Sweatshops vs. Social Justice Warriors

One thing that the world never seems to have enough of is economic knowledge. The other day, John Oliver produced yet another segment on his show that was full of heart and low on gray matter.

(I know. A third post about John Oliver? At some point, I might have to pay him royalties.)

In this segment, John Oliver took aim at some of America's biggest retail clothing stores and put them to task for continuing to use sweatshop child labor in third world nations.

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One of the clips that Oliver used in this video was a news clip from the BBC that was taken in 2000. At the time, it was discovered that some of Gap's clothes were manufactured in a sweatshop in Cambodia, which employed underage children. Specifically, the video shows two young girls who were twelve and fourteen years old at the time. They had lied about their age to work at the sweatshop factory.

Gap announced its plans to enhance its age verification requirements after the BBC aired that discovery. Oliver gives them a backhanded compliment but then the video moves on to show how despite those promises, Gap and other retailers are still continuing to employ child labor throughout the world.

Well, so fucking what?

It's incredibly easy to get on a high horse and start moralizing. Any idiot can do that. And many idiots do. But what Oliver fails to do, yet again, is to ask the more pertinent questions. Case in point, why would a twelve-year-old Cambodian girl lie about her age to work in a sweatshop? Could it be that working at a Gap-owned sweatshop is preferable to the alternative?

In a country that is as poor as Cambodia (the country's GDP per capita is a little over US$1000), childhood, which is very much taken for granted in affluent societies, is a luxury that very few can afford. So, Cambodian children have to work.

If they can't work at Gap-owned or any other clothing apparel-owned sweatshop, a practice that Oliver seems to want to see ended, Cambodian children do have other alternative types of employment to choose from.

For instance, another alternative source of employment that Cambodian children can look forward to is prostitution (see here, here, and here). Of course, prostitution is not the only kind of employment they can pursue. There is also begging (see here, here, and here).

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If sweatshop work is actually put to an end, might that inadvertently condemn those workers, children and adults, to even worse conditions? Maybe it's possible that working at sweatshops is not the worst thing that could happen to children who live in countries like Cambodia?

But who has time to ask such questions? There are social justice warriors who want to watch faux-intellectual comedy shows and feel smug about their sense of self-righteousness!

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Did Korea's Economic Development Require State Protection?

A common argument that is often brought up to argue against free market capitalism is Korea's economic development. Many argue that despite the fact that President Park Chung-hee was a dictator, one thing that people cannot argue against is the economic development that Korea enjoyed under his 17-year-long rule.

Specifically, what those people are usually referring to is the series of protections, quotas, tariffs, and subsidies that President Park had given to what were then nascent chaebol companies.

One such defender of that point of view is Professor Ha-joon Chang, an economics professor at the University of Cambridge, and the author of such books as Bad Samaritans, Kicking Away The Ladder, and 23 Things They Don't Tell You About Capitalism.

Professor Ha-joon Chang
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Much can be said about his books, and I plan to do so in the future. For now, however, I will focus only on his defense of the infant industry argument, which is an idea that argues that emerging businesses and industries require government protection – in the form of tariffs, subsidies, and quotas – from their more entrenched competitors, particularly foreign competitors.

In that article that I linked earlier from The Independent, Professor Chang compares nascent industries to his six-year-old child. If this weren't a cringe-worthy moment of stupidity and/or academic dishonesty, I don't know what is.

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Moving on, in Bad Samaritans, Professor Chang makes the argument that Korea's economy did not develop because of neo-liberal economic policies, but rather due to heavy government involvement in the economy. There is no question that that is true.

There is also no question that Korea's rapid economic growth was nothing short of miraculous. There is a reason that it is often referred to as the Miracle on the Han River. But is that proof that protectionism was what allowed Korea's economy to develop so quickly? Well, that's quite hard to confirm considering the fact that Singapore and Hong Kong, which practised freer trade policies, went through much quicker and greater economic development.

“But they are city-states; they cannot be compared to a country that is so much bigger like Korea,” I often hear people say.

Fine, fair enough. Then one has to wonder about China and India. Both countries are much bigger than Korea and their economies grew much more quickly after they began to liberalize their respective economies (see here and here).

Of course, this is certainly not to say that government controls and economic programs are non-existent in Hong Kong or Singapore or China or India. They are not free market economies. But they have shown that freer markets do lead to greater growth.

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Another point that Professor Chang does not mention is that subsidization and other forms of government protections do not guarantee economic survival or development in any way, stretch, or form.

Yes, Korea is an example of an economic success story. However, we also have to look at other examples where protecting infant industries were not successful. For example, African cotton farmers want their governments to end the subsidies programs for their respective national industries so that they can finally compete in the international market; and which African country's economic development could ever compare with Korea's economic growth?

The problems of protecting infant industries are not limited to African countries. In the United States, despite the government's efforts to prop up Solyndra, a company that specialized in manufacturing solar cells, with up to US$535 million of taxpayers' money, the company still declared bankruptcy.

Similar examples can be found in Korea, too. Samsung was certainly one of the chaebol conglomerates that the Korean government helped to protect and nurture. However, Samsung is not the only business that got so much love from the government. Another industry that has gotten a lot of love from the Korean government is the rice industry. So why has Samsung become an internationally well-known name but there isn't a single Korean food-producing company that is as well-known outside of Korea?

In other words, no amount of subsidies or trade protections ever seems to be able to prevent what was always doomed to fail from failing.

So what does Korea owe its economic success to? That is a difficult question to answer; much more difficult than Professor Chang would like for his readers to believe. It's certainly not free market economics. As Professor Chang has shown, the Korean government has been heavily involved in Korea's economy. But as I have shown, freer markets like Hong Kong and Singapore have grown more quickly than Korea and subsidies do not guarantee success.

