One bonobo's view of the world...and stuff.

Thursday, August 16, 2007

Capitalism 101

A few words on the Mattel toy recall.

There seems to be a lot of criticism of Chineses safety standards. But is it entirely fair to lay the blame on Chinese subcontractors?

Here's how Capitalism works. Corporations are more or less obliged to constantly find ways of cutting their margins. This is how they maintain a compatitive market position, allowing them to stay in business and re-pay their investors. Those in favour of 'Free Marketeers', who are in favour of unbridled criticism, constantly rail against 'regulation' which imposes non-negotiable costs on companies. (eg John Redwood's call for de-facto tax cuts).

Regulation includes things like financial probity, workers' pay and conditions and product safety. These are the responsibility of national governments and are put into place in response to democratic agreement. In effect, the electorate says "We'd rather not have lead in children's toys, thank you." One way for companies to avoid the costs associated with local regulations is to shop around for laxer regimes - ie to source products from markets where labour is cheaper and less money is spent on product safety.

So...say you're a toy supplier placing subcontracts in a competitive market. Your priority is going to be the bottom line...isn't it? Because that's the impersonal law of The Market. The subcontractor offering the best deal is quite likely to be the one who's paying workers pennies and cutting corners on safety (and environmental impact...etc. etc. etc.).

We know this. Right?

So whose job is it to check whether subcontractors are meting our minimum standards? And whose job is it to ensure that companies supplying into our country do not place contracts on subcontractors whose business model relies on terms and conditions for their workers that we would deem unacceptable? At present, we recall poisonous toys. We don't recall garments made by sweated child labour.

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