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Source link: http://archive.mises.org/5870/how-sweatshops-help-the-poor/

How “Sweatshops” Help the Poor

November 9, 2006 by

One of the oldest myths about capitalism is the notion that factories that offer the poor higher wages to lure them off the streets (and away from lives of begging, stealing, prostitution, or worse) or away from back-breaking farm labor somehow impoverishes and exploits them. They are said to work in “sweatshops” for “subsistence wages.” That was the claim made by socialists and unionists in the early days of the industrial revolution, and it is still made today by the same category of malcontents – usually by people who have never themselves performed manual labor and experienced breaking a sweat while working. (I am not referring here to the red herring claim that most foreign “sweatshops” utilize some kind of slave labor. This is an outrageous propaganda ploy designed to portray defenders of free markets as being in favor of slavery). FULL ARTICLE

{ 16 comments }

Axel November 9, 2006 at 12:27 pm

I feel this is yet again appropriate. one of my few pieces of jewelry:

http://www.adamsmith.org/blog/index.php/blog/individual/supporting_free_trade_with_abandon/

they do run out occasionally

George Gaskell November 9, 2006 at 12:42 pm

This is one of the strongest types of arguments that free-market proponents can make — it takes one of the areas that socialists staked out (and won) a long time ago, and turns it right back against them. They congratulate themselves endlessly for their altruism, when in reality they are hurting the very people they purport to help.

I can’t think of another topic where Statists expend quite as much energy patting themselves on the back. Even direct welfare payments have something of a tarnished reputation compared to so-called sweatshop legislation. Maybe the minimum wage comes close.

In any event, whoever threatens one of these sacred cows by describing how Statism makes the lives of the poor worse can expect the most vicious, personal response.

Leigh Jacobs November 9, 2006 at 1:45 pm

Ok, can I go on a soapbox here?

I am a college student, and last week, in my Political Science class, we discussed “insoluble problems” facing America. Some of them included war, health care, crime, and social security. I was quick to point out to my professor (and literally nearly burst out laughing in his face) that social security ( and all other social welfare programs) are merely political bribes to get poor people’s votes — to which he had no reasonable response. But here’s the point:
Are these things really insoluble, or is the solution merely to pull out of Iraq/ Afghanistan, immediately and without question discard all social welfare programs, legalize drugs, and ruthlessly supress criminals?

That’s what pisses me off about college/ my generation. My teacher tells us “In the 60s, our professors told us the same things and we thought we were the generation to fix things.. now we pass them on to you” but he doesn’t offer real solutions (DIFFICULT SOLUTIONS) like legalizing drugs, pulling out of IRaq, and destroying any and all social welfare programs, immediately.

This article is a perfect example of everything I’m talking about.. goverment doublespeak backed by professors begging for their next grant.

on another note.. could anyone help me out in this area. I had someone tell me that taxation isn’t theft because the goverment enables us to work under our current conditions. Although this is to a degree true, a few objects that came to my mind were, 1) how do you therefore calculate how much the government enables us and translate that into taxation? (or do you simply let the goverment arbitrate taxation?) 2) how do you deal with moral hazards that government programs create which actually reduce our ability to be productive (such as social welfare programs, fiat money, foreign aid, FDIC, etc..)? 3) where did the goverment come up with the funding to enable us in the first place?

any other strong arguments against the “the goverment enables you to work” arguement for taxation?

M E Hoffer November 9, 2006 at 2:03 pm

Leigh,

This: “3) where did the goverment come up with the funding to enable us in the first place?” To me, is the key query.

The Gov’t has what it does, because it has what it takes to take what you have. This truth runs throughout Finance, all the way through Economics.

It’s grants, whether special “priviledges” or anonomous checks in the mailbox, are net negative, they decrease each and every.

Thereby, is the reason one will find sound minds able to Reason the fact that Free Markets build Moral peoples, and/or it’s converse, being equally true.

The next time you hear an “Equal Rights” proponent expounding on the merits of “Gov’t”-intervention, Watch Out! Know that the source is as corrupt as the idea flowing therefrom.

George Gaskell November 9, 2006 at 2:14 pm

The fact that some functions of modern government are important to the protection of property rights (courts, for example) does not mean that a State is the only organization that can provide them.

The question is not whether governments provide some services that help some people. The question is whether the modern nation-state is the best method for accomplishing these tasks. Or even if it is a particularly good method. Or if it has so many costs that, on balance, it is a net detriment.

