Nightcap

  1. Thoughts on the Battle of the Marne, 105 years later John Rossi, American Conservative
  2. The transformation of time Keerthik Sasidharan, Aeon
  3. The turn against motherhood Frank Furedi, spiked!
  4. In praise of Facebook Rachel Lu, the Week

Nightcap

  1. Emptying the Soviet bread basket Donald Rayfield, Literary Review
  2. The real sexism problem in Economics Victoria Bateman, Aeon
  3. Europe’s hard problem of capitalism or democracy Mark Mazower, New Statesman
  4. A new Gilded Age, or Old Normal? Luria & Zabala, American Affairs

Nightcap

  1. The nature and origins of modernity Brian Micklethwait, Samizdata
  2. If poverty is declining, why worry about inequality? Pranab Bardhan, 3 Quarks Daily
  3. 800 years of change in Hawaii and the Pacific Glyn Ford, Asian Review of Books
  4. Are we still living in Western Civilisation? Ananya Chowdhury, ASI

Mexican Productivity and Poverty: a Superficial, Street-Level View

I just spent three and a half weeks in Puerto Vallarta, Mexico (summer 2019). Below are some impressions. First things first; I have to give you the severe limits of my field of vision while I was there.

My wife and I stayed in an old-fashioned, 1950s low-rise hotel on the ocean with a pleasant faded kind of glory. (My wife Krishna does not let me go to Mexico by myself, for obvious reasons!) It was very hot throughout so, we did not go out much except that we had to shop for food every day at the mall across a broad avenue. We took taxis to and from the dentist about fifteen times. I always chat with taxi drivers; they gave us the foundation of sociology, I am sure! We spent a little time in the old touristy market district (where we have friendly acquaintances from past visits). We also walked some on Puerto Vallarta’s beautiful and interesting seafront (the “malecon”). I speak Spanish well, I understand everything in the language; I read it with ease. I read the paper a few times; I watched the Spanish language news on television a few times. I read free brochures on this and that.

There is much to like in Mexico, and especially Mexicans. They are low-key, unexcitable, stoical cordial, affable, and eager to help, and not only vis-à-vis this pleasant, well-disposed gringo, myself. Living for a short time in pleasant, clean Puerto Vallarta, it’s difficult to remember that Mexico’s homicide rate is three times the US rate. It takes the occasional sighting of a truckful of the new, nattily dressed National Guard with automatic weapons to jog your memory. (See notes from a previous visit: “Mexicans in Mexico,” 2017, )

Low productivity

My main observation is a repeat from what I recounted the last time I was there (See my “Mexican Underdevelopment: Pop-Sociology.”) It’s about productivity. For most of our stay, there was work going on on a brick path right beneath my windows. It was mind boggling. At one point, there were seven people working on the same two steps, including a master craftsman. They continued by restoring and cleaning a flat brick path. The thought stuck me that,in California, two, or two-and-a-half of the same Mexican workers (the very same guys) would have done the same work in the same time easily. And, yes, I know something about brick laying, both personally (I used to be very poor; now I am moderately poor), and as a customer. I am talking about a more than fifty per cent rise in productivity obtained by simply moving workers into a different environment. Bosses and economic leaders would easily kill for a change of such magnitude!

Of all the guys on the bricklaying and brick cleaning site, only one had a proper power tool, and it was only operational part of the time. The others labored by hand, mostly on their knees. No one had thought of giving them knee-guards. They had not themselves.

Moderate Poverty

The workers told me they were making about US$23 a day, or $115 for a forty-hour week. That’s not bad given that beginning professional positions – that require a university education – in thriving, manufacturing Monterrey are advertised for US$600 a month. Yet, and although most food, housing, gasoline, and health care are all cheaper in Mexico than in the US, this is still not much money on which to rear a family. But, this is also not dire poverty of the kind we used to see, and sometimes still find in India or in Africa. In that part of Mexico, everyone looks healthy, especially the children. Many adults are obese, more or less like in the US. Everyone is well dressed, by the admittedly low standards of central California where I live.

Over-staffing

Here is striking fact: Wherever you go, you find overstaffed shops, restaurants, etc, often very overstaffed. I mean like three shop attendants doing nothing in the middle of the afternoon. There must be a reasonable number of exceptions because my dentist’s office makes good use of its human resources. The same young women who serve as assistants, also act as receptionists. (I know, know, comparative advantage; don’t get me started, this is not the time or place.)

Productivity and Income

Over-staffing and the failure to provide workers with the best tools matter a great deal if you think, as I do, that incomes roughly follow productivity though often with big time lags, and often not in a linear fashion. Although employers sometimes fail to share the product of productivity gains with workers, the fact is that they cannot share gains that have not occurred. Low productivity pretty much guarantees low wages.

