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An AP article yesterday entitled "Can low-paying garment industry save Haiti?" highlights how depressingly hypocritical US commitment to helping Haiti really is.  Using the quake as an opportunity to kick into high gear a plan formulated last year, the UN, Obama administration, and American business community are planning to expand the sweatshop industry as a means of helping Haiti's economy recover from the disaster.  

Yes, you heard that right--more sweatshops to help the Haitian people...typical American solution.  The industry in Haiti currently pays a wage of $3.09 a day, having refused to accept a law last year that had tried to peg the minimum wage at a bounteous $5 a day.  (The clothes sewed, incidentally, are no Wal-mart brands, but sell for $550 a pop at stores like Jos. A. Bank.)  At this wage rate, employees can pay for the barest food and, if they're lucky, shelter, and no more; indeed, they must miss out on the free food handouts that are currently available because they're kept at work all day.  
Nevertheless, Bill Clinton, currently serving as a "special envoy" to the nation, promised that "The rich will get richer, but there will be a much, much bigger middle class, with poor people pouring into it at a rapid rate."  The theory, of course, is that eventually, all these folks will save up enough money from their meager wages that they can spend more, encouraging more industries, and thus more wages, and they'll be able to acquire more skills, and thus command higher wages, and so on.  The problem, of course, is that the wages are so low that nobody has anything left over to save or invest, and the population is so desperate and unemployed that those wages won't be rising anytime soon.  In fact, in the last twenty-five years, real wages have fallen by 50% at these factories!   No one has poured into the middle class from sweatshop work; rather, the poor and desperate have simply sunk even deeper into poverty and desperation.    
Nevertheless, a year and a half ago, the US Congress passed an act called the "Haiti Hemispheric Opportunity through Partnership Encouragement Act" or "Hope II," giving Haitian sweatshops completely tariff-free access to US markets, to try to encourage more US clothing companies to outsource their labor there.  Of course, the lifting of such barriers does nothing to raise wages, but simply boosts factory profit margins, which now average 22%! 
I recall Rerum Novarum's indispensable dictum:
"If through necessity or fear of a worse evil the workman accept harder conditions because an employer or contractor will afford him no better, he is made the victim of force and injustice."

5 comments:

I appreciate the sentiment here, but it doesn't seem like you've thought things out all the way through. You do a lot of tsk tsk-ing but don't offer any positive arguments for what should be done to help Haiti in the long term. Clearly being paid $3.09 a day is, in absolute terms, a travesty. But if the goal is to help people, then it is not helpful to judge things in absolute terms; we need to evaluate solutions relative to what other options there are. So, being paid 3.09 a day is bad, yes, but it might not be as bad as having no job at all.

Also, I think you have to think of the question: how are economies built? You seem to be fixated on profit margins, but the fact that the capitalists make spectacular amounts of wealth while the workers scrape by is an old story and just reduces to an argument against capitalism in general. But--barring a switch to some magical form of government in which rank poverty just goes away--if we want to look at how wages go up over time, it's not determined by retail prices in America but rather by how competitive the labor market is in Haiti. People like the woman in the article get paid 3.09 a day because she has no negotiating power, and because there are legions of people who could replace her at the drop of a hat. Only after there is a broad-based growth of the economy across different sectors do the wages start to go up, because only then to companies start competing with each other for labor. And doing things like opening up the US market to encourage the Haitian garment industry (and other industries) to grow is precisely the sort of thing that is necessary (albeit not sufficient) for this broad-based long term economic growth to take place.

Also, we must take care to remember just how astonishingly impoverished Haiti is when we think about what "progress" means. Progress in Haiti in the years ahead is going to be measured in terms of life expectancy, infant mortality, how many people have running water, etc. Capitalism is painful but--given sufficient social institutions and a more or less functional government, I think it really can materially improve the lives of millions of people, as I think has been demonstrated in places like India and China, where unthinkable poverty still exists (is predominant, even), but where its alleviation is at least a realistic possibility sometime in the future.

Of course, I'm all for charitable aid and basic domestic social justice in Haiti, and these causes really do a make a difference at the margins. The right kind of international pressure and domestic political situation, for example, could move the garment industry minimum wage from 3.09 to 5.00 per day, which would be a wonderful thing. But in the long run what's going to be more crucial to more people's lives is precisely things like trade policy and whether the United States chooses to impose ruinous tariffs on a struggling developing economy.

