Planet Money - SUMMER SCHOOL 6: Trade & The Better Life

Episode Date: August 17, 2022

International trade is the web of cross-border relationships that binds economies together. Because of trade we have access to cheaper, higher-quality goods, and we get to benefit from other countries' cultures. Economics tells us trade makes society, overall on average, better off, but that doesn't mean everyone wins. Today, the good and bad of trade through the eyes of workers in developing economies who make the things sold around the world. We follow them as they navigate the ever-shifting international trade environment. |At this Summer School, phones ARE allowed during class... Check out this week's PM TikTok! | Listen to past seasons of Summer School here.Learn more about sponsor message choices: podcastchoices.com/adchoicesNPR Privacy Policy

This is Planet Money from NPR. Hello and welcome to Planet Money Summer School, the supply for your intellectual demand. I am Stacey Vanek-Smith. So far this season, we have learned about inflation, the jobs market, the business cycle, all things macroeconomic. But today, we are going super macro. We are macroing out because today we're looking not just at a country's whole economy, but how a country's whole economy interacts with other countries' whole economies. I am talking, of course, about trade. Trade is a very powerful economic force.

It has shaped our jobs, our lives, what we see on our store shelves in countless ways. Trade has created this economic web that binds us all together. Everybody on the planet, it links our fates. So here to parse this tangled web with us are two of my very favorite economists in the world, Sumaya Keynes and Chad Bowne. Hey, guys. Hi, Stacey. Hi, Stacey. Sumaya, let's start with you. So I am an economist. Currently, I'm the Britain economics editor at The Economist. And so I spend my time thinking about trade, productivity,

growth, which is a lot of nerdery. And that brings us to Chad Bowne, our other very special economist guest. Hello, Chad. So I'm a senior fellow at the Peterson Institute for International Economics in Washington, D.C., which is a think tank. I'm a trade economist. And so I do, you know, trade economics all the time. So trade is, at its essence, a relationship between countries. And in general, what countries are looking for from this relationship is something called gains from trade, which is just, you know, extra wealth or some other kind of advantage that countries can get by trading with each other. So Planet Money did a very deep dive into this issue about a decade ago

with the Planet Money t-shirt project. Planet Money actually had t-shirts made, but like from scratch, it followed them from the cotton fields of Mississippi, where the cotton for the shirts was grown, to Bangladesh and Colombia, where the shirts were sewn, then back in shipping containers to the U.S. where they were sold. And it used this project to explore globalization and trade and to take a look at why so much of what we buy is made overseas. And one of the big reasons for this

boils down to absolute advantage. Sumaya, Chad, would one of you mind defining absolute advantage? So absolute advantage is when you're just better at doing something than in another country. is when you're just better at doing something than in another country. Supposing you make t-shirts. Maybe you just got lower costs. You're just more efficient at producing t-shirts than another country. So that's absolute advantage. When it comes to making t-shirts, the U.S. just is really never going to have an absolute advantage because people here get paid too much.

Our wages are too high. Other countries can make basically the same exact t-shirt we could make here, but for a lot less money. They have a huge cost advantage over us. So Planet Money followed its t-shirts to the places that had these advantages. And it partnered with the company Jockey to make the shirts. There were two kinds of shirts that were made. There was the men's shirt, which was gray with kind of a round collar. And there was the woman's shirt, which was pink and more tailored and had a v-neck. Make of this what you will. But right after the break, we will travel to the place where the woman's T-shirt was made, Columbia.

Stick around after the break. It's a great story. We are back with our story from the Planet Money t-shirt project. In this piece, we follow the women's t-shirt to a factory in Colombia where it was sewn. Marianne McCune reported the story back in 2013. Here's Marianne. The women's t-shirt is made from exceptionally soft cotton knit fabric. It's a deep v-neck tailored down the sides. And when Planet Money's fans finally pull it on, the single mom who stitched on the neck has this message. Hi, lady, she says with a twinkle. I hope you wear this shirt with a lot of pleasure because we put a lot of sweat into it.

