I actually think there is a bigger motivator for differences is cost to enter.

Consider this: in the US the biggest cost of a furniture store is the land. When you compare the cost of starting a Quito-style "no guarantees" store vs. an American style "customer is always right" store, the difference is negligible. You see this also in the US real estate market - "luxury" real estate is overrepresented, because the difference between building with nice appliances and marble vs. cheap appliances and particle board is a trivial percentage of total build cost. So if you're going to develop real estate, or open a furniture store, or a restaurant, or almost anything else in the US, you usually go for the "nice" version because it's a marginal expense.

This swings the other way too - because the relative risk of opening an American-style store in Quito is greater, you end up with disproportionately high prices, often approaching those of the West.

Disclaimer: I said "Quito" but the above is based on my experience with another city in a developing nation.

Real estate is a messy example though because the supply is heavily restricted for what are ultimately aesthetic reasons. There's always going to be more average earners than exceptional earners and both need homes, but if you restrict the available supply of developable land with things like height limits and zoning then of course builders are going to prioritize the luxury markets.

The big box model in the US just outsources the labour involved in producing goods to countries where that labour is cheaper; it's not like any of the big manufacturers of anything manufacture locally in the US.

Mostly, yes.

I read something once that indicated that the industrial revolution started in Europe and didn't really hit places like China as early because China had a huge amount of cheap human labor and Europe had less.

It was proposed that the lack of cheap labor is what drove people to find efficiencies.

Granted I'm not a historian so I can't verify this claim, but it was an interesting dynamic.

That is a nice "just so" story that simply doesn't fit the facts.

Europe had many points in its history where labor was dear. For example wages went up after the Black Death because so many workers had died. Why did the Industrial Revolution not happen then?

Where and when it did happen, the https://en.wikipedia.org/wiki/British_Agricultural_Revolutio... preceded it. Meaning that lots of laborers were displaced from fields (particularly due to enclosures) and forced to move to cities. This lead to an excess of labor in the cities, not a shortage.

The evidence is rather better that the progress of science and technology simply hit an inflection point with the invention of things like the steam engine (factories could be put anywhere) and the spinning jenny (machines could make cloth far cheaper than it had been). In a society which already had a free market bent (it was not an accident that The Wealth of Nations came out of the same time and place), these things were seized upon, imitated, and further innovations proceeded apace.

The spread of the Industrial Revolution afterwards was dependent upon the spread of the necessary skills, the investment of capital, and the building of supply chains. Which meant that what started in England spread to places in closest contact with her. Namely the United Stated and Continental Europe. And then only slowly spread elsewhere.

I've been told (also with no references to cite) that this was also one of the reasons why Rome didn't industrialise, they always had a plentiful supply of slaves, so there was no demand for machinery to replace them.

The causation of the Industrial Revolution is one of those historian's favorites because there isn't a definite "yes" to it, and you can point to origins going as far back as the end of the Roman Empire and the beginning of the Great Migration. Europe lost its old identity as it went into the medieval period - with one large invasion after the next, it was difficult to keep track of anything - and the new nations that formed from the ashes gradually lost their taste for subjugating and extracting tribute from each other, preferring trade competition instead, which is an innovation! If you look at most earlier empires, there's trade, but it isn't in a systemically central position because the ruling class would stomp out competition. That there were multiple of these nations is critical to the process: it allowed someone who angered a so-and-so to flee elsewhere and keep working. Fleeing is a common recurring theme in biographies of notable early modern people. This allowed Europe to keep holding on to ideas and discoveries over time, putting it in a good position to absorb the world's knowledge.

Why Britain specifically is a subset of the question. One of the precipitating factors often cited is the enclosure movement, which was part of a push for stronger, more logical systems of property rights(a big philosophical movement originating in the late 1600's and gaining steam in the 1700's - "life, liberty, property", utilitarianism, and related ideas all come from this period, and in Britain these ideas were especially popular). Enclosure had the effect of kicking peasants off the farm, leading them into wage labor, and Britain had a colonial system already in place, giving it many export markets and therefore demand for manufacturing. Add to that the local availability of coal and the gradual ceding of governing power to Parliament(another centuries-old process) and you have something resembling a thesis for preconditions of industrial capitalism - a stable country ruled by its merchants, with a strong export market, availability of labor and energy sources, and sufficient knowledge to usefully organize the labor.

Thank you

The Industrial Revolution happened on England in a time when labor was plentiful relative to the usual rate. There was a run away into the cities happening.

