Friday, December 29, 2006

POLITICAL UPDATE--Economics

This update focuses on economics. Government regulations imperil freedom and prosperity, but freedom leads to prosperity.

Walter Williams explains that the military draft misallocates resources.
William Anderson shows that the New Deal was an economic disaster.
Phyllis Schlafly explains some of the problems with globalization.
Thomas DiLorenzo explains that "sweatshops" help the poor.
Walter Williams explains the basic principles of economics.
Walter Williams argues that free trade leads to prosperity.
David Hogberg shows that business selfishly supports regulation.

POLITICAL UPDATES are archived here.

4 comments:

The Blogger formerly known as Anonymous said...

Okay Allan. You have a bit more explaining to do. This time it involves Mr. DiLorenzo’s article. In it, he cites but one study and is, interestingly, not credited for any publications in economics either. Despite his position as a professor, it seems once again you have posted a pundit with a vendetta against something (this case organized labor). I have decided your postings are an outlet for right-wing ideology and have stopped taking them seriously for the most part. I am still looking for an answer as to why you only post pundits, however. Now, in regards to DiLorenzo’s article, he does not identify exactly what is meant by the term “sweatshop.” His definition would allow any place of employment to be characterized as such. This allows him to set up what is then a straw man argument meant to bash labor unions. Regardless of your opinion of such organizations now, they played an important role in securing worker rights and protections in the early part of the last century. Though we may agree that they have outlived their purpose, to suggest they are somehow out to destroy capitalism is shear demagoguery. Now, perhaps you might respond that “sweatshop” is defined in the article cited by Mr. DiLorenzo. Once again I have to ask why bother positing him and why not simply link to the journal article itself? Are you suggesting there are not places of employment where workers are forced to work for pittance (sometimes nothing at all) in deplorable conditions (Ms. Schlafly seems to think there are)? Perhaps you are arguing this is okay and simply a byproduct of capitalism and, as Americans, we should be glad “we” do not have to do such things. I know you do not like people accusing you of saying things you did not intend to say but you leave one little choice. This is all the more so when you post conflicting articles that lament increased trade and globalization on the one hand but then encourage it on the other. Such convoluted thinking is why one must always be suspicious of the economic ideas emanating from the right and why Democrats tend to come out ahead when it comes to the economy. I look forward to your comments and clarifications.

Matt said...

While I cannot speak for Allan, I would like to respond to some of the claims you made.

It seems you launch your first few arguments as an ad hominem attack on Mr. DiLorenzo. The actual criticism you then make is in his definition of a "sweatshop." The point of the article wasn't a semantics debate about the definition of the word, but rather that their objection to low wage jobs is not only a) not made for the benefit of those in Third World countries, but b) counterproductive to increasing the living standards of those working those wages in those countries.

He argues that labor unions fight against "sweatshops" simply to destroy the competition they pose to organized labor. I see not how using a particular definition of the word "sweatshop" is critical in this context, nor how you refute the point Mr. DiLorenzo actually makes.

You ask if Allan is suggesting that "there are not places of employment where workers are forced to work for pittance in deplorable conditions?" The answer to this is that, yes, there are people in those conditions; however they are better off working in those conditions compared with the alternative. That alternative is working in some parasite-infested field under the sun and elements with no competition for their jobs. Putting a factory or any new employer gives these people a choice. The ones who chose to work in the “sweatshop” voluntarily decided that the job they were currently working was worse than the one they could take in these "deplorable conditions" making a "pittance." Therefore it is assumed that in the jobs they already had they were making less than a "pittance" and/or in even more "deplorable conditions" than the demonized "sweatshops."

They give a choice and a chance for people with no skills, no education, no transportation, and typically poor health that would otherwise not be available to them. The "sweatshop" added capital investment into the area and gave every worker who chose to work there a better place of employment, but many would attack them for improving the conditions of these Third World workers!

The Blogger formally known as Anonymous said...

Matt,

I have a number of responses to the points you raise. Bypassing your first comment because I think you mischaracterize my observations on the tone of the article, the debate is entirely about semantics precisely because DiLorenzo fails to specify the object under scrutiny. As I point out, doing so allows him to construct what looks like a solid argument but which is, on closer examination, poorly constructed. Were his objective to point out the harm caused by labor unions in modern economies, he could have done so far more effectively by leaving the sweatshop question aside or by being more specific in his terminology. In not doing so, he lumps many groups with vastly different objectives together as having an "anti-capitalist ideology." Speaking for myself, I support market capitalism but deplore sweatshops when defined as "a workplace that is physically or mentally abusive, or that crowds, confines, or compels workers, or forces them to work long and unreasonable hours" (Wikipedia).

Addressing your comment on "choice," this is where I am extremely skeptical of arguments put forward by conservatives. By the narrowest of definitions, the existence of a sweatshop would present an individual with a choice. Similarly, when faced with starvation, I could say rob someone or die. Such logic always rings hollow, however, when one examines sweatshop practices carried out by profitable multinational corporations. Moreover, your notion of choice depends on there being an ability to earn a living in farming (for example), which is not always the case in overpopulated areas. Where workers are placed in conditions described above, it is, in my mind, a solidly moral argument to resist such practices through boycotts and campaigns of consumer awareness. Therefore, I disagree that such "choices" are morally acceptable and I support those who seek to secure better working conditions and wages.