What are the functions of the modern State that people would voluntarily pay for? Courts, police, schools, and road-building, probably, and not much else. Some mail service, I guess. Everything else that the State does only exists as the result of coercion, and would not even exist in a private, voluntary society.

But even if we are talking about courts, police, schools and road-building, why should these things be co-opted by a state? What is it about the government monopoly that makes the product or service better?

Clearly, in every instance, the quality of the product/service is reduced, and the cost is increased, when government seizes it. This decline is inevitable, as the direct result of the calculation problem that Mises described.

In ordinary moral terms, is a thief any less of a thief because, after he steals your wallet, he uses some of your money to buy you some stuff? Stuff that you never would have bought if you had the choice? Stuff that he pays an absurd amount of money to get?

RogerM November 9, 2006 at 2:49 pm

“As important as private property and market-driven prices are to capitalism, another necessary ingredient for capitalist success is a culture of entrepreneurship, management, risk taking, marketing, financial know-how, and other skills that have developed over several hundred years in the capitalist countries.”

I can’t stress enough how important this statement is for economics. Culture matters to eocnomics. See http://www.geert-hofstede.com/.

A culture of entrepreneurship requires a society in which individualism is highly valued. Visit Geert Hofstede’s web site and read his book “Culture Matters” and you’ll find that the world is divided according to the dichotomies of individualism/collectivism and risk-takers/risk-avoiders. Americans are so extreme on the individualism and risk-takers scales that we are statistical outliers and must appear as crazy people to the rest of the world. But a culture of entrepreneurship requires both.

RogerM November 9, 2006 at 3:07 pm

Leigh:”Are these things really insoluble…?”

I have to agree with your prof to some degree. In a dictatorship, you could solve these problems with a single command. But in a republic, you have to convince enough voters of your position to get a majority. That’s long, hard, frustrating work, which is why change takes a very long time. That’s a good thing, however, and the way the Founders designed the system.

“any other strong arguments against the “the goverment enables you to work” arguement for taxation?”

I think I would ask how government enables one to work. It seems like a ridiculous statement on its face and I can’t even imagine how someone would answer it with a straight face. Also, why does gov do such a poor job of “enabling” people to work, when some people work very hard and others not at all?

I believe government has a legitimate role, as did Mises, in keeping order, defending the nation and protecting property rights. In performing its proper role, taxes are legitimate. If government steps outside its legit role, it becomes a thief. Anarchists will argue that private agencies could do a better job in all of the above roles, but that’s highly theoretical. Still, we should keep in mind that the Founders of our Republic weren’t striving to optimize the benefits of good government, but to minimize the damage caused by bad government.

David C November 10, 2006 at 12:37 am

any other strong arguments against the “the goverment enables you to work” arguement for taxation?

Yeah, the government doesn’t enable us – it is we who enable the government. People have rights even of no government exists at all, but typically they organize into the form of government to secure those rights. To the extent it fails to do so, it deserves rejection. In fact, it is our duty to reject it.

In any normal situation, the servent is beholden to the master. I don’t know about you, but if I hired a butler, and then that butler came along and told me that I was too stupid to control my own finances, and that he knew how to spend my money better than I did, and that I owed him for all my successes and that he owed me nothing. That little bastard would be fired in 5 seconds flat with a big boot in his ass. The fact the government bureauocrats can actually pull off that kind of crap simply amazes me.

Michael Hampton November 10, 2006 at 12:41 am

STIMULATING AN ECONOMY through keeping its currency cheap, has allowed China to get millions out of poverty in the villages, and onto the ladder of prosperity. It isnt pretty, but it works.

But soon the tables may be turned on the US,a s China moves to is next stage: an emerging Consumer Economy.

= =

I HAVE TRIED to get into the minds of the leaders of China, and to understand why they built up all those Dollar reserves in the first place, and what forces might bring them to start unloading.

Originally, I had planned to write a novel about it, but as I got writing, I soon saw that the scenario I was developing was going to unwind too quickly. And the disaster that I foresaw was going to happen BEFORE any novel could be published.

So I decided to go public with the story. An article was posted yesterday on FinancialSense.com , and I have already received a fair amount of positive comment about the article.

LINK: http://www.financialsense.com/fsu/editorials/2006/1109.html

What astounded me was, after I had finsihed the article and submitted it, Zhou came out with his comment. Is the China Trigger being pulled already?

“DrBubb” on GreenEnergyInvestors.com (Michael Hampton)

Dan Coleman November 10, 2006 at 7:08 am

Leigh, you’ve asked for some help with the following situation:

any other strong arguments against the “the goverment enables you to work” arguement for taxation?