February 24, 2010 at 10:03 PM  

David,
You're right that I don't explain the reasons why this is a travesty in this post, but they can be picked up from other posts on this blog, in particular the recent "Leo on Labor Justice."

Here's my basic concern:
1) The end doesn't justify the means. To pay workers only $3.09 a day is objectively wrong (again, see "Leo on Labor Justice"); that seems clear to me now, even if it took a long time to become clear. Given that that's the case, you can't excuse it by saying, "Oh, well, it'll pay off in the long run...a lot of injustice may need to be done now, but in the end, it'll work out better for everyone." The fact that "capitalists make spectacular amounts of wealth while the workers scrape by is an old story" doesn't make it any less appalling and sinful of a story.

2) Given that it's objectively wrong, we shouldn't surprised when it turns out that the promised benefits are also a mirage. Hence my point about real wages declining by 50% in the last 25 years. When people are paid little enough that they remain in economic desperation, then there is no competitive pressure on wages to go up; no one can hold out for higher wages if the alternative is receiving nothing. So the laws of supply and demand, in this situation, will not by themselves raise wages, at least not for a very long time.

Moreover, it is worth mentioning that while you mention "sufficient social institutions and a more or less functional government," those things do not arise very readily in an economy built on sweatshops; rather, it creates a society of landless destitute dependents, unable to govern themselves properly and always at the mercy of more powerful foreign powers like ourselves.

February 25, 2010 at 10:08 AM  

Look, I think you have to make a distinction between two different components of the Haiti economic situation.

The first is a question of the aggregate size and wealth of Haiti. Obviously, the nation is extraordinarily impoverished. Per capita GDP--which serves as a nice rough estimate of how much total wealth there is available in a nation that can be divied up amongst its citizens--is, for Haiti, $1300/year, or rank 197 out of 225 countries. So, with regards to this first component, the goal should be the growing of the overall pie, so to speak: increase the total wealth of the nation (its per capital GDP), and you increase the wealth potential of each citizen. After all, even assuming a society perfectly disposed to justice and equity, if the wealth just isn't there, then you just physically cannot dispense a wage that is sufficient "to support a frugal and well-behaved wage-earner".

The second component is distributive justice, which is how exactly the pie gets sliced up. In Haiti, you have a situation of grotesque inequity: Haiti's GINI coefficient (an interesting statistic that measures how equally wealth is distributed. 1 means perfect inequality, where 1 person controls all wealth; 0 means perfect equality) is about .6, which as you can see from this map is very high. Now obviously the goal with this component is a bit fraught, as you well know: liberals (like me) will tend to favor policies that result in more equal distributions, whereas conservatives will tend to favor policies that they perceive as encouraging growth (component 1) which they consider an acceptable tradeoff for less equality (or, if the conservative in question is a high school student who just read some Ayn Rand book, they will say that equality in and of itself shouldn't be considered a goal at all). But all mainstream conservatives and liberals agree to some basic minimum of redistribution of wealth that will result in something far more equitable than the current situation in Haiti where, to keep our example going, a hard-working person is paid a subsistence wage of 3.09/day while an elite few reap all the benefits.

Now, obviously in order to have a functional and just political-economic order you need both of these components in place. If you have extreme aggregate wealth (component 1) but that wealth is concentrated in the hands of the few (lack component 2), then you get a situation where people are "made the victim[s] of force and injustice". If on the other hand you lack aggregate wealth, then you don't have the capability to deliver on distributive justice in a meaningful way.

So, getting back to your original post. You specifically criticized Obama for suggesting that we help Haiti by removing trade barriers so as to encourage the garment industry there. However, trade policy like that is solely concerned with component 1, or growing the aggregate wealth of Haiti. Tariffs penalize Haitian exporters, taxing away money that would be set into circulation in the Haitian economy. Free trade (and encouraging companies to buy Haitian) bolsters the amount of money that stays in Haiti, growing the aggregate economy.

Of course, enacting free trade is not sufficient to get a more just outcome because component 2, domestic distributive justice in Haiti, is also required. So the worst case scenario in allowing free trade is that yet more wealth will accrue to the wealthy and the poor will not see any of that wealth*. But it's still true that some amount of distributive justice may yet prevail--through political action and what have you--thus resulting in a material increase in well-being of the Haitian poor. It's a real possibility!

