Wal-Mart and Slavery

by Don Boudreaux on October 21, 2006

in Myths and Fallacies, Wal-Mart

In yesterday’s New York Times, Andrew Grossman — Executive Director of Wal-Mart Watch — wrote the letter below in response to John Tierney’s recent (and superb) argument that Wal-Mart lifts countless people out of poverty:

To the Editor:

Did John Tierney write “Shopping for a Nobel”
tongue in cheek? Is he really claiming that there is no more effective
antipoverty organization than Wal-Mart?

Drawing parallels
between Wal-Mart, the corporate giant, and the Grameen Bank is beyond
belief. The Grameen Bank creates wealth and capital and is about
empowerment. Wal-Mart rents labor at the lowest possible price and
discards people when they are done.

Wal-Mart has long tried to portray exploitation as efficiency, and now, according to Mr. Tierney, it deserves the Nobel Prize.

Yes, any wage is better than no wage, but to state that overseas factory workers have been lifted out of poverty is a fallacy.

It has been widely reported that workers abroad in Wal-Mart’s
suppliers’ factories routinely experience forced labor, minimum-wage
violations, maternity-leave violations, overtime pay violations and
more.

We need to understand that suppliers overseas perpetuate
inhumane conditions in an attempt to maintain the low prices that
Wal-Mart demands.

Andrew Grossman
Exec. Director, Wal-Mart Watch
Washington, Oct. 18, 2006

Perhaps it’s true that "[i]t has been widely reported that workers abroad in Wal-Mart’s
suppliers’ factories routinely experience forced labor."  But the frequency of these reports no more proves their truth than do the frequency of reports of people being abducted by aliens from outer space prove that people really are frequently abducted by aliens from outer space.  Indeed, the plausibility of slaves producing manufactured goods for sale by Wal-Mart is just as implausible as the wackiest alien-abduction allegation.

Slaves simply are too unlikely to be good factory workers.  Put differently, the cost of monitoring an  enslaved workforce is likely way to high to make slavery an economically efficient means of producing modern consumer goods.

Suppose country X’s workforce is enslaved.  The benefit of slavery to producers is the cheapness of the labor.  So with the cost that producers must pay for labor held below what it would be if the workforce were one of free men and women, producers will use relatively labor-intensive means of production.  But because modern manufactured goods generally have countless dimensions of quality, very few of which are cost-effectively observable by factory owners producing large quantities, the opportunities are great for slave workers to shirk in ways that reduce the quality of their output.

One way to reduce the magnitude of this problem is to substitute capital for labor — to substitute machine power and skill for human power and skill.  With more tasks being done by machine, fewer opportunities exist for slave workers to degrade the outputs’ quality through their shirking (or, even, through their intentional sabotage).  But the higher the capital-labor ratio,

(1) the greater is the opportunity for slave workers to sabotage expensive and complex factory machinery, and

(2) the lesser are the benefits to producers of slavery because these producers are using less labor than they would use if monitoring costs weren’t so high (and, therefore, producers are buying and using much of the machinery that they would buy and use had they had to pay market wages for their workers).

These theoretical observations, of course, don’t prove that Wal-Mart’s suppliers aren’t using slave labor.  But I find these observations sufficiently compelling so that, when combined with a recognition of how easy and tempting it is for Wal-Mart’s enemies to make allegations unsupported by facts, I’m quite confident that Wal-Mart sells no goods produced by slave labor.

And recollecting credible reports of workers from China’s countryside, and rural India, streaming into manufacturing centers for the sole purpose of seeking jobs in factories, my confidence that Wal-Mart sells no slave-made goods increases further.

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{ 28 comments }

William October 21, 2006 at 2:38 pm

In China, rural workers move to the city with high hopes and sometimes fall prey to dishonest employers that play bait-and-switch. That's bad, but it certainly isn't slavery.

Adam October 21, 2006 at 3:13 pm

I'd point out that paid employees can also shirk, with the same monitoring problems as for slave labour. But that's a minor quibble, I agree with you point.

I love the bit about "minimum-wage violations, maternity-leave violations, overtime pay violations and more." And equating these with "inhumane conditions." Not getting your time and a half, if that's what your employer agreed to, isn't right but it's hardly "inhumane." Hyperbole, anyone?

Kent Gatewood October 21, 2006 at 3:19 pm

Dr. Boudreaux–does this mean that all the virtual slaves in National Socialist Germany and Communist Russia didn't exist.

tarran October 21, 2006 at 4:24 pm

One of the enduring legacies of the industrial revolution are that peasants are somehow "exploited" when factories first appear.

While to conditions in the factories are pretty awful, the employees choose to work there because the consitions are far better (or less worse) than the alternatives of farming or starving.

