A place to seek clarity on timeless issues and issues of the day.
This is what showed up in my inbox from The Washington Post this morning. I suspect no commentary needs to be added for my readers to know what is wrong about this picture. Suffice it to say, with this kind of representation of the facts, WashPo is not earning its special free press rights.
See also, “The Truth Is Hard For The New York Times.”
By picking Colin Kaepernick as its newest ‘Just Do It’ star,” Nike has, in a huge way, supported Kaepernick’s policy prescriptions, rhetoric, and tactics, and, by inference, those of Black Lives Matter (“BLM”). Because of that, Nike made a huge mistake.
Despite the extensive public debate about Kaepernick and Nike’s pick, to my knowledge, no one is talking about the most significant error of their ways: They are making matters worse for the people Kaepernick thinks he is helping. Let’s sort that out.
AUTHOR’S NOTE: The public debate over Nike’s pick is predominately about (1) the validity of BLM’s[i] and Kaepernick’s allegations against police, (2) the propriety of kneeling before the flag during the national anthem, and (3) whether (a) Kaepernick is worthy of hero status, (b) Kaepernick sacrificed anything by kneeling and other issues as to whether Kaepernick is an apt role model for the merits of sacrificing to achieve a higher purpose, (c) “punishing” Kaepernick for protesting violates his civil or free speech rights and (d) sundry less important matters such as whether the pick will be profitable for Nike. As important as any of those issues might be, they ignore a more important point: Nike is supporting the message and actions of BLM and Kaepernick (hereinafter “BLM”) that will make things worse for the people BLM believes it is helping. (Sound familiar?[ii]) This is an uber-example of most modern leftist activists’ activities, i.e., they identified a problem, have little or no idea how complicated the problem is or how to fix it, organize a movement around simplistic ideas, propose policies grounded on a small fraction of the relevant facts, and quixotically either hinder progress in solving the problem or make the problem more problematic.[iii] Because Nike’s move is so big, BLM’s counterproductive activism is boosted by Nike’s pick, and BLM’s policies will inflict great harm on many people who are in desperate need of assistance, sorting this out is extremely important.
That members of BLM care about and want to improve the interactions between black people and the police are highly commendable. On those occasions when BLM brings public attention to cases of actual police misconduct, BLM provides a commendable public service. To the extent BLM activists save black lives, reduce injustices of the justice system (e.g., police misconduct), and improve the lives of black people, their hearts and minds are in the right place and are a force for good. When, however, their policy prescriptions and rhetoric are based on misperceptions or accurate perceptions of insufficient fact (which is the norm), or (2) their policies are counterproductive to their goals, they make things significantly and heart-wrenchingly worse for the people they believe they are helping. This post explains why BLM, and thus Nike,[iv] are making matters worse for black people (assuming, as I do, that more conflict between blacks and the police, less hope for a better tomorrow, less safe neighborhoods, and more black anger, frustration, and poverty people are bad).
In paradise, humans would thrive without rules or law enforcement. Sadly, paradise is beyond the reach of living humans. In the here and now, in societies without rules and reasonably effective police forces, only the powerful can thrive. Having police forces is necessary for societies to create conditions in which essentially everyone has a shot at thriving. Sadly, having police forces results in some injustice. Not having police forces results in vastly more injustice.
The odds that any sizable police force will have zero “bad cops” is essentially zero. While determining the ratio of good cops to bad cops would be impossible, the actual ratio is irrelevant to the points made herein. (For what little it is worth, my belief is that a large majority of cops in the U.S. today are good cops.) That ratio, however, makes an especially large difference to the lives of poor black people. The higher the ratio of good cops, the better for black people—especially those in dangerous neighborhoods. Consequently, sorting out how BLM’s actions and policy prescriptions are increasing the ratio of bad cops in police forces is important.
As used herein, “good cops” means cops who (1) believe a reasonable level of security and safety for everyone is necessary for a good society, and (2) are willing to face danger and risk life and limb doing what they reasonably can to serve and protect the person and property of everyone. They are not racist, sexist, homophobic, etc., and they believe that equal protection and application of the law for all is a virtue. “Bad cops” means cops who do not adhere to above characteristics of good cops. The traits of “bad cops” include relishing the ability to bully or lord over people, being racist or otherwise bigoted, selectively enforcing the law, and/or looking forward to opportunities to exercise their power to instill fear, arrest, harm and/or kill people—and get away with it.
