Jewish World Review Jan. 27, 2004 / 4 Shevat, 5764

Thomas Sowell

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Third World sweatshops

http://www.NewsAndOpinion.com | "Low-Wage Costa Ricans Make Baseballs for Millionaires."

That was the headline on one of those New York Times "news" stories that continued its recent tradition of disguised editorials. The headline said it all but the story ran on and on anyway, with details and quotes that added nothing to the familiar story that Third World workers don't earn nearly as much money as most Americans, even when they work for rich American companies.

Perhaps the best refutation of the implied message of this "news" story also appeared in the New York Times, in a frankly labeled op-ed piece by the paper's own Nicholas D. Kristof. Writing from Cambodia, Kristof reported: "Here in Cambodia factory jobs are in such demand that workers usually have to bribe a factory insider with a month's salary just to get hired."

The workers in Cambodia receive even lower wages than those in Costa Rica. But the difference is that the report from Cambodia spelled out what the local workers' alternatives were and how anxious they are to get the jobs denounced by intellectuals and politicians in affluent countries.

"Nhep Chanda averages 75 cents a day for her efforts. For her, the idea of being exploited in a garment factory — working only six days a week, inside instead of in the broiling sun, for up to $2 a day — is a dream."

By and large, multinational companies pay about double the local wages in Third World countries. As for "exploitation," the vast majority of American investment overseas goes to high-wage countries, not low-wage countries.

Why are these international capitalists passing up supposedly golden opportunities for exploitation? Because they understand economics better than most intellectuals and politicians, who are content to score cheap points, without worrying about the logic or the consequences.

If outsiders succeed in pressuring or forcing multinational companies to pay higher wages, that will make it more economical for those companies to relocate many of their operations to more affluent countries, where the higher productivity of the workers there will cover the higher wage rates.

Net result: Third World workers will be worse off for having lost better jobs than most of them can find locally. Meanwhile, Western intellectuals and politicians will be congratulating themselves for having ended exploitation.

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At the heart of all this is a confusion between the vagaries of fate and the sins of man. All of us wish that workers in Costa Rica and Cambodia, not to mention other poor countries, were able to earn higher pay and live better lives. But wishing will not make it so and causing them to lose their jobs will not help.

It is tragic that people in some societies simply have not had the same opportunities to develop more valuable skills and that those societies have not had economic and political systems that promote economic progress comparable to that in most Western countries.

Low pay is one symptom of that fact — and changing the symptom will not change the underlying problem, which is that the people in such countries got a raw deal from fate, history, geography or culture. But the left attempts to blame Western employers who are providing these workers with better options than they had before.

The left-wing spin is that the poor are poor because the rich are rich. That opens the door for a big power-grab by the left in the name of "fairness" or "social justice" or whatever other rhetoric resonates with the unwary and the ill-informed.

Unfortunately, this theory does not also resonate with the facts. Whether domestically or internationally, investors looking for the highest rates of return usually steer clear of poor areas and put their money where there are people with more advanced skills, living in more prosperous countries, even if they have to pay much higher salaries in such countries.

The United States, for example, has long invested more in Canada than in all of poverty-stricken sub-Saharan Africa, where wage rates are a fraction of Canadian wage rates. If the facts mattered — and if the poor really mattered to their supposed saviors — the implications of that would have been understood long ago.

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JWR contributor Thomas Sowell, a fellow at the Hoover Institution, is author of several books, including his latest, "Applied Economics: Thinking Beyond Stage One." (Click HERE to purchase. Sales help fund JWR.)

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