What is interesting is that in England (and I'm sure this happens elsewhere) there was a backlash by the wealthy landlords as their peasant laborers fled their lands to seek better pay and less exhausting work in the factories. In England these landowners (who of course formed the backbone of the nobility) launched a propaganda campaign against the new factories. They lobbied for legistlation to regulate the factories in a bid to slow their spread. This propaganda campaign has been so successful that today, most people, if questioned about the impact of the industrial revolution on the so called "lower classes", will answer that it left them worse off.

Yes, slavery is still practiced in India and China. This slavery is dependent on the poor having no economic options so that they are at the mercy of local strongmen. The factories that feed Walmart, Target et al. allow the locals not only better pay, not only better working conditions, but the freedom to tell the local party boss or strongman to get stuffed.

The industrial revolution is what permits the formation of a middle class. The industrial revolution is what permits the accumulation of wealth independently from the local government. Industrialization goes far to empower those who would otherwise be peasants exploited by the local land-lords. Shut down the factories and the people who will be hurt the most are workers.

Ken Willis October 21, 2006 at 5:20 pm

To the best of my knowledge slaves do not start unions, but workers for Walmart-China have done just that.

Kent Gatewood October 21, 2006 at 6:30 pm

I'm a big user of Walmart, but the workers weren't in the loop on starting a union. The president of China wanted them in a state controlled union.

Mike Antonucci October 21, 2006 at 7:46 pm

Perhaps Mr. Grossman could explain this story:

http://www.eiaonline.com/2005/09/best-union-story-ever.html

einzige October 21, 2006 at 7:46 pm

Kent,

In answer to your question above: No, they existed. What it means is that the quality of the products they produced was so poor that Wal-Mart wouldn't have bought them at any price.

Mike Antonucci October 21, 2006 at 7:48 pm

The original cited story is here:

http://www.lasvegasweekly.com/2005/09/08/awsi1.html

Martin October 22, 2006 at 9:06 am

Professor Boudreaux,

You have written the phrase –

"But because modern manufactured goods generally have countless dimensions of quality, very few of which are cost-effectively observable by factory owners producing large quantities, the opportunities are great for slave workers to shirk in ways that reduce the quality of their output."

I fear for your sanity.

Kent Gatewood October 22, 2006 at 9:22 am

1. In National Socialist Germany, slave labor was successfully used in the construction of V2 rockets. V2 rockets are at least as difficult to build as a CD player, and just as open to sabotage.

2. Slavery is profitable. It's never been some vast Quaker public works project.

triticale October 22, 2006 at 9:33 am

A CD player which doesn't function can be returned for exchange or refund. An impact fuse which doesn't function after a rocket reaches its target cannot. A hand grenade with zero delay has negative value.

Kent Gatewood October 22, 2006 at 11:33 am

The mafia running China has millions of people in prisons. Communist party wants those people busy, preferably making money for the party.

As was said, commercial products are easier to build because the customer will let the manufacturer know when the product doesn't work. I'm sure Churchill didn't send a complaint to Hitler when a V2 failed to hit the target. I expect Soviet military gear has a high dud rate.

If the prisoners don't make the good CDs, the party might execute them or send to the Chinese equivalent of Kolyma death camp. If I were in Chinese prison, I would be aware of the consequences. But there will always be a few brave souls, I honor them.

Ken Willis October 22, 2006 at 12:08 pm

So its not Walmart enslaving its workers, it's the government of China.

Tim October 22, 2006 at 7:56 pm

Tarran –

Is there someplace I can see more on the propaganda campaign re: the industrial revolution you discussed above?

Brad Warbiany October 22, 2006 at 9:54 pm

Back in the wake of Kelo, when I was a bit enraged by the Supreme Court's tendency to give corporations and local governments any power they desired, I wrote a satire piece:

Williams et. al. vs. Wal-Mart

It was a piece with the Supreme Court upholding Wal-Mart's right to enslave it's employees. I'm not usually very good with satire or humor, but looking back on it, it's one of my best posts…

Check it out. It's [almost] on-topic!

(hmm, looks like you may not allow html… Link below)

http://unrepentantindividual.com/2005/07/02/williams-et-al-v-walmart/

Wild Pegasus October 23, 2006 at 11:56 am

Almsot everything tarran said was the complete opposite of the truth. The truth about the Industrial Revolution is that the Crown gave the landed lords (i.e. thieves) modern private property in their feudal lands. Under their feudal lands, the lords had duties to the poor living on their land. Under modern private property, they did not. The peasants were quickly evicted off land that their family had justly held for centuries.

Indeed, reports of the time among the capitalist class are full of worries that there won't be enough wage workers, and that people preferred to work their own plot of land than work 75-hour weeks in factories. Fortunately, a few clearances and enclosures squeezed a few hundred thousand off their ancestral land, and a new wage class was born.

