Tuesday, July 25, 2006

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Us greedy, chocolate-eating, Wal-Mart-shopping, family-protecting academics

In the Chronicle of Higher Education, Mathew H. Gendle engages in one of the more useless acts of self-flagellation about globalization I've seen in quite a while:

Like many liberal-arts institutions, the university where I teach [Elon] places a heavy emphasis on the freshman year, and all new students are required to take a class called "The Global Experience," taught by faculty members drawn from departments across the campus. One of the central objectives of the course is to break students out of their bubble by forcing them to think about the interconnectedness of our world.

In my class, we spend considerable time talking about the negative aspects of globalization: depressed wages, slave/child labor, the exploitation of the poor, and homogenization of cultures. I emphasize the underbelly of modern economies not to condemn them in a "holier than thou" manner, but with the intention of getting students to understand (in some small way) that their everyday consumer choices can have far-reaching social and economic effects around the globe.

I make a point of discussing how we are all implicated in some of those adverse outcomes, and suggest that the only way to prevent them is to work together for change. Despite my best efforts, I find myself feeling like a complete fraud with such idealistic talk. Indeed, I have pointed out to previous classes that on the very same day that we are discussing such issues, I am also wearing clothes that were probably manufactured with child labor and have consumed chocolate that was, in all likelihood, produced by slaves.

But I had no idea just how much of a hypocrite I was until I started to pay attention to my retirement account....

[A]s ignorant as this sounds, I was quite unhappy to discover that the equities funds in which I have invested own millions of shares of General Electric, Unocal/Chevron, Altria Group, Halliburton, Nestlé, and other corporations whose behaviors I have used in class as specific examples of poor global corporate citizenship....

You might say, "Well, that's capitalism," but that response seems hollow and unsatisfactory. Unfortunately, the simple reality is that as long as you are operating within a capitalist market, there will always be winners and losers, and I am essentially trying to position myself to be one of the winners.

The same could be said of my clothing purchases. Sure, theoretically I could buy only clothing that was union-made, or the product of workers earning a living wage. But the reality is that such articles are pricey and surprisingly hard to find. With a mortgage and child-care expenses, I find myself gravitating toward the inexpensive and mass-produced clothing offered by large corporate retailers.

With those choices, I am again essentially saying that the welfare of my family is more important than the welfare of others, which is truly the last sentiment that I want my students to identify with.

I find myself confounded and in one of the most uncomfortable positions I have been in as a college professor.

When I teach "The Global Experience" this coming fall, it is my intention to share the nasty details of my investments with my students. But will that really matter? Can I honestly expect my students to change their consumer behaviors when I refuse to change my own? (emphasis added)

Oh for Pete's sake.....

If Gendle really wants his students at Elon to learn, he might want to inform them of the following:

1) Eric V. Edmonds and Nina Pavcnik, "Child Labor in the Global Economy," Journal of Economic Perspectives 19 (Winter 2005): 199–220,. Their punchline:
Fortunately, abhorrent images of children chained in factories or forced into prostitution stand out for their relative rarity. Most working children are at home, helping their family by assisting in the family business or farm and with domestic work....

While some children do work in circumstances so hideous as to command immediate attention, development is the best overall cure for child labor.

In all likelihood, the clothes you wear are not manufactured with child labor -- but if you choose to refrain from buying clothes made in countries like Bangladesh, you actually increase the likelihood of exploitative child labor.

2) As for cocoa and slave labor, I can understand the confusion -- there's been a lot of media reportage of the alleged abuse of children to cultivate cocoa in West Africa. In 2000, Save the Children-Canada estimated that “15,000 Malian children have been forced to work in virtual slavery on plantations in the Ivory Coast” to harvest cocoa for multinational corporations such as Nestlé or Hershey. This figure was cited in many press accounts of the problem of child labor in West African cocoa plantations. A November 2001 cover story in the New York Times Magazine painted a harrowing picture of one child’s ordeal as a plantation worker.

