Globalizing markets and salaries

Photographs taken in Caracas back when black and white was the only game in town show us how the population usually wore coats and clothing adequate for temperate climates. This should already have been history since the world by all accounts was already heading towards global warming.

Something must have happened to explain why a famous Spanish store, located in an equally as famous shopping center in our tropical capital offers and actually sells winter clothing – not autumn – winter clothing.

As a result of a comment I made to one of my partners to this effect, he waved his newly issued and stamp free Spanish passport in my face and argued that this had nothing to do with climatic evolution but rather with the new realities imposed by a globalized world. As you understand, my partner belongs to that group of Venezuelans that has instantly acquired Spanish citizenship as a result of Spain’s incorporation into the European Common Market.

As stated by my partner, his fellow patriots are numerous in Venezuela and also represent an important purchase capacity. In this sense, the above mentioned store was only servicing a domestic market that had been globalized. I must have put on a surprised look since he then asked my who I though I was to question the right of Spaniards in Venezuela to have access to the same goods and services as do Spaniards in Spain.

It was never my intention to question my partner’s rights, and I told him so, ratifying my profound admiration for the globalized service offered by Spanish chain stores. Unfortunately, it was too little, too late. He continued to expand on his arguments in a slightly agitated manner - sort of confirming the origin of his genes.

“It is not fair that I, as a globalized Spaniard, do not have automatic access to the same financial services that my co-patriots have simply due to the fact that they live in Spain and I do not.” I immediately understood where he was coming from, and wishing to conserve our partnership, I joined in, throwing more coal into the fire.

I maintained the thesis that all banks of Spanish origin with offices in Venezuela should offer all Neo-Spaniards resident in the country, mortgages with 30 year maturities at 6% annual interest rates (or whatever the advantageous conditions in Spain currently are). I finished off my spiel with “If Spanish banks can bring to Venezuela something as Spanish as the piglets and lotteries, they should also have to bring their cheap loans with them as well”. Happily, this finished off the conversation. 

Afterwards I continued to think about the relationship between the domestic markets and the globalized markets. Some unexplored possibilities seem interesting enough for further analysis.

According to the tenets of commercial integration, the differences in salary levels from one country to the next are in principle only temporary. Supposedly, the resulting economic growth should make these differences disappear. Without a doubt, however, these differences in salaries are initially an important tool with which developing nations can compete. If not so, it would have been extremely difficult to sell market opening.

In recent months we have been surprised by certain arguments put forth to the World Trade Organization by some organized trade unions in developed countries. There is increasing pressure in favor of protectionist measures designed to compensate for unjust competition which, according to these organizations, comes from developing nations with low salary bases. This does not bode well for the latter as they are threatened with renewed commercial restrictions.

Simultaneously, we have also seen how the offer of professional services worldwide is increasingly concentrated in the hands of fewer firms. As a result, our lawyers, accountants, publicists and other professionals must commit more and more of their income towards the payment of franchise fees exacted by this modern day privateering. This trend is definitely changing the traditional scope of non-tradable services, and I am not at all sure this is favorable for our country, or for any developing nation for that matter.

While trying to develop a way of defending ourselves from this trend, it occurs to me that one way of returning the ball can be found in the following questions: If it is possible to refer to the possibility of globalized domestic markets, could we then also be thinking about globalized domestic labor conditions? And if labor unions in developed nations can use differences in salaries to negotiate protection for their tradable goods, could we not apply the same concept to our non-tradable services?

In that respect, a starting point would be to analyze the possibility of requiring international firms that operate locally in the service sector, accounting firms for example, to remunerate their local staff with salaries equivalent to those being paid in their countries of origin.

If what is equal is fair for them, then what is equal should not be unfair for us.