For a look at what is probably happening today in China and India, I strongly recommend a look at what happened in Britain: "The Iron Fist Behind the Invisible Hand" by Kevin Carson. If the link does't work, just google it.

- Josh

Wild Pegasus October 23, 2006 at 11:58 am

Almsot everything tarran said was the complete opposite of the truth. The truth about the Industrial Revolution is that the Crown gave the landed lords (i.e. thieves) modern private property in their feudal lands. Under their feudal lands, the lords had duties to the poor living on their land. Under modern private property, they did not. The peasants were quickly evicted off land that their family had justly held for centuries.

Indeed, reports of the time among the capitalist class are full of worries that there won't be enough wage workers, and that people preferred to work their own plot of land than work 75-hour weeks in factories. Fortunately, a few clearances and enclosures squeezed a few hundred thousand off their ancestral land, and a new wage class was born.

For a look at what is probably happening today in China and India, I strongly recommend a look at what happened in Britain: "The Iron Fist Behind the Invisible Hand" by Kevin Carson.

- Josh

tarran October 23, 2006 at 9:14 pm

Josh, I must disagree. There was a propaganda campaign (alhtough it was pushed by the Church and not the landlords as I falsely remembered).

The thing I had in mind was the controversy circulating around the Sandler report on working ocnditions within Facotries produced ~1830. An MP named Michael Sandler who was looking to pass laws outlawing child labor and limitng work hours to 10 hours per day (the jerk), convicned the British parliament to investigate working conditions in factories. The report was based on data gathered by setting up shop in what I think was London, and inviting disgrunteld workers to come in and complain. I believe that statisticians call that introducing sampling bias.

When the report was published a group of factory owners protested that they were being slandered and the parliament ordered another study, this time to be conducted with people other than Michael Sanders. The subsequent report, known, I think, as the "Supplamental Sandler Report", found most of the accusations made in the Sandler report to be baseless.

I do recall reading a quote about Engels (Marx's partner in crime) where he acknowledged that the Sandler report was full of exagerations which he passed off as being an understandable attempt to motivate people to improve the workign conditions of the proletariat.

The Sandler report is frequently quoted today, the supplamental report is consigned to the dustbin of history (I believe that only a few copies survive in microfilm in a few libraries in England and the U.S.). I looked on the web, and couldn't find anything other than passing references to the Supplamental report.

This article has footnotes that might be useful: http://www.the-rathouse.com/Revivalist4/RC_FactorySystem.html (hey they even talk about Engels! :) )

I think the notion that the Barons wanted to get rid of the peasantry was kind of silly, the peasants would have been the source of their wealth! Also given the wide power that the lords had over the peasantry, it not like anyone would call them to task over refusing to care for their vassals. Fedualism generally sucked for the serfs. But, hey, I am no expert on English history, and certainly the Whigs (being hard-core mercantilists) were not above using a little violence to improve their profit margins, so perhaps I am wrong about the landowners.

I am not wrong about the propaganda campaign though.

nunyabizness October 24, 2006 at 12:08 am

Dr. Boudreaux:

I think your sychopantic praise for Wally World just went one step too far:

"I'm quite confident that Wal-Mart sells no goods produced by slave labor".

If that's your belief then I'm quite confident that you're an idiot.

One day you econolibs will wake up to see china owning every manufacturing facility on the planet and the rest of us exactly where they want us. Dependent. And then it won't matter what currency peg they use. It's too bad that folks if your ilk constantly cheer on the elevation of china at the expense of this country. Why, in the name of God, if you think they're so all-fired superior don't you just hop on the next jet headed to beijing and stay there for a while?

Matthew October 24, 2006 at 3:19 am

nunyabizness,

Do you know that manufacturing employment has declined in China and has declined in 9 of the top 10 countries in manufacturing output?

In fact, manufacturing output has significantly increased in the US, far more than in other recoveries and booms. It's only that manufacturing employees are now being replaced by technology, similar to what tractors have systematically done to farm employment over the last 100 years.

Matthew October 24, 2006 at 3:23 am

My last sentence probably sounds to harsh out of context.

My point is that employees will now move to making different things because of how productive a few workers are in manufacturing. Through the industrial revolution, people started making goods that did not exist when everybody was making food, because machines made food instead. Similarly, people will work in services and such instead of having to make goods, because technology automates the creation of goods instead.

Henri Hein October 24, 2006 at 7:33 pm

"It's too bad that folks if your ilk constantly cheer on the elevation of china at the expense of this country. "

There's your fallacy. What's good for China is good for us. Do you prefer expensive goods to cheap goods? Do you prefer stagnation to progress? What do you have against the Chinese anyway, if you prefer they stay in poverty?

nunyabizness October 25, 2006 at 1:29 pm

Henri,

"What's good for china is good for us"….

