We have had a look at the misunderstandings many have of the benefits of fast fashion before. The people who make the stuff get richer because they get paid to make it. The people who buy it are richer by their own standards because they voluntarily purchase it. It must be increasing their perceived utility. As to why anyone would oppose this mutual enrichment answers on a postcard to the loons wherever they are.
It’s just that they get even more stupid than this. The complaint is that the people who are making the clothes are not making a “living” wage.
Not only is fashion one of the world’s most wasteful and polluting industries, but it’s also one of the most exploitative. Less than 2% of clothing workers globally earn a fair living wage, with most trapped in systemic poverty at almost every stage of the long and shadowy supply chains. While we enjoy the ease, speed and abundance, it’s they who are paying the price.
As Paul Krugman has spent decades pointing out that’s not how wages actually work:
– Wages are determined in a national labor market: The basic Ricardian model envisages a single factor, labor, which can move freely between industries. When one tries to talk about trade with laymen, however, one at least sometimes realizes that they do not think about things that way at all. They think about steelworkers, textile workers, and so on; there is no such thing as a national labor market. It does not occur to them that the wages earned in one industry are largely determined by the wages similar workers are earning in other industries. This has several consequences. First, unless it is carefully explained, the standard demonstration of the gains from trade in a Ricardian model — workers can earn more by moving into the industries in which you have a comparative advantage — simply fails to register with lay intellectuals. Their picture is of aircraft workers gaining and textile workers losing, and the idea that it is useful even for the sake of argument to imagine that workers can move from one industry to the other is foreign to them. Second, the link between productivity and wages is thoroughly misunderstood. Non-economists typically think that wages should reflect productivity at the level of the individual company. So if Xerox manages to increase its productivity 20 percent, it should raise the wages it pays by the same amount; if overall manufacturing productivity has risen 30 percent, the real wages of manufacturing workers should have risen 30 percent, even if service productivity has been stagnant; if this doesn’t happen, it is a sign that something has gone wrong. In other words, my criticism of Michael Lind would baffle many non-economists.
Associated with this problem is the misunderstanding of what international trade should do to wage rates. It is a fact that some Bangladeshi apparel factories manage to achieve labor productivity close to half those of comparable installations in the United States, although overall Bangladeshi manufacturing productivity is probably only about 5 percent of the US level. Non-economists find it extremely disturbing and puzzling that wages in those productive factories are only 10 percent of US standards.
Finally, and most importantly, it is not obvious to non-economists that wages are endogenous. Someone like Goldsmith looks at Vietnam and asks, “what would happen if people who work for such low wages manage to achieve Western productivity?” The economist’s answer is, “if they achieve Western productivity, they will be paid Western wages” — as has in fact happened in Japan. But to the non-economist this conclusion is neither natural nor plausible. (And he is likely to offer those Bangladeshi factories as a counterexample, missing the distinction between factory-level and national-level productivity).
Sure, this is pointy head intellectuals arguing over angels on pins. But it’s important.
In a substantial number of industries, low wages allowed developing countries to break into world markets. And so countries that had previously made a living selling jute or coffee started producing shirts and sneakers instead.
Workers in those shirt and sneaker factories are, inevitably, paid very little and expected to endure terrible working conditions. I say “inevitably” because their employers are not in business for their (or their workers’) health; they pay as little as possible, and that minimum is determined by the other opportunities available to workers. And these are still extremely poor countries, where living on a garbage heap is attractive compared with the alternatives.
And yet, wherever the new export industries have grown, there has been measurable improvement in the lives of ordinary people. Partly this is because a growing industry must offer a somewhat higher wage than workers could get elsewhere in order to get them to move. More importantly, however, the growth of manufacturing–and of the penumbra of other jobs that the new export sector creates–has a ripple effect throughout the economy. The pressure on the land becomes less intense, so rural wages rise; the pool of unemployed urban dwellers always anxious for work shrinks, so factories start to compete with each other for workers, and urban wages also begin to rise. Where the process has gone on long enough–say, in South Korea or Taiwan–average wages start to approach what an American teen-ager can earn at McDonald’s. And eventually people are no longer eager to live on garbage dumps. (Smokey Mountain persisted because the Philippines, until recently, did not share in the export-led growth of its neighbors. Jobs that pay better than scavenging are still few and far between.)
The benefits of export-led economic growth to the mass of people in the newly industrializing economies are not a matter of conjecture. A country like Indonesia is still so poor that progress can be measured in terms of how much the average person gets to eat; since 1970, per capita intake has risen from less than 2,100 to more than 2,800 calories a day. A shocking one-third of young children are still malnourished–but in 1975, the fraction was more than half. Similar improvements can be seen throughout the Pacific Rim, and even in places like Bangladesh. These improvements have not taken place because well-meaning people in the West have done anything to help–foreign aid, never large, has lately shrunk to virtually nothing. Nor is it the result of the benign policies of national governments, which are as callous and corrupt as ever. It is the indirect and unintended result of the actions of soulless multinationals and rapacious local entrepreneurs, whose only concern was to take advantage of the profit opportunities offered by cheap labor. It is not an edifying spectacle; but no matter how base the motives of those involved, the result has been to move hundreds of millions of people from abject poverty to something still awful but nonetheless significantly better.
This is how we cure poverty dunderheads. And yes, from direct personal observation this works, in clothing, about fast fashion:
Per capita incomes in Bangladesh show that it has risen to about the 30th percentile amongst countries, so it has overtaken the level of well-being of perhaps sixty others.
Bangladesh, like China, is what the growth models we’ll be doing after spring break say should be happening in every poor place. That it is not is an astounding commentary on the amount of poor policy practice around the world; many macroeconomists, myself included, assert that the poor choices of many governments around the world qualify as crimes against humanity.
Tim is giddy about what he is seeing in Bangladesh, so I felt I would paste in his entire post. Our world has, over your lifetime, undergone the greatest reduction in poverty and misery in human history. Heck, more people have been lifted out of poverty over that time than in all the rest of human history. That’s a story that every college student should know by heart.
Here’s the important part about those sweatshops, those $2 t-shirts, that exploitation at less than the living wage:
But bugger me, it is working. Ain’t that fucking grand?
So, what is it that the Guardian and all who sail in her recommend as a manner of reducing this global poverty, this destitution?
The fast fashion fix: 20 ways to stop buying new clothes for ever
Less than 2% of clothing workers earn a fair wage – while many of us have wardrobes full of unworn outfits. Here’s how to break the cycle
Those poor people are being made richer by our buying new clothes. The fix for poverty is for us to stop buying new clothes. How is it that people can be this stupid and still be able to breathe?