Jason Hickel
Jason Hickel

Why Jeffrey Sachs is wrong about sweatshops

The news that a Romanian sweatshop manufactured one of Kate Middleton’s most famous dresses has inspired renewed popular interest in the ethics and economics of outsourcing jobs to utilise super-cheap labour. This is only the most recent in a string of cases that exemplify the shocking proliferation of sweatshops — even across Europe — over the past few decades. But the truly troubling part of the story is the logic that Kate’s defenders have invoked to justify this trend, drawing on arguments made by allegedly “progressive” US economists.

Jeffrey Sachs, well-known author of The End of Poverty, once famously stated, “My concern is not that there are too many sweatshops, but that there are too few.” Similarly Paul Krugman has argued that sweatshops “move hundreds of millions of people from abject poverty to something still awful but nonetheless significantly better … [so] the growth of sweatshop employment is tremendous good news for the world’s poor.”

In a New York Times magazine article disturbingly titled Two Cheers for Sweatshops, Nicholas Kristof endorsed this logic by explaining that when he first moved to Asia he, “like most Westerners”, was outraged at the sweatshops, but eventually came to appreciate them as “a clear sign of the industrial revolution that is beginning to reshape Asia”. He pointed out that “Asian workers would be aghast at the idea of American consumers boycotting certain toys or clothing in protest. The simplest way to help the poorest Asians would be to buy more from sweatshops, not less.”

These arguments all turn on one simple idea that often vanquishes critics with its apparently unassailable economic logic: that sweatshops exist because people are willing to take sweatshop jobs at sweatshop wages. People have a choice in where they go to work, the thinking goes, and sweatshops are often the best deal in town — certainly better than no job at all. If sweatshops didn’t exist, then millions of people would be hungry on the streets.

This view rests on the assumption that countries that attract sweatshops have always been populated with masses of poor people desperate for wages, that poverty is somehow an a priori condition. In such a world, sweatshops can only be a boon.

But this assumption entirely misses the crucial point about poverty. People — in Thailand and Peru, for example — only choose sweatshop jobs because they have been made desperate and given no alternatives for livelihood. So it’s not really a “choice” at all. They are forced by circumstance to sell themselves into sub-human conditions. Sociologists refer to this as the “structural violence” of unemployment.

Colonial and neoliberal legacies
The desperation that drives people into sweatshops is a historically recent phenomenon. Most of the people in the so-called third world used to be subsistence farmers who were able to support themselves on the yields of their land. That started to change under late-19th-century colonial regimes. In most places in Africa, Asia, and South America, colonisers initially had a very difficult time getting natives to work in their mines, factories, and plantations. To solve this problem, they either forcibly removed farmers from their land or levied onerous taxes in order to coerce them into seeking wage work, all under the guise of the “civilising mission”. This caused hundreds of thousands of people to move to industrial cities where they constituted a reserve army of workers willing to take whatever job they could find.

But only recently did things get bad enough that sweatshops started springing up. Beginning in the late 1970s, the World Bank, the International Monetary Fund, and later the World Trade Organisation began pushing new forms of market deregulation — known as “structural adjustment programmes” — on third world governments, requiring them to stop subsidising their agricultural sectors and to allow cheap imported grains into their markets. These neoliberal policies crippled small-scale farming to the point of collapse and created a second wave of people forced to migrate to cities to survive.

This happened at the same time as two other crucial structural adjustments. First, protective trade tariffs were drastically reduced, allowing Western corporations to move their operations offshore without paying prohibitive import duties. Second, important labour regulations like collective bargaining rights and high minimum wages were curbed or cut. This created an ideal environment for companies like Nike, Walmart, and General Motors to move their production facilities to places where they get away with paying workers many times less than developed economies would ever allow. This process of seeking the most exploitable location possible has become known as “the race to the bottom” — the dark underbelly of what economists so calmly encourage as “comparative advantage”.

