Capitalism and Developing Countries

Long ago on this site, I wrote this:

More recently, progressives have turned their economic attention to lesser developed nations.  Progressives go nuts on the topic of Globalization.  Without tight security, G7 and IMF conferences have and would devolve into riots and destruction at the hands of progressives, as happened famously in Seattle.  Analyzing the Globalization movement is a bit hard, as rational discourse is not always a huge part of the "scene", and what is said is not always logical or internally consistent.  The one thing I can make of this is that progressives intensely dislike the change that is occurring rapidly in third world economies, particularly since these changes are often driven by commerce and capitalists.

Progressives do not like American factories appearing in third world countries, paying locals wages progressives feel are too low, and disrupting agrarian economies with which progressives were more comfortable.  But these changes are all the sum of actions by individuals, so it is illustrative to think about what is going on in these countries at the individual level.

One morning, a rice farmer in southeast Asia might faces a choice.  He can continue a life of brutal, back-breaking labor from dawn to dusk for what is essentially subsistence earnings.  He can continue to see a large number of his children die young from malnutrition and disease.  He can continue a lifestyle so static, so devoid of opportunity for advancement, that it is nearly identical to the life led by his ancestors in the same spot a thousand years ago.

Or, he can go to the local Nike factory, work long hours (but certainly no longer than he worked in the field) for low pay (but certainly more than he was making subsistence farming) and take a shot at changing his life.  And you know what, many men (and women) in his position choose the Nike factory.  And progressives hate this.  They distrust this choice.  They distrust the change.  And, at its heart, that is what the opposition to globalization is all about "“ a deep seated conservatism that distrusts the decision-making of individuals and fears change, change that ironically might finally pull people out of untold generations of utter poverty.

Which is why I really enjoyed this article linked by Mark Perry:

"Years after activists accused Nike and other Western brands of running Third World sweatshops, the issue has taken a surprising turn. The path of discovery winds from coastal factory floors far into China's interior, past women knee-deep in streams pounding laundry. It continues down a dusty village lane to a startling sight: arrays of gleaming three-story houses with balconies, balustrades and even Greek columns rising from rice paddies.

It turns out that factory workers -- not the activists labeled "preachy" by one expert, and not the Nike executives so wounded by criticism -- get the last laugh. Villagers who "went out," as Chinese say, for what critics described as dead-end manufacturing jobs are sending money back and returning with savings, building houses and starting businesses.

Workers who stitched shoes for Nike and apparel for Columbia Sportswear, both based near Beaverton, Oregon, are fueling a wave of prosperity in rural China.

Update: I would have thought it unnecessary to add these provisos, but apparently per the comments it is necessary for some.  Of course people need to be treated as human beings.  Companies in some poor countries that are using the power of local government to actually enslave workers or to employ them in non-consensual ways are not organizations a good libertarian would ever defend, as our bedrock principle is to deal with other human beings without force or fraud.

My point is that we cannot apply our wealthy middle class values to the pay/benefits/workweek package being offered in poor countries.  To my mind it is immoral to try to deny poor people in poor companies jobs just because we rich people in the US would not consider taking such a job.  This arrogant and frankly clueless attitude forgets a critical question - what is their alternative?  We may think the Nike factory job sucks, and against the choices we have it probably does, but I would bet the subsistence rice farming job, with one's family always one bad harvest away from starvation, would suck worse.  Of course we should aspire that everyone in the world can work in an air conditioned building for $40,000 a year while spending most of the day surfing the Internet and texting friends complaining that they are underpaid.  But you can't tell these countries that the only ladder they can use to escape poverty doesn't have any rungs in the first 20 feet.


  1. Ian Random:

    Funny, they still list Portland as their corporate headquarters. Apparently, they had trouble expanding and moved across the river to Vancouver.

  2. Fay:

    Just because someone used to work in a field, does not make it okay to chain them to a sewing machine for 12 hours a day, 7 days a week. I'm sorry libertarians can't see this; it's my main problem with the philosophy. Just because you're treating someone LESS inhumanely, doesn't mean their treatment is humane. And certainly just because you're paying them enough to scrape some savings together, doesn't mean their wages are fair or that the entire world should have to scale down labor prices to meet "just barely better than subsistence farming" wages. It's like smacking a woman across the face and saying "well it's better than being stabbed! Your life has improved! You should be grateful!"

    I mean, that's great, that jobs in Nike factories have improved lives in China. What's elitist is to say American workers deserve humane treatment, but Chinese ones don't because it's better than what they had before. Libertarians tend to treat labor as a "cost" when it suits them, and as human beings when it suits them, and never the twain shall meet.

