Monday, November 26, 2007

Developed World Sets Standards Too High

The article, "New York Manhole Covers, Forged Barefoot in India," was published in the New York Times on November 26, 2007.

A quote from the article: “The scene was as spectacular as it was anachronistic: flames, sweat and liquid iron mixing in the smoke like something from the Middle Ages. That’s what attracted the interest of a photographer who often works for The New York Times — images that practically radiate heat and illustrate where New York’s manhole covers are born.”

My opinion: It is not the place of the developed world to set the standards of labor for the developing nations.

Here is the picture from the article:

Here is a picture (from Bettman/Corbis) from the 1890’s of 5 chimney sweepers:

The picture from the article is not anachronistic for India (especially back to the middle ages) – perhaps for a developed economy, such as the U.S., but certainly not for a developing economy such as India. The prevalent production sectors in India are mining, textiles, transportation equipment, machinery, and agriculture (cotton). Does this sound familiar? Sure, the developed-world’s industrial revolution! The industrial revolution (late 18th century to early 19th century) marked a time of increasing labor productivity in production sectors including agriculture, transportation, and manufacturing. Labor was the primary resource, and even child labor laws were not yet developed. According to Galbi (1997), during the period of 1818-1819, 49.9% of spinners in English cotton factories were under 10 years of age when they started. In today’s standards, that is inhumane.

Long-term economic growth models explain this disparity in working conditions and production specialization between the developing (e.g., China, India, Vietnam) and developed economies (e.g., U.S., U.K., Germany). Over the last century, the United States has transitioned from an economy focused on manufacturing, textiles, and mining (products based) to one focused on investment services and banking, information, health care services, and arts and entertainment (service based). According to the Census Bureau, the service sector accounts for 55% of current economic activity in the United States. If the U.S. does not produce it, it imports the product-based production, such as textiles and agricultural and metal commodities, from economies such as India and China. These economies are behind the U.S. in terms of economic growth and technical advancement. Since production in the developing nations is roughly a century behind production in the developed nations, the labor laws are understandably behind as well.

When the United States of America was production based (mining, textiles, and manufacturing), the labor laws were not well-developed. It was not until 1938 that Franklin D. Roosevelt passed the Fair Labor Standards Act, which established a minimum wage, guaranteed overtime pay, and prohibited child labor. In 1802, the first labor law was passed in the U.K., the Fair Factory Act. Countries such as India and China will catch up – they are on a path of growth toward claiming status as developed economies, but this will take decades to occur (perhaps even another 40-50 years).

The workers in India make the choice to go to the mines and factories. According to the Penn World Tables, in 2003, average production per worker in India was: $6,724.55, and $67,865.44 in the United States. That means the average worker in the U.S. was roughly 10 times better off than his/her counterpart in India. The Indian workforce is choosing between growing opportunities to work in conditions that are deemed unacceptable to the developed world and not feeding their families. They choose to feed their families by working. It is their choice. As average production per worker rises to meet that in the U.S., higher standards for labor will be valued. At that time, the laws and conditions will change, but not before.

Admittadly, the quality of exports from the developing economies to the developed world (e.g., toys) have been under scrutiny, and affect the developed world. The developed world has much strategic power in the international markets. If world demand falls, then international toy makers will increase their standards in order to make the sale.

In conclusion, history dictates that labor laws are likely to come, but the nations such as India and China must dictate these rules, not the developed nations. The developed world learned about labor laws all on its own, and the developing world must, too. It is not the place of the developed world to regulate and judge the practices of the developing world. Give them time, and they will catch up!

Bibliography:
Galbi, Douglas A. (1997). Child labor and the division of labor in early English cotton mills.
Journal of Population Economics 10, 1432-1475.
Photo downloaded at: http://www.scienceclarified.com/everyday/Real-Life-Biology-Vol-2/Noninfectious-Diseases.html

Penn World Tables at: http://pwt.econ.upenn.edu/php_site/pwt62/pwt62_form.php

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