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Friday, November 1, 1996

Sweatshops for the New World Order

Americans' Lofty Perspective Invites Hasty and Disparaging Explanations

Poverty is an anomaly to many Americans. When they encounter it in foreign countries they view it as an aberration of human relations: the rich are exploiting the poor who are forced to work for “slave labor.” In contemporary terminology, “profit-seeking multinational corporations are operating monstrous sweatshops for the New World Order.”

What these Americans call “sweatshops,” the workers in those workplaces may actually hail as “opportunity shops”; and what Americans call “slave wages,” foreign workers may welcome as “living wages.” The descriptions seem to vary according to the height from which the earnings are viewed. Americans whose wage rates and standards of living are among the highest in the world always look down on the lower earnings of other nationals. Their lofty perspective invites hasty and disparaging explanations. Looking down on poor and primitive workshops they see “sweatshops” paying “slave wages.”

A little historical knowledge would help these critics to come down from their lofty perches. During the last century and earlier our forefathers labored long hours in shabby factories and dangerous mines with primitive tools and equipment, earning wages even lower than those paid in poor countries today. It took many decades of economic development to arrive at current levels of productivity and income. It took several generations of Americans to save and accumulate the productive capital that built our modern apparatus of production. The savings of the people and the business profits that were reinvested by capitalists together with the technological improvements by inventors built the economy as we know it today.

Politicians who always labor for the next election are quick to take credit for the improvements. The phenomenal rise in American wage rates and working conditions, they declaim, was the sweet fruit of their own efforts, their labor legislation and regulation. Wise and courageous politicians, they want us to believe, fought valiantly for higher wages and better working conditions. The chorus of these politicians is often sounded out by the agents of labor unions who are singing the praises of their efforts in the form of collective bargaining, violent strikes, and costly boycotts. Both groups often cooperate and give credit to each other for pointing the way and forcing greedy employers to pay American wage rates.

The main activity of politicians and labor leaders is criticizing their opponents. If they actually could improve the working conditions of all workers, they could eradicate the hunger and want of this world, purge all poverty, and bring prosperity to everyone. American legislators and union organizers could bring American working conditions to every corner of the world, from Burundi to Bangladesh.

In reality, working conditions and wage rates depend on labor productivity, which is a direct function of the stock of capital invested per worker. Unless they themselves made investments in their equipment, American workers made no contribution whatsoever to their high standards of living. Wherever they opposed the introduction of modern equipment, or their union agents and political representatives fought or taxed it, they actually resisted the rise in productivity and improvements in their own working conditions.

It was rising labor productivity and increasing levels of living that liberated women and children from the early sweatshops. In the industrial countries, labor legislation merely sanctioned the improvements brought about by capital investments. Naturally, legislators, regulators, and union officials claimed credit for the changes.

Their loud denunciation of child labor in poor countries usually produces unintended consequences. It may actually hurt the very people it is intended to help. The children who are dismissed or never hired usually do not return to school. On the contrary, they are likely to seek new employment in the underground economy that pays lower wages and makes more physical demands than the “sweatshops.” Many children manage to return to the shops by buying fake documents that make them older than they actually are.

Few American critics of “monstrous sweatshops” are motivated by their concern for foreign children. They rarely offer to house, clothe, and educate the children after they have been driven out, or merely inquire into the fate of those who have been given the gate. This glaring lack of concern clearly indicates that many critics of foreign child labor are more interested in protecting jobs in the United States than in improving the lot of foreign children. They are old-fashioned protectionists who seek to disguise their odious intentions in the sweet talk of great love for children.

Their protectionist agenda also is visible in their open hostility toward “the new world order.” No matter what we may think of the new order, it is preferable by far to the old order of war or preparation for war. The cataclysmic polarization between the democratic and dictatorial worlds, which generated two world wars and numerous lesser wars, has given way to the worldwide dominion of democracy under the leadership of one world power, the United States. The new order created a world of unprecedented interconnection and economic interaction. National trade barriers have come down significantly, which has led to a great extension of international cooperation and division of labor. The new information technology has brought the light of individual enterprise and the market order to all countries, and a new transportation technology has drawn them closer together than ever before.

Many millions of people in the developing countries now are laboring diligently and joyfully for Americans. Foreign and American capitalists have built thousands of assembly plants giving employment to people who heretofore had depended on charity or had toiled for mere survival. In exchange for their efforts, several million American workers have found employment in efficient American export industries. Both parties to the exchange, Americans as well as foreigners, benefit visibly from the trade. In fact, the new world order with its great improvements in the international division of labor has helped to offset the horrendous burdens placed on the American economy by the New Deal, Fair Deal, New Republicanism, New Frontier, and all other new political calamities. If it had not been for the phenomenal expansion of world trade with its new “sweatshops,” many of us would be unemployed and all of us immeasurably poorer.


Hans F. Sennholz

  • Hans F. Sennholz (1922-2007) was Ludwig von Mises' first PhD student in the United States. He taught economics at Grove City College, 1956–1992, having been hired as department chair upon arrival. After he retired, he became president of the Foundation for Economic Education, 1992–1997.