However, this meme has turned out have little basis in fact. Three months after it originally appeared, the New York Times Magazine cover story was revealed to be a fabrication; the author’s titular character was in fact a composite, and events in the story were based on “extrapolation”. The New York Times later reported that the 15,000 figure is also a myth.

The ILO and USDA financed study by the International Institute of Tropical Agriculture, "Child Labor in the Cocoa Sector of West Africa." The ITTA study does an excellent job of chronicling labor abuses, but the big-picture point is on page 12:

The quantitative surveys revealed that the recruitment and employment of both children and adults from outside the family [to work on cocoa plantations] as permanent salaried workers was relatively uncommon. In RCI [Ivory Coast], an estimated 0.94% of farmers indicated that they employed children as permanent full-time workers, while in Ondo State, Nigeria, an estimated 1.1% of farmers reported doing so. In Ghana and Cameroon, none of the farmers questioned reported employing children as salaried workers. An estimated 5120 children were employed as full-time permanent workers in the RCI (versus 61 600 adults), while in Ondo State, Nigeria, 1220 children (versus 11 800 adults) were full-time permanent workers. In the RCI, an estimated 4630 farmers were employing salaried child workers.
3) On Wal-Mart, I'll just refer to Jason Furman's analysis of the welfare effects of big-box retailers.
If Gendle wants to make his Elon students really ponder their consumer behavior, here's a question worth asking -- what is the welfare effect of not purchasing goods and services made in the least developed countries?

UPDATE: The flagellation continues in the Chronicle's discussion board:

I'm in an area that focuses on social justice and responsibility along environmental, gender, political, and economic lines. Know what I'm doing this afternoon? Going to the WalMart to buy a product I haven't been able to find anywhere else. After I finish my tropical fruit and non-organic, non-fair trade coffee and take a 20-minute shower, of course.

It is really difficult to have ideals and still live in the world.

posted by Dan on 07.25.06 at 10:26 AM


The answer to that question - with a specific reference to Bangladesh - is given clearly and compellingly in the chapter on this subject in Wheelan's "Naked Economics." Anti-globalization activism is, like many leftist foreign policy ideas, well-intentioned and good-hearted but drastically counterproductive. Improving the economic condition of the world's poor is a moral imperative, but we can best help the poor by objectively looking at which policies benefit the poor economically and which do not. Refusing to buy goods in Bangladesh or any developing country falls clearly into the latter category.

posted by: Ryan McCarl on 07.25.06 at 10:26 AM [permalink]

"With those choices, I am again essentially saying that the welfare of my family is more important than the welfare of others, which is truly the last sentiment that I want my students to identify with."

Is that by any chance also the last sentiment you want your family to identify with?

posted by: mkay on 07.25.06 at 10:26 AM [permalink]

It's both amusing and disheartening that universities set up courses to be taught by people who clearly little understand what they will be teaching.

posted by: Norman Pfyster on 07.25.06 at 10:26 AM [permalink]

"Unfortunately, the simple reality is that as long as you are operating within a capitalist market, there will always be winners and losers, and I am essentially trying to position myself to be one of the winners."

He should be thrilled and grateful that capitalism has surprisingly put him anywhere near a place where he might be able to position himself to be one of the winners.

posted by: Sebastian Holsclaw on 07.25.06 at 10:26 AM [permalink]

"Unfortunately, the simple reality is that as long as you are operating within a capitalist market, there will always be winners and losers, "

And this guy thinks he's the one to bring kids out of THEIR bubble? In fact the simple reality is that the "losers" in globalization, the sweatshop workers and the parents who sell thier kids into slavery to work chocolate plantations, fight tooth and nail to get those sweatshop jobs and pay good money to fixers so they can get hired. The parents who sell thier children surely hate to have to do that, but the other oprion is thowatch their children starve to death. Those are horrible situations, but they are due more to wretched governments and the lack of opportunity that results form economic isolation than from globalization. In fact globalization is the cure for these people. What a moral exhibitionist idiot the man is.

posted by: Jim on 07.25.06 at 10:26 AM [permalink]

Hi Dan, I'm glad to see you write about this! I'm a lefty but really respect your thoughts, but I'm still wondering where you stand:

How do you think a 'responsible' consumer and 'responsible' investor ought to behave - if there is such a thing?