And we also put in a lot of love, of course. Lina Maria Tascón works in Colombia's fashion capital, Medellín, where she and the women she sews with are probably some of the fastest in the world. That's just one reason why Jockey, the company that helped us make our shirts, chose Colombia for this batch. Jockey's director of manufacturing, Bill Frazier, came with us on a two-day tour of all the factories that made our t-shirts. I think you're going to be amazed of the thought that really goes into making underwear. I think you're going to be amazed of the thought that really goes into making underwear. I think you're going to be overwhelmed by it. Yep. Here, eight women are stitching together the fronts,

backs, necks, and sleeves of our smooth pink cotton. This is your t-shirt. Isabel Rios, a manager here, picked up a little white strip that will line the back of the t-shirt's neck. It says Planet Money, Planet Money, Planet Money. What is Planet Money? Planet Money is the name of the t-shirt's neck. It says, Planet Money, Planet Money, Planet Money. What is Planet Money? Planet Money is the name of our show. Ah, okay, the show in the radio. Yes, exactly. Okay, okay. If you're a sewing machine operator, this is the kind of place you want to work.

Cristal pays for health insurance. There's a subsidized restaurant on campus. Ceiling fans keep things cool. Overtime is paid, but it's optional, not required. And at least once a shift, music blares over a loudspeaker to make everyone stand and stretch for a few minutes. Of course, this is still a minimum wage job, about $13 a day. And it's still tough, repetitive, manual labor. While we peered over her shoulder, Lina Maria Tascón, the single mom who said she put sweat and love into these shirts,

she was madly stitching on one slender neck after another. I don't think people really think that sewing operators are skilled. Bill Frazier, Jockey's Director of Manufacturing. But they're highly skilled with their hand movements, and that's where they gain their efficiency. He says he's been in so many factories, he can measure that efficiency just by listening to the length of the silence between seams. The workers in one factory, can they be twice as fast as the workers in another factory? Yes.

You've seen that? Yes. Yes. You've seen that? Yes. The day we visited, all eight women stayed from 6 a.m. to 7 p.m. in order to get the shirts done in time. It was good and dark by the time Norely Morales got home to the bare-bones apartment she shares with her mom and three-year-old daughter. Mariana crawled as fast as she could into her mom's lap to snuggle.

Morales says sure she regrets not staying in school long enough to get a job that pays more for less taxing work. She started sewing because she and her family needed money. Now she's kind of stuck. Hard to get a better job unless she goes to school. And with this schedule and a kid, there's no time for that. But then you remember that there are people worse off than you. She says, I'm not as bad off as some people. But there's a flip side to Morales' relative good fortune. Her job may be in jeopardy. There is a saying that is going to sound horrible. But our industry follows poverty.

Our industry follows poverty. Luis Restrepo is Morales' boss's boss's boss's boss, or something like that. He's the CEO of all the factories we visited here. Our industry is like on roller skates. First, it was Latin America, then it moved to China. Now China is becoming more expensive. It moved to Bangladesh or moved to Vietnam and it goes like this. Rolling toward the lowest paid workers. What that means is that the better off Colombia gets, the less sense it makes for global apparel companies to manufacture here. With the Colombian peso extraordinarily strong against the dollar,

the cost of labor here is many times what it costs in a place like Bangladesh. Colombia can no longer keep costs low enough. They have to offer something other than the lowest price, like speed or quality, or innovative and higher-end products. If you can't offer foreign companies something no one else can, making clothes for the global market will turn your hair gray. Because that breakup call, Restrepo says, where the client tells you he's found a cheaper option, it can come at any moment.

You have one phone call away, so that's not good. Partly because of increased competition from Asia over the past decade, Restrepo says he's had to cut his staff. He got it by 10%. Sometimes at the factory, while Lina Maria Tascón's hands are flying around the sewing machine, her head is far away. She'll put in earbuds and listen to romantic salsa to drown out her worries. That increasingly nasty pain in her shoulder,

the extra room she needs at home so her dad can move in, and here's a really bad one. There's this rumor making its way around the factory that after eight years of manufacturing here, Jackie is going to make that breakup call and pull out. People on her team are really stressed about it, she says. That rumor, that Jockey was leaving at the end of the year, we heard it elsewhere, too. So when I got back to the U.S. and had Jockey on the phone, it was the first thing I wanted to know.

