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 Furious Libertarian

The Furious Libertarian

Founded by Contributing Editor and Writer for the Humane Condition Will Shanahan, The Furious Libertarian is great reading. Check it out…

“The Furious Libertarian” is a project to expose the prevailing injustice in society caused by the state.  It is a project that seeks to emphasize the futility of the one dimensional left-right political paradigm that dominates the political world.  Once one realizes how the state systematically regulates, impoverishes, and imprisons innocent people while simultaneously enriching its privileged allies, one can no longer remain apathetic.  This project is educational in nature.  It is ultimately aimed at highlighting and analyzing the various actions of the state that would make anyone furious.  This project will cover everything from the war on drugs to crippling regulations to the disenfranchisement of the poor.  Hopefully, this will move at least one person away from their apathetic relationship with the state.  If so, I will consider it a success.  After all, no one should be less than furious with the state.”

– Will Shanahan

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

Practicing Political Pacifism: The Immorality of Voting.

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Up until recently, I had never missed a political election that I was eligible to vote in (to be fair, I’m only 20).  Philosophically, I’ve considered myself to be what some call a “voluntaryist” for over three years.  However, for much of that time, I also considered myself to be a “pragmatic libertarian” who was willing to combat the government through the system of voting.  I now realize that, ultimately, voting is incompatible with a voluntary society and that it constitutes an act of aggression.

To understand these conclusions, one must understand the nature of the political process.  Libertarian theorist Murray Rothbard summed it up nicely when he wrote that “libertarians regard the State as the supreme, the eternal, the best organized aggressor against the persons and property of the mass of the public. All States everywhere, whether democratic, dictatorial, or monarchical, whether red, white, blue, or brown” (For a New Liberty).  How exactly is the state the “best organized aggressor against the persons and property of the mass of the public”?  Again, Rothbard has the answer.

For centuries the State has committed mass murder and called it “war”; then ennobled the mass slaughter that “war” involves. For centuries the State has enslaved people into its armed battalions and called it “conscription” in the “national service.” For centuries the State has robbed people at bayonet point and called it “taxation.” In fact, if you wish to know how libertarians regard the State and any of its acts, simply think of the State as a criminal band, and all of the libertarian attitudes will logically fall into place. (Rothbard, For a New Liberty).

However, if governments are in fact a “matrix of coercion,” why would disengaging in the facility of government that gives me some voice be the morally correct thing to do?  The answer to this lies in the libertarian axiom of non aggression.  It is also referred to as the Non Aggression Principle and holds that all initiations of aggression against humans are immoral.

What does this have to do with voting?  To put it simply, voting is not self-determination.  I was not just selecting who I wanted to represent me when I went to the 2012 New York primaries and voted for Ron Paul.  I was also attempting to select a person who would “represent” 330 million other people (it is important to note that politicians don’t actually “represent” anyone seeing as their policies are enforced via coercion).  Therefore, even though I voted for a voluntaryist, I attempted to enforce a ruler on everyone else.  This did not sit well with me when I first realized it and for good reasons.  If it is immoral for me to force another person to live a life that I deem fit for them, how is it any less immoral for me to support someone who would then force another person to live a life that I deem fit for them?

However, I did not stop voting after drawing that conclusion.  Instead, I started to just write my own name on the ballots in an act of reclaiming my “personal-sovereignty” and to show my disgust with the choices being offered.  I eventually realized that even this act of the “protest vote” violated the NAP.  After all, I was writing my name on a ballot that would give the winning person the power to rule other people.  By writing my own name down, I was just as guilty as the politicians who sought those government positions of power.

This just leaves one question to answer; how should one go about changing the current state of affairs if not through voting?  The answer is through voluntary interactions among those whom are needed to change the world in the way that you see fit.  Don’t attempt to change the world through voting or through the use of government.  After all, government is force and brute force is the lazy way to solve any problem.  Regardless of the immorality involved, an idea that requires forced cooperation of the people involved is probably not that great of an idea.  What would you prefer? A world you changed dramatically through the instruments of coercion or a world you changed minutely through voluntary interactions?  Jeffrey Tucker summed it up on his Facebook page when he wrote

You know what’s evil about politics? It turns people into enemies when they should and would naturally be friends in a normal society. In the marketplace you are happy to cooperate with anyone to mutual betterment. But in politics, it’s all about hating your neighbor… a person who believes all of civilization rests on a Romney win would naturally and rightly regard all Obama voters as mortal threats, wreckers of the good life itself. And the demographics of voting are rather predictable. You can often tell quickly how a person will or will not vote, by appearance alone. That creates prejudice, bias, and hate. So politics creates these stupid battles between people — for absolutely no reason — and wars against the brotherhood of man. It creates the divisions it pretends to heal.

– By Will Shanahan, Contributing Editor for the Humane Condition

Contact Will: wshanahan.student@manhattan.edu