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The Straw Man Argument
Friedman is just a glorified hack. But Paul Krugman is a real economist. Not only that, he's a sharp critic of much that's wrong with economic thinking when it comes to domestic matters. His just-published book, Fuzzy Math: The Essential Guide to the Bush Tax Plan is a devastating critique. But when it comes to global economics this only makes him a more sophisticated believer—a St. Augustine to Friedman's Jerry Falwell. Well, not quite St. Augustine, but…. Take this for example:
"The facts of globalization are not always pretty. If you buy a product made in a third-world country, it was produced by workers who are paid incredibly little by Western standards and probably work under awful conditions. Anyone who is not bothered by those facts, at least some of the time, has no heart.
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Who are these people "who think that the
answer to world poverty is simple outrage against
global trade"? Straw men, that's who.
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"But that doesn't mean the demonstrators are right. On the contrary: anyone who thinks that the answer to world poverty is simple outrage against global trade has no head — or chooses not to use it. The anti-globalization movement already has a remarkable track record of hurting the very people and causes it claims to champion."
Who are these people "who think that the answer to world poverty is simple outrage against global trade"? Straw men, that's who. No one I've ever met has made that kind of argument. No one believes that outrage is enough, nor that global trade—as opposed to corporate rule—is the problem. At least no one I've met.
A Distracting Cheap Shot At 'Nader Distraction' Excuses DLC Folly, Betrayal
So how does Krugman prove his point? With an example—blaming folks who voted for Nader for un-President Bush's election. Using his extended metaphor portraying protesters as people with no heads, Krigman writes, "The most spectacular example was last year's election. You might say that because people with no heads indulged their idealism by voting for Ralph Nader, people with no hearts are running the world's most powerful nation."
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Forget Nader. The way Gore lost Florida—and the whole election campaign—reflects a lack of both heart and brains that's unfortunately nothing new.
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I wish Krugman would spend some time debating Friedman on the lofty virtues of "elected leaders," since he seems to have a bit more realism about the nature of plutocratic "democracy." But hardly enough. The way Gore lost Florida—and the whole election campaign—reflects a lack of both heart and brains that's unfortunately nothing new. It was precisely the DLC/Clinton-Gore abandonment of traditional Democratic constituencies that lost the House and Senate in 1994, and has put the Democrats on the run ever since. Clinton quickly abandoned his promise of tough labor, environmental and human rights guarantees in NAFTA, and arm-twisted it through a Congress that would never have agreed to it if George Bush had been pushing it. Al Gore was a leader in this fight, showing none of his Election 2000 hesitation or confusion in attacking Ross Perot in the only nationwide debate America's ever had on neoliberal trade relations.
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If Gore had shown an ounce of interest in fighting for disenfranchised black voters—thousands of whom were illegally kicked off the roles in the months before election day—he'd be President today.
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Such betrayal wasn't the exception, it was the rule in the DLC takeover of the Democratic Party, opening up space for the Republicans to move even farther to the right. NAFTA passed, while universal health care—a given in other industrialized democracies—never even made it on the agenda. Given the limits of our outdated 18th-century electoral system—which strongly favors such unrepresentative politics—voting for Nader may have been counterproductive in Florida. Still, if Gore had shown an ounce of interest in fighting for disenfranchised black voters—thousands of whom were illegally kicked off the roles in the months before election day—he'd be President today. Thus, Gore apologists are in no position to launch shallow attacks accusing others of neglecting the poor.
Reversing The Argument: Flawed Corporate Model—Good, Flawed Alternatives—Bad
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This distracting cheap shot at Nader voters serves to
connect two contrary arguments.
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This ill-conceived, but effectively distracting cheap shot at Nader voters serves to connect two contrary arguments. Before the Nader canard, Krugman was arguing on behalf of a flawed system. Afterwards he argues against a flawed system. The flawed system he supports is corporate globalization. (Anyone who demands that it be flawless "has no head'). The flawed system he's against is the so-far-inadequate efforts to regulate corporate globalization. (Anyone with ideas for more effective remedies will simply be ignored.) Specifically, Krugman argues:
"Even when political action doesn't backfire, when the movement gets what it wants, the effects are often startlingly malign. For example, could anything be worse than having children work in sweatshops? Alas, yes. In 1993, child workers in Bangladesh were found to be producing clothing for Wal-Mart, and Senator Tom Harkin proposed legislation banning imports from countries employing underage workers. The direct result was that Bangladeshi textile factories stopped employing children. But did the children go back to school? Did they return to happy homes? Not according to Oxfam, which found that the displaced child workers ended up in even worse jobs, or on the streets — and that a significant number were forced into prostitution."