I understand simply boycotting global trade will hurt the poor in other countries. I think the Left is slowly learning this (Peter Singer mentions this specifically in his latest book 'The Way We Eat: Why Our Food Choices Matter'.)

When I was in college in the late '90s I was involved in efforts to boycott companies that supported the military junta in Burma (boycott was the request of nobel-prize winning Aung San Suu Kwi, who was imprisoned.) I was surprised to find that TIAA CREF invested in many of these companies and even refused to declare how they voted in shareholder resolutions. The campaign ultimately failed, but TIAA CREF's actions didn't seem right to me.

The issue I know most is farmed animal issues. I find companies block transparency, block the smallest improvements for the lives of the animals (even in cases where costs are low and consumers support the changes), and deceptively market their products.

I think many on the Left wrongly believe they should boycott global trade and big companies in general. But what do conservatives believe about initiating reforms? Are their no reforms worth fighting for through targetted boycotts/protests and acting as conscientous consumers and investors?

Or do conservatives think there are important issues, but the best way to deal with them are to treat investments and products as 'black boxes' - to simply always do what's best for us - which in turn will also cause the fastest positive changes for everyone? (sincere question)

posted by: JeffB on 07.25.06 at 10:26 AM [permalink]

"With those choices, I am again essentially saying that the welfare of my family is more important than the welfare of others, which is truly the last sentiment that I want my students to identify with."

I'm sure his family is thrilled to hear that he doesn't consider their welfare to be any more important than anyone else's.

In reality, I applaud his logic, and condemn him only for his hesitation in banning those things from his life. I recommend that he instantly stop all these actions. Return all his goods he feels are immorally produced, sell all his stock he considers to be immoral. I want him to be an example of what happens to people who believe such ludicrous things.

posted by: Brian Moore on 07.25.06 at 10:26 AM [permalink]

JeffB -- you should always invest and consume according to your principles. If you feel like you can't support something, don't.

Others can argue that you are wrong, but you need to make the decision for yourself, and accept whatever results from it.

posted by: Brian Moore on 07.25.06 at 10:26 AM [permalink]

I concur with remarks made earlier: It is depressing how specific knowledge of economics is so lacking in university professors instructing in the humanities and sciences. As for investing: The fund managers of other people's money have very specific fiduciary responsibilities under the law: Investing for someone's version of what is 'moral' or 'immoral' would be a clear violation of their fiduciary responsibilities, subjecting them to legal liability from disgruntled investors (those prosperous professors in the TIAA).

posted by: a Duoist on 07.25.06 at 10:26 AM [permalink]

This reminds me of a documentary that was on the Discovery Channel a few days ago ... some idiot goes into the wild and tries to live with bears and thinks they are cute, etc., and then the bears have a similar thought about him: Hmm, he looks mighty tasty ... to bad we don't have A1 Steak Sauce. I suppose this professor could take his place, now that he's no longer there.

Regarding reform, etc., start your own business that does the same thing, for example, open up a meat processing plant in a way where you believe the animals are treated humanely ... I guess this would include "organic", and then sell them to wealthy liberals who can feel good about eating them while also wearing their "Free Tibet" t-shirts (and this advice will be applicable 100 years from now ... due to the efficacy of t-shirts is comparable to that of UN Peace Keeping Missions).

But, perhaps I'm wrong ... perhaps collective poverty is the way to go.

posted by: me on 07.25.06 at 10:26 AM [permalink]

One wonders if he'll ever be taken out of his own bubble, and see that out there in the world, people work in sweatshops because the alternatives are even more awful. When they cease to be so awful - as has happened in some parts of China - sweatshops have to increase wages to keep attracting workers, and do things like become a bit less "sweaty".