> Everything mentioned in the Ecuador example is labor intensive: private sector busses driving around plentifully

I don't think this is a result of cheap labour but rather increased efficiency of routing due to a less spread out city:

> with a bevy of signs—up to a dozen—in the front windshield listing major destinations: neighborhoods, universities, other landmarks

A bus that does this in most American cities would need to drive quite far and make a large number of stops, as everything is far apart from everything else.

In non-American cities, things are usually more concentrated, so a single bus route can reach more stuff in less time.

More stuff in less time = more trips completed per unit time = more money for the driver = more drivers.

I think another way you can think of it is as an evolution of Uber/Lyft's ride-sharing services. If you ran such a service you might find that there are common routes. At that point drivers could drive those routes repeatedly and advertise them through the app. But why bother with the app when you can just put signs outside?

Labour costs are a factor only when trading internationally or across markets.

Within a single market, they're not so relevant. In this case, everything is cheaper. The furniture is cheaper, so there's less money to pay people with. So the proportion of costs for labour is about the same. Assume 10% of the cost of the furniture goes to paying people - in the USA that's a larger number than in Ecuador, but still 10%. It doesn't really affect the model.

I think the real difference is the consolidation of the supply chain in the US (and other developed economies). In the US, the first "big box" stores were able to squeeze savings from the supply chain and offer lower prices. Customers liked that, bought more, and soon every furniture store had to either go very up-market or adopt the same strategy. A few decades and a lot of acquisitions later, and the entire new furniture market consists of half a dozen completely vertically integrated superstore chains, plus a few up-market retailers.

The second-hand market is not so consolidated. The article doesn't say whether they were buying new or second hand furniture. It'd be interesting to find out why the second-hand market isn't subject to the same market forces. How come there isn't a few large second-hand furniture stores?

> Within a single market, they're not so relevant.

The relative cost of labor and capital is a defining property of any place.

yes, but within that place, they're not so relevant

Yes, they are. The ratio is relevant within the place, even in insulation.

That ratio basically determines the economy productivity.

Ah, OK, I see.

I'm saying "the fact that Ecuadorian labour earns less than US labour doesn't matter to an Ecuadorian furniture shop owner because everything costs less in Ecuador, including furniture".

You're saying "labour costs are less in Ecuador relative to capital costs, so it's more affordable for business owners to hire more people instead of buy more trucks"

is that right?

Yes, that's right.

Getting on a tangent, the market for capital goods is much more globalized than for labor, so capital prices vary less from one place to the other. As a consequence, when everything is cheaper on some place, it usually means that labor is cheaper relatively to capital too.

> Assume 10% of the cost of the furniture goes to paying people - in the USA that's a larger number than in Ecuador, but still 10%. It doesn't really affect the model.

It makes everything bigger. Instead of a couple guys with a pick up truck making one delivery at a time it's a couple guys with a big box truck making multiple deliveries. Instead of one shop keep with their tiny shop you have one big shop. That scale allows efficiencies which drives down the labor per unit.

agreed, but that's not driven by high labour costs. That's driven by scale, which is a product of consolidation and vertical integration.

The big box store has (let's say) 20 deliveries a day to make, because it's serving a larger proportion of the market. So it becomes worth buying a big box truck and hiring a couple of guys to make all those deliveries.

The small retail store has (presumably) fewer deliveries to make, so they don't do delivery themselves. So the delivery is done on a case-by-case basis by the couple of guys in a pickup truck.

If the small store has more sales and more deliveries, it will eventually become worth them hiring a truck and drivers, and offering delivery to their customers. Again, not limited by labour costs, but by scale and vertical integration.

> Assume 10% of the cost of the furniture goes to paying people - in the USA that's a larger number than in Ecuador, but still 10%.

You're assuming without evidence the key supporting point of your argument? Why not assume something different and end up with the opposite conclusion?

I think it's fair to assume the labour costs are lower in Ecuador than in the USA. I also think it's fair to assume that furniture costs less in Ecuador than in the USA (though probably relatively more in terms of GDP because of the price efficiencies of the big box store).

So yes, you're right, I have assumed this. And if you disagree with this assumption then you're going to disagree with my argument. However, the article provides some good evidence that this assumption is true. I would be interested to hear any evidence that it's not...?

I don't think that most Ecuadoreans would be afford to furnish an entire apartment in straight cash, any more than an American could in the USA.