While travelling on business in Venezuela nearly 20 years ago, my local host and
representative indicated that the locals judged the exchange rate between
bolivares and the dollar by the price of the Big Mac. There was the official
exchange rate, and then the BIG MAC rate. invariably the official exchange rate
favored the government, but the BIG MAC rate was what the people had to live by.
At the time, the BIG MAC was the equivalent to about $5.50.
Having been in business myself for a long time, meaning I was running *the*
company, not *my* company, I would say that it *sounds* like a good index, but
essentially, goods are priced by companies at a level of, first, *See with how
much we can get away with*, and second, *How much will the market bear?*We
dealt a lot with *The Government*, and in most cases, you could not get away
with making exorbitant profits ... If we made a clear profit of around 11% we
were doing great !But ... , there was a lot of competition !I
wonder ...Would McD be willing to make a public statement where they would
fess up, and tell us what their *clear profit* (in each country) really is ?
What would that *accomplish*? Provide someone the opportunity to *throw rocks*
because they don't agree with their business model?
I write this sitting at a MacDonalds in a foreign country and find the insights
very interesting. I'm sure there are variables that dilute some of the
index, but have to laugh that a French-based professor thinks that only American
tourists eat at MacD's!!I look around me now and don't
hear any English at all...
"Ashenfelter's Big Mac study provides evidence for the idea that the
gap between rich and poor countries comes down to worker productivity on
tradeable goods." No mention of the fact that some Chinese factory workers
get 1.50 per hour, sleeps in dorms attached to the factory, and are charged 1/3
of their pay for the cost of the dorm bed. If Americans worked to 1.50 per
hour, we would have lots of factories. The real story here is that low-balling
one's fellow man is a very consistent part of homo sapien's nature,
and an ugly one.
We go to MCDonald's to have breakfast and seldom eat lunch there.
My children worked at McDonalds and developed work skills that greatly benefited
them when they started their current careers! McDonalds is successful because
they produce a product that people are willing to pay for! Their profits are not
The profits are not evil, Mountainman, but that they make them off of near-slave
labor puts a foul cast to it. Slave labor is evil. If India adapted fair-wage
laws and an enforced minimum wage, they'd see the standard of living rise.
Big Macs can explain the world? Yes. They can. 1 word: obesity.
When I've eaten at American fast-food chains in Latin America, what has
always amazed me is how many locals can afford to eat there. The food is usually
about the same price it is at home, yet local middle-class wages are a fraction
of those in the U.S. It costs me, say, 15 to 20 minutes of labor to buy a
McDonald's meal, and for these people it's two hours. Yet the
restaurants don't seem to be lacking for business.