This brings us to the subject of organized labor. It is precisely in response to the "Dickensonian Capitalism" of the early industrial period that labor unions proliferated in the industrializing countries. These organizations allowed labor a collective voice in negotiations with capital and are directly responsible for the varying degrees of labor de- commodification" seen across the industrialized world (on this point see e.g. Esping-Anderson. [1990]. "The Three Worlds of Welfare Capitalism". Princeton, NJ: Princeton UP). Advocacy of worker rights, characterized here as improving the "choices" given to labor was therefore a necessary and moral aspect of industrialization. Admittedly, today’s global economy is different from that at the turn of the 19th century. Capital is more mobile and labor, consequently, weaker. To compensate, labor movements do advocate anti-market practices and do seek to exclude non-unionized labor from entering the marketplace. On the resulting harm to society, you and I are likely in agreement.

Once again the issue of semantics plays a crucial role in determining where you and I stand with regard to sweatshops in the global south. The opening of factories in impoverished countries must be seen as benefiting the local population. However, this holds only when labor is paid nominally above a subsistence wage. Where it is not, as in some sweatshops, individuals do not have sufficient excess income to support other businesses and drive further capital investment. A case thus can be made for allowing workers to organize for better pay and working conditions.

Mr. DiLorenzo does not sufficiently acknowledge this point. He focuses on sweatshops as examples of off-shoring in industries particularly vulnerable to such practices so that he can attack organized labor in industrial societies. As a thought, where is his (or your) criticism of agricultural farm subsidies in this nation as having an equally harmful effect on development in the global south. Cynically, I could point out that voters in farm-heavy states tend to vote Republican. In employing an overly broad definition of sweatshops, he disservices his own argument and leaves himself and those who support him open to criticism. What of labor unions in industries not facing the danger of jobs being exported overseas and also what of those who argue against sweatshops (defined above) as morally unacceptable? Your swiftness to embrace Mr. DiLorenzo is unfortunate but regrettably consistent with the general in-specificity in lumping your enemies together practiced all too often by those writing on this blog.

Matt said...

Sweatshop labor is not the preferred way to work. The conditions are terrible and the pay is low essentially by definition. However, one must always be mindful of the unintended consequences of our "solutions" to the sweatshop "problem." By examining the ramifications of a proposed solution, one sees that they can often make the situation worse, not better.

You make the case that working at a sweatshop isn't really a choice simply because the alternative is starvation. The classic analogy is if I'm being robbed at gunpoint, is it really a choice that I give up my wallet? I understand this point of view; however there is very rarely the situation where the sweatshop is the only employer. The very existence of a "sweatshop" will mean people are paid in money, and they then would need a place to spend their money. A market will then open up creating more employment servicing those who work in the shop. Furthermore, the employees of the shop will also gain skills and training that they couldn't have received elsewhere, as most Third World countries have very limited schooling opportunities. They are then able to get better jobs outside the realm of sweatshops because they have the skills, training, and experience that they could never have received doing farming (or worse, prostitution). This gives choices and options to the current employees of the sweatshop. They are able to move up to better jobs and new employees will fill their seats and learn skills themselves.

You make the claim that a case is made for allowing workers to organize for better pay and working conditions. What are the consequences of this? The first is that the employers, and this applies to any union, will hire less labor. When the costs of labor are increased without a proportional increase in productivity, the employers will hire less. Thus the employees at the shop may gain better conditions than they would otherwise, but it is at the expense of those not hired. Here is where we find the unintended consequences of a labor union. The people unemployed because of the union are truly worse off as not only do they lack employment, but they lack a voice. They don't know that they would have been hired if not for the union, so how can they protest? They are unaware of the damage done to them. And unemployment to the people of Third World countries can mean, in some cases, as you indicated above, starvation.

So if labor unions are not the preferred method of combating sweatshop conditions of labor, what is? The obvious answer is more sweatshops! Increased competition can drive wages up. With more businesses in the area, the infrastructure would have to increase to meet the demands of the business. Sweatshop-style employers that dominated the industries of Hong Kong and Singapore years ago have increased prosperity in these countries significantly. "Within a generation, apparel-assembling and similar jobs in Hong Kong, Singapore, South Korea and Taiwan took national incomes from about 10 percent of that of the U.S. to 40 percent." (Alan R. Myerson, "In Principle, a Case For More 'Sweatshops,'" New York Times, June 22, 1997.) According to economist Paul Krugman of the MIT, even in a nation as corrupt as Indonesia, industrialization originally based on sweatshops has reduced the portion of malnourished children from more than half in 1973 to one-third today. Krugman says the "overwhelming mainstream view among economists is that the growth of this kind of employment is tremendous good news for the world's poor."

So are sweatshops a problem for impoverished Third World labor, or are they the solution as a means of escape from poverty? The answer is clearly the later. Labor unions, at best, will hinder the growth of new employment in these countries and thus hinder the development of their populations.