Third-World Poverty: That Was Easy

There was a story in The NewYork Times a few months ago that startled me. The story was of an American clothing manufacturer with a factory in the Dominican Republic, who decides that he wants to start having a more positive impact on the world. So he starts paying the workers a "living wage," defined in the article as the amount of money needed to adequately feed and shelter a family

This turns out to be about three times the minimum wage in the Dominican Republic, and the results for the lucky workers have been dramatic. The article leads off with the story of a woman who lived with her husband and three children in a windowless shack, sharing an outhouse two doors away. They are now building a new house with two bedrooms and an indoor bathroom. Another woman is planning to send her daughter to college.

OK, so a heartwarming story about a do-gooder, right? And this company can get away with it, because they do a lot of business with colleges, where there are already big anti-sweatshop campaigns organized that can help them do marketing. Not really earth-shaking.

But that wasn't what startled me. Far down in the article you read this: In a T-shirt that retails for $18, the cost of more than tripling the workers' wages is 80 cents.

What?

I started trying to figure out what other costs in the $18 might be affected. The interest cost of holding inventory might go up by whatever fraction eighty cents is of the wholesale price. What else? Shipping: the same as before. Marketing? The same. Retailing? The same. It doesn't appear that the cost of lifting these workers from miserable Third-World poverty to a hopeful Third-World middle-class life is more than five or six percent of the retail cost.

I was mulling this over when I came across another article in the Times. This one was making the unsurprising point that any change in the value of China's currency would affect different U.S. companies differently: if Chinese currency became more expensive ("stronger") relative to the dollar, it would help companies that export to China and  hurt companies that import from China. (That's why the U.S. wants it to happen, after all.)

Again, nothing startling except... The story includes an interview with a Chinese sock manufacturer who makes socks that retail in the U.S. for 2.99 a pair. He sells them for 25 cents a pair. That includes everything, not just labor but material and machinery. At the factory in the Dominican Republic, labor was about 10% of the cost of a shirt before the wage increase. Figure 20% for the socks. That's five cents. Triple that and you've raised the cost by ten cents, or about three percent.

Here's where it gets interesting. Let's say we survey Americans, with this question: "Suppose you could wave a magic wand and ensure that all the clothing imported into this country was made by workers who work in decent conditions and make enough to support a family, and not by workers working in a sweatshop at the minimum wage. But if you wave the wand, the cost of clothing will go up by five percent. Would you do it?" (Ideally, conduct the survey in such a way that the interviewer won't know an individual subject's response.) My guess is that a large majority would say yes.

So what's the problem? First, of course, people usually don't know which kind of T-shirt they're looking at. So you would need a big campaign (though probably quite cheap compared to the scale of the problem) along the lines of the old "Look for the union label" campaign, without, God forbid, mentioning unions. You would need an estimate of a living wage for each country, which some international organizations have taken a stab at, some kind of certifying organization, and an advertising campaign. Maybe George Soros's foundation can come up with a couple hundred million.

The other problem is that people might not actually do it. This is intellectually a trickier problem: even though everyone might want everyone to pay five percent more, strictly speaking it's irrational for anyone to do it. Whatever other people do, my own contribution is going to be too small to make a difference. This is a very familiar problem in political economy.  The same problem exists with installing pollution control equipment on your car, paying for national defense, or voting.

As the example of voting suggests, there are a couple of saving graces here. First, people may get some satisfaction from the activity itself. Second, most people are not rational; try to tell them that their vote's probability of affecting the outcome is essentially zero, and they'll say, "But what if everyone thought like that?" (Yossarian's reply in Catch 22 was, "Then I'd be crazy to think any differently, wouldn't I?") So voluntary action might work better than one would expect.

The examples of pollution-control equipment and national defense suggest what the alternative is: what Garrett Hardin called "mutual coercion mutually agreed upon." That is, we could pass a law saying that imported goods must be produced by workers who are paid a living wage. In principle, even though without the law we might buy the sweatshop stuff, we could unanimously agree to pass a law like that.

In practice, not so much. In general, manufacturers of competing goods and unions would probably support a law like this; importers of inputs would oppose it. Actually, the politics might get quite interesting. While the libertarians over at the Volokh Conspiracy would go through the roof, it might be possible to get liberals to link arms and sing "Kumbaya" with xenophobic opponents of immigration (under the slogan "Keep Them Where They Belong!").

