Sunday, February 13, 2005

The Capitalist Conundrum

A recent editorial in the New York Times on the horrific conditions for workers in the U.S. meat industry sparked an exchange between a friend and I on one of the fundamental dilemmas inherent in capitalism, which is recognized on at least a superficial level by most people, but rarely made explicit and explored in detail.

The fundamental assumption underlying capitalism and market-based economies is that people trade goods and services, including their labor, voluntarily. Contrary to the rants of its most vocal critics, capitalism is inimical to slavery. If exchange is non-voluntary (i.e. achieved through coercion) it is by definition not a capitalist exchange. The power of this concept is not to be underestimated; it leads to a profound set of conclusions. The most important is that if exchanges are made voluntarily then all parties engaged are by definition better off after the exchange; after all, if they weren’t why would they have agreed to take part in the first place? Putting aside legitimate issues of perfect information and externalities that accompany this conclusion, the essential logic is sound and helps to explains why market-based systems are dominant almost everywhere in the world, even in places without political freedoms. It also explains why overall, no other system has been able to improve the standard of living for so many in such (relatively) short periods of time. The bottom line: Allowing people to freely trade and specialize amongst themselves is the most powerful driver of prosperity in the world.

There is a catch, however.

There are many situations in which people find themselves willing to do things voluntarily that are demeaning, obscenely dangerous, and deprive them of their basic human dignity because they are so down and out that they have no other options. For example, the meat workers in the NYT editorial are often poor, uneducated immigrants who don’t speak English and are therefore willing to work in conditions almost identical to what Upton Sinclair exposed in the Jungle almost 100 years ago. While it is true that these men volunteered for the job does that mean it is right to subject them to these conditions?

Economics as a science rarely differentiates between degrees of voluntarism, but you don’t need to be a moral philosopher to understand that this poses a problem. My deciding which high paying and fulfilling job to take is qualitatively different then a woman with no education and no money deciding whether to work in a brothel or a sweatshop in order to survive at some subsistence level. (I want to make sure to differentiate this example from someone in the U.S. who chooses to work in a dangerous occupation but is compensated with higher wages. In this case, the individual is not forced to choose the risky job because they have no other options, but they are willing to take the risk for the added reward.)

Once we acknowledge that not all voluntarism is the same, proponents of capitalism cannot take so much comfort in the fact that many of the worst jobs in the world are carried out by people who “volunteered” for them of their own free will. The next question naturally arises, what minimum standards do we as a society have an obligation to provide to workers even if they would willingly accept less? Even posing this question is contrary to the purest forms of laissez-faire capitalism, but it is this type of thinking that (ironically) has helped capitalism prosper into the dominant system it is today. Although the victories of the labor movement- the 40 hour work week, an end to child labor, safety standards- have greatly benefited the average worker, they also helped to quell widespread discontent directed at the entire capitalist system, which seriously threatened its very existence during the 20th century. Capitalism is much more universally accepted because advancements were made in labor standards above and beyond the bare minimum.

The purpose of this piece is to introduce the issue of voluntarism in the capitalist labor market and the moral question it poses, and I will end with some concrete examples.

There has been widespread condemnation against child labor in the developing world, in which hundreds of millions of very young children are forced to work long grueling hours, often in unsafe conditions. While the sentiment against child labor is to be commended, a widespread ban on child labor in many poor countries might actually worsen the plight of children since many would be forced into drug gangs or prostitution. A significant amount of financial assistance from outside countries would be necessary to prevent this, since the poor countries themselves cannot be expected to eliminate child labor altogether at their stage of development without adverse consequences. Certainly, child labor standards can be enacted in order to combat the worst abuses, and efforts should be made to provide education and other opportunities for these children, but it is unfair to expect these nations to overcome this plight immediately all on their own.

On the other hand, in a country such as the U.S. there is absolutely no legitimate excuse as to why any people, citizens or not, should be subjected to the conditions outlined in the NYT editorial. We are one of the wealthiest nations on earth and providing safe working conditions where people are allowed adequate rest and are fully compensated if they are injured is something that should be universal in all of our business enterprises since the cost is so small relative to our level of development.

This lens may also be useful in examining some of the current battles in the U.S. over increasing the minimum wage or in legislating that employees provide health insurance to all workers. Those on the Right typically oppose any such intrusions in the capitalist market, while many on the Left often view these as essential components of making the market more fair. Both sides raise legitimate issues, and since there is no perfect marker for deciding what standards are just or fair, there will always be room for reasoned disagreement. However, acknowledging that not all degrees of voluntarism are the same may help to expand the dialogue and allow a wider range of moral concerns into the discussion. For example, a single mom who chooses to work at Walmart may be choosing the best available option, but still find herself unable to provide her family with the basics such as adequate food, shelter, and medical care.

In summary, while the capitalist labor market is based on the exchange of labor for wages, these exchanges may be consistent with labor conditions that are abhorrent and don’t meet even basic minimum standards of human rights. In some sense, the fact that I can even say this stems from the fact that over time standards of human decency have improved as societies have become wealthier. Acknowledging this must lead us to accept that on some level labor standards are relative, but what they should not be is stagnant; the push should always be to improve them in conjunction with general improvements in the overall material standard of living. This isn’t contrary to capitalism, in fact it strengthens it, by allowing more and more people to enjoy dignity and the fruits of their labor, and therefore to become enthusiastic supporters of the system.



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