Saturday, July 19, 2008

Industry and Intentions

G sent me a postcard from Saipan. Snail mail. I love snail mail.

Most of what I get by snail mail is bills, sale circulars, catalogues, and credit card offers. But every once in while even a poor correspondent like me gets a treat.

When I send a postcard there is only room to express one idea. Sometimes an idea and a half and then I am writing cramped illegible chicken scratches in places that post offices stamp and sticker. But G, so lovely and talented can legibly do much more with the space alloted. From her card, I share the following:
"The garment factories shut down by the likes of Corporate Watch have unleashed a host of Chinese laborers who have since turned to prostitution. I think liberals should know that."

I think we should too. It would appear that good intentions can lead to unfortunate and unintended consequences. I recently read something similar in Charles Wheelan's book "Naked Economics."

He quotes Paul Krugman:

"In 1993, child workers in Bangladesh were found to be producing clothing for Wal-Mart and Senator Tom Harkin proposed legislation banning imports from countries employing underage workers. the direct result was that Bangladeshi textile factories stopped employing children. But did the children go back to school? Did they return to happy homes? Not according to Oxfam, which found that the displaced child workers ended up in even worse jobs, or on the streets -- and that a significant number were forced into prostitution."

In his own words Wheelan says:
"There is nothing pretty about people willing to work long hours in bad conditions for several dollars a day, but let's not confuse cause and effect. Sweatshops do not cause low wages in poor countries, rather they pay low wages because those countries offer workers so few other alternatives."

I am not convinced that all of this means that we should write odes to the sweatshop or celebrate their horrible work conditions. But economists in their dismal abstracted and brutal way of thinking will point out that one works in a sweatshop when it is the best alternative available. It may be exploitation. But if workers had nothing to gain, they wouldn't do it. And boycotts lead to a further reduction in alternatives. A bad situation can certainly get worse.

What if people could build their own alternatives, more alternatives, in a scalable way? What kind of investment and return would that offer?

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