Police forces can and should remove bad cops. That, however, cannot be done to perfection for many reasons, including these:
Consequently, if humans are to have reasonably functional societies, there will always be bad cops in police forces. The best that can be done is to keep the ratio of bad cops as low as practicable. Policies that achieve the opposite result are counterproductive.
Victims of wrongdoing by bad cops and mistakes by good cops (of which there are all too many, no matter how few) are understandably and justifiably aggrieved, if not outraged. Full stop. Those grievances should be addressed. Ideally, they would be addressed with good ideas and policies rather than the bad ideas and plans held and proposed BLM—which does not include all of BLM’s ideas and policies. The focus here is on BLM’s bad ideas and policies that are producing the opposite of their stated objectives.
BLM Claims/Policies[v] relevant to this post:[vi]
Much of the so-called “war” was adopted with the best of intentions and at the urging of Bill Clinton and black leaders, including Charlie Rangel, i.e., they were a bunch of well-intended, bad ideas and policies to help black people that preceded BLM’s new set of well-intended bad ideas and policies.[vii]
For a democratic society to work, the rule of law must be accepted by the people and sufficiently maintained by the government. To peaceably, efficiently, and effectively maintain the rule of law, an interaction between the police and a citizen cannot be treated as an interaction between equals concerning the issue for which the “meeting” was called. If the police have probable cause that a person has committed a crime, the police have the right to stop and obtain information from that person. Under the rule of law, the courts, not the suspect, is empowered to decide whether the police had probable cause. Confrontational resistance to a policeman’s request is not a part of a peaceful process and wastes time the policeman could otherwise use to deter, stop, or bring justice to other criminals. YouTube is replete with examples of how things do not end well for black people when they do not act civilly with police. No doubt, some of those videos evidence police misconduct. Those videos make a big splash, but they create at least four negative consequences for black people: (a) The black person in the video suffers more than would have been the case had they cooperated, (b) The eagerness of many Americans to address problems of police misconduct is reduced, (c) Some good cops are unfairly maligned, and (d) It provides opportunities for bad cops to do what they like to do.
Stated differently, poor people should be exempt from criminal procedures that apply to everyone else.
Stated differently, the police should not use many of the methods that are designed to protect innocent people in black communities and usually do.
Stated differently, render the job of policing more dangerous and policing less effective.[viii]
Stated differently, until the negative consequences of committing crimes by blacks are lessened to some undefined, possibly utopian, standard, there should be no negative consequences for black criminals.
Notice the absence of a mention of the relative incidence of violations of disciplinary rules by members of various groups.[viii]
Notice the absence of a mention of the relative incidence infractions deserving corporal punishment by members of various groups.
Police do not criminalize activities, houses and senates do that—they also pass the laws that call for incarceration. Reasonable cases can be made that too many things have been criminalized. Defunding institutions that enforce crimes will cause there to be less enforcement of the laws that protect innocent poor black people.
A system that does not condone killing people in certain situations (e.g., self-defense or killing someone shooting at school children) would be a bad system (regardless of the skin color of the person killed). No cop who justifiably kills someone wants to be accused of being evil—especially a good cop.
These claims defame cops—especially good cops.
If good white people are called racist whether they are or not, fewer good white people will remain or become cops—thereby leaving vacancies for bad white people to fill.
BLM’s policies undermine police effectiveness. While ineffective policing will hurt all neighborhoods (because criminals do not limit their crime in their own neighborhoods), ineffective policing disproportionately hurts poor black people.
Many of America’s poor black people live are high crime areas.[x] If the residents of high crime areas who are innocent and deserve protection (which is the overwhelming majority of residents) are to have a reasonable level of protection (and not lose the deterrence of crime provided by the presence of cops), more police are needed, not fewer. So, while cutting or eliminating policing in poor neighborhoods would be beneficial to people wrongly suspected of criminal activity, people who would have been victims of police impropriety (both of which are significant positives) and BLM, fewer cops will also help criminals wreak even more havoc on poor black people (the negative of which is even greater than the above positives).