The thing that is even more obnoxious than this sort of feel-good leftism is the sense that only they have a "grip on reality" and it is up to them to get students out of "bubbles" - and bring them into their own hermetically sealed vacuum-packed intellectual bubbles.

posted by: Foobarista on 07.25.06 at 10:26 AM [permalink]

A sincere question for economists. Suppose I want to improve the quality of life of the cocoa farmers and am willing to spend an extra $5 per month, do I:

a) give them $5 cash directly
b) use the $5 to buy higher priced fair trade chocolate
c) donate the $5 to improve healthcare in the region
d) buy an extra $5 chocolate from walmart

I understand that eventually the general market and development will improve their lives, but what do economists think is best to speed it along?

posted by: JeffB on 07.25.06 at 10:26 AM [permalink]

JeffB: In terms of helping a particular person in dire poverty, $5 in cash directly to that person is much more cost-effective than the others on your list, because the recipient gets the whole $5 rather than a tiny fraction of it. In some places, it's not a trivial amount of money.

Caveats: 1) If you regularly send the same person $5, you may develop an unhealthy dependency in that person (although you could also end up allowing him to start a business or send a kid to school).
2) Depending on the cultural situation, if the recipient's family and/or neighbors find out about your gift, the recipient will be under tremendous pressure to share the good fortune. This will dilute the impact on the recipient.

posted by: srp on 07.25.06 at 10:26 AM [permalink]

It depends though, if you give the $5 directly, you only benefit one person, whereas $5 to healthcare will help more people. Also it depends how that money is sent. Direct transfers of money may also be pilfered in some way by authorities.

posted by: plam on 07.25.06 at 10:26 AM [permalink]

Yes, it's unfair that some children overseas are having to be sold into sweatshops in order to help provide for their families, it was equally as bad when our country went through our industrial revolution. However, I don't think that boycotting certain fabrics will make that great of a difference in international affairs. I see the problems with globalization but the only way I can think of really making a difference is by giving more power to the ILO, or changing the standards for countries to be let in the WTO.

posted by: Mike on 07.25.06 at 10:26 AM [permalink]

It's both amusing and disheartening that universities set up courses to be taught by people who clearly little understand what they will be teaching.

Literally. This guy is a psychologist. Why is a psychologist (trying to) teach economics?

posted by: David Nieporent on 07.25.06 at 10:26 AM [permalink]

Why is there a line through all lines of the comments except the first line of the paragraph? Why are all posts posted at the same time, in this case 10:26 A.M.?

posted by: lee on 07.25.06 at 10:26 AM [permalink]

I'm interested in JeffB's comments & would enjoy seeing a followup post. Because of the way the world is set up, it is virtually impossible to avoid complicity in at least some of this stuff (unless you decide to go live in a cave, I guess).

Even if it's hard to figure out what to do, it's worth knowing what is going on. A start?

(BTW some of the commentators here are pretty rude! What is the deal with this, going on other peoples' blogs and being rude?)

posted by: Professor Zero on 07.25.06 at 10:26 AM [permalink]

The comment about Bangladesh is a good one. For those who are not familiar, U.S. collective action against child labor in the garment industry resulted in a sharp rise in child prostitution in Bangladesh.

Was there child labor in New York City 100 years ago? Absolutely. The nasty things that are happening in developing countries are the same nasty things that happened in the U.S.A. when it was developing.

Forcing the labor statndards of a highly developed economy onto a developing economy does not make the world a better place. It causes workers in the developing economy to seek alternatives, many of which are more sinister than child labor.

posted by: Lucas on 07.25.06 at 10:26 AM [permalink]

Dan, I am sure you know, but you and your arch-enemy Jeffrey Sachs actually agree on this. Being as liberal as he is, he consistently calls for more sweatshops.