A 2002 study conducted by economist Robert Pollin found that the retail prices of clothing in the United States would have to rise by only 1.8% in order to cover a 100% wage increase for sweatshop workers in Mexican garment factories. In other words, the price of Kate’s £175 dress would increase to £178.15, with the additional money doubling the wages of the seamstresses who made it. This is especially important in light of a 1999 study by the National Bureau of Economic Research that found that consumers were willing to pay 15% more on a $100 item — and 28% more on a $10 item — if it was made under “good working conditions”.

The point here is that companies do not have to use sweatshop labour to earn profits, just as workers in third world countries do not have to be desperate enough to work in sweatshops. None of this is natural or inevitable, despite what sweatshop enthusiasts are so eager to have us believe. Sachs’ and Krugman’s absurd conclusion that we should promote sweatshops as a solution to the problem of global poverty derives from a profound deficit of historical perspective. How tragic that our most cherished priests of progressive economics have nothing to offer beyond a world of sweatshops justified beneath the banner of “market freedom” and comparative advantage. How tragic that this has become the utopian vision of our time.

A new economics
A few targeted changes to global trade rules could create a world where sweatshops wouldn’t have to exist. If developing countries were allowed to erect import tariffs to protect small-scale agriculture and enforce labour regulations to ensure that every working citizen earned a living wage, the sweatshop concept would be completely unnecessary. Of course, if the workers that make our shoes, clothes, and electronics were earning decent wages, that would mean that we would all pay a little bit more for our stuff, and the companies that sell it might net a little bit less. But income redistribution along these lines would hardly be a bad thing, especially given today’s historically unprecedented levels of social inequality: The wealthiest 1% of the world’s population controls 40% of the world’s wealth while the bottom 50% controls a mere 1%.

The counter-argument holds that if working conditions become too humane and wages too decent in any given country companies will relocate to more welcoming states, hurting GDP and leaving the poor with fewer employment opportunities. This could be solved with an international minimum wage law (putting a floor on the race to the bottom) and a targeted trade quota system that channels foreign direct investment to where it is needed to alleviate poverty rather than to where labour is most exploitable. In addition, states can help create good jobs for their citizens by protecting local infant industries and by implementing import substitution programmes.

Such policies have been tried before. The United States, Great Britain, and virtually every major economic power have been built on precisely these principles, and they were standard practice for many developing countries emerging from colonialism in the 1960s. If the developing world were to reinstate these policies — winding back the clock to a time before structural adjustment — they would be able to significantly improve local employment and generate an additional $480 billion per year in GDP above current levels. But such reforms would require confronting the entrenched interests of the states and corporations that control global trade policy for their own narrow benefit.

Sweatshops may indeed be preferable to poverty. But instead of taking poverty for granted in the first place, we should question the processes that produce it — the policies that make people desperate. Sweatshops are an easy, unthinking solution, and only make sense if we are ready to bend to the dictates of “market efficiency” and accept exploitation as economically rational. What we need is a new economics, one that can think beyond the limited boundaries of neoliberal ideology and make an effort to construct a more humane and democratic world. The question is not whether we have the ability to do this, but whether we have the courage.

*A longer version of this article was originally published in Foreign Policy in Focus

  • HD

    Wow, this is the stuff that academics teach to their students! Thank god my eyes have opened to the absolute rubbish that gets taught as economics in most social science and humanities departments.

    Do you really want tariffs, import substitution, corporatism (under the mantel of targeted industrialisation), minimum wage legislation and subsidies? Really!

    Seriously, it is all of these policies that have led to the massive inequalities that we have today in much of the world.

    All the more ironic that the misery/inequality we have today is mostly the result of anti-capitalist crusaders and their state capitalist buddies on the right.

    I agree with your assessment of the impact of colonialisation and imperialist policies.

    But, neo-liberalism is largely the same as those things that you are calling for to be implemented in developing countries. It is all forms of corporatism that gets secured through regulation (often well meaning). The more regulation, the more you open the window for regulatory capture by special interest and big business.

    Free trade and free market capitalism is a completely different ballgame…

    Where do you think governments in developing countries will get the money to subsides industry? What are the consequences of forcefully redistributing (through legislation and taxes/tariffs) resource/capital according to the whims of bureaucrats and central planners?