I should mention that I've always thought "living wage" laws were pretty silly. Why is this not silly? If you try to regulate the supply side, by setting a wage rate that local businesses must pay, the businesses will move to the next town over. But if you regulate the demand side, what are businesses going to do? Not sell to us? If you bring those bleeding-hearts in Europe on board, you've got a huge chunk of total world demand.

All right, I haven't got all the details of this worked out. Most people in the Third World are self-employed farmers. Should we ignore them and hope that a rising tide will lift all boats? Would this change lead to a mass migration to cities? Is it legal under World Trade Organization rules?

Hey, implementation is someone else's problem.

A Couple More Notes From the Fringe

1. The prize for most unintentionally depressing subject line in an email goes to townhall.com, which sent me one titled "It's a Savage Nation." The reference, of course, is to "[b]estselling author, conservative icon, and popular radio host Dr. Michael Savage," who has a new book out.  But that seems to be increasingly true, doesn't it? It is a savage nation.

2.  Recently I commented on the right's bizarre rage against Obama. Yesterday I was visiting The Volokh Conspiracy, a website that I mentioned here last week. (I assume the name is an allusion to Hillary Clinton's claim of a "vast right-wing conspiracy" to bring about impeachment. The slogan of redstate.com is, "Where the VRWC conspires." That's from memory, of course, as I'm banned. Personally, I think "vast" might have been a little over the top.) Anyway...

I was reading, and commenting in, a thread about global warming. As  you might expect, the thread started out being reasonable and was quickly overpowered by passionate denialists skeptics. I came across this remarkably frank account:

...I stopped hiking and travelling because of physical problems that preclude hiking 20+ mile days in the backcountry. And I'm one pissed-off dude because of that.  This kind of "discussion" gives me an outlet that is both socially acceptable AND useful.

Now - I've already said some things about the "denialist" thing. For the moment, I'll just add this - it's kinda like those who use the F-word 3 times in every sentence - it's an indication of their immaturity, mental capacity, lack of imagination, lack of socialization and how thin their veneer of civilization is.  IOW, it's rude, crude and uncalled for and deserves no respect at all. 

For those who understand what science is, how it operates, its history and possible future, the word "Consensus" is utter nonsense. It's not an argument and it's only persuasive to those who are either ignorant or stupid (or both). 

Yes, that's one pissed-off dude, all right. I'm not too clear on why he's so exercised about being called a "denialist," or why that's worse than a term that he uses elsewhere, "the Church of AGW" (anthropogenic global warming). But what's noteworthy is that he is quite open about his rage being completely unrelated to the topic, and about finding an outlet for it in the "discussion" (in quotation marks, I suppose to indicate that discussing things is only his ostensible purpose). No doubt that is more socially acceptable than shooting someone, or beating the crap out of them.

But have the non-political, exogenous causes of rage increased for some reason, or has it just become more common for people to channel their rage into politics? And when they do, does violence go down, or does public expression of rage become more socially acceptable? And does that, possibly, increase the temptation to feel rage in a variety of situations (say, physical limitations)?  Is there a vast Satanic conspiracy against the better angels of our nature? Are we in fact turning into a savage nation?

Just speculating.

Misreading the Constitution

I have continued my optimistic, if quixotic, quest to bring civility and open debate to the Internet by visiting sites I don't agree with. Recently I have been spending time at the Volokh Conspiracy, a collective blog by a group of right-wing libertarian law professors. I am pleased to report that I haven't been banned, and that the tone is generally non-abusive and the opinions non-uniform. (There is one guy who referred to "Sonia Sodomizer" and commented on the "Muslim-in-Chief," but he doesn't really fit in there.)

In fact, I am finding this site a bit addictive, because it's actually possible to have a serious discussion there, though so far neither I nor anyone else appears to have been convinced. I did have a sudden intellectual epiphany, though, that I want to tell you about.

It was during discussion of a rather pointless post about a rather silly statement by Rep. Peter DeFazio that he was investigating articles of impeachment against Chief Justice Roberts. Part of the reason was the Citizens United decision immortalized in the last State of the Union address, in which a 5-4 majority struck down limits on corporations' political advertising as violations of the First Amendment.

There was some huffing and puffing about DeFazio (as if no one had ever proposed impeaching a Supreme Court Chief Justice before), and then talk turned to Citizens United. That led to this exchange, with me in italics:

Let me reframe it this way: Suppose (arguendo, as I believe they say) that CU results in big corporations and billionaires having a dominant influence on democratic elections. What would your response be? 1) I’m happy, because it would help my party, and the ends justify the means. 2) I’m happy, because big corporations and billionaires are smarter than average people and should determine policy. 3) I’m unhappy, and I would support legislation to reduce the effect of money, even though it might hurt my party. 4) I don’t care, because the assumption is wildly implausible.