  3. David McDonagh:

    McD: Ideas are way more superficially held than current common sense yet realises & the main opposition to classical liberalism & the market economy is down to sheer ignorance only.

    Take what Fay says above, for example. It is on par with the Irishman answering the request for street directions with "If I were you, I would not start from here!"

  4. Russ:

    I am in San Pedro Sula, Honduras at the moment, and have driven by dozens of these sweatshops that are 'exploiting' the work force. I'm still trying to figure out what those big machines on the roof are that are connected to what appear to be air ducts. I think they are known as air conditioners. Doesn't cool air prevent or slow down sweating?

  5. Mary:

    Chaining someone to a sewing machine would be wrong. Preventing someone from choosing to earn a living by working a sewing machine BECAUSE IT OFFENDS YOU, is also wrong. It is elitist to say MY WAY is better than YOUR WAY and I'm going to impose my way on you because 1)I see you as a victim, and/or 2) I'm smarter/richer/more sophisticated than you.

    Treating people with disrespect ("I know better than you"), disallowing them control over their lives ("I've decided you're a victim, so I'm going to help you") is inhumanity disguised as benevolence.

    Walk a couple of miles in their shoes. Ask them what they want. Ask them how you can help. Then get out of their way. It is the humane, respectful thing to do. All else is the worst of paternalism that has created cultures of dependency and entrenched poverty around the world.

  6. Fay:

    Just because something is "better" doesn't mean it's "good." Sure, ask a woman who gets stabbed every day if she'd rather be slapped; of course she would. It doesn't mean slapping her is okay. If that makes me a "my way is right" type, then so be it; I still don't believe in treating human beings in whatever way the labor market allows.

  7. mishu:

    What's good Fay? Why should a company apply working conditions to a textile mill in say, El Salvador to that it's the same as Massachusetts? Workers have different needs based on where they live. Salvadorans don't need to heat their homes, buy winter clothing, have a heavier diet to stay warm. It's warm 365 days a year there. Labor may be cheaper there as it is cheaper to live there.

  8. Carl S:


    As David pointed out by analogy, you can't move from an agrarian society to an industrial one overnight. You're comparing working conditions in developing countries to current working conditions in the US. This is totally innappropriate. The US began industrializing 300 years ago. American workers are paid more now becuase they have 300 years of industrial infrastructure and knowledge which allows them to more productive. Probably 100 years from now we'll consider current working conditions in developed countries inhumane.

    If Nike was grossly exploiting these workers, then Reebok would step in, offer them 10% more and exploit them slightly less. As should be obvious, soon enough the workers would be paid appropriately for what they produce.

  9. Dan:

    This is turning into a really good conversation, and, as usual, I find myself appreciating both sides of the argument (typical for a moderate, I suppose).

    My own grandparents came to the U.S. in the early 20th century and did not have it easy. My grandfather worked in what we'd today call a sweatshop all day, while getting his high school degree at night (and learning English at the same time). He eventually became a successful pharmacist. Certainly, he didn't feel abused by the system, and I never heard him complain about the tough life he had. Early on, he and my grandmother lived in a tough neighborhood in the Bronx (they brought me there years later and the entire area was in ruins), but eventually moved to the Upper West Side of Manhattan, which then was a middle class area, and raised my dad and his sister there. My dad became a doctor and my aunt a lawyer. You know the story.

    I'm not so sure that scenario is possible in China or other countries we're talking about in this chain. It's nice to think that it might be, and China's middle class is certainly growing. But the authoritarian regime there is really an impediment, keeping people from permanently moving to the cities from rural areas. Many people may put in their years at a sweatshop and not be able to stay in the city to raise their kids in a middle class lifestyle. I think we're applying the example of the U.S. to other regions where it may not be completely applicable.

    Also, the U.S. experience in the 20th century may not be repeatable for other reasons, including the lack of available cheap energy, which fueled the United States' rise to prominence. If China continues to grow at current levels, the price of energy will stay elevated, as it has over the last year despite a recession hurting most of the rest of the world. Eventually, unless cheaper energy sources are found and made widely available, it will be very difficult for 1 billion Chinese and 1 billion Indians to live like we do here.

  10. Not Sure:

    "Sure, ask a woman who gets stabbed every day if she’d rather be slapped; of course she would. It doesn’t mean slapping her is okay." - Fay

    I'd be interested in hearing why you think the physical assault of an unwilling victim is in any way comparable to a person choosing among multiple options available to him as to how he makes his living.