Fomenting outrage often leads to the destruction of business property in poor neighborhoods, thereby causing the cost of doing business there to rise. The resulting replacement costs and insurance cost increases must be passed onto the poor customers of those businesses to stay in business. Alternatively, business owners get fed up and decide to no longer serve the needs of the community. Either way, the destruction of property and businesses hurt the poor people in the area. If the uptick in destruction in poor communities due to BLM fomenting destruction after police encounters causes insurance cost for businesses in all poor areas, poor people everywhere will pay the cost.
As if those problem with BLM demands were not bad enough, something else is even worse. To sort that out, first focus on why people become cops.
People choose to become cops for the pay, benefits, and other compensation. Patrol police pay and benefits are relatively high compared to some other dangerous jobs, [xi] but most other dangerous civilian jobs require a less diverse skillset and do not involve people intentionally wanting to prevent them from doing their job or to harm or kill them. All things considered, pay for cops may not be exceptionally low, but it is certainly not exceptionally high. Consequently, other compensations become exceptionally significant in attracting officers and maintaining a police force. For essentially all cops, total compensation includes camaraderie with fellow cops. That, however, can be obtained in much less dangerous occupations. What cannot be obtained in most of those other occupations, however, is the pride of serving and protecting others and the gratification of receiving respect and appreciation of the people they protect and serve. That respect is earned on account of the cop’s necessary and noble work, skill, heroism, sacrifices and courage on behalf of friends and neighbors and society at large.
In the above respects, bad cops get the same compensations as good cops. Bad cops alone, however, receive the additional compensation that attracts bad people to police forces, e.g., the pleasure of feeling powerful and important by bossing people around, instilling fear, lording over people, and/or carrying out their racist desires, etc.—and getting away with it.
BLM is attempting to delegitimize and disarm policing and paint all cops as bad cops deserving our condemnation and scorn instead of our respect and appreciation. BLM claims that policing in black neighborhoods does not serve and protect black people and that police are causing harm when they do their job. Lamont Hill, a BLM supporter, has said[xii] that getting rid of bad cops does little good because there is so much systemic racism that they can only be replaced with other cops who will discriminate against blacks. Setting aside that Hill’s statement is a mischaracterization of the problem, it implies that all cops are racist. All of these BLM actions reduce compensation for good cops, but not for bad cops.
Making matters worse, chanting “Pigs in a blanket, fry ’em like bacon” and Kaepernick wearing socks with pigs wearing police caps increase compensation to bad cops – especially racist ones—by, among other things, revealing that they are getting under black people’s skin.
The heart of the matter is that the more successful BLM is, the more BLM reduces the total compensation that has traditionally caused good people to join and remain with police forces. Lowering good cop compensation results in fewer good people willing to be become or remain cops. As the percentage of good cops on police forces declines, the percentage of bad cops increases. So, as a consequence of the efforts of BLM’s claims and activities, a higher percentage of the cops who do show up will be bad cops. The people who will be the greatest victims of a higher percentage of bad cops will be the exact people on whose behalf BLM claims to be acting.
Making matters worse, as good cops find work elsewhere and the city can no longer offer the reward of being honored and respected by their community for their service, the number of people who will be willing to be cops will decline. As a consequence, the bad cops who remain and the bad people who apply to replace the good cops will be able to demand and receive higher wages because the demand for cops will remain high while the supply of people willing to become cops shrinks. Higher cop salary increases the cost of policing. The higher the cost of policing, the fewer police and the less policing there will be.
A higher ratio of bad cops and budget constrained police forces will cause the people in the communities that need cops most to suffer the most from BLM policies. It is sad.
By picking Kaepernick as the face of the “Just Do It” campaign, Nike has lent credence to BLM’s claims and policy prescriptions and has, thereby, become complicit in the inevitable negative consequences described above—which will be disproportionately visited on poor black people. Nike made a huge mistake.
[i] See “What the Black Lives Matter campaign gets wrong.”
[ii] See my many posts that make a similar case about other activist movements. (It is strange that I just completed an eight-part series defending Nike against claims by activists who harm the people they believed they were helping, and here I’m condemning Nike for supporting a different cause that is doing the same thing. Such is life.)
[iii] See “Jordan Peterson tells you to clean your room.”
[iv] Nike’s move could very well be a huge success in terms of profits, but the positive of Nike’s profits pale in comparison to the huge damage Nike’s selection of Kaepernick will inflict on black people if BLM achieves its aims.
