Planned Misery
I want to briefly
address what Professor Susan Marks, of the London School of Economics, calls
‘planned misery’.[1] In
her writing, planned misery “denotes misery that belongs with the logic of
particular socio-economic arrangements.”[2]
To me, this definition invites reflection about how global capitalism is
structured such that human, labor and environmental rights abuses perpetrated
in developing countries in industries like mining, textiles, and electronics
seem unavoidable.
There is a very positive side to globalization over the past 30 years. Namely, the combination of increased foreign investor protections and lower trade barriers have increased the flow of capital to poor countries, redistributing industrial resources from rich countries to the global poor, and increasing standards of living throughout the developing world. The quintessential contemporary model for this story is China but there are many other examples. For instance, China’s economic miracle might be put in broader context.
The first “loser” in the race, after all, was Britain, home of the original Dickensian factories, which churned out cotton textiles cut and stitched by people in the most desperate stratum of the nation’s society, mainly women from rural areas and children from poorhouses. Taking jobs from the British in the early 1900s were mills along rivers in Massachusetts and New Hampshire, where thousands of young women from the New England and Canadian countryside toiled at similarly repetitive drudgery, often for more than seventy hours a week, until the industry moved to southern states to take advantage of farm girls willing to work for wages half those paid in the north. Meanwhile, by the 1930s, millions of young Japanese women, living in squalid company boardinghouses and working twelve-hour days for substantially less than their American counterparts, were producing a large portion of the world’s cotton goods. . . . [Japan] fell prey to competition from Hong Kong, South Korea, and Taiwan in the 1960s and ‘70s. In this race – whose latest “victors” are China, Vietnam, and Central American nations – each “defeat” was undoubtedly anguishing for the factory workers displaced. But it was simply a part of the process by which these countries became modern, diversified industrial economies, as their buying power created demand for new goods and services leading in turn to new jobs.[3]
A globalization optimist might point out that any lack of human rights or political rights are temporary. Within a generation, or at most inter-generationally, people with rising standards of living mobilize and demand respect. In many ways this is true. But the ready retort is that the temporary nature of low environmental standards or labor standards in one country is a permanent feature of global society. That is, low cost factories can always find another place that does not have minimum wage laws or allows children to work full time. Cheap consumerism, whether in Walmart t-shirts or McDonald’s hamburgers, necessarily preys on people who live in places where environmental or labor standards offend the conscience. This constitutes planned misery precisely because it is nobody’s fault and everybody’s sin, a systemic injustice. If Walmart does not contract for Bangladeshi garment workers, someone else will. That someone else will then sell cheaper t-shirts to European consumers who, out of need or frugality, choose to economize on their clothing purchases. The dominant global trade and investment policies of opening borders to the movement of goods and capital without also using other policy mechanisms such as wealth redistribution, externalizes costs in the form of human rights and dignity in developing countries.
The idea that modern global capitalism requires the externalization of costs in the form of civil, political, and environmental rights is fundamentally problematic. That said, I still believe that competitive markets and inclusion of all people in those markets is good for society. It is imperative that we strive for efficient production of goods, especially basic goods, because efficient production is the only hope we have to end scarcity and sustainably produce enough for everyone in the world. There are two issues that leaders should tackle, and that I will discuss here: first, increasing redistribution through taxation and second, reconnecting financial theory with economic theory. More fundamentally, global capitalism as an ideology must shift its psychological focus from a narrow perspective of self-interested nations fueled by fiat money to an inclusive vision of economic global community underpinned by local popular governance and equitable distribution of wealth.
