September 29, 2004
Going to the Mat

Tim Worstall linked up this most excellent article by Brad DeLong that very nicely explains why free trade is the real solution to global poverty, and how the left's quest for "fairness" and distaste for "exploitation" merely propagate what they want to stop:

Seth Stevenson thinks that those who do not buy the coir mats are morally superior to Debbie and the rest of us: they are not complicit in the exploitation of Third World labor. But there is another way of looking at it ... Suppose that Seth Stevenson, on his bicycle ride, were to stop by a couple of empty huts, run into them, steal the looms, and then smash their looms to pieces on the beach and dance in front of the resulting bonfire. Then the villagers could no longer make coir mats. They would have to find something else to do--something else that is worse than making mats. Such a theft-and-bonfire would have the same effect on the people of Desperately Poor Village as... as... drying up demand for their products by urging First World consumers to adopt a higher standard of morality and eschew the products of Third World labor, no?

One of the biggest problems I have with the traditional liberal agenda regarding economics is their quixotic quest for that ever-elusive "fairness". It's not "fair" a peasant in India makes less than an autoworker in Detroit. It's not "fair" Bill Gates is worth billions of dollars while a mother of four with an eighth grade education can't find a job. It's not "fair" someone gets paid $3 a week to make doormats that I pay $26.99 for.

To which I can only reply, "what is fair?" How can someone, anyone sitting in their own air-conditioned home instant messaging their friend in California on their own computer while watching their brand-new plasma TV determine what is or is not fair for an Indian peasant in Kerala? How can any politician sitting in his office on Capitol Hill surrounded by pretty, well-scrubbed staffers hope to untangle the forces and incentives that created a single mother of four with no education? How can anyone so utterly ignorant of the spectacularly different conditions of each single person living in poverty think they can help create legislation to fix all of them?

They can't. I can't. You can't. The only people who can are the people themselves. The worker knows how much their labor is worth to them, and the employer knows how much they will be able to pay for that labor. Both base their calculations on hundreds of variables, and in a competitive market most of those (on both sides) will be secret. Do-gooder outsiders with little or no understanding of basic economics, let alone the unique stories behind each and every person in a village, can't even be trusted not to offend anyone, let alone offer any real help.

It's so baldly obvious it's no wonder technocrats and stasists do their best to ignore it: In a country with free markets, stable governments, evenly enforced rules of law, in which information is allowed to flow freely, exploitation is impossible.

A peasant works for 50 cents a day because he knows it only costs 25 cents a day for him to live. An educated peasant also knows to save that extra 25 cents a day, and will do so because his stable government won't take it away or murder him to get it. That same peasant can then one day use his savings to open a store selling mats, secure in the knowledge his landlord will be prevented from arbitrarily raising his rent because of his secure contract. This now successful businessman then learns through his newspaper that there is high demand for mats in the next province, and opens another store there, and then another, and then another. The peasant is now a wealthy man, even though at one point he was being "exploited" making a mere 50 cents a day.

Once we accept this axiom for the truth that it is, our policies change. Create incentives for people to use their own knowledge to succeed. Work for consistent and understandable laws, and try to make sure they're enforced evenly so that people aren't holding the hand of someone who's holding them down. Allow the free flow of information, capital, people, and ideas so that they can learn about opportunities and move wherever they may be. Educate them well so that they'll recognize those opportunities when they come.

All of which is, of course, anathema to the technocratic left. People are poor because they are exploited, and only by taking money from those who have made it and giving it to those who didn't can we right the situation. Jobs are lost because greedy corporations wish only to maximize their profits, and only by protecting these businesses from even greedier foreign competitors can the situation be salvaged. Laws are used to oppress the common man, and only by disrupting them through "empowerment" and endless lawsuits can wrongs be righted.

Common sense, of course. Unfortunately utterly wrong as well. Like energy maneuvers in air combat, to really succeed in providing prosperity we must sometimes do things that point the nose away from the target. Trust people, give them the tools to figure it out amongst themselves, and provide the opportunity for them to do so, and prosperity will happen faster than you can possibly imagine. Try to control them, to force them to fit into your idea of fairness, and you will create people who depend on your fairness just to survive. Prosperity becomes something that must be taken, not shared.

Which is, I suppose, what most political leaders want... an appreciating constituency completely dependent on the largess of their leader. It even works, as long as the leader is wise, never makes a mistake, and never dies. For myself, I don't want to be dependent on anyone. I should be allowed to succeed or fail by my own devices, and reap the rewards of my success without them being taken from me, and deal with the consequences of my failure without them being "cushioned" for me at someone else's expense.

I donít want to rely on anyone but myself. Why does anyone want anything else?

Posted by scott at September 29, 2004 10:23 AM

eMail this entry!

Another thing that trying to right this exploitation ignores is the basis of capitalism and free markets - that products need to be produced at an ever cheaper manner for an ever increasing population (scales of economy and the like.). To put it in simpler terms, I can make a fairly nice bookshelf for roughly $100 (I already have the tools, so I'm not counting that into this equation, nor am I counting my time). It'll be a solid bookshelf, made of solid wood and plywood, and it'll probably last forever, should I choose to keep it that long. However, Ikea can make a similar bookshelf out of particle board. It'll look nice, hold up well, and have adjustable shelves to boot (something I'd struggle to do well). And they can provide it for roughly $59. It probably cost them $10 to make the thing. Why in the hell would I make it myself when I can buy it from them? They made it much cheaper than I could, have some additional features built in, etc. So, in the end, they saved me money and made a decent profit. This is a basic tenet of capitalism.