[v] See Black Lives Matter’s Platform, “END THE WAR ON BLACK PEOPLE.”
[vi] Several of BLM’s observations and proposals are accurate and meritorious, i.e., they will create net positives. I commend them for those, but they are not relevant to this post. Other BLM observations and proposals are omitted because they are irrelevant to the point of this post.
[vii] See “’Until the Drug Dealer’s Teeth Rattle’.”
viii] The problems with this idea were addressed in “Slowing the “School-to-Prison Pipeline”—At What Cost?”
[x] See “Top 25 Most Dangerous Neighborhoods in America.”
As was explained in Exploitation Part IV (d), the most self-defeating effect of the anti-sweatshop movement was that it slowed the progress of impoverished countries along their path to prosperity. That worst effect was caused by the higher costs (both in money and reputation) of operating factories in places that desperately needed more, not fewer, factories and the fear that the activists instilled in companies that would have otherwise considered starting or expanding operations in impoverished countries. Consequently, the movement helped a handful of poor people at the expense of more than a million times as many other poor people everywhere in the world, especially the poor in impoverished countries. As if that were not bad enough, the anti-sweatshop activists were also unaware (or didn’t care) about a couple other self-defeating consequences of their movement.
Displacement of Lowest Skilled Workers: When working conditions and/or pay for jobs are increased (e.g., by an imposed minimum wage), the lowest skilled employees holding those jobs at the time of the imposition of the higher wage are, to a large extent over time, replaced by higher-skilled workers from outside the company.[i] Let’s sort out why that is.
An unavoidable fact of life is that some people are more productive than others.[ii] For example, no matter the Nike factory job, some people are capable of producing more work product per hour than others. In general, the people who apply for especially low-paying jobs are especially low-skilled people relative to other workers in their market. Those employees are especially susceptible to competition for their jobs from higher-skilled people.
Let’s look at a hypothetical situation to see how the lowest-skilled workers are disproportionately disadvantaged by minimum wage increases. Let’s say that before the activists began their hectoring, (1) Nike was paying its widget makers 10¢ per hour to make the most widgets they were able to produce in an hour, which was 10 widgets (1¢ per widget), and (2) a native factory owner was paying his widget makers 15¢ per hour to make 20 widgets. Then let’s assume that the hectoring caused Nike to pay widget makers 20¢ per hour.
First, note that the higher skilled workers in native factories had to have preferred to produce twice as much as the Nike workers for only 50% more pay (and probably worse working conditions). If those workers preferred to work less hard for less pay, many of those workers would already be working for Nike.
The consequences of this situation are inevitable:
In addition, the native employers who lost those higher-skilled workers were harmed and, as the findings of the study[iii] discussed in Part IV(e), the number of low-skilled domestic jobs in Indonesia fell very significantly.
Surely this is approximately the opposite of what the anti-sweatshop activists had in mind. That is what happens when people pursue policies based on emotions rather than their minds.
Misplaced Burden: Good people wish that every worker could earn at least a “living wage” (definitions vary). Sadly, not every worker has sufficient skills to produce goods or services worth a little less than[iv] a “living wage” (more technically, the value of their “marginal product”[v]). If people are to be paid more than the value of their marginal product, someone must supply the money to bridge the gap. If the goal is for as many unskilled workers as possible to have a living wage, perhaps the most important issue in figuring out how best to accomplish that worthy goal is: “Who should bear the burden of bridging the gap between the value of the employee’s marginal product and the amount (“living wage”) the employer must pay for that product?”
First note that no employer caused any low-skilled workers to have low skills, i.e., the employer is not responsible for the existence of the problem for which a solution is needed. If society decides that this problem should be addressed, everyone in society that can bear part of the burden should.[vi] If society nevertheless decides that employers must fund the value gap (which is a bad idea), the question should be (but essentially never is), “Which employers should bear that burden of solving the societal problem?” Because that question is essentially never asked, societies almost always allow emotions to provide the answer—which, as usual, results in the wrong answer being chosen.