  11. RobTzu:

    My wife is from SE Asia (Laos). It is a very poor country. I have been there. For 300 dollars, I could afford a banquet for about 300 people. A 200 dollar a month remittance is about all they need to get by, and do so well. In fact, sending their relatives to the U.S. and Europe is their main source of income. I wonder if "progressives" would rather see a country send the flower of their youth off to get married to white guys in America, then have them stay at home and work in a factory?

  12. Jim Collins:

    If the person was actually chained to a sewing machine for 12 hours, then I could see your point. If they choose to work at a sewing machine for 12 hours, you don't have a point. I know people here in the US who work two jobs 8 hours per day. What's the difference? When I was in the Navy, I was friends with several Filipinos who enlisted, just to serve 20 years and go home and retire. Their cost of living was low enough that they could live like kings on their pension.

    Let's address the real problem here. In the Liberalist mind the masses are supposed to be down trodden. How dare they improve their lifestyle. If they all did it then there would be no one who needed the Liberalists to protest on their behalf. There would be no corporations to be vilified. Then a Liberalist might have to actually go out and do something get a job.

  13. Fay:

    And in the Libertarian (economic) mindset, all labor for pay is a choice, bought and sold by choice, among a panoply of choices, and if you don't like it, you can just go get another job. No one is ever chained to a sewing machine, let alone treated badly by an employer, unless it is by that employee's choice.

    All righty then.

  14. Russ:

    Fay: How many people do you employee? I employee over 100 people in Honduras, many working 60 to 70 hour weeks, and a lot of it is hard, hard work. I wish I could pay them more, I really do, but the business doesn't justify it. The level of productivity doesn't justify it. However, no one is chained to any machine, and almost all my employees truly appreciate that they are one rung further up the ladder even if not at the top of the ladder.

    Quit complaining and start your own company. Then you'll be qualified to make comments like you've made. More importantly, you'll be improving people's lives instead of just whining that other people aren't doing what you think they should be doing.

  15. Not Sure:

    "No one is ever chained to a sewing machine, let alone treated badly by an employer, unless it is by that employee’s choice." - Fay

    1. Google "strawman".

    2. Come up with a relevant rebuttal to the arguments presented here.

    Or not.

  16. IgotBupkis:

    > This arrogant and frankly clueless attitude forgets a critical question – what is their alternative?

    Typical of liberal thought processes.
    Everything occurs in a vacuum -- it's a lot easier to identify "what's wrong in the world" whenever you don't have to pick the best of a less than wonderful set of alternatives.

    "This is bad" is usually easy.
    "Both these suck, but 'a' sucks less than 'b'" is a lot tougher decision to make. You actually have to identify and justify the reasons why. And it's easier to be flat-out wrong by missing something, as well.

  17. IgotBupkis:

    > Just because someone used to work in a field, does not make it okay to chain them to a sewing machine for 12 hours a day, 7 days a week.
    > What’s elitist is to say American workers deserve humane treatment, but Chinese ones don’t because it’s better than what they had before.

    1) Indeed, "strawman", much?
    First off, you CLEARLY have never done field work, particularly stoop labor. There's a reason people left the farms to go looking for work in the city, and it wasn't just because there were fewer farm jobs. THAT happened much later. Factory work, as bad as it can get, is generally far better than field work. There are certainly exceptions available but they are exceptions, not the rule.
    Second, they should be getting better money working at the sewing machine than they would be getting in the fields, IF the system is set up as it should be, and typically is. And as long as this is the case, then that's a good thing.
    Third, while we could already completely roboticize a lot of this already, we're holding off on the process because it's somewhat cheaper, AND if we did that then these people would have NO way to move from an impoverished agrarian society to a well-off modern civilization other than pure handouts, which are both demeaning and not good for the social structure. People generally need to earn their wealth, not be given it. As anyone critical of "trust fund babies" would know. The large number of people in the developed world who have no clue what actually working for a living is like is a prime example of this. The sense of entitlement is a rank and vile stench.

    2) Chinese workers can't afford "humane" treatment. The amenities you refer to -- a 40 hr work week, paid vacation, health insurance -- COST MONEY, and until a society has enough excess wealth that it can AFFORD to provide those things, there's nothing to be done. Because this sort of wealth has to come from within, not from without. You can resent us "rich bastard Americans" but you're nothing but an arrogant young punk resenting the fact that his rich uncle won't make his life easy for him. There's a common-sense, logical reason for that, even if you're too self-centered (what, a liberal? Self-centered? NAWWWWWWWW!!!!) to grasp it.

  18. Nota Bene:

    >>>> It’s like smacking a woman across the face and saying “well it’s better than being stabbed! Your life has improved! You should be grateful!”

