In Defense of Sweatshops and Child Labor: A Response to the “Sweat Free” Activists

Wage > Slavery

Wage > Slavery

 

Critics of sweatshop labor often accuse sweatshops of providing inhumane conditions and inadequate pay to the workers. Anti-sweatshop activists take several different modes of action in order to try and end sweatshop labor practices. Boycotts, petitioning for legislation, and buying “fair-trade” products are the typical paths that these activists pursue.

To be concerned with what the real world effects of any policy will be rather than just the intention behind it is crucial to accurate appraisal of policy. Indeed, when Henry Hazlitt condensed all of economics into a single lesson, it was that “the art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups.”(1) It is this type of analysis that leads me to type the following. The anti-sweatshop movement has done more harm than good and has harmed the very people that it claims to try and help. Examining the theory and real world results enables an understanding as to why this is the case.

When a person voluntarily chooses to work in a sweatshop, it is because that person views that option as their best choice among alternatives. This is a truth known a priori, and it is based on the fact that they chose to do so. This a priori theory is confirmed with empirical data from real world analysis. Oxford University published economist Benjamin Powell’s book, Out of Poverty: Sweatshops in the Global Economy, last month. Dr. Powell devoted an entire chapter to the alternative jobs that sweatshop workers would have if they lost their jobs in the sweatshops. He found that “in countries where sweatshops tend to be located large portions of the population work in agriculture.”(2) Furthermore, these agricultural workers tend to be subsistence farmers. In the poorest of these countries, other alternatives include prostitution and sifting through garbage dumps. How do these alternatives compare to sweatshop labor? In Bangladesh, over 80% of the population live with a daily income under $2 a day. In India, it’s 60% of the population. For China, just over half the population earns under $2 a day. The average daily income of a sweatshop worker in Bangladesh is just over $2. For the Chinese sweatshop worker, it’s over $4 a day. The average Indian sweatshop worker earns $8 a day.(3) There’s a reason that people choose to work in sweat shops. As Paul Krugman noted in his article, aptly titled “In Praise of Cheap Labor: Bad Jobs at Bad Wages Are Better than No Jobs at All,” “while wages and working conditions in the new export industries of the Third World are appalling, they are a big improvement over the previous, less visible rural poverty.”(4) These countries are countries with little capital. Thus, these countries are countries with little productivity. Wages rise as productivity rises. But the productivity must rise first.

The relationship between productivity and pay has been demonstrated countless times. But let’s look at the productivity of sweatshop labor and the productivity of subsistence farming. In Bangladesh, agriculture only accounts for 23% of the GDP, even though 58% of Bangladeshis are employed in agriculture. In China, almost half the population is employed in agriculture, yet agriculture only accounts for around 13% of the GDP.(5) There is a reason why sweatshop labor gets paid, on average, higher than the alternatives. Sweatshops are more productive and employ more capital than the agricultural alternatives. As more people invest in these companies, wages will rise. However, legally raising the wages of these workers higher than the value they produce will not result in higher productivity. It will result in unemployment. Productivity must rise before wages rise. Wages respond to productivity but productivity does not respond to artificially mandated wages.

It’s not just the pay that anti-sweatshop activists protest. They also protest working conditions, building codes, and safety standards. Powell also devoted an entire chapter to the consequences of legally mandating that sweatshops follow certain safety standards. He argued that “firms are indifferent about whether to pay monetary wages or in-kind benefits after adjusting for those benefits that improve productivity. Workers do care about the mix.”(6) He also argued that

when overall compensation goes up, workers are more likely to desire more nonmonetary benefits. Comfort and safety are what economists call “normal goods” for most people. Workers demand more of these goods as their income increases. Unfortunately, many workers have low productivity, so their overall compensation is level is low. As such, they demand most of their compensation in wages and little in health or safety improvements.(7)

This makes sense, seeing as the law of diminishing marginal utility states that the previous unit of consumption of a good or service yields more utility than the following unit of that same good. In other words, sweatshop workers prefer direct pay over health and safety improvements because they have such little wealth that their other needs take precedent over workplace safety. A law that directly raises the workplace safety of sweatshop workers, but indirectly reduces their pay, comes at the opportunity cost of the preferred purchases of the sweatshop workers (purchases like food and shelter).