There's this rumor going around that Jockey's pulling out of Colombia by the end of the year. Is that right? Actually, as close to being right as February, but yes. The gossip on the factory floor, it was true. Marion Smith, Jockey's sourcing guru, he was the one who decided to put a stop to orders from Cristal. The reason I was taking a deep sigh is because it was very painful for me. We both like each other a lot. They've got great principles. They have great capabilities. The thing is, Smith told us, Colombia was a great place to source from when he started out. But since then, wages continue to go up, costs continue to go up.

The difference between everyone else in the sourcing mix in the world is becoming bigger and bigger and bigger. And that's because the economy of Colombia is growing. Smith says when Jockey leaves Colombia next year, moves that production to four or five other countries, the company will be spending a lot less per t-shirt. He has a percent, 20 to 30 percent. 20 to 30 percent less. Yes. Imagine you're buying thousands and thousands of t-shirts and you can pay, say, two dollars a piece instead of three. That's a big deal. In order to be less dependent on the jockeys of the world, Cristal's CEO says he's been turning the company's

focus away from manufacturing for foreign companies toward producing its own successful clothing brands. We decided that we want to control our own destiny. They've already opened 160 of their own stores across Latin America, and they have plans for more. So while he's had to cut factory jobs, he says he's adding retail jobs. And that mirrors the path of Colombia's economy. Factory jobs are on the decline, but the service sector is growing. If Lina Maria Tascón does lose her job, it will be hard to find a place in that new economy. She dropped out of school at 13 and had a son. Sewing is what she knows. But that son? He's now in college studying graphic design.

Maybe by the time he graduates, there will be more jobs for designers at the factory. All right. Hello, class. We are back with our intrepid trade experts, Chad Bowne and Sumaya Keynes. Do you have any initial reactions to this leg of our t-shirts journey? I'm wondering kind of what is jumping around in your mind right now? I think what's jumping around in my mind is that international competition in t-shirts is really fierce right and you can have advantages and they can disappear relatively quickly but in this case I think that could be a good thing um there are

winners and losers as trade flows change if you're working in that particular factory and essentially you're out competed by one elsewhere then it may be tricky for you individually to find a better job. But the fact that wages are growing overall suggests that other good things are happening in the economy, right? The services sector is expanding, we've got a burgeoning graphic design sector, that's all exciting and just points to this idea that, okay, maybe in the medium term, Colombia will be making fewer t-shirts, but maybe they'll be doing more of other things that might be associated with high wages, high living standards, general thumbs up for that. But at the same time, because the Colombian economy seems to be doing so well and wages

are going up, they need to be offering more benefits to their workers to stay working at the factory. So they have to offer, you know, health care, which is great. They have to offer a subsidized restaurant to give their workers cheaper food. So all of these extra benefits. Stretching breaks, the stretching breaks. The stretching breaks where the music comes on. And all those things are great, but they add to costs. And so at the same time, they were finding it difficult to then compete with a place like Bangladesh where the companies aren't having to offer workers those same kind of benefits to get them to be able to make the T-shirts. Columbia doesn't have an absolute advantage in making T-shirts anymore because its wages have grown.

The line that stuck out to me was when they said, our industry follows poverty, which I think is right, but is also incomplete. And the sentence really should go on from there and say, but our industry also helps lift people out of poverty because all the places where the industry has been, whether it is Colombia or China or Vietnam, those are countries that are much better off today than they were before the industry came and helped to employ people and the wage gains accrued. And this brings us to our second concept in trade, comparative advantage.

So absolute advantage is, you know, who can make T-shirts the most efficiently for the least amount of money, things like that. But comparative advantage, Sumiya, Chad, would one of you mind jumping in to define comparative advantage in trade? Comparative advantage is slightly more complicated. It might be the case that you would make these t-shirts super, super cheaply. But the question is, what else could you be doing with your resources, right? You're a country, you could make t-shirts really well, what else could you be doing with your resources, right? You're a country, you could make t-shirts really well, but you can also make semiconductors or laptops really, really effectively. And actually, if you think about those two things, you might be relatively better at making the laptops than the t-shirts compared to a different country. And so if you're relatively better at making the laptops, then fine, shut down your t-shirt factory, make the laptops. The other country can make the t-shirts,

even if it's more expensive for them to do so, because they're so terrible at making the laptops. And then you will specialize and trade. And those countries overall will be better off. Their options have expanded because everyone's doing the best thing that collectively they're best at doing. So in the case of Columbia and t-shirts, let's say Columbia still has an absolute advantage when it comes to sewing some of the more complicated, intricate t-shirts with tailoring and v-necks like the Planet Money women's shirt was. The factory Marianne visited, after all, has some of the fastest, most skilled sewers in the world. And also a bunch of really fast machines that can crank out T-shirts in seconds for very little money.