But i think that there is an important issue in this debate. The question should not be so black and white, but maybe people should decide what they buy based on the development gains. so, like, Cambodia is know to have particulary high wages and good working conditions, considering it is a poor country. maybe we should focus on buying from them? But, how do we know whether cambodia has a wide distribution of ownership of its factories, and that they are not just owned by one guy with a huge swiss bank account? maybe we should find out which poor countries are best able to translate investment into development? If there was such an index, i would be very interested to see it. I already pay pretty close attention to what i buy, but something like that would be a benefit to all people like gendle who are trying to do their best with their micro actions to help the world.

posted by: joe m on 07.25.06 at 10:26 AM [permalink]

Professor Drezer, tenure is making you smug and condescending. Your offhanded dismissal of the good man's reflections reveals a certain shallowness in your attitude. Which is more naive: (i) reflecting on poor conditions around the world and on ways that one might make a positive impact on global development through one's consumer habits, or (ii) ignoring all the problems and trusting blindly in the "invisible hands" to make them go away (assuming one even believes that there is bad stuff out there?

You seem to discount people who fundamentally believe in free trade but who want to look more closely at how the global system works (or doesn't work) and see if there are not effective ways to move things forward more quickly. I think the days of the naive do-gooder are over. Obviously, not the day of the naive laisse-faire types who honestly believe that international capital cares whether people live in democratic societies.

As to the article that you cited about the positive welfare impact of Wal Mart, how do you respond to the following passage from the article?:

"More puzzling is that some progressives have described Medicaid, food stamps, the EITC, and public housing assistance as "welfare." The right response to Wal-Mart is not to scale back these programs but to expand them in order to fulfill the goal of making work pay.

If Wal-Mart were committed to the welfare of its more than 1.3 million "associates" as it calls its workers, then it would push to expand these public programs. Instead, Wal-Mart and the Walton family have generally worked against the progressive issues that would benefit its
employees, including funding campaigns advocating the repeal of the estate tax. Recently, Wal-Mart has come around to endorsing a higher minimum wage, but this limited step is outweighed by its consistent funding for attempts to roll back progressive priorities that would benefit its workers. Unlike support for true corporate welfare, advocating steps to make work pay would have little impact on Wal-Mart' shareholders or its bottom line; it could, however, make a large difference for its employees."

posted by: Karl B. on 07.25.06 at 10:26 AM [permalink]

What struck me is his bland statement that "In my class, we spend considerable time talking about the negative aspects of globalization..."

Not even a nod that there might be positive things about globalization.

posted by: David Sucher on 07.25.06 at 10:26 AM [permalink]

Thanks for the comments.

Dan should be commended for pointing out the reports about cocoa farmers. It's good to hear the prevalence of slave labor is not as high as Gendle or many of us thought. I wasn't aware of the details (though I still think it would be nice to help them out).

But I think Gendle and several commentors also overstate the negative implications of being a responsible consumer and investor. For instance, the Domini Social Index has almost matched the S&P500 since it started in 1991. And we currently spend the smallest amount of our disposable income on food that we ever have - we could improve farmer wages.

Is a good test to picture the worker as your next door neighbor and friend, then act accordingly?

posted by: JeffB on 07.25.06 at 10:26 AM [permalink]

Gendle is a twit, but JeffB is asking some sincere and interesting questions. Unfortunately, there are no simple answers, which is usually the case in economics, and in life generally. (Now that's a lesson he should be teaching kids).

The essense of economics is that people have to weigh the benefits and costs of available alternatives to maximize their subjective wellbeing, or "utility" in econ jargon. However, this doesn't necessarily mean that people are selfish, since improving the lot of others can also enter into your utility function (as it clearly does for Jeff in the case of Cocoa farmers). Each of the choices he suggested could help or hurt cocao farmers, or have little effect at all, depending on the circumstances . The higher priced chocolate might help farmers, but it could also just be an advertising gimick targeting people like Jeff who want to help others. Giving money directly (I imagine through a charity) might do a lot of good if farmers have some economic alternatives available to them, but if they don't it might not do much good at all. Buying more chocolate from WalMart would increase the demand for cocoa, and farmers generally like it when their product is in demand because it tends to translate into higher incomes. However, the lives of people in Mali and the rest of Africa will never be dramatically transformed for the better without sustained economic growth, and that's unlikely to happen without participation in the global economy.

