When you get involved in trying to help your hometown football team, in my case the Hamilton Tiger-Cats of the CFL, you get many questions.
From gratitude for helping keep the team in business, to questions about when will the team win its next championship. But the ones I never anticipated were questions about world trade and modern business economics, and: why aren’t the hats the team sells made in the town the team plays in, ie made in Hamilton, Ontario, Canada?
My initial reaction was you gotta be kidding me - doesn’t everyone know why people in China or Bangladesh need those low wage jobs more than we do? But then the penny dropped - in a complex modern society we all specialize. Some of us learn more about world trade than others, and some learn more about html5 Internet programming. That doesn’t make one of us better or smarter than the other, just more knowledgeable about some things while others have greater expertise in other things.
Which is similar to a trade economics concept called “comparative advantage” but please look to the experts for a better explanation than I am able to provide here. http://en.wikipedia.org/wiki/Comparative_advantage
My ancestors used to make cotton textiles in Hamilton back in the first half of the last century. Today the addresses of their cotton textile mills are condos and shopping malls and the cotton textiles are made in Mexico and India. Wondering whatever happened to my great grandparents’ factory I have been forced to learn a thing or two about global trade, and here’s why most of the Tiger-Cats merchandise is made in lower cost locations:
The obvious answer is that a factory worker earns less in China. But that misses the point. The point is Canadians earn more. The better question is why is the work of Canadians worth more to the world than the same amount of effort by a hard working factory worker in Bangladesh or China?
The answer is not that the Canadians do the work better - the answer is, on average, Canadians do more valuable work. For example the Ticats’ sister company MRX, www.mrx.ca, employs a couple of dozen software engineers, architects, and customer service reps. They have very high skilled jobs creating websites that educate and entertain millions of Canadians and Internet users around the world. The websites built and maintained by MRX are accessible via the latest smartphones. While none of those smartphones are made in North America the bulk of the value in those phones was created and stays in North America.
Blackberry or Apple will sell you a smart phone for a few hundred dollars. Yet the cost of manufacturing that smart phone is only a few dozen dollars. The reason for the difference is most of the cost of that smart phone is in the very high value (and well paid jobs) researching and designing those technologies. When you buy an Apple Iphone the bulk of the money you pay goes to Silicon Valley California, not Taiwan or China. Which is one of the reasons why California has an enviably high-standard of living and can afford world class universities of the standard of Stanford University. Where, on an unrelated note, Ticat #95, Brian Bulcke played his college football. ;-)
Coming back to Tiger-Cat haberdashery - the worker who sews a Ticat hat, just sews one hat for one Canadian consumer. Most of the cost (ie the value) in creating that hat is in the design and marketing of the hat, ie most of the value of creating the hat is produced and stays in Hamilton. Only the part of the hat that the Chinese factory can do better than we can do (the sewing) is done in China.
So next time you put on your Ticat jersey or hat, or toss your CFL football in your backyard, take pride in the fact that most of the money you invested in your hat, jersey or football stays right here in Hamilton *and* take pride in the fact that you’ve also done your bit to help a developing world worker feed her family, or educate his kids.
And while you ponder this, be grateful you live in an economy that produces jetliners, advanced communications technologies, and sophisticated Internet solutions, and does not rely on low-paid jobs weaving cotton textiles or sewing hats for our standard of living.