So they may be able to produce these high-quality shirts at the lowest cost, at least for now. They have an absolute advantage. But Columbia's economy is clearly evolving. And so the factory that makes the T-shirts thinks, you know, we might be better off changing our business, becoming a clothing retailer, opening up stores, designing clothes, things that could ultimately be more profitable for us. And then, you know, they could get those clothes actually sewn, constructed in a country where, yeah, the workers might be a little less skilled, a little bit slower, but they will be able to make the clothes for a lot less money.

And then the Colombian factory can import those clothes and sell them for a lower price or at least get a higher profit margin. That is comparative advantage, right? I mean, comparative advantage is essentially a situation where everybody wins, right? I'm going to say that the countries both win from trade, but within countries, there are going to be both winners and losers tied to this idea of comparative advantage. So if there's somebody in my country, the country as a whole isn't going to be particularly good at making t-shirts. But there are people in my country that if we were just

living in isolation, they would be the ones making the t-shirts for my country. Well, we open up the trade. Now, all of a sudden, I can get cheaper t-shirts from somebody in a different country. The folks that are making t-shirts in my country, they're going to be worse off. So trade will make my country as a whole better off. But if I happen to be making and I'm working in the industry that now has to compete with those imports, they're not necessarily going to be made better off. And in an ideal world, of course, you know, a government would see that and would try to redistribute and make sure that any losers from trade didn't have such a bad time. In practice, sometimes that doesn't happen.

But also, as you pointed out, there are casualties with this evolution. And Lina Maria may be one of them, although her son could benefit. She is probably laid off, you know, as the industry moves out of Colombia. And she had a kid and needed more schooling. And so, you know, to transition into new and budding industries, that's typically what we see. We need other social services provided by governments, retraining programs to provide skills so they can move on, child care, daycare, schooling so that somebody else can help provide those skills to your children so you can free up the time necessary to be able to learn the skills you need for that next job as well. in the U.S. Almost all of those jobs moved overseas. And there were some retraining programs that were put in place, but they weren't very effective. And whole communities were just decimated across the country because these industries left. But at the same time, those

industries migrated to places where this business, these jobs, this money had a really transformative effect. And we're going to look at some of those positive transformative effects right after the break. Okay, now we're going to hear a story that Caitlin Kenny and Zoe Chase reported back in 2013. It was part of Planet Money's T-shirt project. And Caitlin and Zoe traveled to Bangladesh, where the Planet Money men's T-shirt was being made. Here's Caitlin. Bangladesh has gone through some huge changes in the last 30 years.

The clothing industry there has just exploded. And it's changing the lives of the people who live there. We bring you the story of those changes, as experienced by two sisters who made our shirt, Shumi and Minu. Shumi and Minu work here at Deluxe Fashions Limited in Chittagong, Bangladesh. It's this big, bright room. There are hundreds of women in here. Some men, too, sitting at sewing machines. Shumi, the younger of the two sisters, her job was to sew the sleeve. The older sister, Minu, she worked on all parts of the T-shirt. Side seam?

The side seam. She attached the front and the back of the T-shirt together. These sisters sit at these sewing machines six days a week, about 10 hours a day. They make 6,000 taka a month. That's about $80 U.S. And that's in the middle of the pay scale here in Bangladesh. The minimum wage in Bangladesh right now is just $39 a month. And that is the lowest in the world for this type of work. But right now, $80 each a month, Baisi's sister's a small room, a short bus ride away from the factory. So Minu is the older one. She is in her mid-20s. She is cynical. She's kind of a fast talker. She likes to chew tobacco wrapped in beetle leaf. It's starting to stain her lips a little bit red.