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"Power concedes nothing without a struggle," Frederick Douglass reminds us. 'So don't struggle,' is Krugman's de facto advice.
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Is the problem here the creation of bans against child labor? Or the absence of bans against worse fates, including prostitution? Krugman simply assumes it's the former. But the later alternative is clearly what protesters are fighting for. And it's hardly a utopian ideal. A hundred years ago or so child labor was as much a commonplace in America's economy as it is in Bangladesh today. The path toward development requires higher wages for adults and schooling for children—both of which neoliberalism opposes. Unregulated markets and the capitalists who thrive in them will always prefer workers who are young and powerless. They will blacklist those who get silly notions about their human dignity and their rights. It's axiomatic that the struggle for rights will always require martyrs and sacrifice. "Power concedes nothing without a struggle," Frederick Douglass reminds us. 'So don't struggle,' is Krugman's de facto advice.
The Argument for Bad Jobs—It's Reality, Stupid!
Next, Krugman moves on to a relativist argument for bad jobs, "Because the countries are poor, even what look to us like bad jobs at bad wages are almost always much better than the alternatives: millions of Mexicans are migrating to the north of the country to take the low-wage export jobs that outrage opponents of Nafta." But Krugman, as much as Friedman, is picking his facts to fit his faith—and distorting them to boot, as we'll see in a moment.
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The same sort of argument touting bad jobs could be made about the first industrial workers in the British Industrial Revolution, and it would be equally wrong.
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The same sort of argument touting bad jobs could be made about the first industrial workers in the British Industrial Revolution, and it would be equally wrong. People had to be deprived of their traditional livelihoods, and driven into desperation to create the exploitable working class that would make the Industrial Revolution so immensely profitable to the capitalist winners, while creating class polarization unprecedented in British history.
In England, the Acts of Enclosure converted common land, used for subsistence agriculture, into private land used for cash crops. In recent years Mexico and the rest of Latin America have seen similar processes, as flowers, fruits and vegetables for American consumption increasingly edge out subsistence agriculture and drive people off lands they've occupied for countless generations. But Latin America has had much more organized death squads and repressive military regimes. The decimation of indigenous and other poor communities by decades of brutal repression cannot be left out of any scientific account that faces up to unpleasant facts as well as welcome ones. Recall the figures Palast cited (in Part One): per capita income in Latin America grew 73% from 1960 to 1980, and has grown less than 6 percent since then.
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Krugman goes on to argue that low wages are a purely economic necessity:
"And those jobs wouldn't exist if the wages were much higher: the same factors that make poor countries poor — low productivity, bad infrastructure, general social disorganization — mean that such countries can compete on world markets only if they pay wages much lower than those paid in the West."
…Or Is It? The NAFTA Evidence
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This argument might seem convincing in
the abstract, but when we get down to brass
tacks it falls apart.
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This argument might seem convincing in the abstract, but when we get down to brass tacks it falls apart. Krugman's argument is particularly weak in his chosen example of the Mexican Maquiladores, since these factories are concentrated in a zone where productivity is relatively high, due to US-style, US-run factories, and where infrastructure for production (if not for workers' everyday lives) is likewise highly developed and well-integrated into the US economy. The "general social disorganization" Krugman points to is undoubtedly a factor in driving down wages, as attested to by vicious attacks on workers' rights, but has little effect on productivity, the foundation of his 'necessity' argument.
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NAFTA at Seven: "The share of
stable, full-time jobs has shrunk, while the
vast majority of new entrants to the labor
market must survive in the insecure,
poor-paying world of Mexico's 'informal'
sector."
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The EPI report, NAFTA at Seven reports that, in the U.S. "NAFTA has eliminated some 766,000 job opportunities—primarily for non-college-educated workers in manufacturing," and has turned the US trade surplus into a large deficit. Both results are the opposite of what was promised. But Mexico has been hurt as well:
"While production jobs did move to Mexico, they primarily moved to maquiladora areas just across the border. As Carlos Salas of La Red de Investigadores y Sindicalistas Para Estudios Laborales (RISEL) reports, these export platforms—in which wages, benefits, and workers' rights are deliberately suppressed—are isolated from the rest of the Mexican economy. They do not contribute much to the development of Mexican industry or its internal markets, which was the premise upon which NAFTA was sold to the Mexican people. It is therefore no surprise that compensation and working conditions for most Mexican workers have deteriorated. The share of stable, full-time jobs has shrunk, while the vast majority of new entrants to the labor market must survive in the insecure, poor-paying world of Mexico's 'informal' sector."