    Have you looked at any studies regarding minimum wage legislation or import substitution?

    Or at critical studies of the British/US state sponsored industrial programs?

    (cont)

  • HD

    I think this is the biggest problem with arguments like these – the unintended consequences of well meaning policies.

    This is why I strongly belief social scientist and humanity students should actually pick up a few books on economics and the history of economic thought before writing and advocating stuff like this…

    The data is everywhere to be found and the reason that even centre of left establishment economist like Krugman and Sachs make these statements.

    We don’t need new economics, what we need is sound economics in public policy and as much choice as possible for people (“freed” markets). The state must get out of the way and not into the way.

    The fatal flaw in your “new economics” is that there isn’t something as a free lunch!

    To use one of your examples (the case against minimum wage is really econ 101):

    Tariffs on small scale agriculture. First, you ultimately pay your imports with your exports. So you have to ask what will the consequences of import tariffs be for the export sector (jobs/new business).

    Two, what is the consequences of channeling people/money into business that are not competitive/sustainable on their own? It it real jobs? Is it fair/wise to reallocated capital this way (taxing others to sustain a target industry / taking capital away from other industries).

    Thirdly, if the reason is to help an infant industry – well for how long? 2 or 50 years? Why ever stop and on what basis?

  • HD

    The data are pretty clear that minimum wages reduce employment and increase poverty.

    It is one of the issues where the contrast between conventional wisdom (or folk economics) and economic thinking is sharpest. It is also part of the “make it so” fallacy.

    http://www.econlib.org/library/Enc/Protectionism.html

    http://www.econlib.org/library/Enc/MinimumWages.html

  • SH

    Brilliantly put, as always Jason Hickel.

  • Loudly South African

    The brilliant exposition from the left-wing LSE writer of how colonialism & capitalism created the dispossessed and landless, completely ignores that none of this applied to China. The “sweated” workers emerged from a communist paradise.

    The insightful writer also omits that the structural violence of unemployment was caused by the eradication of infant, child & childbirth mortality and laissez faire population control (except in “1 child per family” China). Further, despite the ending in SA of the satanic colonial practices so well described in the article, workers are still leaving rural areas in search of jobs in the cities because the idyllic subsistence farming lifestyle this London city-based writer romanticises cannot sustain them.

    While the argument that adding a few percent to the price of goods could improve the lot of sweatshop workers (assuming their bosses don’t pocket the extra) is seductive (after all, there is a market for socially correct organic, local or slow food), this was disproved in the case of the USA auto industry. Thanks to the unions, US automakers carried too high sick & retirement benefit overheads to compete against Asia. This lead to the collapse of Detroit, retrenchments, foreclosures on mortgages and the sub-prime crisis. Talking of automobile industries, the protectionism currently supporting SA’s motor manufacturers has benefited a handful of capitalists and a few thousand labour elite employed in the factories but at the cost of more expensive vehicles priced out of reach of the majority.

  • isabella vd Westhuizen

    A very good summary of the inequities which pervade our world As to HD’s long diatirbe why do you not give us all a break. Neo liberalism has ruined the industrialized core and has hurt the periphery even more. A balance needs to be struck and we need to protect and nurture locla industries not open the borders and expose them to massive undercutting

  • Anne Coventry

    I can’t help feeling it’s all far more complicated. Colonialisation and technical advances also bought things like vaccinations, antibiotics and medication which in turn have helped with population explosions. I can’t believe that India, for instance, would be able to sustain its billions with subsistence farming.

    What are the choices? Huge populations bring poverty, and yet we are bombarded with adverts for us to help fund vaccinations for things like tetanus, etc. to increase the population further, and to condemn even more people to poverty. Do we let people die in infancy in order to reduce populations so that sweat shops are no longer required?

    Over population must be one of the biggest processes that produced sweat shops, and I don’t think the solution is as simple as you make it seem. Tell us how, exactly, a humane solution would be achieved?

  • benzo

    Both you amd HD refer loosely to “new economics”.

