||In Praise of Cheap Labor
Bad jobs at bad wages are better than no jobs at all.
By Paul Krugman
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.
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
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.
To get a taste of moral outrage against globalization, turn
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
Illustrations by Robert Neubecker.