To achieve the stated goal of providing as many as possible low-skilled jobs that pay a “living wage” to low-skilled workers, the last companies that should be dunned for the value gap are the companies that hire low-skilled workers. That creates a direct and large incentive to use robots instead of people for as many low-skilled jobs as possible (or not to start or expand a business that uses low-skilled workers). If anything, the companies that hire low-skilled workers should be rewarded, not punished, for hiring low-skilled workers—so that they buy fewer robots and create more low-skilled jobs. So, if society wants (1) low-skilled workers to be paid more than the value of their marginal product, and (2) companies to bear the burdened of that societal goal, the burden of achieving that goal should be placed on employers in proportion to the percentage of their employees who are not subsidized, low-skilled workers. Under this scheme, companies that hire fewer low-skilled workers should subsidize companies that hire more low-skilled workers. In that way, society would burden the companies that are doing little to solve the societal problem and would reward those that are solving the societal problem.
Minimum wages do precisely the opposite. In effect, those requirements relieve companies that do not employee low-skilled workers of the societal burden and impose the burden on those companies that are helping solve the problem. The current scheme is a recipe for fewer low-skilled jobs, higher unemployment, greater welfare costs, and injustice. This is precisely the recipe that the anti-sweatshop movement served up.
Policies that do not discourage employers from employing more low-skilled people are needed everywhere. This is especially and desperately so in impoverished countries whose percentage of low-skilled workers is especially high. Policies that disproportionately hurt the very employers who employ low-skilled workers exacerbate the problem. People who exacerbate this problem should be called out and condemned. Hopefully, this series of blog posts has done that.
AUTHOR’S NOTE: I am not saying that dunning companies that hire few low-skilled employees or subsidizing ones that do are good ideas. In fact, it is a bad idea because (1) it grants too much power to government (which is already too powerful) and the government is inefficient, ham-handed, and corrupt in almost everything it does), and (2) it distorts the market, i.e., it renders the market less effective at solving society’s problems. As bad the above-proposed improvement is, however, it is far better than what society is doing right now to address the important societal problem of too many people having low skills.
[i] See “The Cruelty of the Minimum Wage.”
[ii] There are exceptions to this rule with respect to astoundingly exceptional people. Because minimum wage impositions are a non-issue in those circumstances, we need not delve into this exception here
[iii] See “The Nike Effect: Anti-Sweatshop Activists and Labor Market Outcomes in Indonesia.”
[iv] See “Exploitation-Part III, The Dangers of Incorrectly Detecting Exploitation.”
[v] See “The Marginal Product of Labor.”
[vi] See “Skin in the Game: Hidden Asymmetries in Daily Life” or “Nassim Nicholas Taleb on Work, Slavery, the Minority Rule, and Skin in the Game.”
In Exploitation Part IV chapters (a), (b), and (c), I claimed the anti-sweatshop movement inflicted much misery on poor people around the world. With the foundation laid in those chapters, we can now sort out how the anti-sweatshop movement caused those negative effects.
AUTHOR’S NOTE: Surely nearly all anti-sweatshop activists had good intentions. That the lives of some poor people in impoverished countries were improved by their activism is undeniable. In particular, the pay and working conditions for the few lucky people who held jobs in rich company sweatshops after the activism was improved. They also made it easier for native owned sweatshops in impoverished countries to compete with (take business from) foreign-owned sweatshops who were forced to improve pay and working conditions—because native owned sweatshops were able to produce similar goods at lower cost by spending less on working conditions and worker pay.
The tragedy of this story is that the thousands of rich country activists caused great damage to many millions, and some damage to billions, of poor people. It is a sad commentary on our education system that activists were not taught enough about economics to understand the net harm they were causing by letting emotions rather than facts and logic guide their actions. Doing things that induce good feelings about one’s self is a powerful motivator to do more of what caused those good feelings.[i] Lest the world be continually plagued by actions based on emotion rather than facts and logic, it is incumbent on those who do know enough about economics to heap scorn on people who act on the basis of emotion, i.e., “People who do not clean up their room.”[ii]
However, unless it is good to value the good feelings of rich country people over the well-being of the vast majority of poor people in impoverished countries, the relatively trivial positive effects activists achieved for a lucky few were overwhelmed by the negative consequences of the activism. Their actions impeded improvements in the standard of living of and dashed reasons for hope for a better tomorrow for many, many millions of poor people. Anyone who values improvements in the lives of a few poor people who are lucky enough to have a job in a sweatshop (what Bastiat called, “the seen”)[iii] over putting many, many millions of poor people on a path to prosperity (the “unseen”) will not likely find the following argument persuasive. Hopefully, few people have such values.