If your interlocutor is suggesting that taxes are voluntary or are payment for services provided by the government to freely paying members of society, ask them if taxes will still be considered “voluntary” if you decide to stop paying them.

Ask them where you may check a box or speak to a bureaucrat to cease purchasing the government’s “services.” Ask them why the government insists on maintaining a monopoly over its vaunted programs (defense, social welfare, and regulatory practices).

Ask them what they think of the idea of giving Wal-Mart special privileges: allowing them to be the sole provider of cheap goods and groceries, and what they think of furthermore giving Wal-Mart the power to punish and jail “customers” who refuse to purchase its services. (If they aren’t subtle thinkers, you may need to follow this up with asking how it is that government is any different).

If it is argued that government “services” are essential to a functioning society, ask them to imagine a world where all food services are provided by the government, and then pose yourself as a critic of making private the food supply. Ask the same kinds of questions that they offer about defense, courts, etc.:

“Tell me how (in a practical manner) food will get distributed, especially by greedy capitalists? What will you do if business’ don’t offer groceries to the poor? How can the poor afford food if the government doesn’t provide it for free? I need food–what happens if there are no food stores nearby? Etc.”

You can make these questions sound even more absurd by using Rothbard’s ‘shoe’ example (http://mises.org/rothbard/newliberty9a.asp , second paragraph).

That’s a good way to make the conversation progress, I find. Point out that taxes are not voluntary, otherwise you wouldn’t pay them. Point out that you could find better service somewhere else. Don’t be an apologist for providing a ‘blueprint’ for how a market would provide things in the government’s absence–that would only be another central plan! Only show that, in every area where the government interferes least, the market takes care of things so well (i.e. groceries and shoes) that no one ponders how a government might accomplish the same “services.” Apply this to current social problems, and see if you can be persuasive in making the connection.

RogerM November 10, 2006 at 12:52 pm

Leigh:”…any other strong arguments against the “the goverment enables you to work” arguement for taxation?”

As some posts above suggest, you might ask who pays the salaries of whom? Government doesn’t pay the salaries of workers in private industry, but private citizens pay the salaries, and therefore enable government workers to do their jobs. Governmental employees are hired hands for the private sector. Private industry and citizens make government possible, not the other way around. People have worked and led decent lives with minimal government in the past and theoretically could do so in the future. Many libertarians suggest that we could do without government altogether. But can government exist with citizens to tax? Not at all!

Björn Lundahl November 10, 2006 at 6:45 pm

“STIMULATING AN ECONOMY through keeping its currency cheap, has allowed China to get millions out of poverty in the villages, and onto the ladder of prosperity. It isnt pretty, but it works”.

Actually it does not work at all. This policy makes only China poorer and us in the western world so much richer.

The Emperor’s New Clothes

People are led to believe that trade restrictions between regions or countries “create jobs at home”, which they certainly do not. If people had the opposite belief that “free trade” between regions or countries “creates jobs at home”, that would also be an incorrect belief. Trade restrictions or free trade does not cause unemployment or cause employment in a region or country. Trade restrictions only lower the standard of living, hamper competition and restrict liberty. If for instance, the EU imposes tariffs on Chinese textiles, the Euro will appreciate against the Chinese Yuan (the value of the Euro will increase relatively to the Chinese Yuan). This depreciation (decrease in value) of the Chinese Yuan against the Euro, in this example, is caused by a smaller demand for Chinese textiles and therefore a smaller demand for Europeans to buy the Chinese Yuan. Because of this change in exchange rates, prices of goods from the EU to China will be generally higher and prices of goods from China will be generally lower (apart from textiles). As you can imagine, this will increase employment in the European textile sector, but decrease employment in other sectors. At the whole, unemployment will not change but trade between the regions will be lower. Specialization, competition and living standards in the EU region will be hampered. The tariffs will only serve special interest that is the textile manufacturers and their employees. Surely, we want our representatives to serve the common good and the common man and not special interests!