Now that the fundamentals have been covered, let’s look at the real world consequences of anti-sweatshop activism. First let’s look at the forsaking of sweatshop goods for products labeled as fair trade. The “Shop with a Conscience Consumer Guide” lists forty-one different factories that produce products deemed “sweat free.” This guide states that “these sweat-free sources are either unionized or run as worker cooperatives, have healthy and safe working conditions, offer wages and benefits that will ‘lift workers’ families out of poverty,’ and treat the workers with ‘respect, dignity, and justice.’”(8) However,

Twenty-nine of these factories are located in the United States and Canada; only eleven are located in Latin and South America; and a single factory is in Asia. Although consumers might feel they are ‘shopping with a conscience,’ they are mostly buying products made by wealthy First World union workers, decreasing the demand for products made in poorer countries and harming the employment prospects of the poorer Third World workers.(9)

By abandoning sweatshop goods for “sweat free” goods, the buyer actually benefits the wealthier First World workers at the expense of the poorer Third World workers. This product swap effectively puts the sweatshop worker in a worse position.

Public pressure is another tool that anti-sweatshop activists use to try and help the sweatshop workers. Just like the boycott, this tool also backfires. In 2003, for example, public pressure led the Yupoong owned BJ&B factory into an agreement that gave “workers a 10 percent wage increase, educational scholarships, paid holidays, and the establishment of a workers’ committee to deal with health and safety concerns at the factory.”(10) The anti-sweatshop activists praised this moment as a victory against the war on sweatshops. Public pressure kept the sweatshop from going back on this deal, even as the factory lost profit. By 2007, the BJ&B labor pool had shrunk from 2,000 workers to just 234. Later that year, the factory shut down.(11) 2,000 workers were thrown into their less desirable alternatives due to activism. Today, that factory is operated under The Altagracia Project, which “was set up to operate as a model factory, showcasing that a factory could pay a living wage, respect workers’ rights to join a union, and at the same time turn a profit.”(12) This project is praised as one of the latest successes of the anti-sweatshop activists. However, this project employs only 120 people. It baffles my mind how anyone could think that this movement (which cost 2,000 people the best job they could get and then reemployed only 6% of them) can be thought of anything other than a disaster.

The last, and perhaps most dangerous, tool at the anti-sweatshop movement’s disposal is government regulation. For example, “in 1993, U.S. Senator Tom Harkin introduced the Child Labor Deterrence Act, which would have banned imports from countries employing children.”(13) This promptly led to Bangladeshi garment companies firing “50,000 children that fall.”(14) At first, this might seem like another victory for the anti-sweatshop movement. However, children choose to work in sweat shops for the same reason that adults do. It is their best choice among alternatives. It is dangerous to assume that alternatives for children in these countries include things such as schooling and leisure time. Subsistence farming is one of the best case scenarios for the children who are banned from working in factories in these countries. Let’s look at what happened to the 50,000 children who lost their jobs. According to Paul Krugman, “the direct result was that Bangladeshi textile factories stopped employing children. But did the children go back to school? Did they return to happy homes? Not according to Oxfam, which found that the displaced child workers ended up in even worse jobs, or on the streets – and that a significant number were forced into prostitution [emphasis mine].”(15) It would be irresponsible for me to say that anti-sweatshop activists advocate increased child prostitution. However, I have no issues with pointing out that many of these activists advocate policies that would lead to such an increase. To paraphrase Murray Rothbard, it is totally reckless to have loud and vocal opinions on economic affairs without understanding the economic consequences of such opinions.