February 26, 2010 at 11:01 AM  

So in advocating free trade, Obama is merely advocating a policy that at best will improve that status quo, and at worst will leave the status quo unchanged. Obviously it's not sufficient to solve everyone's problems there, but at least it's an incremental step in the right direction. Dismissing the entire attempt as part and parcel of a generalized critique of the messed-upness of capitalism--especially in light of an absence of any alternate concrete policy suggestions offered--forecloses on the possibility for improvement in Haiti, and I think is a defacto disengagement from real people's suffering in the real world. It is possible to denounce A and B while also strenuously advocating that, if we must choose, A is preferable to B. Or, more colloquially: it is a question of the lesser of two evils.

PS: You keep mentioning this (unsourced) statistic of a 25% drop in real wages, and seem to be regarding it as dispositive evidence of some claim: but what? Nobody argues that Haiti's society and government has been profoundly dysfunctional over the last few decades. Of course if this doesn't change, then there is little hope that anything we do will end up helping them in the long run. But it doesn't follow from this that we should not even attempt to take steps (such as opening up trade) that would allow the possibility of improvement in the future.

Also, in (3) you make the extraordinary empirical claim that the existence of sweatshops somehow damages or works against the social and government institutions that are required for a functioning economy. First let me just say: well, shoot, I don't know dude--I'm just a computer programmer with a blog, not a polySci grad student. I'm sure there's volumes written on the subject. But also, isn't it true that virtually every developed economy--the US and UK included--passed through a lengthy and painful phase of widespread sweatshop conditions and class strife? What do you think New York was like in 1890? It was a big fat slum--raw sewage running in the streets, even--with a wealthy elite running things downtown!

(this asterisk connects to the one in the first comment)
*I'm overstating this (to my argumentative disadvantage). Even if the capitalists retain nearly all the profits, that money will--to use a detested Reagan phrase--"trickle down" to others in the economy. I mean, hey, the caviar salesman will be doing pretty well. $1000 spent on one man's dinner is as economically stimulative as $1000 spent by a thousand different men. And in the very long run, it might not matter how non-equal the distribution of wealth is in the early stages of economic development for the nation's ultimate economic well-being. But as they say, in the long run we're all dead: so of course the inequity in Haiti is abominable, and certainly to the overwhelming majority of people living and breathing there today, extra cash for the rich won't benefit them in any way whatsoever.

February 26, 2010 at 11:15 AM  

Mr. Littlejohn,

Although I cannot comment on specific wage rates and the cost of living in Haiti, I will assume for the sake of argument that the $3.09 a day you quote is in fact barely a living wage providing only the barest of food and shelter.

Even if this is true - shouldn't the parties you list at least get credit for expanding jobs in Haiti? I mean if a business creates 200 jobs, that 200 Haitians choose to work at, doesn't that mean that 200 Haitians are better off. Opening up free trade and expanding operations in Haiti provides jobs for Haitians who didn't have them before.

Now - that being said you can still argue that a particular wage is morally objectively insufficient and that the company should increase it. But at the level of the American government (which you scorn) I just see a bunch of investment to provide jobs for a bunch of Haitians. Haitians who, by the way, freely choose to take this job because $3.09 a day in their judgment is better than $3.00 a day, $2.00 a day or joblessness which is obviously the alternative.

On the point of the rejection of the $5 minimum wage. Depending on the circumstances, not having a minimum wage may result in a net increase in Haitian employment because a Haitian minimum wage could drive jobs to other countries where workers are willing to work for $4 a day. Therefore, without further empirical evidence one could argue that maybe Haitians are better off without the minimum wage.

Thus, I think your criticism boils down to being appalled at the low wages private companies are paying their employees. Personally, I am appalled at these numbers as well and I do hope that the people running these businesses repent of their sin. I think, however, that being appalled by the actions of private businesses is very different from criticizing a full government policy that is trying to do something to fix the problem.

Finally, this situation is very grave and the poor and defenseless deserve the help of Christians. What is your plan? What do you think should be done? If you were President Obama what would you do? Creating wealth in Haiti is what needs to ultimately happen - what are you going to do to accomplish that?

Cheers,

JRM

February 28, 2010 at 8:02 AM  

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