    The “new economics” is a movement in SA (under SANE) and the UK (under NEF) and started in France (Sorbonne – Paris) in the 60’s. The movement is well established but not seriously implemented as it has to do battle with siome vested interests.

    Two of the items are:
    1. the idea of linking top incomes to lowest income within one economic unit (=company)
    2. promote “local production” wherever possible.

    Item 2 is already prominent in agriculture produce.
    Item 1 requires a major mindset shift as it addresses “greed” in a biog way. However, it could be the key to reducing global poverty.

  • MLH

    ‘But only recently did things get bad enough that sweatshops started springing up.’
    By which time I was absolutely aghast.
    Persian caprets have been woven in sweat shops since time began. The New World was industrialised by importing people who would work for less than Americans. FDR’s 5-yr plan used hard labour. As you point out, where no better jobs exist, people will take the only jobs on offer. And benefit from them.
    I think your argument is flawed because it supposes that unskilled work should command high salaries. Unskilled work will always exist and, in my usual not-PC way, I’d suggest that there is no harm in even a child doing it as long as the parameters are civilised and allow children time for schooling, playing, sleeping and learning.
    Here, the salary of a swimming-pool supervisor (who does about one hour’s work daily in winter) is about the same as a medical intern’s (for doing far more). I don’t believe that’s just, but it won’t be long before the chaps who collect our rubbish will be earning the same.
    The world will always have both poor and rich, no matter how hard we try to eradicate difference. But our poor should be able to meet their needs (rather than their wants), which isn’t happening. I’d suggest the fault lies in great disparities and we need to ask ourselves how much any one person can be worth.

  • Dan

    The WTO is much worse than that. Because this organisation is essentially a bunch of rich countries they allow themselves to have subsidies while bullying other countries into adopting measures that will help the rich get richer.

    Collective bargaining by workers is an absolute necessity as they’re bargaining with a collective. Companies are only very rarely a single individual, and even then they are typically operating from a position of strength. Companies that base their business around abuse of their employees don’t like unions.

    Minimum wages and regulation of working conditions like working hours are unfortunately necessary. Businesses will typically exploit their most vulnerable workers to whatever extent the law allows. In fact they don’t only strip wages to the minimum and maximise hours, firing anyone who refuses to work those hours for next to nothing, but they provide no training, little or no vacation time and have even been known to dock employees for bathroom breaks. Where do you take your labour when every employer does exactly the same thing?

    I once believed in a lot of the nonsense peddled by free market worshippers. I came to realise much of it is based on pure fantasy, bolstered by carefully manipulated data. In many cases these economists need to get out of their cushy ivory towers and take a look at the reality, not the pretend world of the hypothetical free market performing magic tricks that don’t actually occur when the rubber hits the road.

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  • http://www.thoughtleader.co.za/jasonhickel Jason Hickel

    I normally don’t respond to comments, but I thought I would take a minute to speak to “HD”, who appears to quite vigorously oppose the concept of a minimum wage.

    Economists have conducted dozens of studies showing that minimum wage increases and living wage ordinances in America – in cities from Baltimore to Miami to Santa Fe – do not negatively affect unemployment, especially in the case of service work, which cannot be offshored. Probably the best known among these studies is the 1992 Card-Krueger experiment, which showed that in New Jersey employment actually rose after a substantial increase in the minimum wage. These findings have been defended by Nobel laureate economist Joseph Stiglitz.

    Even more recently, in November 2010, the Review of Economics and Statistics published a study by economists Arindrajit Dube of the University of Massachusetts Amherst, T. William Lester of the University of North Carolina at Chapel Hill, and Michael Reich of the University of California, Berkeley, which analyzes employment trends nationwide for several categories of low-wage workers over a 16-year period and reports that increases in minimum wages had no negative effects on low-wage employment.

    You can read about these studies all over the web. For the latter study – which is the most comprehensive ever conducted – start with: http://economix.blogs.nytimes.com/2010/

    more in next comment…

  • http://www.thoughtleader.co.za/jasonhickel Jason Hickel

    In addition, economists at the Economic Policy Institute have defended the living wage concept for nearly two decades, and, in 2006, more than a third of members of the American Economic Association supported raising minimum wages toward the living wage.