If we really want to help sweatshop laborers get out of sweatshop labor and into better situations, we need to increase their alternatives and not take away what they have chosen among their current alternatives. As such, I propose starting a pro-sweatshop worker movement. Historically speaking, almost every modernized country had a period of development in which the population switched from agriculture to sweatshop factory work. This transition is necessary to build the capital that can increase productivity. After all, “economists have found that approximately 70-80 percent in the variation in wages across nations can be attributed to differences in productivity.”(16) Therefore, this pro-sweatshop worker movement should focus on raising the productivity of the sweatshop workers. It can do this by encouraging governments to repeal restrictions to trade and foreign markets, especially in those countries where sweatshop labor is prevalent. This movement should also put public pressure on sweatshop countries to adopt sound monetary policy and protect private property rights. Money goes to where it is welcome. By following these freed market policies, investment becomes more appealing and capital will be able to accumulate. This, of course, will increase worker productivity. One only needs to look at the success stories of Hong Kong, Singapore, and South Korea to see that this is the case. In these countries, “the process of moving from sweatshops to a wealthy First World nation took less than two generations rather than the more than 100 years in Great Britain and the United States.”(17)

For the sake of these workers, do not support anti-sweatshop measures that only limit these workers abilities or price them out of the market. Support policies that will speed up the process of development and give these workers more alternatives rather than less.

 

(If you would like to learn more about well-intentioned policies that hurt the people they try to help, read my debate with Tom Engelhart on the Minimum Wage. http://www.breakingapathy.com/category/call-response-an-informed-debate/)

— Will Shanahan (@Will_Shanahan)

Contributing Editor, the Humane Condition

Notes:

1. Henry Hazlitt, Economics in One Lesson (Auburn, Alabama: Ludwig von Mises Institute, 2008) 5.

2. Benjamin Powell, Out of Poverty: Sweatshops in the Global Economy (New York, NY: Cambridge University Press, 2014) 53.

3. Powell, Out of Poverty, 55.

4. Paul Krugman, “In Praise of Cheap Labor: Bad Jobs at Bad Wages Are Better Than No Jobs at All,” Slate, March 21, 1997. http://www.slate.com/articles/business/the_dismal_science/1997/03/in_praise_of_cheap_labor.html (Accessed April 15, 2014).

5. Powell, Out of Poverty, 54.

6. Powell, Out of Poverty, 66.

7. Powell, Out of Poverty, 66.

8. Powell, Out of Poverty, 33.

9. Powell, Out of Poverty, 33.

10. Powell, Out of Poverty, 35.

11. Powell, Out of Poverty, 35.

12. Powell, Out of Poverty, 35.

13. Powell, Out of Poverty, 84.

14. Powell, Out of Poverty, 84.

15. Paul Krugman, “Reckonings; Hearts and Heads,” New York Times, April 22, 2001, 17.

16. Out of Poverty, 25.

17. Powell, Out of Poverty, 120

 

The Civil Rights Acts and Individual Liberty

The succession of Civil Rights Acts through the 1960’s in the United States is often considered a watershed moment in American history. In general these Bills that became Law are seen as major victories for advocates of civil equality and most especially, black Americans. On the surface it is hard to view these events in any other way, and most often it is the correct view. There is a problem however, and one that may in fact aid in the understanding of the continuing problem of race relations in the twenty-first century.

There is a single distinction that can be made in regards to what the different Civil Rights Acts decreed. There were parts of these laws that eliminated segregation and discrimination in government sponsored or “public sector” establishments, and there were parts of these laws that violated the private property rights of others declaring it unlawful to discriminate or segregate one’s own private business. This is the problem.

The Civil Rights Movement of the 1960’s was a movement demanding civil equality, and equal protection under the law. These are the basic tenets of personal freedom as viewed through the classical liberal lens that the United States was supposedly founded upon. It must be made clear, to endorse the personal freedom of all men and women is not to endorse their ensuing behavior, only that the individual has the rights of person and property. If a society is to maintain freedom and equality, the rights of all private property owners must necessarily be respected, no matter how immoral one may feel about how the property is being used.

This unprecedented expansion of federal government authority over private businesses begs a question. What is the philosophical distinction between a private home and a private business? There is no such distinction that can legitimize a government claiming dominion over some, but not all private property. The mere fact that a business “accommodates” or “facilitates” the general public does not make it “public” property. This may be seen as proposing discrimination to some, but ought to be seen as defense of the smallest minority, the individual.