You omit option #5: It doesn’t matter whether I’m happy or unhappy because free speech is not contingent on my approval of the speech.(Of your four choices, I’d go with #4, however.)

So the fact that big corporations and the rich can (hypothetically) take over the electoral process is not something we should do anything about? We shouldn’t do anything if (hypothetically) democracy is a sham, because that would infringe on people’s rights? I doubt the Constitution would have been ratified if people had known that was the deal. Would you (hypothetically) at least support disclosure legislation, or would that have a chilling effect on the speech of Goldman Sachs?

There was no response, though that may have been because this particular thread was getting a bit old at this point.  In any case, that's when I had my epiphany. I had been incredulous that they could be this cavalier about democracy.  Then I realized: Of course they don't care about democracy! They're libertarians!  It's not that they're anti-democratic. But democracy is a form of government, and government is tyranny. Sometimes, of course, it's a necessary evil, but it's still an evil.

Well, it's a free country. If that's what you want to think, I won't report you to the authorities. The important point is that libertarians have read the Constitution to comport with their ideology. So they see the Founders as people who were primarily concerned with keeping government from getting too powerful, and with protecting individual rights.

I think that is a complete distortion of the Constitution. What was really daring and original was to set up a government where sovereignty rested in the people. Literally, no one had done that before. (To this day, sovereignty in Britain rests in Parliament.) And the Founders got the Constitution approved by having the people (white and male, but not necessarily propertied) vote on it. Democracy is the very essence of what the Constitution is about.

Whether you take the libertarian or the democratic view of the Constitution turns out to make a big difference. Citizens United is one example. If free speech is a right of individuals that overrides everything, then the rich (let's leave aside the trickier issue of corporations) have an unlimited right to buy political advertising. If you're interested in a workable democracy, on the other hand, you want to provide strong protections for unpopular speech, but also ensure that open debate is not drowned out by money.

The difference is also stark with libertarians' favorite amendment, the second. (By the way, what is the deal with gun, uh, enthusiasts? It's a piece of machinery, for crying out loud. Like a lawnmower. Why don't we have outdoor refrigerator shows? "You'll take away my dishwasher when you pry it from my cold, dead hand...") The libertarian view blithely ignores that troublesome phrase, "A well regulated Militia, being necessary to the security of a free State..." Why would the Founders have put such a phrase in an amendment intended to enshrine the right to defend one's home? To me, it seems clear that the text is talking about an individual right necessary to ensure a collective activity. Like free speech, as a matter of fact.

So it's probably a mistake to think of the current majority on the Court as being  merely conservative. Yes, they no doubt have more, uh, empathy for corporations than they minority does. But they seem to have a different view about democracy as well.

Hold Off on the CAT Stampede

NBC opened the Nightly News last night with a story about how screening heavy smokers for lung cancer can reduce lung-cancer deaths. Specifically, when heavy smokers and people who used to be heavy smokers were screened using spiral (helical) CT scans, the death rate from lung cancer was lowered by 20%. (I prefer the old name CAT scan, because it lends itself to so many geeky jokes, such as that when you generalize the principle of the CAT scan, you get the PET scan. And the whole idea of a spiral scan makes one think about there being more than one way to scan a ...) CBS and ABC also gave prominent coverage the the story.

No doubt, this is good news. But every journalist should read (among others) my first substantive post on this blog, in which I mentioned the importance of long division in policy analysis. There were 53,000 people in the study. Over eight years, 442 people in the group getting chest X-rays died of lung cancer, versus 354 in the group getting spiral CT scans.

Let's assume equal numbers in each group. Then if you're a heavy smoker, your chance of dying of lung cancer over eight years is 1.67% with the chest X-ray, and 1.34% with the CT scan. By getting the CT scan you reduce your chance of dying of lung cancer over the next eight years by 0.33%. When you consider that the CT scan has a higher dose of X-rays, and that information about deaths from other causes won't be published for several months, it would seem wise to hold off on the stampede for now. At least the health care debate is over, sort of, so we'll probably be spared Republicans saying that Democrats want to ration CT scans.

By the way, does anyone else find these numbers (remember, heavy smokers and former heavy smokers) surprisingly low? I guess I was so heavily propagandized in elementary school that I thought your odds were about like playing Russian roulette. Of course this still represents hundreds of thousands of people, and doesn't include other cancers, heart disease, emphysema, and so on.