Jeff needs to gather as much information as possible to make an informed choice, but he should realize that the cocoa farmer is doing the same thing. He could continue to work as a cocoa farmer, or he could go to the city and work in a Nike factory, or he could sell his kids into slavery or prostitution. The reason he is working as a cocoa farmer is that it's the best alternative available to him. If you stop buying cocoa, some farmers will be forced to look for less attractive alternatives.

posted by: american in europe on 07.25.06 at 10:26 AM [permalink]

So lets analyze what happens when we buy fair trade goods, union made goods, and the like. These goods guarantee higher wages for their workers. With the increased amount of income the worker can do various things He can spend it on goods to increase his comfort level, he can work less hours to attain more free time wile living at the same comfort level, he can save his money for an investment, etc. He might be able to afford to send his children to school or to a better school or to invest in his children’s education in some way. He might be able to afford to invest in his own education in order to acquire the skills that will earn him more money.
And if we don’t buy these types of goods? Then the people will continue to live on the edge. Regardless of weather there is high demand for the goods that use cheap labor, the worlds population is increasing at a very high rate, especially in the poorest countries, so low skilled labor will continue to be in high supply, keeping people on the very edge of survival.
Will widespread ethical consumption eradicate extreme poverty? It can help, but alone, I’m not sure if it can. What are also needed are large investments in education for the poor, so that they can gain the skills that will pay higher wages in the technologically advancing world that we live in, along with investments in infrastructure, health and so on.

posted by: Christian on 07.25.06 at 10:26 AM [permalink]

This guy needs to read "The Travels of a T-Shirt in the Global Economy: An Economist Examines the Markets, Power" for a little perspective and a lot less guilt. To think people are paying $10,000+ a year to have their kids indoctrinated with this.

posted by: Norma on 07.25.06 at 10:26 AM [permalink]

The reason he is working as a cocoa farmer is that it's the best alternative available to him. If you stop buying cocoa, some farmers will be forced to look for less attractive alternatives.

Posted by american in europe at July 26, 2006 11:55 AM

Quotes like this are one reason why so many people distrust economic "analysis." The quote starts with an unstated assumption (people have choices, and they choose among on the basis of rational optimization, as opposed say to social constraints, force etc.), and then uses this assumption to state all-knowingly that the farmer is behaving in a manner consistent with the assumption.

posted by: Gene on 07.25.06 at 10:26 AM [permalink]

JeffB's question is quite interesting. I'd be interested in Dan's take on "fair trade" in general. In the end, I guess it is only as good as the company that supervises compliance with the trade mark standards. I also see a risk of the movement going down a dead end road of "communal theory" that flirts with revolutionary theory or that gets sidetracked by populist movements in the producing countries. Nevertheless, fair trade appears to be catching on in Europe.

In Germany, a lot of very prominent charities are behind the leading fair trade logo, and a couple of big grocery store chains have started carrying and prominently displaying fair trade products, which helps bring their prices down closer to those of the normal trade competitors.

I've seen and read reports on how fair trade works in Pakistan in the soccer ball manufacturing business. Folks work all day making both regular balls and, when orders are in, fair trade ones. There is not enough business to focus exclusively on fair trade products, but the extra cash from the fair trade orders does appear to result in the workers having a significant amount of extra disposable income, which often is used to pay for schooling for their kids, etc.

There is also a book by a Berkeley professor called "Disposable People" that goes into great detail describing the different types of near-slavery around the world. I found the book to be very non-ideological and pragmatic and can recommend it highly. Some of the chapters were fascinating.

posted by: Karl B. on 07.25.06 at 10:26 AM [permalink]

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