Note what I am not saying. The Mexican work ethic is not the problem. The guys who worked in the hot sun of tropical Mexico for eight hours a day don’t need lessons from anyone on that count. Also, those of us who live in California remember well the recession years when the vegetable picking lines remained nearly all-Mexican (with a handful of Filipinos) while poor Anglos lamented the absence of jobs. Now that wages in the field have increased substantially because of a chronic farm labor shortage, still few college students are flooding in, California sky-high rents or not.

Going back to fairly prosperous Puerto Vallarta, where construction is thriving (because of Canadian refugees from the cold, I am told), there is also the mysterious fact of the invisible zealot pounding stakes close to my hotel at 5:30 AM. I am not complaining. I respect this instance of unreasonable industriousness!

Social Structure and Productivity

Mexicans remain poor, the Mexican economy keeps growing but only slowly. This is, at least in part, I think, because Mexicans have normative standards that do not feed high productivity. These standard maintain a permanent social structure that makes increasing productivity difficult. A vicious/virtuous circle is at work. Labor is cheap because of its low productivity. It’s so cheap that, why not hire an additional worker for the same job? The incentive to hire nonchalantly is probably high because of Mexicans’ high connectivity. Mexicans, even in a fairly new city like Puerto Vallarta appear much more interconnected than Californians. (I don’t know much about the East Coast of the US.) There are many more individuals in one’s life there to please by giving their relatives and liege a job than is the case where I live.

Take the lifelong relationship of “compadre” and “comadre” between adults who are usually not kin to each other. The titles denote the link between a man and a woman who are respectively godfather and godmother to the same child. It easily multiplies by two or three beyond actual relatives the circle of individuals to whom one is to some extent obligated. And, it does not end there. Why, there is even a word in Mexican Spanish to denote the relationship of two people who have the same first name! I forgot the word but I was charmed to discover that I was ##### to any number of “Diegos.” I can even imagine situations where someone would succeed in using that tenuous link to extract a small favor from me (with a probable intention to reciprocate).

High Connectivity not a Specific Feature of Mexico, and Over-Staffing

I don’t think this high connectivity is an idiosyncratic feature of Mexican society. I believe rather that something similar prevails in India (that I know a little). It seems to me that high connectivity was visible also, in rural Brittany when I was a child in the forties and fifties. It was largely absent in Paris by contrast where I lived most of the time (Order my book of socio-historical memoirs of that period: I Used to Be French: An Immature Autobiography; avoid the middle person, go through me.). Having obligations to few rather than to many is a salient feature of modernity (that includes also urbanization, small nuclear families, and a search for formal education).

I speculate that Mexicans, even in comparatively modern places like Puerto Vallarta, have a high tolerance for over-staffing because of the large social networks within which they exist. Over-staffing is thus a primary contributor to low productivity. Low productivity keeps many people poor. Poor people need a supportive network more than do the more prosperous. Long and short of it: to break the cycle would require a degree of de-humanization of Mexican society. It’s not inexorable. Mexicans may collectively choose a bearable level of poverty (see life expectancy below) over the destruction of the emotional comfort larger social networks promote.

Not Following in the Footsteps….

It seems to me that a high degree of familiarity with the negative example of American society next door with its low connectivity – in places – may guide them toward such a choice. In point of fact, I have met a strikingly large number of Mexican men who had worked in the US for several years and who had returned home under their own power, by choice, according to their narratives. (I also note with satisfaction that ten years ago, S. Nikiforov and I had evoked precisely that sort of preference in a big article on Mexican immigration: “If Mexicans and Americans could cross the border freely,” in The Independent Review, 14-1: 101-133 [Summer] 2009.)

There is no law of nature that requires the people of less developed countries to retrace all the steps of their predecessors in development. The cellphone shows us that often, they don’t have to: Several African countries have phone landlines only in the center of their major city but 80% of their population has access to a cellphone. Trying to skip stages is the rational thing to do, of course. I would guess it’s most successful when it depends largely on a myriad of individual decisions, as with cellphones. Nevertheless, it seems to work pretty well – for some reason – even with collective decisions regarding health care, specifically.

Perhaps, societies can pick and choose what features of modernity they actually want thanks to a density of available information and a richness in inter-communications that was unimaginable forty years ago. (That was when I was studying underdevelopment with rigorous methods.) I can picture a partial national consensus forming that says, “We don’t need everything the big guys have; a little bit more of this and of that, and we are OK.” If this scenario is realistic, food, schooling, and health care will probably be its dominant themes. The Mexican food situation appears fine (I will consider contradiction on this.). In my subjective judgment, based on its products, on the average, Mexican K-12 is superior to its American public counterpart.

