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    Sharing the wealth

    Some comments to this recent post by Eric reminded me of something I started writing and then never wound up publishing last year. Virginia Postrel had a fascinating post on megalopolitan development in China and Saõ Paolo. The usual projected scenario (as in Rolling Stone‘s long mid-’90’s showpiece article on Saõ Paolo’s development–it doesn’t seem to be on-line, but if you’re also a former subscriber, you probably remember it) makes huge cities in developing countries out to be Black Holes of Calcutta. That is, the rural poor keep pouring and pouring in, setting off water and energy crises and flooding the job market until the unemployed occupy entire shantytowns. The argument that the sweatshop work available in the cities is the only way people can eke out a living is often given at the same time, with no comment on the contradiction.

    The articles Virginia cited indicate that desperate poverty is, of course, still a horrible problem. They also indicate, though, that (surprise!) people are not gonzo idiots. If work in the big city dries up, they can move to a thriving smaller city. If work in the big city comes with inhumane conditions, they can go back home and make do while they figure out Plan C.

    Eric’s post was about the guilty rich, but the comments I’m referring to are more specifically about our trade with developing countries:

    Money, in and of itself is not an evil thing. However, the way we have designed our free market to create large sums of money off the backs of 3rd world countries is egregious.

    For example, is it moral to buy clothing that was made from a slave labor camp in indonesia? WE don’t allow these camps in the US, because we know it’s immoral, but that doesn’t stop our malls from selling it. I buy this stuff too, I’m guilty.
    We artifically inflate prices of grains coming into the country to help our farmers, but that means 3rd world nations cannot make enough money to continue growing crops, even when that nation is literally starving to death!

    [I’m cutting the rest because the point I want to deal with has been made.–SRK]

    Posted by alchemist

    alchemist (whose comments at Eric’s I always find worth reading, though I rarely agree with her conclusions) got the following response:

    Briefly, the production of goods is farmed out to other Countries because the labor is cheaper. The laborers work in these third world Country factories because they want to – they get paid more than their other options would get them. This provides a net gain in jobs and wealth for that Country. There is no reason to pay these laborers more than the labor market will bear, and reasons not to, and reasons why it simply can’t be done [simple labor competition]. The goods shipped elsewhere become cheaper, holding down prices of competitor products, making currency more potent and actually stimulating greater production. Standards of living increase in the involved Countries. No one is taking profits off the back of the poor. Risk takers and organizers of the whole enterprise need the reward to even try it and keep the businesses in business. Marx was wrong.

    Posted by J. Peden

    I’m a supporter of free markets like J. Peden, but I do think people such as alchemist have a point when they note that reality isn’t a shiny and happy as his (her?) outline above makes it sound. Children have worked to contribute to family welfare since time immemorial, so I’m not against child labor wholesale (an issue alchemist addresses in a later comment). Nevertheless, you don’t have to look far to find ample evidence that children who work in Third World production facilities are often treated worse than First World livestock. While such treatment is carried out by well-connected and ambitious locals, we are, in fact, subsidizing it by buying the products it yields.

    There are other questions to be considered, though. For one thing, while the PRC certainly has a pronounced strain of draconianism, it is notoriously bad at enforcing laws like safety standards at the ground level. Suppose it passed child labor laws–could we reasonably assume, even if it had the best intentions, that it would be able to enforce them? There’s the fact that China has over a billion people, there’s ingrained corruption, and there’s the increased mobility that comes with the beginnings of prosperity. The countries of Southeast Asia may not (except Indonesia) have such huge populations, but they certainly don’t lack for corruption and fly-by-nights.

    Another question is, Does funding sweatshops actually make it possible for them to maintain their exploitative practices without end? There’s evidence that it may not. Rural areas start to become richer (or, given where they started out, less poor) as more wealth comes into the economy, as J. Peden said. And once sweat shops become common, word starts to leak back to rural areas about what really goes on in them. People begin to decide that they might be better off staying on the farm. And factory owners have no choice but to make the work more attractive to employees.

    None of this works perfectly. First World economies have plenty of exploited workers, too, after all. The problem is, in order for our wealth to help the poor elsewhere, it has to get to them. For that to happen, either we give it to them as a gift, or they produce things of value that we want to buy. In the first case, we have to hope against hope that powerful family and cronyist networks don’t siphon it all away as it trickles down to the village level, or waste it on vainglorious public works projects that no one can actually benefit from. Yes, there are wonderful direct-aid organizations with hands-on programs that help real people, but one of the things that seem to prevent them from being taken over by greedy opportunists is precisely that they do slow, un-flashy, long-term work in a small area. That’s a genuine economic contribution, but it takes a long time to show its effects on the grand scale.

    In the second case, we have to trust that the increased choice of newly available work will give them more control over their lives than they have now. While that mechanism doesn’t work perfectly, it offers a short-term alternative to subsistence farming and the long-term possibility of a greater number of opportunities.

    2 Responses to “Sharing the wealth”

    1. Toren says:

      We went through all this in the West during the Industrial Revolution. Things got better, and they will elsewhere, too.

      –Toren, writing as Dr. Pangloss.

    2. Sean Kinsell says:

      I agree. I mean, obviously. I think we should be self-critical, but working one’s way up out of subsistence is a rough life. There’s only so much that can be done about it.

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