What a load of nonsense. What's good for china is what's good for china. Conflating the two for the purpose of argument is intellectually dishonest.

"Do you prefer expensive goods to cheap goods, stagnation….yadda yadda yadda"

Questions that are meritless don't mean a hill of beans. Progress is not tied to the chinese – for you to assert that it is shows the shallow naure of your argument.

"What do I have against the chinese"

Nothing. I just don't happen to belive we should deindustrialize to benefit the chinese, or the indians, or anyone else. Further to that, any culture who makes a national priority out of direct conflict with my own isn't a good trading partner. Of course, in the twisted lib world, it's OK as long as it's the chinese who are conquering us evil Americans. After all, Americans are bad when we don't kiss chinese ass, and chinese are always right when it comes to matters of economics.

As far as chinese poverty is concerned….I really don't give a flip if they're poor or wealthy. They could all starve tomorrow and I wouldn't bat an eyelash at it. They are immaterial. Live, die, poor, wealthy – what difference does it make. You're the one with the sino-afliction.

jaim klein November 4, 2006 at 10:11 am

The arguments that slavery does not work are idiotic, and only show ignorance of real compulsory situations of which slavery is just one case. Compulsory labor was widely used by every civilization, even in nomadic Amerindian societies (Read Vasco Diaz Cabeza de Vaca's story as a tribal slave in his first voyage). Slaves could be quite impertinent as Josef, Putifar's slave, as well as all the slave personages of Greek and Roman comedy.
The mechanism of compulsion is very simple: (a) there must be always degrees in "slavery", and (b) the "slave" doing valuable specialized work must be aware that he is enjoying a privileged situation, that he is always in danger of loosing. Privileges may range from a residence permit in the capital, to work in the kitchen with opportunities to steal some food. I daresay Herr Schindler's factory in Lodz was extremely efficient, his slaves worked to the best of their capabilities. German prisioners of war in the Soviet Union were also most productive, and enjoyed special rations and autonomy to the point that Stalin resisted returning them for purely economic reasons. Roman factories were run and operated by slaves working side by side with free workers.
Even in the South, slavery worked, and the fact is that a healthy young man could fetch very high prices which surely means that thw buyer hoped to make a profit by his work. The price of a good tradesman was much better than than a new comer, and it would be possible to calculate the productivity of slaves on the basis of their price and then compare it with a salaried free man. A man with a good trade could be sold for more moeny. The idea that a malicious slave could not sabotage an agricultural or agroindustrial operation, is ignorance. There are hundred ways a clever slave can ruin his boss, from poisoning the animals, forgetting to grease the treshing machine to putting on fire the barn.
All the above has no relation to Wal Mart nor any other purchaser of merchandise from developing countries. Of course I am against any form of compulsion, and most against slavery.

nishan April 8, 2007 at 7:35 pm

do the employees of wal mart know about the slaves? my friends is a walmart cashier, so does he know about it?

Sam October 26, 2007 at 1:16 pm

"However, slave economies cannot compete with industrialized market economies."

'Industrialized' market economies do not have to compete with 'slave' economies, as an 'industrialized' market may use the 'slave' economy. This paves the way for industrialized marketers to greatly decrease their costs by spending less on labor.

I very much agree with the use of phrases such as "degrees of slavery", so I'll use it here.

If anyone in this forum was forced to work in the same conditions as some of the countries mentioned (e.g. China, India and N. Korea), I have no doubt that they would call it slavery. I use the word 'forced' to describe a situation of not having alternative options. If I have to choose to live or die, I would force myself to live. If I am without option, I may be forced to work 16 hour days to survive. As this pertains to the degrees of slavery, I can choose not to work, but that would be choosing to die. So, without options, I will be the slave that can escape, but chooses to live.

Work v. Death is a great motivator for quality and quantity output. If your quality or quantity are low, you can be replaced. To be monitored by another slave, of a lesser degree (as they may be paid slightly more than you), comes just as cheap in the eyes of an industrialized marketer that no longer has to pay for labor within their own economy.

So when arguements are made that Wal-Mart, and similar companies, are saving or uplifting peoples lives, I must disagree. Yes, their lives are uplifted to degree of being able to live, but, in turn, that degree reflects their quality of life is that of, what you would call, slavery.

Companies that take advantage of peoples lives, by exploiting their lack of or limited options are not worthy of a Nobel. Rather, they become worthy to experience those same qualities of life and reflect upon their choices… or lack of.

Carey Pruitt December 16, 2007 at 1:13 pm

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http://www.cnn.com/2000/WORLD/europe/11/20/eu.defence/

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