Illness and Health care

One component of socio-economic underdevelopment and also an obstacle to development in its own right used to be widespread illness. The morbidity figures I saw in the seventies about the situation in the fifties were horrifying. Illness also obstructed development indirectly because it destroyed family units through the death of parents or older siblings, even of aunts and uncles who might have provided. This is largely in the past. The present in poor countries is very different, greatly improved from the narrow standpoint of health. And, it turns out, the Mexican health picture, in particular appears fairly bright.

Single Payer Health Care

Something to think about for my conservative friends: Mexico has single payer healthcare for those who want it. It has a pretty poor reputation, it’s true. A private health network subsists side-by-side with it for the prosperous. (I like that.) Yet, yet, the life expectancy of Mexicans is only 2.6 years lower than that of Americans, same as the difference between the US and the Netherlands (WHO 2015, in Wikipedia). Americans live longer than Mexicans in the same proportion as the Dutch live longer than Americans. So, either, it’s possible to get fairly similar results health-wise at much lower cost than do Americans, or health care does not matter all that much, as far as not dying is concerned. (Hate to twist the knife in the conservative wound but the Dutch also spend much less money than Americans on their health care.)

Incidentally, I am well aware that there are non-economic arguments against entrusting what is now 17% of the US GDP to the government, to any government. But, perhaps, conservatives should restrict themselves to combating govt. health care on political and principle grounds alone. (End of digression.)

Where To?

So, where am I going with this, you may fairly ask? I am expressing my doubts that Mexican society – and other less developed societies – will be forced to undergo the dislocating social change that would be required to improve much its (their) productivity, according to the old schemes. I have to stop here, more or less, but it seems to me that Mexico is more likely to improve first its societal-level productivity by having more women join the work force. The preservation of a high existing level of connectivity – with its baked-in child care and food services – would ease, and facilitate such mass social change, of course.

Nightcap

  1. Lessons from the East Asian economic miracle Byrne Hobart, Medium
  2. Confessions of an Islamic State fighter Alexander Clapp, 1843
  3. Russia’s vanishing summerfolk Christophe Trontin, LMD
  4. Too cool for Woodstock Rick Brownell, Medium

More tariffs on Vietnam would be great news for China

There is a clear consensus with regard to the fact that Vietnam has been one of the economic success stories of recent years.

The country has witnessed robust economic growth (GDP growth rate for 2018 was estimated at 7.15%, while the growth rate for 2019 is estimated at 6.6%) and has been successful in poverty reduction. Foreign Direct Investment (FDI) for the first five months of 2019 reached a four year high of over $16 billion (a year on year increase of over 69%).

If one were to look at a sectoral break up of the FDI, manufacturing and processing came right on top, receiving over $10 billion.

US appreciation for Vietnam’s economic achievements

US President Donald Trump, who recently imposed tariffs on steel imported from Vietnam, stated at the APEC CEO Summit in 2017 that:

Today, an opening Vietnamese economy is one of the fastest-growing economies on Earth. It has already increased more than 30 times over, and the Vietnamese students rank among the best students in the world.

In 2019, on the sidelines of his Summit with North Korean leader Kim Jong Un, the US President, while acknowledging Vietnam’s progress, stated that North Korea could emerge as another Vietnam if it denuclearized.

US Secretary of State Mike Pompeo had made a similar point while addressing a meeting of the US-Vietnamese business community in 2018.

Increasing FDI and factors which have contributed to it

It would be important to point out that FDI in Vietnam is also not restricted to any one particular region or city. While Hanoi (the Vietnamese capital), which drew well over $2.7 billion, and Bin Doung province in South Vietnam, are on top, North Vietnam too, is managing to draw significant investments. The shipping hub of Haiphong has witnessed significant economic growth since, after the imposition of US tariffs, a number of Chinese companies have shifted to the Shenzhen-Haiphong Economic and Trade Cooperation Zone.

Economic reforms (dubbed as Doi Moi) which began in 1986 have played a crucial role in Vietnam’s economic success. The main advantages which Vietnam has over its competitors are relatively low labor costs (though the country has witnessed a significant year on year growth in minimum wages between 2015 and 2019), increasing consumption as the result of a burgeoning middle class (currently 13% of its total population; it is estimated, by the World Bank, that in 2026 over one quarter of Vietnam’s population will be part of the middle class), and its geographical location.

