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34: The Exportation of Machinery

It was a recent development at the time this book was written for governments to prohibit skilled workmen and machinery from leaving the country. The two are essentially the same: it prevents a factor of production (labor or capital) from seeking a market in which it is most profitable.

The reason for this, quite simply, is fear that foreigners might benefit from having skills and equipment that would give them a competitive advantage over domestic producers. Meanwhile the incentive for the workers and manufacturers to locate overseas is the same as that which would cause them to relocate within a country: a better location in which their work would be more profitable due to geographic, economic, or political advantages.

(EN: Much of the "problem" of foreign competition seems rather silly when one considers that the divisions among nations are arbitrary lines drawn upon a map. Moving from one country to another is essentially no different than moving from one town to another within the same nation.)

Babbage's first argument is that the factors of production seek a profitable location. In that sense, machinery is a substitute for expensive labor, and is only of value in locations where workmen are scarce. The reason a task is performed manually in a foreign land is that labor is cheaper than machinery, and particularly for remote and impoverished areas of the world, an analysis of costs would clearly demonstrate that machinery is not profitable compared to labor. If it were, those nations would industrialize on their own.

(EN: One of the best examples I found of this is the gravel-makers of certain African nations, who use hammers to pound stones into fine gravel. A machine exists to do this quite easily, but the cost of labor in those locations is so low that it's far cheaper to hire an army of men to chip stones by hand than to import a machine to do the work.)

He also finds the notion that having the exact same equipment would enable a foreign producer to underprice local producers: if it is the same, then its efficiently will be equal - meaning there is no advantage to the cost of production, and the cost of transportation is added to the price of imports and include an additional measure for the risk involved in transportation. He concedes that it might be harmful in the foreign market, as a local production facility would eliminate the cost of transporting finished goods routinely, and the profits of the operation would then be exported to a foreign land.

It's noted with some irony that those who disfavor the exportation of machinery to foreign markets also disfavor the establishment of a foreign-owned factory at home. It stands to reason that if one is indeed harmful, its opposite would be helpful. This merely shows the irrational and emotional nature of these claims.

He also mentions that other factors are necessary for successful manufacturing. There must be workers skilled in operating, repairing, and maintaining machine tools - and if they existed, there would be little need to import equipment. There must be a logistical infrastructure in place to support the transportation of materials to and from the location of manufacturing, which is also sorely lacking in many impoverished locations. And there must be a technical infrastructure in place to supply fuel and parts for a machine, which is also missing in many locations.

Another loose note is a written law has little potency unless it is effectively enforced. There never has been a law that prevented smuggling, which is a profession created by such laws. The cost of effective enforcement would be a drain upon the domestic economy, greater than any alleged losses due to competition in the marketplace.

A foreign land that lacks the capability to develop its own manufacturing technology will also be forever a step behind one that does. They may adopt the use of some artifact and even learn to use it properly - but they cannot make any improvements upon it, nor have they shown the ability to keep pace with better replacements. So while it would do much to improve productivity when introduced, it can only degrade while domestic manufacturers constant find ways to improve their machines or replace them with better ones. Witness the textile mills of India, established a century ago by British companies, that are still using the same century-old equipment that, after decades of being patched and jury rigged, are far less efficient than they originally were.

He also suggests that it is most advantageous for the suppliers of machinery to serve domestic customers - the cost of exporting a machine and providing support to operations overseas is unfavorable. It's also suggested that foreign markets that are underdeveloped are an excellent way for producers to divest themselves of older machinery when newer machinery becomes available. A lengthy and somewhat contrived example follows in support of thee assertions.