As an initial matter, national leaders can help ameliorate planned misery by redistributing wealth from the rich to the poor and middle class. The redistributive effects of modern globalization, de-industrialization in America and Europe and development in China and elsewhere, has harmed the wealthy middle-class. American wages have been stagnant for a generation while their rich countrymen enjoy the benefits of a plutocracy paid for by Foxconn workers who would rather commit suicide than endure more labor rights abuses.[10] Topping up American middle-class incomes is a simple, if not easy, way to share the gains of globalization across the national economic spectrum in a way that reduces pressure on people to buy the cheapest Walmart t-shirt out of necessity. Admittedly, intra-national redistribution does not go very far to addressing the root causes of global capitalism’s planned misery, but it can help by increasing consumers’ capacity to exercise choice, so called soft-law, to influence corporate decisions. More importantly, national redistribution of the gains from globalization will help legitimize the process, which is under severe attack across the United States and Europe.
Additionally, economics should attempt to realign itself with finance. The gap between the two struck me as I read Richard Thaler’s book, Misbehaving: The Making of Behavioral Economics. In it, he describes the concept of diminishing marginal returns. Essentially what it means is: the more money you have, the less each additional dollar matters to you. And this concept applies to more than money. For example, if you eat a piece of cake it is probably great. But if you are forced to eat five pieces of cake, each additional piece of cake becomes less enjoyable; perhaps you even detest the last one. In the context of global economic development, Silicon Valley might be seen as the person with five pieces of cake. Transportation infrastructure is pretty good, human capital is talented, the legal system works decently, and so on. Meanwhile, Haiti has almost nothing. Many of the country’s citizens lack even the most basic goods like clean water. Now, investment in the two places, Silicon Valley and Haiti, ignores the economic lesson of diminishing marginal returns. Venture capital investors, looking to put their money where it will earn a suitable return, have about $20 billion plowed into technology ventures in the San Francisco Area.[11] Such investment has led, among other truly useful things, to such necessary and beneficial stalwarts as Snapchat. Meanwhile, Haiti’s whole economy is worth about $8 billion. The San Francisco area is home to about 7 million people while Haiti has almost 11 million citizens. The law of diminishing marginal returns tells us that Haitian citizens will benefit far more from investment in basic infrastructure like earthquake-resistant homes and potable water systems, than San Franciscans will from another SaaS connecting homeowners to housecleaners. Yet investment does not follow this pattern.
The implications of this disconnect between basic economics and financial reality are enormous. For me, the inescapable conclusion is that we must do a better job of reorienting our mindset as citizens to develop an inclusive global economy that does not accept, as a given, the externalization of human and environmental rights as the cost of economic inclusiveness. Many economists rightly point out that imposing labor or environmental standards on poor countries that are not otherwise efficient producers will lead to jobs going to other countries or simply getting automated away. The challenge, then, is for academics, leaders, and citizens more generally to rethink our theoretical understanding of human rights, to connect human and economic rights more firmly together such that people in poor countries might be supported up to a standard of living at which they are empowered to organize organically and protect their own civil, political, and environmental rights, and compete in the global economy.
There is a very positive side to globalization over the past 30 years. Namely, the combination of increased foreign investor protections and lower trade barriers have increased the flow of capital to poor countries, redistributing industrial resources from rich countries to the global poor, and increasing standards of living throughout the developing world. The quintessential contemporary model for this story is China but there are many other examples. For instance, China’s economic miracle might be put in broader context.