Another problem with specifically the Civil Rights Act of 1964 is the requirement of businesses of over one hundred employees not to discriminate in hiring and the impracticability of its enforcement. An agent of the federal government cannot possibly know or prove whether a business owner is truly employing racial prejudice in his hiring decisions. The federal government’s solution was eventually to mandate racial quotas for hiring. It is likely that over time, further collectivization of race as a profound and distinct grouping only served to further racial tension. Former Congressman Ron Paul said on the House floor, July 3, 2004

“…while I join the sponsors…in promoting racial harmony and individual liberty, the fact is the Civil Rights Act of 1964 did not accomplish these goals. Instead, this law unconstitutionally expanded federal power, thus reducing liberty. Furthermore, by prompting raced-based quotas, this law undermined efforts to achieve a color-blind society and increased racial strife.”

Contrary to mainstream opinion, opposition to this aspect of the Civil Rights Act of 1964 does not conflate with a support of the pre-1960’s status quo. It is perfectly within the authority of the federal government provide recourse to individuals whose 14th amendment rights had been denied in regards to segregated public schools, as determined in another section of the Civil Rights Act of 1964. It is also the responsibility of the federal government to require all polling stations to ensure every legally eligible citizen is able to vote, as determined by the Voting Rights Act of 1964.

The only aspects of the Civil Rights Acts of the 1960’s are those that infringe upon the right to private property. Again, contrary to mainstream opinion this principle of private property does not conflate to support of continued segregation and racism. It is important to recognize the real relationship between Culture and Law. If it is true that the progress in race relations that has been made since the 1960’s is not because of these aspects of the Civil Rights Acts but in spite of them, then we can say with certainty that nowhere in the United States could a “White’s Only” private business succeed financially. Our culture has evolved to abhor racism to such an extent that rational discussion about the Civil Rights Acts is often unattainable without being labeled a racist. The market of ideas would have put Jim Crow segregation out of business decades ago if not propped up by Supreme Court decisions and other legislative infringements on the rights of the individual. It is certainly possible that this evolution would have occurred with less racial tension than what was created by the infringements of individual liberties that was part of the Civil Rights Acts.

Legislation must be understood for what it is, violence. All legislation, whether written and signed by a majority of the ‘citizens’ of a democracy or the whims of a monarch, is backed up by the threat of imprisonment, and in many cases the implied threat of death. We should attempt to learn from the successes that occurred organically and culturally, those of Dr. Martin Luther King Jr. Perhaps his doctrine of nonviolence can be applied here to the federal government. One of the five main pillars of Dr. King’s doctrine on non-violence included “Active resistance to the forces of evil, but not the individual actors”. Dr. King believed that racism was “a plague suffered by all races”. Clearly the aspects of the Civil Rights Acts in question here are examples of active resistance to the individual actors. Brown v. Board of Education proved that it is not possible to change Culture via the Law. Ten years after the Brown ruling, only 9.2 percent of black students in the South were enrolled in segregated schools.

Dr. Martin Luther King Jr.     The Civil Rights Acts of the 1960s accomplished several admirable feats. In regards to the public sphere the federal government had every responsibility to guarantee equal protection under the law, and civil rights. Its violations of individual liberties have had long lasting negative effects. It is easy to understand why it is costly and often counterproductive to fight violence with violence, but what many fail to grasp is the inherent violence in legislation. The federal government has tried, again and again, to legislate morality. It does not work. Alcohol prohibition was a dismal failure as the “War on Some Drugs” continues to be. If the federal government had no hand in marriage, there would be no need for marriage equality laws. The rights of individual self-ownership and private property are ultimately what gives every individual the potential to improve his or her lot in life. These rights ought to be protected, not infringed upon by the Law. Cultural evolution is the non-violent alternative to violent, or political revolution. It is also the more effective alternative.

 – Adam Alcorn, @AdamBlacksburg

Founder, Editor at the Humane Condition

 

Dishwashers and Root Beer: The Case Against Public Goods

You may have noticed that The Humane Condition articles have been sparse over these past summer months.  This is in no doubt, partially due to my summer job working as an assistant chef.  However, my experience in the kitchen offers an insight into the wastefulness and destructiveness of public goods and property.

Even the Roads?

Even the Roads?

