Does Capitalism <i>Create</i> Poverty?

In response to the tragic deaths of illegal Chinese workers at Morecambe bay, Chris Bertram concludes that "such tragedies are a normal and predictable consequence of capitalism." I posted a response as follows below, with Chris's text in italics.



First, I want to make sure we are using the same definitions of commonly used terms. By ?capitalism? I assume you mean ?free market?, which I take to be the sum of all voluntary exchanges. These exchanges happen with the consent of both parties. Sometimes, the consent is reluctant, and sometimes, it is a difficult choice, but nevertheless, no force is used. Nothing happens against the will of either party.

But one thing that needs saying is that such tragedies are a normal and predictable consequence of capitalism and not simply the result of coercion and abuse by a few criminals.

If you are going to make this conclusion, you have to also have evidence that in the absence of the voluntary exchange taking place, the alternative would be better. Clearly, the incident is a tragedy. It is unclear from the article whether or not the workers were held captive against their will, in which case, this would no longer fall under the free market.

However, under the assumption that they chose to work at these jobs, why did they choose to work under such horrible conditions? Clearly, in their own eyes, it was better than the alternative. Perhaps the alternative was the starvation back in China. Maybe they thought that working their jobs would help them save enough money to give their own children a better life. It was their own subjective appraisals of the situation which led them to choose these jobs among the available alternatives.

As an example, this article by Nicholas Kristof from the NY Times (which is now unfortunately a pay link) highlighted the lives of factory workers in Cambodia. Many of the stories and accompanying pictures were heart rending. The standards under which they work are certainly inferior to those in the first world.

Yet, the alternative to working in the factory was working in a trash dump collecting garbage for longer hours, worse pay, and fewer if any benefits. The workers chose to work in the factories because they thought it would improve their lives. Some quotes from that article:

?Nhep Chanda averages 75 cents a day for her efforts. For her, the idea of being exploited in a garment factory ? working only six days a week, inside instead of in the broiling sun, for up to $2 a day ? is a dream.

?I?d like to work in a factory, but I don?t have any ID card, and you need one to show that you?re old enough,? she said wistfully. [?]

?I want to work in a factory, but I?m in poor health and always feel dizzy,? said Lay Eng, a 23-year-old woman. And no wonder: she has been picking through the filth, seven days a week, for six years.

The free market, i.e., people voluntarily making exchanges, was bringing these people out of poverty. It was raising their standard of living. Hindering these exchanges by raising tariffs and creating a ?world-wide minimum wage? would throw them back into the garbage dumps. First world companies would have little reason to hire them instead of first world workers.

Those who consider Marx outmoded and are amazed that anyone should take him seriously (scroll to comments) would also find that Capital volume one attends rather more closely to this enduring feature of capitalism than do more conventional accounts.

The reason Marx is considered outmoded by most people is that the entire concept of exploitation rests on the assumption that individuals do not know what is best for the improvement of their own lives. Any case of ?exploitation? of the worker who chooses voluntarily to work in a given set of working conditions is based on the worker?s preference over all other available alternatives. The conditions may not be ideal, and may indeed be tragic, but state intervention is a two-way street. Making the working conditions in the Cambodian factories illegal means putting people out of work if the employer is unable to pay for the ?improved? standards. I have no doubt you wish to see a better world for the poor; as do I. But the way to get there is through free exchange, not making jobs illegal.

It is myopic to claim that ?such tragedies are a normal and predictable consequence of capitalism? when the alternative is worse.

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It seems less a matter of

It seems less a matter of myopia than a kind of cynical repetition of known falsehoods for political profit. The objective isn't to make good arguments, it's to imply or allude to bad arguments in a deniable way that allows room to evade pointed refutation and public embarrassment. Bertram has done a fair bit of that lately.

Yep. My first reaction to

Yep. My first reaction to Professor Bertram's post was - just what is your point? As the follow up comments show, he didn't have much of one - unless you count venting rhetorical spleen as "making a point".

In any case, it is not a given that the cocklers who were at Morecambe left China because of crushing poverty. A leading lawyer who represents the Chinese community in the UK - along with a Guardian report - has said something to the effect that these illegal immigrants pay good money - upwards of ?20,000 - to get into Britain. If the money was provided upfront, then it would seem that these immigrants aren't very poor at all - just economic opportunists.

Caveat: I'm not sure if the figure is correct - the sum could be far less and seems likely to be far less if this account of things were true (if only because 300,000 Renminbi goes a long way in China).

But if it were true, it would mean that the Morecambe tragedy is NOT an example of capitalism "coercing" the poor into risky enterprises. On the contrary, it would suggest that they did it on their own accord - assuming risks as free economic agents are wont to do.

So again, no point from Professor Bertram. The whittling down of his position from "strident" (alluding to some better alternative than a system which incorporates risk) to "unsubstantive" (i.e., he, Chris Bertram, has NO substantively better alternative, despite all the Marxian allusions to the contrary) becomes more evident as the comments wear on.

Made for good reading, though.

You're right, the debate

You're right, the debate hinges on the definition of capitalism. And setting aside my mutualist caveats on whether historical capitalism has anything to do with free markets, or whether a genuinely free market would retain any of the features associated with corporate capitalism, I'd also agree that the free market is "the sum of all voluntary exchanges."

The problem is that, over about four hundred years of history, the privileged classes have acted through the state to suppress free market alternatives to selling their labor on the buyer's terms. A free market that would have made Chesterton and Belloc proud was emerging from the organic society of the high middle ages. And historical capitalism was built, by a brutal statist revolution imposed from above, on the ruins of that nascent free market.

The reason people in places like China, Cambodia, and Central America prefer sweatshops to the "available alternatives" is that the local death squads (if it's a banana republic) or people's vanguard party (if it's a workers' paradise) make damned sure the range of alternatives is severely limited. It's not just a coincidence that sweatshop employers tend to gravitate to such authoritarian shitholes.

Kevin: If the reason that

Kevin: If the reason that workers choose jobs like the ones at Morecambe is that brutal statism has prevented them from operating in a true free market, wouldn't it be more accurate to say that "such tragedies are a normal and predictable consequence of" power-hungry despots and corrupt criminals than it is to blame capitalism?

Amy Phillips, I agree.

Amy Phillips,

I agree. The "progressives" fail to see that statism, and not the market, is the cause of exploitation. As a Tuckerite, though, I'd prefer "free market" to "capitalism."

And I'd add that the power hungry despots aren't there just by accident; some of them were directly installed by western nations, especially with the help of the CIA and School of the Americas. And their pathological political systems probably owe a great deal to the atomization of their civil societies by two or three centuries of colonial rule.

It was their own subjective

It was their own subjective appraisals of the situation which led them to choose these jobs among the available alternatives.

By definition this is an objective appraisal! Which makes it all the more important to note as a DECISION made volunatarily; the alternatives being far worse. As far as capitalism creating poverty this incident does not conclusively show anything of the sort. His comment was nonesense. The only way to "create" poverty is to forcefully take wealth away. According to the principles of capitalism this is forbidden. Only a non-laissez fair system can destroy wealth.

Free-markets raise up everyone above previous levels. When the tide comes in all the ships rise. The evidence is all around us.