Businesses gravitate to where profits are easy or high, and especially to where both are present. Consequently, cheap labor is a possible way for a poor country to attract foreign investment and business operations. However, distant countries whose people speak languages different from those of rich countries, have few capable managers, live in a society that is not conducive to business, and/or have confiscatory and confounding governments have many strikes against them in their efforts to attract foreign investment. Succumbing to demands for higher pay and spending on better working conditions increases the cost of doing business, i.e., lessens the desirability of opening factories there. Defaming As the costs and hassles of operating in an impoverished county rise, the gravitational pull of business to that country weakens.
In previous posts, I have explained the virtuous cycle[iv] of growth that economic development produces. In short, other things being equal, growth begets growth. Economic growth, though far from a panacea, is the best elixir for bringing an ever larger percentage of humans out of abject poverty and human thriving yet identified.[v] Accordingly, the fact that there are too few jobs in impoverished countries is a sure sign those countries need economic growth. Nothing has been proven to be more effective at accelerating economic growth in countries with an overabundance of low skilled workers than factory jobs. Delaying economic development condemns a poor country’s poor to extended poverty and to less reason for the hope that they or their children will build the economic and human capital necessary for a brighter future.
The most harmful aspect of the anti-sweatshop movement reducing the profitability of sweatshops and defaming sweatshop owners with negative publicity (which damaged the profitability of the company’s other lines of business) was the reduction in the desirability of and enthusiasm for opening factories in impoverished countries. In short, the activists diminished the “gravitational” pull on business to open factories in impoverished countries. The weakening of that pull resulted in delaying, if not squelching, economic development in poor countries. Activists both reduced the desirability of sweatshop owners expanding their operations and caused would-be sweatshop owners not to consider or to abandon plans for such operations.
Development delayed is development denied to all who live in unnecessary poverty while waiting and helplessly hoping for opportunities to obtain a better standard of living.
Note also that it will be better for every country, and therefore every human, in the world when poor country consumers can afford to buy more exports from other countries, and poor people everywhere can buy stuff (clothing and shoes, for example) at lower prices. Anti-sweatshop activism kept poor people from becoming richer and raised the price the poor everywhere must pay for their necessities.
The in terrorem effects of the anti-sweatshop movement described above are based on sound economic theory, i.e., the described effects surely happened. I would love to site multiple studies that quantify the in terrorem effects of the anti-sweatshop movement. It is not for want of trying that I have not found an article or study that focuses on those effects. (I would welcome a citation to such an article.)
There are plenty of papers on the improvements in sweatshop working conditions and pay, and the employment effects of those higher costs in impoverished countries. Those studies often attempt to quantify of some of those effects, but, to my knowledge, not the in terrorem effects—which are the most important. Perhaps there are no such studies because (1) it is hard, if not impossible to quantify what was prevented from happening, (2) papers that don’t quantify something are much harder to get published, and/or (3) university professors are uninterested in or fearful of the repercussions of studying things that would disprove their or their peer’s presuppositions. Whatever the reason, they are looking for lost keys under the streetlight because that is “where the light is” rather than where the keys are.[vi] The fact that there are no such studies does not mean there is nothing to be discovered in the dimmer, more difficult light. Hopefully, this post will trigger attempts to study the most important effects of the anti-sweatshop movement.
Even when scholars conduct research on things that can be more easily quantified, they tend to bend over backward to avoid putting activists in too bad a light (which could be a sign that their presuppositions have gotten the best of them). Even then they do not redeemed the anti-sweatshop movement.
For example, two UC Berkeley professors with PhDs in economics studied and then wrote a paper[vii] that examined some lesser important effects of (a) anti-sweatshop activism, and (b) Indonesia raising its minimum wage due to U.S. pressure—as if one did not cause the other. (Separating the effects of activism from the effects of US pressure erroneously suggests that activism was not instrumental in creating the political climate that caused the government actions to be politically popular—a necessary ingredient for US government action.) By separating the issues, however, the researchers erroneously put activists in a more benign light than was warranted. Their report concludes:
“… direct pressure from the US government …, which contributed to a doubling of the minimum wage, resulted in a 25 percent increase in real wages for unskilled workers…. Unskilled real wages increased by an additional 10 to 20 percent for exporters and multinational plants in [textiles, footwear, and apparel] sweatshop industries….
