In Praise of Cheap Labor
Bad jobs at bad wages are better
than no jobs at all,
By Paul Krugman
(1,669 words; posted Thursday,March 20; to be composted
Thursday,March 27)
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,
fter 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,
nd 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,
nd 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,
hy,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,
irst 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,
ou 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,
Links
To get a taste of moral outrage against
globalization,turn to Corporate Watch,a site
dedicated to exposing the "greed" of transnational
giants,Or,for a bizarre twist,check out Sweat
Gear,a satirical online catalog that attacks
sweatshops in Central America,Another argument
against globalization--that it threatens democracy--
is made by Benjamin Barber in the Atlantic,The
Clinton administration's word on the subject can be
found in a speech by Labor Secretary Robert Reich
to the International Labor Organization urging
better compliance with core labor standards,For
more on Paul Krugman,see a Newsweek profile
that dubs him "The Great Debunker." And
information on employment at McDonald's can be
found on the Web site of Hamburger U,their
worldwide management-training center,
Paul Krugman is a professor of economics at MIT
whose books include The Age of Diminished
Expectations and Peddling Prosperity,
Illustrations by Robert Neubecker,
