Posted on 01/22/2010 6:34:50 PM PST by sickoflibs
Like many football fans around the country, I recently tuned into a heavily promoted 60 Minutes segment on the uncanny ability of tiny American Samoa to produce a steady stream of NFL players. Although it was certainly interesting to learn how Pacific island warrior culture translated seamlessly into the disciplines of American football, and how the island's players adapted to the hard-scrabble terrain and poorly funded athletic fields, the most interesting aspect of the piece concerned economics rather than sports.
In passing, the narrator mentioned that American Samoa had recently experienced major setbacks, both natural and man-made. Earthquakes and tsunamis had left scores dead and inflicted major damage on the islands' infrastructure. More ominously, one of the two major tuna canneries, which together accounted for up to half of the islands' private sector jobs,[i] had closed. If the second cannery closes, as 60 Minutes mentioned is a distinct possibility, American Samoa will become completely dependent on Federal support. Whether the reporters considered the subject off-target for their piece or simply could not connect the dots, the pending economic disaster was left largely unexamined. However, the Samoan situation offers a very clear lesson for the rest of America about how government policies can devastate an economy, and how the road to hell is paved with good intentions.
For generations, American Samoa offered strong advantages for tuna canners. The close proximity to vast Pacific tuna schools, the islands' good port facilities, political association with the United States, and an abundance of relatively inexpensive labor (by American standards) enticed StarKist and Chicken of the Sea to locate their primary canning facilities in American Samoa. Although the workers were paid, in recent years, wages that were below the U.S. minimum, given the low taxes and living costs, these wages were enough to offer the average worker a standard of living that was superior to the denizens of other islands in that area of the Pacific.[ii]
But then, in 2007, Washington came to the "rescue." As part of its efforts to provide a "living wage" for all Americans, Congress passed a law to step up the minimum wage to $7.25 per hour across all U.S. states and territories by 2009.[iii] Understanding that such a law would devastate American Samoa by raising canning costs past the point where the companies could maintain profitability, the non-voting Samoan member of the U.S. House of Representatives convinced Congress to allow an exemption for the islands. However, Republicans raised allegations that Speaker of the House Nancy Pelosi, in whose district both Chicken of the Sea and StarKist had corporate offices, had caved to pressure from big donors and was allowing the continued "exploitation" of Samoan workers. Facing a sticky political situation, the exemption was removed.
The Samoan representative desperately sought to fend off what he was sure would be an economic calamity. He asked the Department of Labor to issue a report examining the potential consequences of the law upon the islands' economy. The report explained that "nearly 80 percent of workers covered by the FLSA earned under $7.25 per hour. By comparison, if the U.S. minimum wage were increased to the level of the 75th percentile of hourly-paid U.S. workers, it would be raised to $16.50 per hour." Therefore, the study continued, "there is concern that [the tuna canneries] will be closed prior to the escalation of the minimum wage ... and that production will be shifted to facilities outside the U.S." Ultimately, the Department of Labor concluded that "closure of the tuna canneries will cause a total loss of 8,118 jobs - 45.6 percent of total employment." (emphasis mine)[iv]
Despite this dire forecast, the law went through. Two years later, the results could not be clearer: Chicken of the Sea closed its cannery and moved its production to a largely automated plant in Georgia,[iv] while StarKist has reduced its workforce and is threatening to leave as well.[v]
If that were to occur, which seems likely, American Samoa would be left with no functioning industry. Although many of the islanders have the size and athletic ability to be drafted into the NFL, clearly football will never serve as the backbone of their economy. By imposing an artificially high minimum wage on American Samoa, without taking into account actual economic conditions on the islands, Washington essentially decided that it was better to have no one working there than have thousands of people working for wages that the politicians felt were substandard.
Meanwhile, just as the minimum wage is destroying jobs in American Samoa, it is destroying jobs here on the mainland. Of course the numbers are fewer because the relative minimum is lower, but the principle is the same. Rather than causing wages to rise (which only do so as a function of increased worker productivity), minimum wage laws simply set the minimal level of productivity a worker must contribute to legally be allowed to work. In the case of American Samoa, tuna canners simply could not deliver $7.25 cents per hour of productivity, so their jobs were eliminated. Rather than being employed at $3.26 per hour (the level prior to the minimum wage hike), they are now unemployed at $7.25 per hour. Which do you think is better?
Among the unintended consequences of congressional "benevolence" are rapidly rising consumer prices, due to the higher shipping costs now necessary to bring consumer goods to the islands. Before the minimum wage hikes destroyed most of the canning jobs, lots of canned tuna were shipped from American Samoa to the U.S. (over 50% of the canned tuna in American markets came from American Samoa). One benefit of all the shipping traffic was a low cost of imports, as ships were coming to the islands anyway to pick up the tuna. However, with fewer ships coming to Samoa to pick up tuna, goods are now much more expensive to import. That is because the round trip cost of the journey must now be factored into import prices, as ships bringing in those goods now leave tuna-free. As a result, consumer prices rose from a 2006 annualized rate of 3%[v] to roughly 20% by 2008.[vi] So, not only is unemployment wide-spread, but the cost of living has risen sharply as well - a double whammy.
This just serves to highlight, once again, how inflexible central planning is compared to free markets. From housing to banking to money itself, the politicians would rather mandate prices that they deem acceptable than listen to the innumerable individual decisions that set market prices. Though not always as transparent as with the Samoan case, the result is the same, every time: economic dislocation, higher unemployment, the boom-bust cycle, and a lower standard of living.