    Finally, it bears pointing out that the living wage concept was absolutely central to Keynesian economics in postwar America, and provided the foundation upon which the Greatest Generation built the country into the world’s most prosperous. The Fordist model of production that characterized that period delivered a dependable family wage in exchange for highly productive labor and a robust consumer base. Recent neoliberal policy has eroded this edifice significantly since the late 1960s: once adjusted for inflation, the federal minimum wage in the United States today is lower than it was in 1967, which is one reason that inequality stats have gone haywire.

    In any case, HD, perhaps you might find it useful to read the study I cited in the article that deals with your questions: http://www.paecon.net/PAEtexts/Chang1.htm

  • http://necrofiles.blogspot.com Garg Unzola

    Sure, put up wages of sweatshops. And watch the sweat shop owners get rid of wage earners in favour of machines that do the job cleaner, neater and without complaints.

    The sword cuts both ways: You have labourers willing to work at sweatshop wages (for whichever reason) and you have sweatshop owners willing and able to pay those wages. Raise the wages and expensive machines that replace human labourers become cheaper.

    Sweatshops do not instil structural violence because they enable wage earners to fulfil their basic needs. Unless of course the sweatshop industries are run by government and the government forces people to work there.

    Minimum wage is about the worst form of institutionalised discrimination in existence. It only affects those already in the labour market and makes it more difficult for those outside of the labour market to participate.

    This article seems to hunger after the mercantilism days that turned the 19th century from a relatively prosperous and free world into a world of white settler colonies.

  • HD

    @Isabella:

    I don’t advocate “neo-liberalism”. What passes for as “neo-liberalism” and free market capitalism today is an insult and a complete perversion of what I believe. I believe in genuine free markets, contractual society and limited government (ideally no government).

    @Jason:

    First, regarding the paper. I agree fully with the history argument. But, then again that is exactly what I was also saying – where did these mercantilist and protectionist policies get us? Why do you want the developing world the copy these models? Also, you have to look at the political, economic and military power behind these policies…it had a big part to play in the so called “successes”. Did it really work because or despite of these policies.

    Secondly, I believe Keynesian economics and econometrics represents most of what is wrong with economics today. So I am afraid those arguments are not going to win me over. In fact have a look at the work of Rothbard and Higgs on the Great Depression – big government and Keynesian policies made things worse, it was only once many of these policies were abandoned that things got better…

    Finally, I think you need to be careful with studies like Berkley’s. Econometrics are a very imprecise tool to measure something like unemployment over various states (each with different labour markets). Even if we assume the study is correct many have argued that students, inexperienced workers and minorities get hurt by these policies – no doubt those in work benefit!

  • http://necrofiles.blogspot.com Garg Unzola

    @Jason Hickel:
    Keynesian economics did not build the post-war American paradise. It is ridiculous to lump ‘since the late 1960s America’ into one Neoliberal grouping, particularly since this is not post-war America and because America has alternated between periods of more regulation and more deregulation during that time, with drastically different policies.

    Fortunately, we are all experts in economics and minimum wage thanks to Wikipedia. So the minimum wage in New Jersey increased the adjacent state Pennsylvannia had a lower minimum wage? Great scott, what is the source of higher employment? I’ll be damned! “Relative to stores in Pennsylvania, fast food restaurants in New Jersey increased employment by 13 percent”. Truly perplexing.

  • HD

    See:

    http://ageconomist.blogspot.com/

    The studies against minimum wage legislation far outnumber those in favor. There have also been consistent criticism of Card Krueger (one of the most well know) and know of the most recently released Berkley study.

    Econometrics can only control for certain variables and then you also have to question the stats, survey techniques and conclusions.

    Just to mention a few:

    (1) Different labour markets across states
    (2) Substitution effects
    (3) Increase in prices and cost
    (4) Misallocation of capital and resources
    (5) Controlling for race, class, gender and income

    I also think we need to think carefully about the differences between the US and lets say South Africa. We sit with a large pool of unskilled labour. What is the consequnces of pricing them out of the market, forcing business to take on extra costs and the implications for the general strategic direction of the economy. In today’s open society and markets you cannot hide inefficiency and uncompetitive industry through old dated mercantlist practices.

