A scenario was given to me. There is a couple who makes belts in a rural village. Chrissie, a businesswoman, approaches them to expand their business by taking it to the USA. Alex, a critic, presses that expanding the business would not be good for the local economy and that Chrissie should stay a while in the village to see for herself. I was asked to choose a side.
My response:
I think one must step into the belt maker's lives to truly understand how the husband and wife really contribute to the community. After this week's lesson, I think I would support Alex. This situation looks very similar to the Haiti case study in this week's lesson. The "beneficiary" or the producers (husband and wife) have very little decision-making power and benefits from expanding their business to the USA. Their lifestyle would not alter as much, and they will have to work for greater periods of time. Even if Chrissie manages to build a factory and hire the fellow villagers, they would not be paid more than a couple of dollars a day in order to make great profits. Right now, some villagers sell their crops in the produce market, some weave baskets, some sell handmade clothes, and some make belts. There is variety. If these same villagers are pulled in to work to make belts, market variety reduces. Also, the workers are not autonomous anymore. They cannot schedule their own day, split their profits into how they see fit, and change merchandise design. There is very little progress in this type of business. Also, it does very little to help the local economy. I am going to prove this with some basic economics. Suppose this village is in Bangladesh. The reserve requirement for Bangladesh is around 6%. The money multiplier is around 16. 67 (1/.06). If this village's market produces 5000 takas (Bangladeshi currency) a day, the most money the market can produce is about 83, 333 takas (16.67 * 5000 takas). This depends on the velocity of the money: how many times the money circulates in the market and how many exchanges are made. However, if the belts are exported to USA, the profits are received in dollars. There are no takas added to the market; there is less of the currency being exchanged and circulated, reducing the maximum amount of money the village can produce. It may help the individual workers, but it will not benefit the local economy as a whole. The workers are indirectly helping the businesswoman and USA's economy more than they are helping their own economy. If Chrissie wants to help the village, it is a better idea that she experiences the community and learns of their true needs. Since she is a smart businesswoman, she will immediately learn how vital their own individual markets are to the community. There is no need to expand the belt market. If she wants, she can buy a large amount of belts from the husband and wife herself and sell it in USA, which helps both her and the local village.
My response:
I think one must step into the belt maker's lives to truly understand how the husband and wife really contribute to the community. After this week's lesson, I think I would support Alex. This situation looks very similar to the Haiti case study in this week's lesson. The "beneficiary" or the producers (husband and wife) have very little decision-making power and benefits from expanding their business to the USA. Their lifestyle would not alter as much, and they will have to work for greater periods of time. Even if Chrissie manages to build a factory and hire the fellow villagers, they would not be paid more than a couple of dollars a day in order to make great profits. Right now, some villagers sell their crops in the produce market, some weave baskets, some sell handmade clothes, and some make belts. There is variety. If these same villagers are pulled in to work to make belts, market variety reduces. Also, the workers are not autonomous anymore. They cannot schedule their own day, split their profits into how they see fit, and change merchandise design. There is very little progress in this type of business. Also, it does very little to help the local economy. I am going to prove this with some basic economics. Suppose this village is in Bangladesh. The reserve requirement for Bangladesh is around 6%. The money multiplier is around 16. 67 (1/.06). If this village's market produces 5000 takas (Bangladeshi currency) a day, the most money the market can produce is about 83, 333 takas (16.67 * 5000 takas). This depends on the velocity of the money: how many times the money circulates in the market and how many exchanges are made. However, if the belts are exported to USA, the profits are received in dollars. There are no takas added to the market; there is less of the currency being exchanged and circulated, reducing the maximum amount of money the village can produce. It may help the individual workers, but it will not benefit the local economy as a whole. The workers are indirectly helping the businesswoman and USA's economy more than they are helping their own economy. If Chrissie wants to help the village, it is a better idea that she experiences the community and learns of their true needs. Since she is a smart businesswoman, she will immediately learn how vital their own individual markets are to the community. There is no need to expand the belt market. If she wants, she can buy a large amount of belts from the husband and wife herself and sell it in USA, which helps both her and the local village.
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