Saturday, February 16, 2008

When Industries Quiver

What happens when an important component of an economy shivers? What happens to the people that "the economy" supports and produces when there is great uncertainty? (image from Extrel) The pharmaceutical manufacturing industry in Puerto Rico is experiencing these quivers now. Puerto Rico pursuing biologic bucks, from December 2007.

I recently attended the Interphex Trade Show (trade shows are interesting events, with people from various backgrounds and with various agendas all in one place, but this is a topic for another time) in San Juan (emitting even mo
re carbon for the trip there and back). It was an interesting few days, with some serious standing around time with coworkers and occasional bursts of enthusiasm speaking with customers, students, and other vendors. In any case, conversations more than a few times turned toward the recent announcements by some of the larger pharmaceutical manufacturers about downsizing, or reallocating resources. Depending upon what you read, the net job impact may not be large, in either the positive of the negative direction, but the perception of the people I spoke with was that things were moving in a negative direction. Perhaps they were just pessimists?

What are the risks that states and countries face when attempting to lure corporate investment? Can the good times last if the incentives given to the industries are too generous and the infrastructure needed to support them is too expensive? There are jobs created, and wealth is distributed to the local communities through the spending of the laborers, but as I am learning in the political economics portion of class at BGI, the owner
s of the means of production (managers & shareholders) are extracting the greatest amount of wealth from the system, that may or may not be reinvested locally.

There is an inherent conflict between the capitalists and the workers as illustrated in the profit rate equation (see below). Taken at face value, the capitalist is driven to reduce costs, of which wages (w) is one component.
In addition, the owners of the means of production are driven to reduce material and input costs (Pm) and the price of capital goods (Pc). If they can find a place that will accommodate their needs from a cost perspective, what's to prevent them from moving to the next state, country, or territory that offers an even lower price structure? Profit rate equation taken from Understanding Capitalism

If it is all about the numbers, where does social responsibility fit into this equation? w? Is that it?

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