    I in no sense advocate striking women, but there are people, both male and female, who probably would be greatly improved by a whack upside the head.

    You appear to be one of them. I'm sure that will flabbergast you, of course, because it's "obviously" sexist (despite the blatant non-sexist codicil) and shut down your brain, but since it was never open to begin with, I don't think that's losing much.

  19. IgotBupkis:

    > I’m not so sure that scenario is possible in China or other countries we’re talking about in this chain.

    Dan, you need to justify this. I believe you are demonstrably wrong. I recommend you seek out P.J. O'Rourke's excellent treatise on economics, "Eat The Rich". In it, he studies a lot of different nations, from the economic basketcases to the economic wonders, and attempts to identify what it is that makes the ones which are well-off so well-off. Surprisingly, it's not freedom and liberty, as we think of them, though those are factors in why one does better than the other. No, in his estimation, the thing which makes a nation-state a basket-case or not is actually first and foremost, rule of law and, secondly, respect for private property rights.

    While China clearly doesn't have the latter, it's certainly got the former, and it is, in fact, softening up somewhat on the latter, and one can argue that its current and future wealth depends very much on that softening up sufficiently to at least "Swedenish" levels. So China may well manage to get from its former basket-case status to true economic powerhouse, if it continues to develop a true middle-class. And that middle class will itself push for changes, to the point where the collectivism may well fall by the wayside.

    > the U.S. experience in the 20th century may not be repeatable for other reasons, including the lack of available cheap energy, which fueled the United States’ rise to prominence.

    Again, a totally unjustified assertion without basis. Dan, look, I know the Chicken Littles are running around telling you the "end is nigh", but it's crap. It's been crap since the first Chicken Little (a guy named Malthus) spouted his idiocy centuries ago. Energy, in general, is going to get cheaper and cheaper as time passes. Stop listening to Malthusian fools like Paul Ehrlich &co., and start reading Julian Simon.

    The primary reason it's not cheaper YET is because of two things:
    a) We refuse to develop nuclear power as we should, for stupid and idiotic reasons that only make sense to Green imbeciles.
    b) We currently lack an adequate energy storage mechanism. Developments in fuel cells are likely to change that, but some other tech breakthrough may well do it instead (I've heard of some interesting developments in carbon nanotubes).
    The former will power industry and living, the latter will power transportation. And there ARE solutions which can do those jobs now, they just aren't BETTER than oil at the current prices. If the price rises much and stays there, then a place like China, especially with its still largely undeveloped infrastructure, COULD switch whole hog to hydrogen as a fuel, for example. Hydrogen is more dangerous and has problems and difficulties we currently consider unacceptable, but it CAN do the exact same job as oil and CAN take advantage of the power from nuke plants to power transportation. In other words, the price of power -- on all levels and for all purposes, has a current upper limit for the foreseeable future. And it's not that much worse than it is now... certainly not worse than double or triple its current price. Undesirable but hardly catastrophic.

    These things would already be in development IF power prices consistently rose above a certain price point (around $5 to $7 a gallon in the USA) and threatened to STAY that way, which is one of the chief problems. In the last decade alone we have seen gasoline prices go, for example, from the lowest price ever (in inflation adjusted dollars - ca., $1/gallon) to the highest price ever (ditto -- ca. $5/gallon).

    ...And then drop back down to close to that lowest price ever once again (ca. $2/gallon). The structural alternatives WON'T develop to fruition until that sort of fluctuation won't happen. It's kind of like the gasohol problem -- the subsidies artificially drive investment, which leads to development, then prices drop on the alternative (gas) and, even with subsidies, the gasohol can't compete, and the industry which developed to satisfy it with an alternative has the bottom drop out of it. In the end, much of that development is cannibalized and torn apart for other things. A large chunk of the effort (i.e., CAPITAL) was wasted. So the smart people aren't going to spend time developing the alternatives until they know they have a guaranteed steady market for them. If China finds itself with energy supply/cost problems, they WILL take the needed steps to deal with that issue. As will America, but we're likely to be slower since we have
    a) lots of alternatives (such as our own natural gas and oil supplies, which are not trivial
    b) a substantial infrastructure to replace with the alternative mechanisms

  20. Greg:

    More recently? After the disaster that was the Chicago school in Latin America, *someone* had to come in and fix up the mess. Brazil is a fine counter-example to the neo-liberal reforms as they were able to avoid many of the problems of SAP. The fact that you're now trumping the virtues of privatization in China is scary. But please, don't let history get in the way of libertarian fantasy.