Friday, September 09, 2011

Regulation Through Deregulation

Shorter David Bernstein: The best and fastest means of obtaining a fair, worker-friendly employment environment is to eliminate wage, hour and safety protections for workers.

Really - trust the market. Employers will offer better worker conditions on their own, and if you think otherwise you're being tricked by "vague recollections" from your "fourth grade social studies class". (Ah, memories of fourth grade....)

If your reaction is, "Why, then, do employers fight unions? Why, for that matter, aren't they offering the same or better wages, hours and working conditions available in union states when they open factories in 'right to work' states? Why do they open plants overseas to avoid offering decent wages, meeting workplace safety standards that are expected in the developed world, or abiding by environmental laws? Why does the U.S., with some of the lowest legal protections for workers, not have wages and job benefits that meet or exceed those typically offered in Europe?", I suggest that you start listening to Bernstein and stop believing your lying eyes.

What, you say? I'm being a bit unfair to Bernstein because his argument isn't, "In the absence of labor regulation things will automatically get better in the workplace," and he instead suggests, "all of these things improved because Americans got richer, with American workers becoming more and more productive"? What happens if you so much as scratch the surface of that explanation: Does Bernstein deny that workers have continued to become more productive in recent decades? Does he deny that corporate profits and executive compensation are extraordinary? Does he deny that, even through this extraordinary recession, the rich of this country are richer than ever? It's simply not the case that "becoming more and more productive" or "Americans are getting richer" translates into better wages and working conditions.

What you actually see is that when manufacturers have identified cheaper alternatives, they have run with them. Avoid union wages by locating your plant in a "right-to-work" state. Avoid the environmental laws, safety standards and wages demanded by workers in a "right-to-work" state by opening a plant in Mexico. Mexican workers want too much, and Mexico is tired of your polluting the local drinking water? Open a plant in Southeast Asia. Oops - Thai workers have too many opportunities and want higher wages? How's Cambodia... too unstable? Then it's off to China!

What does Bernstein think when companies with staggering profits treat their workers in those foreign nations like chattel, don't worry about child labor or working conditions unless they get negative media coverage, and hop from nation to nation chasing the lowest wages and fewest job protections? Clearly he's not thinking, "Those nations should have better protections for their workers" - after all, his thesis is that the market should magically correct the situation. He may be thinking, "Things are getting better for those workers, so that they can demand better wages, hours and working conditions," but that's only true to the extent that the employer won't relocate, and it's a thin defense of his thesis that sweatshop conditions have marginally improved - to the point, say, that workers get a bathroom break during their shift and an extra ten cents per hour, but not to the point that a highly profitable foreign corporation is going to relocate the sweatshop. It's possible that Bernstein simply doesn't care if western living standards are supported by the exploitation of workers in the developed world, but that's not a defense of his thesis. Bernstein also complains,
Labor laws can outlaw some outlier abusive practices, and help some workers in the short run, though usually at the expense of others. But, as rule, they don’t raise productivity and societal wealth, which is what ultimately leads to a better deal for workers.
The first question, then, is which "outlier abusive practices" does Bernstein believe will never again be practiced by a U.S. corporation? After all, if a company is willing to abuse its workers in China, the only thing that's keeping it from doing the same here is that it would be violating the law or might be affected by negative publicity. Hm. We seem to have zero outliers left. You next have to ask why, if labor laws and unionization had nothing to do with it, their heyday is associated with the explosive growth of the middle class and an unprecedented rise in the standard of living. No, I don't want to play the "correlation equals causation" game, but Bernstein is explicitly playing that game - he says the middle class would have risen anyway because "Americans got richer, with American workers becoming more and more productive", so under his thesis why isn't the middle class continuing to rise? Why is the middle class collapsing?

Yes, of course labor laws benefit some (workers) at the expense of others (owners, investors, and even consumers). As most people understand, it's a trade-off and it's difficult to achieve balance. Bernstein's brand of libertarianism rests upon the dogma that the markets always work (or work better than anything else in terms of the allocation of wealth), and thus that anything that restricts the markets is wrong. What are the odds that somebody who holds that type of view has ever had to worry about whether he would be able to pay the rent or buy groceries, or held a job at which he's had to get his hands dirty? Looking at all of human history, throughout which the treatment of workers has largely been both unregulated and abysmal, Bernstein points to a few decades, ignores other contributing factors and more recent history, and argues, "See? The market takes care of everything!"


  1. And Moses said to the Pharaoh, "Thank G-d for capitalism!"

  2. That's because libertarians believe in mystical karma. "The market" will make sure that in the long run, the bad guys are punished and good rewarded. See, without regulation, there will be a bunch of terrible sweatshops, but then one good employer will rise above, paying decent wages and offering benefits, and putting all those bad old companies out of business. Karma!

  3. The problem with putting too much faith in 'instant karma' is that it's apt to end up knocking you right in the head.