IN PRAISE OF CHEAP LABORBad jobs at bad wages are better than no jobs at all.
SYNOPSIS: Detractors of globalization don't understand Economic reality and comparative wages.
For many years a
huge Manila garbage dump known as Smokey Mountain was a favorite media
symbol of Third World poverty. Several thousand men, women, and children
lived on that dump--enduring the stench, the flies, and the toxic waste
in order to make a living combing the garbage for scrap metal and other
recyclables. And they lived there voluntarily, because the $10 or so a
squatter family could clear in a day was better than the alternatives.
The squatters are gone now, forcibly removed by Philippine police last year as a cosmetic move in advance of a Pacific Rim summit. But I found myself thinking about Smokey Mountain recently, after reading my latest batch of hate mail.
The occasion was an op-ed piece I had written for the New York Times, in which I had pointed out that 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." I guess I should have expected that this comment would generate letters along the lines of, "Well, if you lose your comfortable position as an American professor you can always find another job--as long as you are 12 years old and willing to work for 40 cents an hour."
Such moral outrage is common among the opponents of globalization--of the transfer of technology and capital from high-wage to low-wage countries and the resulting growth of labor-intensive Third World exports. These critics take it as a given that anyone with a good word for this process is naive or corrupt and, in either case, a de facto agent of global capital in its oppression of workers here and abroad.
But matters are not that simple, and the moral lines are not that clear. In fact, let me make a counter-accusation: The lofty moral tone of the opponents of globalization is possible only because they have chosen not to think their position through. While fat-cat capitalists might benefit from globalization, the biggest beneficiaries are, yes, Third World workers.
all, global poverty is not something recently invented for the benefit
of multinational corporations. Let's turn the clock back to the Third World
as it was only two decades ago (and still is, in many countries). In those
days, although the rapid economic growth of a handful of small Asian nations
had started to attract attention, developing countries like Indonesia or
Bangladesh were still mainly what they had always been: exporters of raw
materials, importers of manufactures. Inefficient manufacturing sectors
served their domestic markets, sheltered behind import quotas, but generated
few jobs. Meanwhile, population pressure pushed desperate peasants into
cultivating ever more marginal land or seeking a livelihood in any way
possible--such as homesteading on a mountain of garbage.
Given this lack of other opportunities, you could hire workers in Jakarta or Manila for a pittance. But in the mid-'70s, cheap labor was not enough to allow a developing country to compete in world markets for manufactured goods. The entrenched advantages of advanced nations--their infrastructure and technical know-how, the vastly larger size of their markets and their proximity to suppliers of key components, their political stability and the subtle-but-crucial social adaptations that are necessary to operate an efficient economy--seemed to outweigh even a tenfold or twentyfold disparity in wage rates.
then something changed. Some combination of factors that we
still don't fully understand--lower tariff barriers, improved telecommunications,
cheaper air transport--reduced the disadvantages of producing in developing
countries. (Other things being the same, it is still better to produce
in the First World--stories of companies that moved production to Mexico
or East Asia, then moved back after experiencing the disadvantages of the
Third World environment, are common.) In a substantial number of industries,
low wages allowed developing countries to break into world markets. And
so countries that had previously made a living selling jute or coffee started
producing shirts and sneakers instead.
Workers in those shirt and sneaker factories are, inevitably, paid very little and expected to endure terrible working conditions. I say "inevitably" because their employers are not in business for their (or their workers') health; they pay as little as possible, and that minimum is determined by the other opportunities available to workers. And these are still extremely poor countries, where living on a garbage heap is attractive compared with the alternatives.
yet, wherever the new export industries have grown, there has been measurable
improvement in the lives of ordinary people. Partly this is because a growing
industry must offer a somewhat higher wage than workers could get elsewhere
in order to get them to move. More importantly, however, the growth of
manufacturing--and of the penumbra of other jobs that the new export sector
creates--has a ripple effect throughout the economy. The pressure on the
land becomes less intense, so rural wages rise; the pool of unemployed
urban dwellers always anxious for work shrinks, so factories start to compete
with each other for workers, and urban wages also begin to rise. Where
the process has gone on long enough--say, in South Korea or Taiwan--average
wages start to approach what an American teen-ager can earn at McDonald's.
