Open Letter to An E-Mail Correspondent

by Don Boudreaux on February 27, 2011

in Trade

27 February 2011

Mr. Lance B_________

Dear Mr. B_________:

You urge me “to take more serious the argument [that] free trade hurts Americans when our trade partners don’t protect their workers as strong as us Americans do.”

You go on to explain that foreign governments that fail to enforce the same high standards of environmental protection and workplace safety that Uncle Sam currently enforces provide for their producers “unfair cost advantages.”  Free trade with such countries, you assert, only harms Americans.

I have some questions for you.

Suppose that a brilliant Chinese entrepreneur invents an automobile factory that converts house-fly droppings into all of the energy that the factory requires for its operations.  Suppose further that this entrepreneur devises a process that causes house flies, in their natural search for food, to fly through a series of teeny-weeny turnstiles whose combined movements result in an incredibly productive assembly-line process for daily churning out high-quality, low-priced automobiles for export to America.  This factory requires only three human workers; its chief workers are unpaid house flies whose instincts prompt them to set in motion mechanical processes that produce an incredible quantity of high-quality automobiles each day.

The small complement of human workers are paid and protected handsomely by the factory owner, but the bulk of the factory’s labor is supplied by unpaid house flies, none of whom enjoys the slightest bit of legislatively enforced ‘worker’ protections.

Would Americans be harmed by trading freely with this Chinese factory?  Should Uncle Sam prevent Americans from buying these Chinese-made cars on grounds that most of the workers in this Chinese factory are paid less – and receive far fewer work-place protections – than do American workers?

The point of my questions is not to justify cruel exploitation of foreign workers; it is, rather, to challenge your contention that free trade with foreigners who produce at lower costs – both ‘real’ and government-induced – than their American rivals harms Americans.  It does not.

Sincerely,
Donald J. Boudreaux

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{ 3 comments }

E.G. February 27, 2011 at 11:13 pm

No argument on the notion that this protectionist moral stance is nonsense. However, I feel the argument could have been done much better. An entrepreneur developing out of the blue a magic bullet to cut labor in an automotive factory by a factor of 100? I mean…was it really necessary to go to such a fantastical scenario? The one place where you will get snail-pace improvements and no entrepreneurial role at all…is in manufacturing technology.

The argument could have been made more realistic and comprehensible by addressing the very notion that workers in China or some other developing country are somehow being exploited and brutalized in their factories. Thats a ridiculous argument, for several important reasons.

First, to get manufacturing efficiency, scale and most important QUALITY, you need motivated and involved workers, and a large management and engineering team. People who picture sweat-shop conditions of workers in chains being beaten by whips…have obviously never set foot in a production facility in a developing country. A manufacturer that is going to produce 1 million widgets per day, regardless of how many people he may employee, needs to adopt sophisticated production methodologies. This requires workers that are accustomed to such methodologies, requires management that is educated and observant of their worker’s needs and owners who are mindful of quality. None of this fits in with the notion of some whip-carrying bosses beating 12 year old girls…simply because what produces results is involved employees. A Chinese manager doesn’t need to have a Harvard MBA to learn this simple lesson in 1 month.

I’ve been to production facilities in Mexico and in China. The places are spotless and models for employee care, much more so than most places I’ve been to in the US. For example, in our Mexican and Chinese facilities…food is provided to the employees at no cost. No such thing happens in the US (because US workers can afford their own food, and prefer their own food).

Second, the wages and facilities and treatment provided to workers in factories in China or elsewhere, is far superior to that they would otherwise experience if they were working in an alternative occupation…like starving as dirt-poor farmers. And the more connected with western partners an enterprise is, the more likely it is to offer much higher compensation and much better benefits. So the opposite of the argument made by the protections is true; buying from the Chinese will contribute to making their life better. And the reason for this goes back to point 1; to get the needed quality and sophistication in producing for the US market (even a simple widget), requires more experienced and more valuable workers which in tern merit better wages. A producer making widgets for the Chinese market has few limitations on what kind of workers he gets, or the sort of turnover, or training etc. The quality they can produce can be shoddy, and he can still sell. The opposite is true if selling in the US market.

Third, anyone who visits a production facility in a developing country, besides having their stereotypes completely demolished at the sight of the modern sophisticated production facilities and eager motivated workers…will also notice a long line of people usually standing by the gate of the plant, often all day. These are people looking for temp work…or an opening. Why are they there? Why would people be so eager to be exploited and beaten by whips??

At the end of the day, people who make such arguments simply are making up an alternate reality of the conditions in developing countries. Just as they tend to be the same people who make up simple 2-dimensional realities for conditions in the US…

Simon Grey February 27, 2011 at 11:22 pm

Foreign government /= foreign entrepreneur, ergo your comparison is invalid. Indeed, the only way it would be is if the Chinese government forced businesses to use a more efficient production method. Of course, this is an axiomatic absurdity.

Mr. Lance’s argument appears to be that American government has crippled local production through an onerous regulation apparatus. He astutely points out that the solution to this problem is not increased foreign trade, but rather deregulation.

Furthermore, increased foreign trade in light of crippling regulation is about as “free-market” as deregulating heavily subsidized industries. Sure, the government is less involved, but this is not the same as the government being uninvolved. As such, there is still a market distortion occurring, only now it is of a different type. And market distortion is still market distortion no matter how you slice it.

Alan Mead February 28, 2011 at 1:10 pm

Where can I hire some of these flies?

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