On that note, I must take a step back and qualify some of the remarks I made in last week's commentary "Poland's Economy Is No Joke." Motivated by the Polish Finance Minister's terrific pro-market opinion piece in the Financial Times, the generally favorable economic statistics coming out of the country, and the impressions I received during my trip to that country a few months ago, I attempted to highlight how free-market reforms can contribute to economic success. Although in my research I did consult a few wise sources (and even the Polish embassy), based on the e-mails that I have subsequently received from readers in Poland, it appears that my portrait of the country's current administration could have been more balanced.
In particular, my descriptions of the current tax system in Poland did not account for their onerous social security and value-added taxes. In addition, rather than boasting a pro-business agenda that encourages entrepreneurship, as I had argued, Polish citizens have pointed out to me that the labor laws in Poland are still far more restrictive than those of Western Europe (a pretty stodgy place itself). I also appeared to have given the government a pass for the corrupt manner in which the state's industries were privatized following the fall of communism.
While I did claim that Poland "has continued the process of transforming [itself] into a laissez-faire paradise," I did not mean to imply that the metamorphosis was even nearly complete. For the record, Poland still has a very long way to go. However, if their leaders can talk the talk, there is always hope they can walk the walk. Then again, politicians always have trouble with this, no matter what language they speak.
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If you think there is a Santa Claus who is going to get elected in Washington and cut a few taxes and spend a few trillion and jump start the economy, and get our lost money back, this list is not for you.
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Is anyone curious as why the Samoians are so large?
I once managed Mitchel Hall Service Club at Lackland AFB. I remember a Samoan once got drunk and literally punched a hold in the wall.
He didn’t cause any other trouble and when the Air Police came to arrest him, he simply said he didn’t know what happened.
He was a huge person. Actually seemed gentle but clearly was capable of violence.
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I suppose they could escape the FSLA by declaring independence. There would probably be an import tariff on their tuna if they did though.
Somoa can survive tsunamis, because the damage is only temporary, but this toxic Federal Gov't meddling will last forever. Or until economic conservatives gain control of Congress.
I feel very sorry for the Samoans. They will likely migrate here in droves.
Rather than being employed at $3.26 per hour (the level prior to the minimum wage hike), they are now unemployed at $7.25 per hour. Which do you think is better?
That question should be put to all congresscritters who voted to revoke the exemption!
They eat a lot of Spam?
On a lesser note, the NFL’s football development program will also be counter-productive. The stated reason that the Samoans excel at the game is because of their warrior culture & work ethic. Youth football will compete with the work ethic part, not reinforce it.
Anthropologists theorize that the reason why Somoans are large is due to Darwinian pressure; reaching there by boat required a fantastically long voyage into unknown waters.
The theory is that the only ones who did not starve to death during such voyages were those who had could store lots of bodyfat and started out the voyage in such a condition.
I’d guess they eat a heck of a lot of tuna.
What did they do for work before the tuna canneries set up shop?
Samoans aren’t large. They are HUGE. LAPD least favorite call: Samoan Domestic Violence. 6’6,” 375 lbs. ... and the men are even bigger.
Is anyone curious as why the Samoians are so large?
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Same reason lots of Native Americans get huge. Eating white man’s food and junk food and too much carbohydrates. Plus they (Pacific Islanders) were always chubby but are now gross
If you want to eat whole grains you will do OK but not by eating numerous plates of poi and fry bread and other denatured craps that these so called indigenous peoples love to chug down
A local vato in Fontana, CA, decide to rob a local beer joint in Fontana, Cali.
So our not too bright lad goes into the place with a .22 caliber revolver and does the old 'stick'em up routine'.
The Samoans, ever gently tell him 'hey we work hard for our money... let us buy you a beer then be on your way".
This candidate for the Darwin Award then starts shooting, wounding a couple of the fellows....
Where upon, the Samoans charged him .... for years one could see the blood trails where the Pendajo tried to climb under the pool table to escape.
It took the Paramedics a couple of hours to convince the Samoans to get their gunshot wounds treated....
Finally, a officer said, "it will break your mother's heart when I have to call her to tell her that her son died, needlessly."
They are very respectful of the mother figure.
Nancy Pelosi and her husband have huge financial interests in American Samoa and not only did she make sure that the minimum wage increases would NOT apply to the workers there but she even added a cool $30 million to the margin of the so-called “stimulus” bill to stimulate hers and her husband’s businesses there.
I think there may be a relation to some Japanese. I used to work at a Summer retreat which every year would have a group of maybe 30 Japanese students who would work for around a month or so as part of their schooling.
Most of them were small and always a couple of tiny but pretty girls, tho there always seemed to be a couple of six footers too. It seemed like just about every Summer there would be one Japanese student who looked like a Sumo wrestler. Now that I think about it, they sort of looked like Samoans in their features.
Another thing was the pretty girls tended to be the really petite ones. The larger girls had coarse features. Clearly Japan is a mixture of different Oriental groups.
I recall one guy whose name was Konda. I use to kid him and say Konda is as big as a Honda. One day he told me that Konda and Honda were actually the same name.
"Dr. Brace said this interpretation also explains why the facial features of the Japanese ruling class are so often unlike those of typical modern Japanese. The Ainu-related samurai achieved such power and prestige in medieval Japan that they intermarried with royality and nobility, passing on Jomon-Ainu blood in the upper classes, while other Japanese were primarily descended from the Yoyoi." The reactions of Japanese scientists have been muted so. One Japanese anthropologist did say to Brace," I hope you are wrong."
so why are they that way?
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