The first “loser” in the race, after all, was Britain, home of the original Dickensian factories, which churned out cotton textiles cut and stitched by people in the most desperate stratum of the nation’s society, mainly women from rural areas and children from poorhouses. Taking jobs from the British in the early 1900s were mills along rivers in Massachusetts and New Hampshire, where thousands of young women from the New England and Canadian countryside toiled at similarly repetitive drudgery, often for more than seventy hours a week, until the industry moved to southern states to take advantage of farm girls willing to work for wages half those paid in the north. Meanwhile, by the 1930s, millions of young Japanese women, living in squalid company boardinghouses and working twelve-hour days for substantially less than their American counterparts, were producing a large portion of the world’s cotton goods. . . . [Japan] fell prey to competition from Hong Kong, South Korea, and Taiwan in the 1960s and ‘70s. In this race – whose latest “victors” are China, Vietnam, and Central American nations – each “defeat” was undoubtedly anguishing for the factory workers displaced. But it was simply a part of the process by which these countries became modern, diversified industrial economies, as their buying power created demand for new goods and services leading in turn to new jobs.[3]
In all of the cases
cited, Britain, America, Japan, etc., the people who made textiles were part of
a larger industrialization project. Industrialization, synonymous with
specialization, mass production, and urbanization, not only creates demand for
new goods and services but also creates demand for civil and political rights,
and environmental rights. As a case in point, the women in New England who
toiled away in textile factories the early 1900s participated in and benefited
from the broader American labor movement of unionization.[4]
Similarly, today, the Rana Plaza garment factory collapse, which killed or
injured over 3,000 workers in Bangladesh, ignited a wave of unionization across
the country, strengthening workers’ rights
and entrenching the progress those workers had already made in lobbying
for higher minimum wages.[5]
In the environmental realm, a good example of the tradeoff between economic
development and environmental protection comes from the mining of rare earth
elements. Rare earth elements are critical inputs to modern electronics and
they are not actually rare at all. However, mining rare earth elements takes a
lot of investment in money and people, and a willingness to accept
environmental degradation; extracting the stuff is dirty business.[6]
Due to the high costs of extraction, China accounts for the vast majority of
global rare earth production, and the United States accounts for none of it. In
2016, “the United States relied 100 percent on imported rare earth element . .
. [with] more than 70 percent” coming from China.[7]
The United States could mine rare earth elements out of Mountain Pass mine in
California, but for years mining has been prevented by environmental concerns.[8]
Not unexpectedly, China, after years of preferring development over
environmental protection, is now curbing rare earth mining to limit
environmental damage.[9]
Thus, the story goes, over time countries
leverage industrialization to raise standards of living. As standards of living
increase, people become empowered to mobilize and demand more of what
constitutes the modern ‘good life,’ replete with environmental protection and
labor rights.
At the same time,
costs in poor countries are low precisely because civil and political rights
are ill-protected and environmental damage is accepted as a cost of
development. Textile factories continue to move from one low cost location
where unions do not exist and minimum wage laws can be flouted, to the next.
This is global capitalism’s planned misery.A globalization optimist might point out that any lack of human rights or political rights are temporary. Within a generation, or at most inter-generationally, people with rising standards of living mobilize and demand respect. In many ways this is true. But the ready retort is that the temporary nature of low environmental standards or labor standards in one country is a permanent feature of global society. That is, low cost factories can always find another place that does not have minimum wage laws or allows children to work full time. Cheap consumerism, whether in Walmart t-shirts or McDonald’s hamburgers, necessarily preys on people who live in places where environmental or labor standards offend the conscience. This constitutes planned misery precisely because it is nobody’s fault and everybody’s sin, a systemic injustice. If Walmart does not contract for Bangladeshi garment workers, someone else will. That someone else will then sell cheaper t-shirts to European consumers who, out of need or frugality, choose to economize on their clothing purchases. The dominant global trade and investment policies of opening borders to the movement of goods and capital without also using other policy mechanisms such as wealth redistribution, externalizes costs in the form of human rights and dignity in developing countries.
The idea that modern global capitalism requires the externalization of costs in the form of civil, political, and environmental rights is fundamentally problematic. That said, I still believe that competitive markets and inclusion of all people in those markets is good for society. It is imperative that we strive for efficient production of goods, especially basic goods, because efficient production is the only hope we have to end scarcity and sustainably produce enough for everyone in the world. There are two issues that leaders should tackle, and that I will discuss here: first, increasing redistribution through taxation and second, reconnecting financial theory with economic theory. More fundamentally, global capitalism as an ideology must shift its psychological focus from a narrow perspective of self-interested nations fueled by fiat money to an inclusive vision of economic global community underpinned by local popular governance and equitable distribution of wealth.