    Don’t get me wrong – I agree with your criticism of much of the neo-liberal policies being proposed under the mantle of free trade / free market capitalism. But, I also think we must be careful to advocate policies that have proven to be counter-productive – SA has far less room for error…

  • http://necrofiles.blogspot.com Garg Unzola

    @Jason Hickel:
    Most American states have minimum wage requirements that are above the Federal minimum wage. Workers are entitled to the higher one of the two, so the fact that minimum Federal wage is lower than it was in 1967 is completely irrelevant. Most Americans do earn far above the living wage (note: living wage, which is above minimum wage). It follows that America can afford to put up its minimum wage quite a bit because: 1. it is far under what the market-related minimum wage 2. most people in the labour market earn more than living wage anyway.

    May I recommend that your next blog post covers a topic you are actually familiar with, such as anthropology?

  • Hard Rain

    “Finally, it bears pointing out that the living wage concept was absolutely central to Keynesian economics in postwar America, and provided the foundation upon which the Greatest Generation built the country into the world’s most prosperous.”

    Yes, after they destroyed their currency and became the most bankrupt nation on earth, right? But all they need are more waiters and busboys getting $10 an hour, as mandated by the state, and all will be well?

  • HD

    These two articles in today’s Business Day does a good job of illustrating the consequences of minimum wage legislation in SA:

    http://www.businessday.co.za/articles/Content.aspx?id=147440

    http://www.businessday.co.za/articles/Content.aspx?id=147459

    I would also read the article by Gavin Keeton on lumping all South Africa’s policies since 1996 under the mantle of “neo-liberal”.

  • Ant K

    One needs to define “sweatshops” and “child labour”. In Asia many folks have sewing machines at home and do piecemeal work for large factories allowing moms to be home and work flexi-hours. When kids come home from school many sit on machines and either mess about or actually help mom. The fact that they work into the evening and weekends is just the Asian work ethic. This is a better way to earn a living than to travel many miles daily to a large factory employing thousands. This used to be common in the UK until the 1970’s when unions banned the practice as it robbed them of membership. Ask yourselves why most manufacturing has left Europe and America during the last 30 years and is now all done in China?

  • http://www.cindynel.co.za peter nel

    Absolutely brilliant Jason. Whether we have the courage and not only the ability remains the burning question. Of course there are folks on this planet who would kill their own flesh and blood for a dime, are there not? A very sad human trait is greed.

  • http://blogroid.wordpress.com Nicholas

    We teach 9th grade kids about the “economic problem” The textbook says that the economic problem results from people having unlimited wants and needs while having only limited resources with which to satisfy them.

    Specifically therefore the economic problem has to do with scarcity of resources.Labour is a resource that is not really scarce.

    It is a pity you never took 9th grade economics. It is much clearer than economics 101 which it seems you never took either.

    The core problem for labour in the 21st century is that it has largely become superfluous… mandated minimum wage levels notwithstanding

    The essence of the economic problem is that it gives us two concepts called Supply and demand.

    When the supply of resources is greater than the demand then the price of the resource must go down and vice versa.

    Regrettably the demand for labour is less than the supply… and for unskilled or slightly skilled labour is significantly less, and for commoditised labour it has largely been mechanised out of existence..

    There isn’t a huge demand for `anthropologists’ one imagines either, an occupation that is relatively unskilled in the greater scheme of things. I’ve certainly never seen an advertisement for one in the weekly job press.

    As for castigating the contemporary market scene, it is more than probable that the entire current global economy constitutes an endgame in rigged market economics and is hardly representative of capitalism in the mythological sense you have placed under your fogged up microscope.

