What is Seen and Not Seen
Frédéric Bastiat died of tuberculosis at age 49. But in the two hundred years since his birth (1801), his simple philosophies of economics have turned up time and again. In one parody, he concocted a petition by candlemakers for protection against "the ruinous competition of a foreign rival who works under conditions so far superior to our own for the production of light that he is flooding the domestic market with it at an incredibly low price." The rival was the Sun, and the suggested remedy was mandatory shuttering of all windows, so candlemakers might thrive.
Perhaps his most famous essay, which has relevance today, is "What is Seen and What is Not Seen." Bastiat was one of the first to point out that many "obvious" solutions to economic problems turn out to aggravate the very same problem when the unseen part is factored in. This observation is so modern that we talked about some of the cases at the workshop that I co-led (with Carol Blotter) at Friends General Conference just last month.
The Minimum Wage
One of these is the minimum wage, currently $5.15 an hour in the United States. A "living wage" movement is afoot, to mandate increases. "Everyone" (me too) would like poor workers to earn more. What is not seen about the minimum wage is:
If increases in the minimum wage will not raise the real (inflation-adjusted) wage in full employment, how do we bring about a "living wage?" If Bastiat were here today, he would have the answer. The only way is to increase the skills of workers, through education, training, and culture change.
Friends are deeply concerned about sweatshops in less developed countries -- long hours, unhealthy and unsafe work conditions, cruel punishments (such as flogging and not letting workers go to bathrooms), and above all, very low wages. Many Westerners are calling for boycott of sweatshops that do not meet minimum requirements for health, safety, and wages.
What we do not see is (1) sweatshops are found everywhere in the less developed world, not just in the producers of our clothing, and (2) sweatshop workers come mostly from families whose very subsistence depends on their keeping their jobs. Employers have sometimes fired them in order to please the American buyer. "As a result of American pressure, perhaps 30,000 children have been thrown out of their jobs in [Bangladesh's] textile industry in the past two years. A study by Oxfam found that far from going to school, many of these children have ended up in far more dangerous employment, in welding shops or in prostitution" (New York Times, 2/20/00). Other studies have found them being sold as sex slaves in Saudi Arabia.
So, what can we do? We can demand that purchasers of sweatshop products (Gap, Nike, etc.) monitor the work and safety conditions, as Gap did in El Salvador. But we cannot demand that employers increase wages or provide education for their workers, as some have proposed. Why not? Because sweatshops are a way of life in the Third World. No producer can operate much in advance of general conditions everywhere. One cannot be an island in a sea of poverty.
American wages, health, and safety conditions are the result of centuries of struggle, innovation, and rising productivity. We cannot impose the rich person's way of life upon the poor without adverse unseen consequences. What we can do, is join the centuries-long struggle to improve standards of living all over the world. (That's another subject).
Third World governments are swimming in debt. This debt must be forgiven, or so pronounce the advocates of "Jubilee 2000." What is not seen is that the debt is primarily owed by corrupt politicians who have used the money to pad their own bank accounts abroad. The poor, by contrast, do not have debts, because they do not have satisfactory credit ratings.
The debt is so great that it will never be repaid. Yet forgiveness would tell the corrupt debtors that they got away with it, and maybe they can do it again. Being forced to repudiate the debt, on the other hand, would bring them shame and possibly force them out of office. Many governments have defaulted on their debt, but we do not have an international court of bankruptcy. Steve Williams (of Bethesda MD Meeting), a jurist, responds by saying: "No procedure, paralleling domestic bankruptcy, exists for compelling creditors to accept some uniform percent of the debts of bankrupt governments (e.g., 25 cents on the dollar). with the debtor free to contract new debts. This is an area where international law and institutions could make real and important progress."
The corrupt borrowers should be pushed to repay, just like any borrower. When they cannot, the lending agencies will learn a lesson.
Applied today, Bastiat's lesson is that we cannot solve the terrible economic conditions around us by manipulating wages and prices, by excusing corruption, or by boycotting the poor if they do not live like the rich. For every economic policy, we must examine what is not seen. If we do that, we will find that we cannot change the world all at once. We must work, patiently and persistently, toward those solutions that will better the world as the way opens.
Can you think of other economic events where the unseen reverses the benefits of the seen? If so, or to comment on the ones I have mentioned, please sent TQE an email.
Peace and friendship,
For most people the idea of becoming an economist presents an insuperable, depressing burden, to which they may well react in a hostile manner. It also sounds as if they're not OK the way they are and that they are being labeled uneducated. This is all part of the "Unseen" to which they are reacting. At this point in my life I have very little ego invested in my ignorance, and I think it's possible for people with the very best intentions to make grave mistakes. It suits my current attitude to want to review things, and perhaps learn a little bit here and there.
Faith Williams, Bethesda (MD) Friends Meeting.
We had over 100 people at our Southeastern World Affairs Institute last weekend to discuss "Understanding Globalization". I think you will agree with Janet Malkemes when she says, "It's a fact of life in the developing world today, that children are working because if they don't, then the whole family starves."
Some attenders were concerned about the environment and labor issues, but John Fobes, retired UNESCO staff, pointed out UNESCO and other UN organizations are working on this and we should use the UN rather than the WTO.
George White, Charlotte (NC) Friends Meeting.
When I purchased [my company] Universal Woods, they were paying just over the minimum wage. They were getting just about what they paid for. Our CEO is Paul Neumann who is also a member of our Louisville Friends Meeting. He is now part owner. He has worked with management to increase the skills and the participation of the shop to the point that, with benefits, the shop people are earning close to $30,000, and they are on a guaranteed 40 hours, the same as management. They are earning it. As we have increased our technology level, the percentage of cost in labor has gone down. This also enables us to spend more on worker quality.
Lee B. Thomas, Jr., Louisville (KY) Friends Meeting.
I don't believe there is any way the small farmer in Mexico or any other country can compete with the big farmer unless she too is using genetically engineered seeds and confined animal feeding operations, which are spoiling the soil, air, and water.
Deb Garretson, Fall Creek Meeting.
For debt, the Oxfam report targeted independent funds for the indebted countries, that can only be used for education, combined with debt relief. They also give some examples of it working. It's interesting as an idea to be used in conjunction with an international bankruptcy court.
Geoffrey Williams, Bethesda (MD) Friends Meeting.
A simple rebuttal of the supposed effectiveness of the minimum wage is this: If an increase from $5.15 to $6.75 can increase the income of people, why stop there? Let's raise it to $100/hour and make millions of people rich. A moment's reflection on this extreme example reveals the fallacy of thinking that we can legislate jobs and higher wages into existence.
I am all in favor of giving money to the poor, but not by trying to force their employers to provide welfare.
Asa Janney, Herndon (VA) Friends Meeting.
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