Although we find no direct impact of anti-sweatshop campaigns on employment, we do find that the minimum wage increases reduced unskilled employment… [by] as much as 10 percentage points over the period. Our results also suggest that [the studied] exporters were significantly more likely to leave Indonesia during this period.”
If one (more accurately) acknowledge that the activism induced the pressure, the researchers found that the general minimum wage increases Indonesia adopted in the 1990s due to (activist induced) U.S. pressure caused working conditions to improve and wages for those fortunate few who held jobs in the rich country factories to increase by about 30%, without reducing the number of those employees. Good for those lucky few. But the higher minimum wage reduced “unskilled” employment across the economy by as much as 10 percentage points and exporting companies left Indonesia. This is exceptionally bad because Indonesia so desperately needed more jobs, not fewer.
So, activist pressure reduced total “unskilled” labor jobs by around 10%. The impact was swift, significant, and horrible. In 1999 30%[viii] of Indonesian factory workers worked in foreign-owned factories. That means that activists induced the losses of unskilled factory jobs owned by natives by more than 14%. That was not only a tragedy to those workers who lost their jobs.[ix] Those former workers who became job seekers added to the surpluses of workers for the unnecessarily few jobs that were available, thereby putting downward pressure on the wages of all of the country’s unskilled workers. Another terrible effect is that those people no longer produced wealth for themselves and the economy, i.e., the combination of these effects was counterproductive.
To get a feel for the cumulative effects of all of these effects, take a look at this chart of Indonesian employment in textiles, footwear, and apparel plants (“TFA”):
The chart depicts noisy data because in 1997 Thailand induced an economic crisis in Asia that hit Indonesia as activists were wrecking their havoc. The activists were not likely a material cause of the downturn. Because however, Indonesia was in the activists’ crosshairs, activists were likely a material factor in why Indonesia was hit harder than other Asian countries. (Compare rates of GDP growth of Indonesian ad India in the chart below.)
It is certain that the activists caused doing business in Indonesia to be less profitable than it would otherwise have been. Prospects for less profits results in less investment. Fewer/smaller investments result in fewer jobs than would have otherwise have been the case. Fewer jobs result in extended hardships for everyone in the country, and the world is poorer as fewer people are not producing wealth.[x]
The winners of the movement were (1) Keady, Kretzu[xi] and other movement notables who exploited the public’s economic ignorance about “exploitation” and gained wealth, self-esteem, and/or admiration from millions of similarly economically illiterate supporters, and (2) the lucky few employees of Nike and other “exploiters” who held onto their factory jobs in impoverished countries. The benefits enjoyed by the activists were unjust. The meager positive consequences of the movement were dwarfed by its negative consequence to the many millions (likely billions) of poor people around the world whose lives were made worse—very possibly including some of the workers in the videos who lost their jobs to higher skilled workers who displaced them to obtain the higher pay and better working conditions the activists caused.
Postscript: A few other negative consequences of the anti-sweatshop movement will be described in another post.
[i] See “The Economics of Caring.” The idea that humans are motivated only to maximize their utility is false.
[ii] See “Jordan Peterson: Delusions of Leftist Political Activism.”
[iii] See “Frederic Bastiat on the Seen and Unseen.”
[iv] For example, see “Wealth,” and its comments, “Wealth Creation – It’s For The Children, and their children, and their children….,” and “Wealth Creation. No Happiness, Why Bother?”
[v] See “Tyler Cowen on The Complacent Class.”
[vi] See “Streetlight effect.”
[vii] See “The Nike Effect: Anti-Sweatshop Activists and Labor Market Outcomes in Indonesia.”
[viii] See “Indonesia Labor Market Policies and International Competitiveness.”
[ix] See “Two Cheers for Sweatshops,” “The truth is, those grim factories in Dongguan and the rest of southern China contributed to a remarkable explosion of wealth.”
[x] See “Two Cheers for Sweatshops,” “When Britain launched the Industrial Revolution in the late 18th century, it took 58 years for per capita output to double. In China, per capita output has been doubling every 10 years.”
[xi] See “Exploitation Part IV, Exploiting Exploitation−The Cause.”