And she has this seven-year-old daughter who lives back in the village with her grandparents. She has this 7-year-old daughter who lives back in the village with her grandparents. Shumi, the younger sister, is 19. And where Minu is reserved, Shumi is bubbly. Where Minu's serious, Shumi is always smiling. She loves her makeup, she spends a lot of time doing her hair, and it's really hard for her to get through any story without laughing. Today at work, she says she and her friends were throwing clothes at each other,

and it was so funny. Shumi and Minu look out for each other in the city. They pool their money to split the rent and bills, they share the household chores, and they share this tiny room with Minu's husband. Minu's husband works, but he's a day laborer, and his income, when it happens, is not reliable. It's basically up to her and Shumi to cover the rent and the food. Tonight, it's Minu's turn to make dinner. Ooh, there's a bunch of vegetables bubbling up.

And what is this? It's vegetable curry. Tonight's dinner, tomorrow's breakfast and lunch. One dish, three meals in a row for both of them. To cook, they share these two little gas burners outside their room with their neighbors. This is the world behind our T-shirts, behind lots of our clothes. A tiny concrete room shared by three people, a life that by Western standards looks pretty wretched. But four million people in Bangladesh are essentially making the same choice that Shumi and Minu made, to move to the cities, to work long hours for very little money, to work in the garment industry.

The village where they grew up is about two hours away. To get here, the sisters take a bus to a motorized rickshaw. And then they walk through the rice paddies home. When we get there, lunch is cooking. through the rice paddies home. When we get there, lunch is cooking. In the village where Shumi and Minu grew up, their mom cooks in the back room. And the difference between her life and her daughter's lives is very clear. No gas burners here. It's a fire pit made from mud. There are holes underneath to stick branches into, and the room fills with smoke when she cooks. You're the father of Shumi and Minu.

Their father's name is Abdul Jabbar, and he used to be the only one in the family making any money. And he didn't make enough. The consequences were horrible. Three of his daughters died before they were seven. They were eating dirt, they got sick, and he couldn't afford to take them to the doctor. Still remember them at times and feel bad because it's my daughters, my kids. It feels emptiness in our family. What Shumi remembers about this time is that there wasn't enough to eat. If I ask you to close your eyes and picture what it was like when you were growing up, what do you see? What do you feel?

Can I eat? Oh, yeah. You see? I'm sorry. I didn't mean to make you cry. Now, things have really changed in this family. Shumi and Minu send money back to the village, and you can see how that's changed things right here in the kitchen. The stove is the same as what they had growing up,

but what's inside the pot is different. What is it? Murgi. Murgi. It's chicken. Back before the sisters made money, this family rarely ate meat. Now, the sisters' holiday bonuses pay for all the chicken and fish they want. The money they send home keeps their younger brother in school.

It keeps Minu's daughter in school. For millions of young women like Shumi and Meenu, making t-shirts, like the Planet Money t-shirt, have transformed their lives. But there's this other thing that happens when millions of young women start to earn their own money. There's a cultural shift. And that's happening here in Bangladesh. You can see this shift just in the couple years difference between Shumi and Meenu. For Meenu, the older sister, she's had very few choices of her own to make. When Meenu became a teenager, her father began to worry about getting her married. In Bangladesh, it's a burden to have girls not get married.

I have to spend money on their food, lodging. So it becomes a big burden. Marrying Minoo off meant she became her husband's burden, not her father's. And Minoo's family thought the man they chose for their daughter had money. He paid for the wedding. That was a big relief. But Minoo's parents were wrong. The man they chose didn't have much money. And that's why Minoo went to work in the garment factories. Minoo is unhappy in her marriage. Minoo's husband is pretty jealous. Minoo had no choice. She had to marry a man chosen by her parents. But by the time her younger sister Shumi was marrying age, the rules were changing in Bangladesh. The fact that Shumi's young and unmarried means she gets to be selfish.

Meenu has to send all her money home for her daughter's school. Shumi sends some money back to her parents, but she also has her own bank account. And she's saving for something special. Something that shows what a different world she's living in compared to the one her sister grew up in. I just save the money if I need it for my marriage, and then I use the money for my marriage. For your marriage? Yes.

