excerpts from a comment by Kieth on Income Inequality
Feudalism – exploit the masses through land ownership
Capitalism – exploit the masses through wealth (Capital)

Today this is done through the parasitic, rentier trickle up of Capitalism:

a) Those with excess capital invest it and collect interest and rent.
b) Those with insufficient capital borrow money and pay interest and rent.

All this was much easier to see in Capitalism's earlier days.

Malthus and Ricardo never saw those at the bottom rising out of a bare subsistence living.

This was the way it had always been and always would be, the benefits of the system only accrue to those at the top.

It was very obvious to Adam Smith:

The Labour and time of the poor is in civilised countries sacrificed to the maintaining of the rich in ease and luxury. The Landlord is maintained in idleness and luxury by the labour of his tenants. The moneyed man is supported by his extractions from the industrious merchant and the needy who are obliged to support him in ease by a return for the use of his money. But every savage has the full fruits of his own labours; there are no landlords, no usurers and no tax gatherers.
I think Sri Lanka, being rural and an agricultural economy (and specially after Land Reform) has been spared much of the extraction of labor by the capitalist class. Under the British the Sinhalese refused to work on the Plantations because they were self sufficient with their own land and crops.

The proposed Indo Lanka ECTA is the new version of Brits import of Indentured workers for the Plantations. We will end up with cheap Labor.

The most appropriate comparison (from recent history) to ECTA would be the effect of North American Free Trade Agreement (NAFTA) on US employment and industry. Both employment and industry went south Figuratively and literally. Good for big business bad for the people of the US.

The North American Free Trade Agreement (NAFTA). was signed in 1994, 17 years later, 682,900 U.S. jobs have been “lost or displaced” because of the agreement and the resulting trade deficit. In 1993, before the signing of NAFTA, the U.S. held a $1.6 billion trade surplus over Mexico. By 1997, the tides had turned, and Mexico laid claim to a much larger surplus of $16.6 billion. As of 2010, it’s not even close. Mexico’s trade surplus now hovers around $97.2 billion

The take home is that the poorer country gains. In the case of ECTA, India is by far the poorer based on GDP/capita. Also population wise this is not an agreement between equals. The whole of Sri Lanka is smaller than an Indian city. If the US is getting Mexicanized what would happen to little Sri Lanka.

Obviously Indian labor is cheaper. What is not that well known is they have shortages of water and will attempt to take over water resources.  One method may be privatization of water and another by establishing water hungry industry on the cheap. See how establishment of an Indian fruit juice company Dabur has severely depleted water resources to the detriment of locals.  

Back to NAFTA. One may well ask why the US agreed to NAFTA, who gained. Big Business Multi nationals. They moved their manufacturing to Mexico and gained by cheap labor and taxes. It was really a transfer of wealth from the average Joe to the rich in the US. Rentier extraction of Labor.

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