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This finding completely refutes Krugman's argument. "Competing in world
markets" has only harmed Mexican workers as a whole.
Manufacturing wages plunged 20.6% between 1993 and 1999.
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This finding completely refutes Krugman's argument. "Competing in world markets" has only harmed Mexican workers as a whole, so it can hardly justify low wages and long hours at bad jobs in terrible working conditions. The promised pay-off simply never comes for the vast majority of workers at the bottom who make the sacrifices. In fact, viewed as a whole, Mexico shows clear signs of moving backwards in terms of development. Manufacturing wages plunged 20.6% between 1993 and 1999, while the already-low minimum wage dropped 17.9% and 'contractual wages' (set via bargaining processes under federal supervision) fell 21.3%. Mexico's substantial new trade surplus with the US is overwhelmed by an even larger trade deficit with the rest of the world. In addition, Carlos Salas noted:
"[U]nderemployment and work in low-pay, low-productivity jobs (e.g., unpaid work in family enterprises) actually has grown rapidly since the early 1990s. Furthermore, the normal process of rural-to-urban migration that is typical of developing economies has reversed since the adoption of NAFTA. The rural share of the population increased slightly between 1991 and 1997, as living and working conditions in the cities deteriorated."
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NAFTA At Seven: "The entire process of
development has been halted, and in some
cases it even may have been reversed."
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The conclusion of the report section on Mexico states:
"The decline in real wages and the lack of access to stable, well-paid jobs are critical problems confronting Mexico's workforce. While NAFTA has benefited a few sectors of the economy, mostly maquiladora industries and the very wealthy, it has also increased inequality and reduced incomes and job quality for the vast majority of workers in Mexico. In many ways (such as the stagnation of the manufacturing share of employment), the entire process of development has been halted, and in some cases it even may have been reversed."
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The Mexican experiment under
NAFTA completely refutes the logic used to justify
all neoliberal trade and commercial agreements.
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In short, the Mexican experiment under NAFTA completely refutes the logic used to justify all neoliberal trade and commercial agreements. Therefore, it must be completely ignored and replaced with unfounded propaganda. It's not just Krugman's specific argument that these facts refute, but the whole neoliberal faith, the whole "universe of discourse" as post-modernists call it.
Sweatshop Apologetics Fail Reality Test
But even if Mexico's experience didn't undermine the whole neoliberal myth, Krugman's argument fails in all other instances as well. For one thing, wages are so abysmally low that substantial increases would still leave labor costs a tiny fraction of the cost of finished goods. This point has been made repeatedly by the National Labor Committee in its exposés of sweatshop labor, and they're not alone.
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Dean Baker on another NYT article:
"According to the article, the current
wage rate is 60 cents per hour. If this were
increased by 50 percent (a very large
increase), it would imply an increase in
labor costs of 10 cents for every shirt or pair
of pants."
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Another article in the NY Times two days after Krugman's, "Labor Standards Clash with Global Reality," by Leslie Kaufman and David Gonzalez, sought to make Krugman's argument at length. But, as Dean Baker noted in the Economic Reporting Review (ERR, April 21-27, 2001), "The evidence presented in the article does not support the headline's assertion, nor many of the other claims made in the article." Specifically, Baker pointed out:
"The article indicates that each worker faces a quota of more than 55 shirts or trousers a day. If the average worker puts in a 14-hour day, this implies just over 3 per hour. According to the article, the current wage rate is 60 cents per hour. If this were increased by 50 percent (a very large increase), it would imply an increase in labor costs of 10 cents for every shirt or pair of pants."
Furthermore, the National Labor Committee exposés have highlighted other oppressive working conditions and work practices (such as no bathroom breaks for hours on end) which arguably serve to reduce productivity. The only reason wages stay so low is that multi-national corporations play workers from different countries off against one another. It's not a struggle for survival that's involved, but a struggle for super-profits. One way of combating this exploitation is with national investment regulations requiring long-term commitments. These are precisely the sorts of regulations that corporate trade agreements are designed to destroy.
Even Weak Measures Are Off The Table, And Real Alternatives... Fahget Aboudit!
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Long-term investment requirements are pretty weak stuff. By carefully excluding even such minor alternatives from his discussion, Krugman leaves us with a false dichotomy: do nothing to oppose corporate globalization or else make things worse.