This lesson starts with a simple anecdote concerning dishwashers and root beer.  Specifically, I noticed that my dishwashers were drinking root beer at an alarming rate and far more frequently than anyone else I have ever observed.  What led to this particular behavior among my dishwashing staff?  Were they more gluttonous than the average American?  Did each and every one of them just happen to have a deep appreciation for the sugary drink?  I think not.  In fact, the answer to this lies in the economics of public goods versus private goods.  This is because the root beer was not supplied by the dishwashers nor was it allocated as private property among them.  In fact, we would order cases of root beer as a treat for the dishwashers to enjoy.  However, the distribution of the root beer was left up to the dishwashers.  To put it simply, the cases of soda were public goods for the dishwashers to enjoy.  This led to certain incentives which actually demonstrate the nature of man and public property.

To start with, the root beer was scarce.  In other words, there was a finite amount of root beer available in the kitchen.  When the supply ran out, the dishwashers would have to wait for the next food truck.  Because the soda was treated as a public good, they all had equal access to the supply until it ran out.  The public arrangement incentivized the dishwashers to actually consume more root beer than they otherwise would have. The equal ownership (or lack of ownership) is the cause to this wastefulness.  Each time a dishwasher took a root beer from the soda supply, he essentially took one potential root beer from each of the other dishwashers.  Likewise, each time a different dishwasher took a root beer the original dishwasher suffered from the loss of a potential root beer.  In order maximize their psychic revenue, it was in the self-interest of each dishwasher to drink as much root beer as possible so as to minimize potential losses.  Thus, the dishwashers often burned through their supply of root beer before the next food truck was en route.

How does this lesson apply on a broad scale with public policy?  The same incentives to burn through public root beer apply to public resources.  That is why private tree farms do not suffer from mass deforestation.  If the forests were public, it would be in the interest of every lumber company to clear as many trees as possible.  People often say that free market capitalism promotes Darwinian competition.  Yet it is distinctly the attribute of public property that would lead to competition and excessive lumber production.  If the lumber forests are privately owned, as is often the case, it is in the interest of the forest owner to clear only as much lumber as is needed to meet the demand of the market.  Anymore would burn through the entrepreneurs resources and drive down the prices of various lumber goods.  The forest owners could save the rest of their natural resources for future use without fear of suffering potential losses from other competitors harvesting their lands.

Public property rights do not only lead to excess waste of resources.  It also leads to an increase (not decrease) in pollution.  There are certain aspects of nature that governments do not allow private property rights in.  Certain bodies of water and clean air are some of these goods that remain in the public realm.  One might argue that oxygen is so abundant that it is not scarce and that it is pointless to assign property rights for it.  However, clean air can be a scarce good based on a factory and its proximity to people.

What does public property (or lack of private property rights) have to do with pollution?  Public property creates certain incentives for businesses to produce what economists call “negative externalities.”  To put it simply, it pays a business to send smog into the atmosphere or dump sludge into the local lake because there are no defined property rights in either of those realms.  To be fair, modern day governments do try to make up for this with certain regulations against polluting.  However, politicians are terrible custodians of the “public’s” property.  They can be easily bribed by the factories themselves or might not have enough of a motive to stop it.  It is important to note that the custodial political agency has as little property rights in said public good as the factory that wants to pollute it.

How should the “negative externalities” problem be dealt with?  The solution is to internalize the negative externalities the public property creates.  In order to do this, private property rights would have to be assigned to goods and resources that are now in the public realm.  If each resident of a small town had a property right in clean air, the factory would have to contract with each resident that its pollution would reach.  As the town becomes more and more populated, the harder it becomes for the factory to contract with each and every resident.

Furthermore, the benefits of private property rights do not just come from ownership outside of the factory.  A factory owner who owns the lake next to his/her factory is far less likely to dump sludge into it compared to if the lake was publicly owned.  This is what is meant by “internalizing” the negative externalities.  This is because the owner now has actual property rights in the lake.  The incentive changes from taking as much advantage of the lake as possible to preserving as much value of the lake as possible.  I do not need to work out the theoretical reasons as to why this is so.  There is peer reviewed, empirical evidence that backs this claim up.  I am referring to a peer review study published by the University of California at Berkley with support from Universidad de San Andres and Universidad Torcuato Di Tella.  The study itself is a fascinating read.  However, for the sake of brevity, I am going to quote the full abstract and nothing else.  I will provide a link at the end so that those interested can read the full study. Argentina went through a mass water privatization policy change thirty years ago.  The abstract explains the results.