And eventually people are no longer eager to live on garbage dumps. (Smokey
Mountain persisted because the Philippines, until recently, did not share
in the export-led growth of its neighbors. Jobs that pay better than scavenging
are still few and far between.)
The benefits of export-led economic growth to the mass of people in the newly industrializing economies are not a matter of conjecture. A country like Indonesia is still so poor that progress can be measured in terms of how much the average person gets to eat; since 1970, per capita intake has risen from less than 2,100 to more than 2,800 calories a day. A shocking one-third of young children are still malnourished--but in 1975, the fraction was more than half. Similar improvements can be seen throughout the Pacific Rim, and even in places like Bangladesh. These improvements have not taken place because well-meaning people in the West have done anything to help--foreign aid, never large, has lately shrunk to virtually nothing. Nor is it the result of the benign policies of national governments, which are as callous and corrupt as ever. It is the indirect and unintended result of the actions of soulless multinationals and rapacious local entrepreneurs, whose only concern was to take advantage of the profit opportunities offered by cheap labor. It is not an edifying spectacle; but no matter how base the motives of those involved, the result has been to move hundreds of millions of people from abject poverty to something still awful but nonetheless significantly better.
then, the outrage of my correspondents? Why does the image of an Indonesian
sewing sneakers for 60 cents an hour evoke so much more feeling than the
image of another Indonesian earning the equivalent of 30 cents an hour
trying to feed his family on a tiny plot of land--or of a Filipino scavenging
on a garbage heap?
The main answer, I think, is a sort of fastidiousness. Unlike the starving subsistence farmer, the women and children in the sneaker factory are working at slave wages for our benefit--and this makes us feel unclean. And so there are self-righteous demands for international labor standards: We should not, the opponents of globalization insist, be willing to buy those sneakers and shirts unless the people who make them receive decent wages and work under decent conditions.
This sounds only fair--but is it? Let's think through the consequences.
of all, even if we could assure the workers in Third World export industries
of higher wages and better working conditions, this would do nothing for
the peasants, day laborers, scavengers, and so on who make up the bulk
of these countries' populations. At best, forcing developing countries
to adhere to our labor standards would create a privileged labor aristocracy,
leaving the poor majority no better off.
And it might not even do that. The advantages of established First World industries are still formidable. The only reason developing countries have been able to compete with those industries is their ability to offer employers cheap labor. Deny them that ability, and you might well deny them the prospect of continuing industrial growth, even reverse the growth that has been achieved. And since export-oriented growth, for all its injustice, has been a huge boon for the workers in those nations, anything that curtails that growth is very much against their interests. A policy of good jobs in principle, but no jobs in practice, might assuage our consciences, but it is no favor to its alleged beneficiaries.
may say that the wretched of the earth should not be forced to serve as
hewers of wood, drawers of water, and sewers of sneakers for the affluent.
But what is the alternative? Should they be helped with foreign aid? Maybe--although
the historical record of regions like southern Italy suggests that such
aid has a tendency to promote perpetual dependence. Anyway, there isn't
the slightest prospect of significant aid materializing. Should their own
governments provide more social justice? Of course--but they won't, or
at least not because we tell them to. And as long as you have no realistic
alternative to industrialization based on low wages, to oppose it means
that you are willing to deny desperately poor people the best chance they
have of progress for the sake of what amounts to an aesthetic standard--that
is, the fact that you don't like the idea of workers being paid a pittance
to supply rich Westerners with fashion items.
In short, my correspondents are not entitled to their self-righteousness. They have not thought the matter through. And when the hopes of hundreds of millions are at stake, thinking things through is not just good intellectual practice. It is a moral duty.