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Long-term investment requirements are pretty weak stuff in the larger scheme of things. But precisely because they're so weak, they show how constricted the neoliberal worldview is. By carefully excluding even such minor alternatives from his discussion, Krugman leaves us with a false dichotomy: do nothing to oppose corporate globalization or else make things worse. He would never argue this way in discussing Bush's tax cut, for example; he's one of the sharpest critics of this domestic class warfare. But when it comes to global economics he only differs from the rest of the crowd by carrying with him a more credible aura of concern—an aura that utterly fails to square with his actions.
Not only are stronger universal protections possible to protect workers and the environment, a more fundamental rejection of neoliberal centralization is very promising in light of economic history. Waldon Bello is a leading 3rd World scholar-activist from the Philippines, and an IMF/World Bank abolitionist. In the Left Business Observer ("After the IMF and Bank are Gone," LBO #95, November 2000), Bello wrote:
"[T]oday's need is for the deconcentration and decentralization of institutional power and the creation of a pluralistic system of institutions interacting with one another, guided by broad, flexible agreements and understandings."
"It was under such a pluralistic system of global governance, where hegemonic power was far from institutionalized in a set of powerful multilateral organizations, that a number of Latin American and Asian countries were able to achieve a modicum of industrial development between 1950 and 1970. It was under such a pluralistic system under a GATT that was limited in its power, flexible, and more sympathetic to the developing countries that the East and Southeast Asian countries were able to industrialize through activist state policies that departed significantly from the free-market biases enshrined in today's system."
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Whether one agrees with Bello or not, he
bases his argument on an economic history that
neoliberal true believers simply ignore as an
article of faith, much like Galileo's foes refused to
look through his telescope.
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Whether one agrees with Bello or not, he bases his argument on an economic history that neoliberal true believers simply ignore as an article of faith, much like Galileo's foes refused to look through his telescope. In order to rationally refute Bello's position, it would be necessary for the Friedmans and Krugmans of the world to take account of that history in their counter-arguments.
It's easy to see why they find it easier simply to ignore Bello and others like him, and to go even further by pretending such people don't even exist. 'Spoiled white students' make a much better target when you're posturing as a defender of the world's downtrodden masses than an inconvenient intellectual who has arisen from the very midst of those supposed-to-be inarticulate masses. Even Southern sheriffs in the 60s knew that.
So Long, "Capitalism With A Human Face," Who Needs You Anymore?
In the end, Krugman dismisses the stance "that the movement doesn't want to stop exports — it just wants better working conditions and higher wages." It sounds good enough, "But it's not a serious position. Third-world countries desperately need their export industries — they cannot retreat to an imaginary rural Arcadia. They can't have those export industries unless they are allowed to sell goods produced under conditions that Westerners find appalling, by workers who receive very low wages. And that's a fact the anti- globalization activists refuse to accept."
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In other words, Krugman is telling us, capitalism can't have a human face. Get used to it....
But if capitalism with a human face is abandoned, something else with a human face must take its place.
Maybe even something with a human soul.
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In other words, Krugman is telling us, capitalism can't have a human face. Get used to it. But the history of the Cold War says otherwise. So long as there was an existing alternative, no matter how flawed and far-removed from the ideal it claimed to express, capitalism did find a way to don a human face. Third World development was promising, as Bello notes, but European welfare states were the most visible example and fully realized example. The people of Europe have proved quite tenacious in holding on to their welfare states even after the Communist alternative has vanished. Here in America, Krugman is one of few elite pundits still defending our pale imitation against un-President Bush's all-out assault. It's unfortunate indeed that Krugman doesn't see the connection. For if capitalism with a human face is abandoned, then something else with a human face must take its place. Maybe even something with a human soul.
Paul Rosenberg is a freelance writer and member of IMC-LA's website workgroup.
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References:
"Hearts and Heads,", Paul Krugman, New York Times, April 22, 2001.
NAFTA At Seven, Robert Scott, Carlos Salas, Bruce Campbell and Jeff Faux (Introduction), The Economic Policy Institute, April, 2001.
Economic Reporting Review for April 21-27, 2001. Dean Baker.
"Failures of the 20th Century: See Under IMF," Gregory Palast, The Observer, Sunday October 8, 2000
"Democrats Fail To Defend Disenfranchised In Election 2000," Ron Daniels, The Black World Today, Januuary 8, 2001.
"Florida's 'Disappeared Voters': Disfranchised by the GOP," Gregory Palast, The Nation, Monday, February 5, 2001
"After the IMF and Bank are gone," Left Business Observer #95, November 2000.
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