  • Geoff

    The fundamental problem with HD et al’s arguments is that they they treat economics as if it is a natural law, separate from human beings, rather than as a system created by human beings. Further, they are based on economic models in which assumptions are made about how people, markets and economies should work, but fail to grasp that economies have never and will never work according to these models. It is possible to create a system where sweatshop labour, for example, is never required, but it takes imagination, courage, and a commitment to justice.
    It is the economists who should be reading social science texts, not the other way around.

  • http://necrofiles.blogspot.com Garg Unzola

    @Geoff:
    Please follow HD et al’s links on minimum wage. The body of data is clear that minimum wage negatively affects unskilled employment, negatively affects skills levels and in-job training for those who are in employment, and
    that the single study that Jason Hickel referred to was a telephonic survey, which did not even take real employment data into consideration. That study is much criticised because of its confirmation bias.

    The good intentions of minimum wage do not mean that minimum wage leads to the desired results, nor that those who oppose minimum wage somehow disagree with its intent.

    The data concerning minimum wage merely shows that minimum wage does not achieve what it aims to achieve.

    You can also read about how HD et al treat economics in this excellent article on what Mises can teach the quants.

    Note the difference between case and class probability. You’d also note that minimum wage instead is the culprit that treats cases like classes.

    We know how markets and economics work. We cannot know nor determine how they should work. All we know is that interfering with the market usually doesn’t work.

  • Toni Benoni

    Ahh yes, words of the wise and well fed. One mans sweat shop is another mans pay cheque.Only the well fed can argue against sweat shops. In China people DO have an alternative, it is called farming, yet millions leave the farms to work in the cities illegally in sweatshops because THEY EARN MORE MONEY and dont have to live in the sticks. According to the self appointed do gooders in the world abject rural poverty is better than urban low wage employment. Like I said, the “wisdom” of the well fed.

  • Geoff

    @garg
    My point is that what we have now is a system, created by people, based on a particular understanding of human interaction that relegates billions of people to poverty with phrases such as “Regrettably the demand for labour is less than the supply” (@Nicholas).
    You are correct in that in the current system minimum wage laws probably do negatively affect employment.
    But in my view this is an argument against this system, not an argument against minimum wage laws etc.

  • http://necrofiles.blogspot.com Garg Unzola

    @Geoff:
    Yes, I agree with you. It is an argument against the system. It is also true that the current system is an attempt at designing and regulating human interaction, and it does relegate billions of people into poverty.

    Minimum wage is part of the fallacy that a large system can be designed and built by some divine providence. You might enjoy Hayek’s notions of spontaneous order if you aren’t familiar with it.

  • HD

    @Geoff

    Economics is a social science and as already mentioned I have a big problem with the overtly mathematical/statistical nature of most mainstream economics being taught at universities. Pick up a primer on economics (Robinson Crusoe stuff) and see for yourself. The classic economists were as much philosophers as economists.

    The Austrian school, for example, explains all of modern economics through logic and few empirical observations, from the simple premise that humans act purposefully, through means at their disposal, according to their personal “plans” (not perfect) to achieve future ends (outcome not certain and not limited to material ends).

    Hayek, Friedman, Mises, Smith etc. all stressed social institutions and cooperation. Today many top economist investigate social issues like robust institutions, political systems, problems of the commons (pollution, ecology, etc) in diverse economic disciplines such as institutional economics, public choice, behavioral economics – drawing from techniques in sociology, political science and psychology.

    Check out Econtalk.org – it is an excellent site that discusses a wide range of issues from an economic perspective.

  • HD

    @Toni

    Agree, especially given that the alternatives in many poor developing countries are: scavenging garbage dumps, prostitution, begging on street corners, engaging in criminal activity and trying to make a living of subsistence farming and informal street vending.

    Contrary to middle class sensibilities, studies have shown that people perceive “sweatshop” labour more favourably than agricultural work and street vending. It is not just that these “sweatshops” improve meagre monetary position, but it also contributes to increased job prospects for women, educational opportunities and intergenerational mobility.

    Working long hours at the low hourly wages actually put many people above the average per capita income in many of these countries.

    You also only need to look at Chinese “sweatshop” workers, who are already beginning to reflect some of the increased prospects mentioned above by demanding and justifying higher wages, moving into higher skilled sectors and in short continuing to break the poverty cycle.