The second part is the consumer version - if I wanted this bookcase produced as a 'Made in America' product, here's what I'd be looking at. The average skilled craftsman/carpenter type probably charges in the $60/hr (I'm guessing on this based on some of charges I've received for plumbers and the like). For him to build it, it's going to cost me the same in materials were I to do it myself, plus probably 4 hours of time. So, my $59 bookcase just turned into $340 - again, it'd look very nice, hold up forever, and likely would have adjustable shelves and all - but at roughly 5.75 times the cost. Not worth it.

Now, if I wanted to buy a factory version that's 'Made in America', I'd get it at a lower cost - but wait - I can't just buy it from any factory - what if they've laid off workers due to technology? In order to be 'fair', I'd need to buy it from a factory that still makes things by hand - and the best price I can find on that is $99 - same as I could make it for, but still $40 more than the same thing at Ikea.

Long-winded explanation to point out that we, as Americans, want things at a cheaper and cheaper price, but we want to make sure all of our products are made in America and that factory workers make a decent salary (typically, after a factory moves into town, the unions get started in, people get 10 years or so in, that equates to $50K/year, plus benefits, retirement, etc.). It's just not mathematically possible. So, in order to meet the demands of the consumer, we go out of the country.

And this keeps our country's economy going. So, to the folks who say they want things 'fair' and to pay people in the third world minimum wage or something similar, I say get ready to pay roughly 100 times more for the same things that you buy now.

Posted by: Ron on September 29, 2004 11:38 AM

While I don't have the time to sit online and debate this issue with you I will just have to say one thing and continue this in real life if you want...

wow, this time you really did miss the mark. Of course this rant/article/write up is comng from the same person that laughed and agreed with the Foamy cartoon about Dell computers and how they do their tech support.

So yeah, fuck the poor, civil rights, EEO, regulation that stops monopolies. If you can't afford the drugs to keep you alive then so what, its just Darwinism in action.

In a country with free markets, stable governments, evenly enforced rules of law, in which information is allowed to flow freely, exploitation is impossible is not a reality and never will be a reality.

No I don't have the answers. But why is any form of reciprocal altruistic actions considered a bad idea?

yeah, you hooked me with this one.

Posted by: Joshua on September 29, 2004 04:45 PM

* Saying the economic regulations and laws liberals want and like are wrong is not the same thing as saying all economic regulations and laws are wrong. Read Adam Smith. If you can find any one place he says anything good about businessmen I'll buy you pizza for the rest of the year.

* Saying the policies and laws liberals want and like to help the poor are wrong is not the same thing as saying any attempt to help the poor is wrong. Liberal policies create dependency, they wreck economies and lives, worst of all THEY DO NOT WORK. By accepting basic economic principles as the facts they are, it changes the way we think about policy. This is one of the points of the essay.

* Claiming my axiom is not true and never will be misses the point. I agree it's not true NOW, but that's because there's not a country on the planet with all those factors in place and functioning at all times for all peoples. It's as much a blueprint as it is a saying. Improve any one of those points and exploitation lessens. Get them all and it's gone.

* Saying reciprocal altruistic actions don't work on a large scale is not the same thing as saying they don't work at all, or should be considered a bad idea. We should all work together for the common good without an eye to what's in it for us. We should, but we don't. You can rail against this all you want, you can call us all stupid and mean and greedy and evil and a hundred other things, but it won't change human nature.

I've said it before, but it bears repeating: free markets, like democracies, are *not* the best way for humanity to do business. They are messy, nasty, unfair, capricious, at times even brutal and deadly. Academics have come up with dozens of different "better" ways of doing things. The problem is that when tried, and remarkably most of them have been tried in the past 150 years, these "better" systems don't work. They break down. They ossify. They trap people in an amber of regulation and bureaucracy as one set of them attempts to impose its vision of "fairness" on everyone else. The bigger the group, the worse it fails.

Democracies and free markets are not the best. But, unlike EVERY OTHER system thought up in the past six thousand years, they work, and always have. You don't have new answers because your ideology can't provide them. Mine does. Trust the people. Give them the tools to succeed but don't tell them how to do it. Let them work it out amongst themselves wherever possible. Government should be used to facilitate transactions, not originate them. Promote incentives, not outcomes. Accept that failure can and will ocurr. Help people recover from it, but never try to prevent it.

It won't always be clean. It won't always be fair. There will be winners, and there will be losers. Thinking this somehow makes it all wrong and all unfair, that losers will always lose forever and winners will always win forever is to engage in a special kind of childish thinking. Times change. People change. Markets change. Winners sometimes lose, losers eventually win. To try and prevent any of it is to try holding back the tide.

Me, I'd rather surf.

Posted by: scott on September 30, 2004 08:56 AM
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