“In the 1990s Argentina embarked on one of the largest privatization campaigns in the world as part of a structural reform plan. The program included the privatization of local water companies covering approximately 30 percent of the country’s municipalities. Since clean water and sewage treatment are critical to control the spread of infectious and parasitic diseases; access expansions, quality improvements, and tariff changes associated to privatization may have affected health outcomes. Using the variation in ownership of water provision across time and space generated by the privatization process, we find that child mortality fell 5 to 7 percent in areas that privatized their water services overall; and that the effect was largest in the poorest areas. In fact, we estimate that child mortality fell by 24 percent in the poorest municipalities. These results suggest that the privatization of water services prevented approximately 375 deaths of young children per year. We check the robustness of these estimates using cause specific mortality. While privatization is associated with significant reductions in deaths from infectious and parasitic diseases, it was uncorrelated with deaths from causes unrelated to water conditions.”[1]

The results seem clear.  Public property is harmful, wasteful, and leads to dog-eat-dog competition that is far more destructive than free markets and private property.

 – Will Shanahan, Contributing Editor for The Humane Condition

[1] Sebastian Galiani, Paul Gertler, Ernesto Schargrodsky, Water for Life: The Impact of the Privatization of Water Services on Child Mortality, (California: University of California at Berkeley), 2002.

http://faculty.haas.berkeley.edu/gertler/working_papers/Water%20for%20Life%20June30.pdf

Economics in One Lesson – Henry Hazlitt – A Short Discussion

Reviewing Mises U 2013 Required Reading List: Part I

Economics in One Lesson - Henry Hazlitt

Economics in One Lesson – Henry Hazlitt

“Economics is haunted by more fallacies than any other study known to man. This is no accident. The inherent difficulties of the subject would be great enough in any case, but they are multiplied a thousandfold by a factor that is insignificant in, say, physics, mathematics, or medicine—the special pleading of selfish interests.” – Hazlitt Economics in One Lesson.

            Henry Hazlitt opens his masterful book Economics in One Lesson without pulling any punches. Hazlitt’s offensive approach to defending free market economics is refreshing and notable. Rather than starting with a conventionally accepted foundational basis for his forthcoming economic theory, which no doubt would have been a way of kissing the asses of whom he later refers to as “so called brilliant” economists, Hazlitt immediately noted his intention of picking them apart with what should be basic foundational economic principles.

            Before going into logical and practical examples of Keynesian fallacies, (though he never mentions Keynes in this particular chapter), Hazlitt introduces us to “The Lesson” that gives root to these pervasive fallacies. One primary lesson that comes across in this opening chapter is that economic policies must be measured not only by those industries targeted by the policy, but all industries, consumers, and entrepreneurs in every sector of the economy. This observation relates directly with Hazlitt’s second main factor in allowing an epidemic of economic fallacy. Hazlitt says:

“…there is a second main factor that spawns new economic fallacies every day. This is the persistent tendency of men to see only the immediate effects of a given policy, or its effects only on a special group, and to neglect to inquire what the long-run effects of that policy will be…”

– Henry Hazlitt, Economics in One Lesson.

This observation, though written in 1946, could not be more accurate today. From the steady increase in the minimum wage, (despite the obvious harmful reality of such policies), the unreasonable taxation of poor rural communities to “help the farmers”, and most blatantly the inflationary policies of the Federal Reserve, robbing the lower and middle classes in the most cowardly of methods, the inflation tax. It is the “new” economists, as Hazlitt terms them, that are unable to see the ways in which inflationary monetary policy affect any other sector of the economy outside of the financial sector, including lending and thus interest rates. When all you have is a hammer, everything looks like a nail, and the Fed’s hammer doesn’t consider the lower or middle class. Hazlitt calls this the fallacy of “overlooking secondary consequences”.Hazlitt demonstrates this concisely here:

“The bad economist sees only what immediately strikes the eye; the good economist also looks beyond. The bad economist sees only the direct consequences of a proposed course; the good economist looks also at the longer and indirect consequences. The bad economist sees only what the effect of a given policy has been or will be on one particular group; the good economist inquires also what the effect of the policy will be on all groups.”

