By: ALEX VRONCES
The tragic collapse of the Bangladeshi factory on April 24, and the terribly unfortunate loss of too many lives shouldn’t be used to cast doubt on the merits of unfettered trade, especially that with the developing world. Though people understandably want to end what the prominent Pope Francis demagogically coined as “slave labour,” letting the market run its natural course is admittedly the best approach.
To be sure, the conditions under which labourers from the developing world work are decidedly deplorable — at least by our standards. After all, the wages are extremely low, the hours are long, and the environments are unsafe. But commanding and legally forcing companies to pay workers abroad the socially just price, as opposed to the market price, most certainly causes more harm than good, for the result is usually greater poverty for the already impoverished workers.
“Economists across the political spectrum have pointed out that for many sweatshop workers the alternatives are much, much worse,” wrote Professor and Economist Benjamin Powell, who has done a lot of work on the subject. “All too often the fact that we have better alternatives leads first world activists to conclude that there must be better alternatives for third world workers too.”
And there’s actually a famous case that illustrates Powell’s point.
Two decades ago, a U.S. senator learned that very young children were producing apparel for Wal-Mart abroad. Senator Tom Harkin then proposed legislation to bar the importation of products from countries that employed ‘underage’ children. As a direct result, a Bangladeshi textile factory let go of a large sum of its working children, a significant portion of whom, British charity Oxfam reported, were thereafter forced into prostitution because they had no better alternatives.
That the alternatives to sweatshop work are relatively worse is usually snubbed because critics tend to wrongly compare apples to oranges. It’s beyond obvious that Western wages and safety requirements uphold far better standards of living than the developing world’s lack, and virtual absence, of wages and safety requirements, respectively. But that’s without question a meaningless comparison, for we’re at different points evolving under different circumstances.
For a long time, anecdotal evidence was usually used to cast a light on the problems of prohibiting or raising the cost of trade between countries under the guise of protecting underprivileged foreign-workers. Economists David Skarbek and Benjamin Powell, however, published a 2006 study in which they empirically demonstrated the oft-ignored bright side of sweatshop labour.
Skarbek and Powell compared the wages of foreign-workers in less developed countries, and what they found is rather damning to the wrongheaded critics of sweatshops. According to the data they collected, sweatshop workers making apparel for long hours and little pay generally earn incomes that are above the national average. What’s more, Skarbek and Powell went further and used alternative data cited by prominent American news media on the various wage rates of the developing world and reached a similar conclusion.
Interfering with what ought to be free trade between countries also has longer-term repercussions whose effects transcend the boundaries of sweatshop industries. It’s widely accepted among economists that free trade promotes greater growth and therefore improves the standards of living of everyone who participates. Actively trying to impede or restrict the flow of goods and services across or within borders — including labour — is akin to actively trying to throw people into poverty.
What happened in Bangladesh was certainly tragic, but what will inevitably happen should we heed the calls of the economically illiterate are even more so.