In the post just below, I linked to an article about Charles Kernaghan, a man who spends his life shaming big corporations over their use of child labor and sweat shop labor in the products they have made overseas. Over at his site, Matt Yglesias responded with the standard, but quite powerful, argument that we in the West (or the developed world) often project unrealistic and even harmful expectations on to wages and labor practices in developing countries.
So for instance, rotten working conditions for far under a dollar an hour may be bad. But the conditions <$Ad$> may be less onerous and the pay at least marginally more generous than what some of these people would otherwise be making in the agricultural sectors of their national economies. And maybe that’s why the company owners are able to get people to work at what seem to us to be inhumane conditions. (As a general matter, people in the West underestimate the sheer wretchedness of agricultural labor and the endemic nature of rural poverty.)
In any case, that’s the argument. And while I think it somewhat discounts the related issues of rural overpopulation and mechanization, on balance it’s a strong argument.
There is one thing, however, that this line of reasoning misses: political violence. Which is, after all, the grand-daddy of extra-economic inputs.
You can’t make a solid argument that wages in other countries have found their natural level if one of the major ‘inputs’ is organized political violence to keep wages low and labor activism inert.
To put it more concretely, one part of a real market in labor is the ability for people to protest conditions, either actively (through organizing) or passively (through quitting or refusing to work). But if people who try to form labor unions are murdered then that whole theory falls apart.
This certainly doesn’t solve the thicket of questions about globalization and third-world economic development. Nor does it invalidate the broader argument Matt is making. But on this particular point I think it makes clear that we’re dealing with more than invisible hands.