  • http://necrofiles.blogspot.com Garg Unzola

    Here are some primers in economics:
    Concise guide to economics. It covers the basics (such as defining capitalism, for those who are still stuck ‘exploiting the workers’ gramophones. It even covers minimum wage and Marxism).

    A Crusoe social philosophy, Murray Rothbard’s parable that explains basic economics concepts. This is worthwhile because it shows the methodology used by Austrian economists (surprisingly arithmetic free).

    And in the vain hope that someone cares, here’s a guideline to having an intellectually honest debate, and a short guide to critical thinking.

  • http://necrofiles.blogspot.com Garg Unzola

    My apologies, here’s the short guide to critical thinking if anyone cares.

  • http://blogroid.wordpress.com Nicholas

    @Garg Unzola: Thank you for these excellent links

  • Stephen Browne

    A fair wage for a fair day of labour hey? I believe that thinking comes in the same package as free trade etc.

    Moral obligation has been forgotten by business (if it ever knew what it was.)

  • HD

    http://www.learnliberty.org/content/unintended-consequences-price-controls

    A short video on the unintended consequences of price controls – looking at minimum wage.

  • http://jockcoats.me Jock

    I’ll wager that many of those people on here speaking from an Austrian or thereabouts position have, like me, travelled politically and economically from the sort of position advocated by Jason Hickel here in what seems like an echo from a previous life, through understanding *human* action as the core economic motivation and that institutional action, whether of states, government and their corporate cronies through international financial planning organisations always thwarts beneficial human action.

    And for those who still do not understand freed markets, as *opposed* to “free markets”, I once wrote a little primer for my UK based political colleagues.

    The thought of global institutions setting and enforcing their idea of a “minimum wage” and all the protectionist stuff advocated here fills me with dread. The UN has set a “minimum wage” ($1/day) and guess what? Sweatshop workers in comparable countries make many times this. Perspective is required!

  • HD

    @Jock

    Sure, it is very difficult studying social sciences / humanities without being exposed to these ideas.

    In fact I cannot recall ever being exposed to Hayek or any free market advocates in my studies (even post graduate) that included Political Economy, Global Political Economy, Political Theory and International Relations. (Gellner being the closest)

    I was exposed to plenty of Marx, Chomsky, Polanyi, Klein, Gramsci and Cox (critical theory).

    Looking back at it, it is amazing how much you where brainwashed and never got the other side of the argument.

    You also realise that a fair share of your professors never picked up a book on economics or were only exposed to the same stuff.

    Any way, I don’t think it was all useless and still think people like Gramsci/Cox have important insights, plus many of the others.

    What really turned me over to the “dark side”,was getting a job in government…

    Interesting article, very similar to arguments made by Roderick Long / Kevin Carson. Carson’s view on “vulgar libertarianism” is very important, especially in debates like these. Reminds me, Long had a good paper out recently on talking to the Left.

  • http://necrofiles.blogspot.com Garg Unzola

    @Nicholas:
    You’re welcome. Here is a great one page primer on economics:

    10 things debaters should know about economics.

    Note that a 1,8% increase in clothing prices would result in less clothes being sold. Certainly, it might double the wages of the sweat shop workers, but ‘what is not seen’ here is that less sweat shop workers would be hired and in the long run, less clothes would be sold.

  • Josh

    China was never colonized. It has many sweatshops. How can this be the result of Europeans?

  • Pingback: Why Jeffrey Sachs is wrong about sweatshops (Participation) « IntrotoCES()

  • Mike

    “With or without religion, you would have good people doing good things and evil people doing evil things. But for good people to do evil things, that take religion.”

    I’m scanning down the comments, and we have a few very dogmatic users, seeing the world in black and white, yearning to take advantage of people – to use – to abuse – because their ideology says it’s just.

    This is their economic/political religions at work – passionately yearning for slave labour and sweatshops. They are utterly convinced that two options are available, and have convinced themselves that abuse is noble.

    Well, religion is giving way to reason and empathy, and so will these political and economic religions too.

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