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Originally Posted by smooth
My post was referring to the fact that capital can move trans-/multi-nationally whereas labor can not due to immigration/emmigration constraints.
This issue is further complicated by import/export regulations.
So what we have are powerful corporatins that can move production at will, yet they have powerful voices/influence in politics resulting in curtailed mobility of labor as well as consumers.
Where is the "invisible hand" in this context?
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Are you stating that to move production to a different location is free? There are setup costs, transportation costs, duties/tarriffs that you have mentioned already, lease costs, all of these things come with an explicit price.
The difference is that this new price bundle is
STILL CHEAPER than continuing to pay 1st world wages... There is no such thing as a free lunch.
And there are costs to moving your labour to another location (haven't we all moved for a new job at one point or another?) but your proposition that labour is fixed to one locale is flawed. People move, and some of them move internationally, for work. The social costs of leaving friends and family behind is steep, but economics teaches us that a rational person has a wage rate such that they would be willing to move. There is a price, for example, that I would be willing to go to Iraq and drive a delivery truck full of explosives. To say that "Everyone has a price" is jaded and not the point; I said a RATIONAL person has a price. People do not act rationally sometimes.
The invisible hand, you were wondering? Well, Adam Smith would probably say (and I hate to put words in his mouth) that the hand was quite busy in this regard:
The wages in the home country "Pushed" the capital into a 3rd world setting;
The Rent in the 3rd world setting "Pulled" production to set up in that location;
The Capital did not care where it went, and therefore being simultaneously pushed and pulled in the same direction, landed in 3rd world.
Oooooooh, I get turned on when I talk about invisible hands, land, labour and capital...
All together now: Economics is the coolest subject in the world!