As an initial matter, national leaders can help ameliorate planned misery by redistributing wealth from the rich to the poor and middle class. The redistributive effects of modern globalization, de-industrialization in America and Europe and development in China and elsewhere, has harmed the wealthy middle-class. American wages have been stagnant for a generation while their rich countrymen enjoy the benefits of a plutocracy paid for by Foxconn workers who would rather commit suicide than endure more labor rights abuses.[10] Topping up American middle-class incomes is a simple, if not easy, way to share the gains of globalization across the national economic spectrum in a way that reduces pressure on people to buy the cheapest Walmart t-shirt out of necessity. Admittedly, intra-national redistribution does not go very far to addressing the root causes of global capitalism’s planned misery, but it can help by increasing consumers’ capacity to exercise choice, so called soft-law, to influence corporate decisions. More importantly, national redistribution of the gains from globalization will help legitimize the process, which is under severe attack across the United States and Europe.
Additionally, economics should attempt to realign itself with finance. The gap between the two struck me as I read Richard Thaler’s book, Misbehaving: The Making of Behavioral Economics. In it, he describes the concept of diminishing marginal returns. Essentially what it means is: the more money you have, the less each additional dollar matters to you. And this concept applies to more than money. For example, if you eat a piece of cake it is probably great. But if you are forced to eat five pieces of cake, each additional piece of cake becomes less enjoyable; perhaps you even detest the last one. In the context of global economic development, Silicon Valley might be seen as the person with five pieces of cake. Transportation infrastructure is pretty good, human capital is talented, the legal system works decently, and so on. Meanwhile, Haiti has almost nothing. Many of the country’s citizens lack even the most basic goods like clean water. Now, investment in the two places, Silicon Valley and Haiti, ignores the economic lesson of diminishing marginal returns. Venture capital investors, looking to put their money where it will earn a suitable return, have about $20 billion plowed into technology ventures in the San Francisco Area.[11] Such investment has led, among other truly useful things, to such necessary and beneficial stalwarts as Snapchat. Meanwhile, Haiti’s whole economy is worth about $8 billion. The San Francisco area is home to about 7 million people while Haiti has almost 11 million citizens. The law of diminishing marginal returns tells us that Haitian citizens will benefit far more from investment in basic infrastructure like earthquake-resistant homes and potable water systems, than San Franciscans will from another SaaS connecting homeowners to housecleaners. Yet investment does not follow this pattern.
The implications of this disconnect between basic economics and financial reality are enormous. For me, the inescapable conclusion is that we must do a better job of reorienting our mindset as citizens to develop an inclusive global economy that does not accept, as a given, the externalization of human and environmental rights as the cost of economic inclusiveness. Many economists rightly point out that imposing labor or environmental standards on poor countries that are not otherwise efficient producers will lead to jobs going to other countries or simply getting automated away. The challenge, then, is for academics, leaders, and citizens more generally to rethink our theoretical understanding of human rights, to connect human and economic rights more firmly together such that people in poor countries might be supported up to a standard of living at which they are empowered to organize organically and protect their own civil, political, and environmental rights, and compete in the global economy.
[1]
Susan Marks, Human Rights and Root Causes,
74(1) The Modern Law Review 57 (2011).
[2]
Id. at 75.
[3]
Paul Blustein, Misadventures of the Most
Favored Nations.
[4] See, generally, Steve Golin, The Fragile Bridge: Paterson Silk Srike 1913.
[5]
Udita (Arise), available at https://www.youtube.com/watch?v=g_tuvBHr6WU
[6]
Mayuko Yatsu, Revisiting Rare Earths: The
Ongoing Efforts to Challenge China’s Monopoly, The Diplomat (Aug. 29,
2017).
[7]
Id.
[8]
Saleem H. Ali, Social and Environmental
Impact of the Rare Earth Industries, Centre for Social Responsibility in
Mining (Feb. 13, 2014).
[9]
Id.
[10]
Richard Bilton, Apple ‘failing to protect
Chinese factory workers’, BBC (Dec. 18, 2014).
[11]
Hannah Kuchler, Silicon Valley start-ups
suffer fall in VC funding, Financial Times (Jan. 11, 2017).
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