Vietnam a beneficiary of the US-China Trade war and the CPTPP

Vietnam has benefited significantly from the US-China Trade war. A number of companies have shifted manufacturing operations from China to Vietnam, and others like Apple (which plans to shift anywhere between 15% and 30% of it’s iPhone production), Microsoft, Amazon, Sony, Nintendo, and Dell are likely to shift in a big way to Vietnam.

The Southeast Asian country is also gaining significantly by being part of the CPTPP. Exports to both Japan and Canada have risen significantly in the first quarter of 2019, if one were to look at the year on year figures.

US-Vietnam ties

In the past two decades ties between the US and Vietnam have improved significantly. The foundations were laid by Bill Clinton; during his first tenure, the Vietnam Foreign Ministry opened its office in Washington DC (1993), and the US State Department opened its office in Hanoi in the same year. Similarly, the US lifted its trade embargo on Vietnam in 1994. Vietnam also figured importantly in Obama’s ‘Pivot to Asia’ and was part of the Trans Pacific Partnership (TPP) that the US abandoned.

US President Donald Trump has given mixed signals on Vietnam. Trump has, though, referred to the geopolitical relevance of Vietnam, and it is for this reason that the US President articulated his vision for a free and open Indo-Pacific in Vietnam in 2017 (while speaking at the APEC CEO Summit at Da Nang).

In March 2018, U.S. Navy aircraft carrier USS Carl Vinson visited the port city of Da Nang for the first time since the end of the Vietnam war in 1975. Former Defence Secretary Jim Mattis visited Vietnam twice in 2018, and reiterated on both visits the increasing relevance of the Washington-Hanoi relationship.

The fact that the US President chose Hanoi for his 2nd summit with North Korean leader Kim Jong Un was significant not just in terms of symbolism, but also in sending a message that the Southeast Asian country was strategically relevant. During his visit in 2019, Trump of course praised Vietnam for its economic success, but a number of trade deals (Boeing inked a deal of over $12 billion to sell 100 planes to Vietnamese budget carrier, Viet Jet, for example) were also arranged.

Imposition of Trade Tariffs

As a result of trade wars, Vietnam’s exports to US have also witnessed a sudden rise. Exports for the period January-June 2019 rose 27.4% year on year. The US trade deficit with Vietnam for the first six months was estimated at $25.3 billion (in 2018, this was $40 billion).

US has recently imposed tariffs of 456% on certain steel products which were imported from Vietnam. According to the US Commerce Department, certain corrosion resistant steel products and cold-rolled steel which were supposed to be manufactured in Vietnam actually underwent only minor processing in the Southeast Asian country, but used substrate of Taiwanese and South Korean origin (duties on these South Korean and Taiwanese products had been imposed in 2015 and 2016 respectively).

Imposition of tariffs by the US is not likely to end here. There are strong indicators that the US could impose further tariffs on Vietnam, citing the reason that a number of Chinese goods are rebranded there to avoid tariffs (this is dubbed as transshipment). Trump had made some harsh remarks, including in an interview with Fox News:

Vietnam is almost the single worst — that’s much smaller than China, much — but it’s almost the single worst abuser of everybody.

It remains to be seen as to what impact the imposition of tariffs will have not just on Vietnam’s economy (the increase in bilateral trade and exports), but also on the bilateral relationship which has witnessed significant improvement due to the efforts of successive US Presidents. Vietnam’s growth and prosperity is also important from a strategic perspective, as it is one of the countries which has been strengthening defense ties with the US, Japan, and India. While Vietnam does have robust economic ties with China, it also has serious differences over the South China Sea (only recently, tensions between both countries had escalated when a Chinese survey ship and coastguard vessels had entered disputed waters near the Spratly Islands).

Conclusion

Vietnam provides a good lesson for many other countries. It has stuck to the basics, and so far has been very astute in balancing out economic relationships between China and other countries. Vietnam’s real test lies in how it deals with Trump’s unpredictability, and deals with the turbulence resulting out of Trump’s brash decisions. If the US President actually slaps more tariffs on Vietnam, not only will it have an adverse impact on bilateral ties and undo all the good work of previous US and Vietnamese administrations, but fissures between Hanoi and Washington will also have an adverse impact on efforts towards promoting a Free and Open Indo Pacific. On the other hand, Beijing, the biggest loser of the China-US trade war, would certainly not mind tensions between Washington and Hanoi (which has been a big beneficiary of the trade war).

Nightcap

  1. What it’s like to be black in Europe Christopher Kissane, Financial Times
  2. America’s other rebellious border Maxime Dagenais, Age of Revolutions
  3. Capitalism in America: Up, up, and away Deirdre McCloskey, Claremont Review of Books
  4. How Italy made me think about America Addison Del Mastro, American Conservative