– Henry Hazlitt, Economics in One Lesson.

            Economics in One Lesson has never received its due credit. Many of the principles Hazlitt espoused have become widely accepted amongst free-thinking economists today, but he was writing in a time even more hostile to laissez-faire policies than even today. How is it that such foundational theories, proven right over time, become so demonized in the eyes of the public? It is obvious why the State benefits from fallacious economic policies (see: parasitism), but why the general public? Hazlitt addressed this in the following way:

“The group that would benefit by such policies, having such a direct interest in them, will argue for them plausibly and persistently. It will hire the best buyable minds to devote their whole time to presenting its case. And it will finally either convince the general public that its case is sound, or so befuddle it that clear thinking on the subject becomes next to impossible.”

Henry Hazlitt, Economics in One Lesson.

 

            The Keynesian inflationary economic policies of today are based on obvious falsehoods and illogical justifications. Hazlitt points out the uncontroversial truth by asking “Doesn’t every little boy know that if he eats enough candy he will get sick?” Why is it that public economic policy practices very rarely if ever consider the future? It is after all something we all learn at a rather young age. On this, Hazlitt says:

 

“Yet when we enter the field of public economics, these elementary truths are ignored. There are men regarded today as brilliant economists, who deprecate saving and recommend squandering on a national scale as the way of economic salvation; and when anyone points to what the consequences of these policies will be in the long run, they reply flippantly, as might the prodigal son of a warning father: “In the long run we are all dead.” And such shallow wisecracks pass as devastating epigrams and the ripest wisdom. But the tragedy is that, on the contrary, we are already suffering the long-run consequences of the policies of the remote or recent past. Today is already the tomorrow which the bad economist yesterday urged us to ignore.”

– Henry Hazlitt, Economics in One Lesson.

 

The Broken Window

             Hazlitt includes more than just a sound explanation of the all-pervasive “broken window fallacy”. He also explains how this, and other fallacies are caused by the previously mentioned rejection of the “elementary truth”. Clearly, when a window is broken the local glazier will have a slight increase in sales. The short-sighted “bad economist” would see only the immediate benefit, refusing to account for the legitimate needs and wants of the consumer that would have been more efficiently allocated without the unexpected window repair bill. While this is a fallacy that many accept on the surface, Hazlitt notes that in terms of large scale disasters the fallacy still prevails. To demonstrate this Hazlitt connects the belief of the Keynesians that war improves the economy with the broken window fallacy, under “one of a hundred disguises”.

 

“They tell us how much better off economically we all are in war than in peace. They see “miracles of production” which it requires a war to achieve. And they see a postwar world made certainly prosperous by an enormous “accumulated” or “backedup” demand. In Europe they joyously count the houses, the whole cities that have been leveled to the ground and that “will have to be replaced.” In America they count the houses that could not be built during the war, the nylon stockings that could not be supplied, the worn-out automobiles and tires, the obsolescent radios and refrigerators. They bring together formidable totals.”

          Henry Hazlitt, Economics in One Lesson

 

Hazlitt answers this fallacious analysis in a concise fashion that is prevalent throughout the entire book, his grasp on market economics is apparent in his opinion of inflationary economists and their policies:

 

“Mere inflation—that is, the mere issuance of more money, with the consequence of higher wages and prices—may look like the creation of more demand. But in terms of the actual production and exchange of real things it is not. Yet a fall in postwar demand may be concealed from many people by the illusions caused by higher money wages that are more than offset by higher prices.”

          Henry Hazlitt, Economics in One Lesson.

 

 There is no better introduction to free market economics than Hazlitt’s Economics in One Lesson, it has remained timeless and will continue to be an invaluable resource in the promotion of liberty and free markets. You can download this book for free, or support the Mises Institute by ordering a copy for yourself here.

 

          Adam Alcorn, Editor/Founder the Humane Condition, ,

 

Mail to: thcondition@gmail.com

     @AdamBlacksburg