So I got to ask, do you have a groom in mind? Yes? Yes. What's his name? Shumi is blushing and laughing, and she won't tell me his name. Back in the village, her father would never let her talk to a boy who wasn't a relative. But here in the city, she and her boyfriend take rickshaw rides together. He buys her jewelry. They hold hands. He tells her he loves her. Shumi has the paycheck. Shumi gets to make the choice. Her father isn't in charge anymore. For Minu, these battles have already been lost. But here in the city, in the small room that she shares with Shumi, there are some things that make Minu happy. Ask Minu, what's your favorite thing in this room? It's the tiny TV in the corner.

Too good still now because I bought this TV with my salary and when I was free, I just watching TV and I feel too good. I feel too good when I watch it, she says. This is the world behind our t-shirt. Two sisters, tiny room, watching TV they bought with their own money. That was Zoe Chase and Caitlin Kenney back in 2013. And I am here in 2022 with our two economist guides, Chad Bowne and Sumaya Keynes. Ed Bowne and Sumia Keynes. So guys, I feel like this is a pretty extraordinary portrait of the very positive sides of trade and gains from trade. And just what an amazing and far reaching impact these gains have in the lives of these two women. What are your thoughts? You know, trade isn't the miracle cure, right? It's not like having this t-shirt production

in Bangladesh. Shumi has been completely listed out of poverty, right? It's still, it's still, you know, she's, she's a lot poorer than an average worker in, say, the US. But relative to what she might have been doing otherwise, she's got more freedom. It's interesting to me in the story, too, how many things are affected by the poverty in the story, including, you know, marriages and life and death and just how much difference this one job makes. To see that transformation is very powerful. You know, she's like, the TV, it's almost too good. Like, they have a little extra. They have a TV. And to the point on choices, they have additional money that they can send home,

which it sounds like their family is able to use to keep their younger, youngest brother in school longer than he might be able to stay before he has to get a job. And the more education that you get, probably the better, higher quality job you're going to be able to get. Okay, well, this has gone really fast and I can't believe it, but we are almost to the end of class. And it is time to go over concepts and vocabulary. We've got absolute advantage. That is a country's ability to produce a good or service most efficiently, like a higher quality or for the very least amount of money. There's also comparative advantage.

That is a little more complicated. It's a country's ability to make a good or service most efficiently, for the lowest cost or the highest quality, while taking into account the best or most efficient use of all of that country's resources. And all of this, of course, is meant to achieve, final vocab word, gains from trade. That is money or other advantages that come when countries trade with each other. Now, before I let you go, there is something that I've been really curious about for kind of a long time. Samia, I've known you for years and I've never asked you about this, but I have to ask you

because our summer school season, it all started with John Maynard Keynes, the economist who is basically the father of macroeconomics. I've never asked you this, but are you, Simeo Keynes, like John Maynard? I am indeed. Yes. What? Yeah. Yeah. He's my great, great uncle. He died in 1946. So I'm not going to lie, the bond between the two of us is a weak one. It's tempting to see me as the vessel of him and it would be very unhealthy for everyone. You know, Einstein's relatives are probably like, space-time continuum, like, I don't believe in it. Or, you know, maybe

they're into mysticism or time travel or something. Yeah, I mean, I think Einstein's relatives are probably clever enough not to go into physics. So I fell down on that one. But, you know, it's too late now. Well, Sumiha, I, for one, am very glad that you went into economics. And I happen to know that I'm not alone. But before I let you guys go, I did want to ask if either of you guys have a song for our Planet Money Econ Songs of the Summer playlist, anything inspired by trade or any of the topics we discussed. So I thought about this question in a different way, which is if we didn't have international trade, what music would I not have access to as an American, right? Oh, I love that. Yes. And so having teenage daughters at the moment, I wouldn't be familiar with K-pop, for example.

Right, BTS. Let alone BTS, Just at the White House. Is there a K-pop song that you especially love? Well, we've been listening to a lot of Blackpink lately. Sumiya, Chad, this has been such a joy to see your faces and to talk trade again. Thank you. Thanks so much for having us. Planet Money Summer School is produced by Audrey Dilling, with help on this episode from Emma Peasley and Greg Morton.

It is edited by Alex Goldmark, engineering on this episode by Gilly Moon. Our project manager is Devin Meller. I'm Stacey Vanek-Smith. Planet Money is a production of NPR. Thanks for listening. And a special thanks to our funder, the Alfred P. Sloan Foundation, for helping to support this podcast.