Though that specific question may be harder to answer, what is much easier to answer is that Korea's economy did not develop because of the government's protections, subsidies, and overall involvement in the economy, but rather in spite of them.

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Why doomsday prophecies tend to fail

Recently, I read a very well-written article by Philip Iglauer in 10 Magazine, which was about a team of young scientists here in Korea who are currently developing a new plasma technology that could potentially convert carbon dioxide and methane into hydrogen and carbon monoxide, which could then be sold at a hefty profit. If you have not read it, I highly recommend for you to do so.

I study economics, and am about the furthest thing from a climatologist. As such, like most people in the world who have not studied climatology, which is a very rigorous and difficult discipline, I have no choice but to rely on second or third or fourth-hand information. So I cannot say for sure whether or not I think climate change is man-made or if it will be as deadly to all humankind as some people say that it will be.

Of course, due to the fact that the information that people receive are second-hand information, one of the problems with the debate behind climate change is that confirmation bias often comes into play. Therefore, as most people cherry-pick the data and evidence that conform to their own points of view, people on both sides of the argument can and do honestly believe that the existing evidence supports their views. Perhaps not so oddly enough, this also applies to other disciplines, such as economics.

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But I digress. Assuming that these young scientists will not pull a Hwang Woo-suk, regardless of whether climate change is human-induced or caused by natural phenomena, this new technology could turn carbon dioxide, the gas that is causing so much consternation among people all over the world, into just another natural resource that humans can exploit for commercial purposes. Who knows? Carbon dioxide and methane, which some people are convinced will bring about the downfall of humanity, could even become a future fuel source!

(I wonder how this might affect the cap-and-trade market?)

Though it is possible that I am being far too optimistic about this new technology, as I read about it, it occurred to me yet again that the one constant thing in this universe is change. And because of this constant state of change, as the old saying goes, prediction is hard, especially about the future.

Doom! Doom, I tell you!
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Of course, that has never stopped doomsday prophets from attempting to predict the future.

For example, Paul R. Ehrlich predicted in his 1968 bestseller, The Population Bomb, that millions of deaths would occur per year throughout the 1970s. He also insisted that the only way to avert this catastrophe was through mass population control “by compulsion if voluntary methods fail.”

The following is a portion of the prologue from Ehrlich's book:

The battle to feed all of humanity is over. In the 1970's the world will undergo famines – hundreds of millions of people are going to starve to death in spite of any crash programs embarked upon now. At this late date nothing can prevent a substantial increase in the world death rate, although many lives could be saved through dramatic programs to “stretch” the carrying capacity of the earth by increasing food production. But these programs will only provide a stay of execution unless they are accompanied by determined and successful efforts at population control. Population control is the conscious regulation of the numbers of human beings to meet the needs, not just of individual families, but of society as a whole.

Nothing could be more misleading to our children than our present affluent society. They will inherit a totally different world, a world in which the standards, politics, and economics of the 1960's are dead. As the most powerful nation in the world today, and its largest consumer, the United States cannot stand isolated. We are today involved in the events leading to famine; tomorrow we may be destroyed by its consequences.

Thankfully, Ehrlich's prognosis never had to be heeded due to the arrival of Norman Borlaug.

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Another example of a failed prediction can be found in this article from 2007 in the Daily Telegraph. Back in 2007, Yvo de Boer, a former executive secretary of the United Nations Framework Convention on Climate Change and the current Director General of the Global Green Growth Institute said, “the number of environmental refugees – from deforestation and desertification as well as climate change – is likely to exceed the number of traditional refugees by the end of the decade.”

He also added that “it could lead to 50 million people, the equivalent of the population of England, becoming environmental refugees by 2010.”

Both Ehrlich and de Boer called for sweeping economic, political, and social reforms, which would have made the world unrecognizable (and horrifying) by many of us today had world leaders actually listened to them.

Of course, these are not the only examples of apocalyptic predictions that have failed to come true. There are many more examples of failed predictions here. So, why do so many people still keep preaching doom and gloom?

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Professor Bryan Caplan took the concept of confirmation bias a step further and calls his theory pessimistic bias. To explain, Caplan says that one of the biggest mistakes people make is that people have a tendency to overestimate society's troubles and underestimate its progresses. That is because, as Caplan says, people tend to dwell on problems and failures and take solutions and successes for granted.

Doomsday predictions have been around for nearly as long as humans have been around, it seems. So, they should be par for the course that we call humanity. However, the big problem with gloom-and-doom predictions is that many of these doomsday prophets hold influential positions in academia, the media, governments, non-governmental organizations, and inter-governmental organizations. And one common feature that these prophets share is that they always project today's problems into the future, despite the fact that most people can never tell what the world will look like in just a few years, much less in a few decades.

Today's supposedly man-made problem is carbon dioxide. And people who believe that excess carbon dioxide will lead to the downfall of humanity operate on the premise that carbon dioxide will continue to be a problem in the future. But going back to those young Korean scientists, it is possible that carbon dioxide might not be a problem at all, but rather a boon, in the future.

Or in the case of people who fear the continued use of fossil fuels, many of them operate on the premise that fossil fuels will continue to be used in perpetuity. They do not consider that the decreasing costs and increasing efficiency of solar energy will likely make people less willing to use fossil fuels in the future.

Bryan Caplan might just be right in his theory that pessimistic bias colors far too much of people's predictions of the future. Perhaps it might not be such a bad idea for people to step back for a moment and smell the roses.

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