Someone might complain that the Chinese are intervening in the exchange markets to keep their currency artificially low and that they are not letting market forces to appreciate their currency, and therefore my statement about free trade, in this case, is not applicable. Free trade, someone might think, is presupposed by freely fluctuating currencies with no Government intervention (also called clean floating exchange rates). Certainly I do not want Governments to intervene in exchange markets, but actually it is the Chinese that are in this case the losers and we are the winners. We should be glad that China is suppressing the rise of its currency, and the Chinese people should be mad about it. When market prices indicate that, for example, a project is unprofitable; investors naturally stop investing in such a project. Otherwise, factors of production such as land, capital, and labour would be wasted. Every government manipulation of market prices is a step toward economic breakdown and chaos. Land, capital, and labour that are invested in the exporting business in China because of a suppressed currency, have changed the economic structure in China and are mal investments, unprofitable for the nation to undertake, and we are getting something free. We don’t need to export anything to pay for this “extra importation of Chinese products”. To make my statement more obvious, we could consider that if the Chinese currency would be suppressed to no value at all (which would not be possible to realize), the Chinese would be working for nothing and we would get goods and services from China for free (which is, naturally unprofitable for China to undertake), then the market forces in the EU (if market forces would not be hindered by Governments) would reallocate land, capital and labour for other uses and to those fields which the Chinese are not able to compete (even if the Chinese were working and exporting to full capacity, that will not, by far, be enough to satisfy all our wants, in other words, their GNP is by far, too small). The increases in production which mentioned reallocation of recourses leads to are our extra bonus. We should applaud this and the Chinese people should revolt!

If you want to know more about floating exchange rates, go to; http://www.hooverdigest.org/974/friedman.html

Productivity and trade will flourish more intensively with one currency* than with several different currencies, and even with one currency, market forces will smoothen out any imbalances between regions, cities or countries. We do not worry, for example, about the balance of payments between London and Manchester, Berlin and Munich, Paris and Bordeaux or Stockholm and Göteborg etc. If, for example, London exports more to Manchester than Manchester exports to London, the demand for goods and services will be greater in London relatively to their supply, and also relatively to the situation in Manchester. Because of this, prices will go up in London and therefore will exports from London to Manchester contract, as well as, imports from Manchester to London will expand. This happens all the time and we do not even know about it and therefore do not worry about it. Governments do create problems all the time.

If we really want increased competition, why not adopt free trade between nations. Why does the EU and the USA not follow that path? The reason is that they do not want increased competition.

For an example, I quote from answers.com;

“In the United States, the decade from the mid-1980s to the mid-1990s saw import quotas placed on textiles, agricultural products, automobiles, sugar, beef, bananas, and even underwear—among other things. In a single session of Congress in 1985, more than three hundred protectionist bills were introduced as U.S. industries began voicing concern over foreign competition”.
Go to;
http://www.answers.com/import+quotas?gwp=11&ver=2.0.1.458&method=3

Only Governments can be so silly to reject great offers and bargains. Individuals doing the same thing would be considered mad.

The essence with above statement is that Governments hinders competition, lower our standard of living, promote special interests and they make excuses for this with faulty theories and propaganda.

Björn Lundahl
Göteborg Sweden

* A gold standard. See also “What Has Government Done to Our Money?” by Murray N. Rothbard.
http://mises.org/money.asp

Björn Lundahl November 10, 2006 at 7:32 pm

Nowadays a lot of people talk about the low wages in China. The truth is that they are low because of low productivity, but that they are also higher than ever.

A quote from answers.com:

“Although China is still a developing country with a relatively low per capita income, it has experienced tremendous economic growth since the late 1970s. In large part as a result of economic liberalization policies, the GDP quadrupled between 1978 and 1998, and foreign investment soared during the 1990s”.

http://www.answers.com/topic/people-s-republic-of-china

Rising wages in China:

http://www.businessweek.com/the_thread/economicsunbound/archives/2006/03/rising_wages_in.html

Björn Lundahl

RogerM November 10, 2006 at 8:38 pm

Bjorn:”This policy makes only China poorer and us in the western world so much richer.”

Absolutely right! The only path to wealth is through productivity increases and savings. No other way exists under any circumstances! If currency manipulation or trade protection could do it, none of the currently poor countries in the world would be poor. I people had just a tiny understanding of the economic history of Latin America or Africa, they would know that every trick that could be tried, those nations have tried it. Nothing, absolutely nothing, works besides productivity and savings! Of course, you must have the institutions to protect private property. When will people learn?

Bob April 8, 2009 at 5:38 pm

Bottom line each one of us has to step it up to help out in any little way we can. Everyone loves to talk about what we or the government needs to do but we can do it individually likewise.

FINVEST May 19, 2009 at 5:05 pm

Interesting post. As a Fisher Investments employee, I learn more about the stock market (and related misperceptions) at http://www.fisherinvestmentsforum.com/stock-market-misperceptions

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