FreeRange

In the spirit of provocation I am referencing an article here by American uber economist Paul Kruger where he makes an argument in Praise of Cheap Labour.  The entire article can be read here. I have pasted a sizable excerpt below.  To me the crux of the provocation comes not from different priorities about human needs, but from a different view on reality.  Many people that might be called anti-globalization folk share a idealist view of the world, seeing through a prism of how things should be and how people should be treated.   I don’t mean this as a veiled criticism, its an invaluable position.  But it is one that contrasts strongly with the utilitarianism of many economists (I’m excluding the obviously corrupt ne0-liberal groups here that just spout their own terrible idealism) who have a deep understanding of the present vast inequalities and are able to argue that what might look like terrible-ness to our eyes is infact improvement for people.  I can’t bring myself to entirely support the position that cheap labour is necessarily a good thing, but I do entirely encourage reading articles as this as they do fundamentally challenge what are often the safe but naive intellectual positions of the left.

“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.

And 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.

And 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.)”