September 5, 2011

Labor Day Interlude: The "Sweatshop"—Sweating the Details

After posting Thomas DiLorenzos essay, “Bono The Capitalist Exploiter, we received an email from a reader that amplified one of his lessons, namely, that the margins within which any enterprise operates must be presumed to be tight. There are many moving parts, and the entrepreneur can never tell which one is going to change for the worse. He or she must therefore scrupulously monitor every factor’s cost and performance, and respond to its changes appropriately or risk failure (which would cost everyone his or her job). We invited him to turn his message into a guest post, and we are happy to share the result with you.

The Illegal Alien “Sweatshop”
Stephen F. Perry
Let’s think about the “Illegal Alien Sweatshop Scenario” from the praxeological side.
Suppose I am a do-gooder, and I believe, correctly, that the best way to help the poor is to give them opportunities to help themselves. Suppose I decide that the set of poor people I most want to help are illegal aliens, because they really don’t have anywhere to turn, since they are persona non grata. So I decide I will start a business to employ them, so they can develop some skills, make some money, have the rudiments of a social setting, etc.
What would be the characteristics of this business, and how would they govern its relationships to its employees?
Firstly, I would not be able to invest too much of my own money in it, because the risks of discovery are great, and discovery means the loss of the entire investment. I also would not have much access to other people’s capital. I would even have to be suspicious of anyone who wanted to invest in the business, because its very illegality would make it a target for people who would want to direct its resources to more lucrative and hence more dangerous illegal activities, and I, as a do-gooder, don’t want to expose my employees to that.
Secondly, I cannot offer to pay very much, because at the very least I don’t want the word to get around that there exists an average-quality opportunity that is being offered only to one class of people, and that a class with no social standing or legal protection. If I offered to pay even the minimum wage, there would be legal residents trying to get the jobs, and they would have every incentive to turn in the illegals so the positions would fall to them. And why would it trouble their consciences?—after all, these workers are “breaking the law.”
It goes without saying that work conditions would be the minimum quality required for getting the job done. If the factory floor air conditioner should break, for example, it might be very hard to find a repairman who will look the other way while all this illegal employment is going on. (So maybe this is why they’re called sweatshops in the first place?) If a worker is injured on the job, his very own co-workers would have an interest in persuading him to receive minimal treatment, for fear questions would be asked.
Without outside capital, the margins can be expected to be very small. It won’t be feasible to get the most efficient machines to increase workers’ productivity, so with small margins, wages will have to be small, probably smaller than I would like, given that I’m a do-gooder. Plus, I can’t neglect to pay sizeable sums for legal protection; I don’t want to be closed down and have all these poor people back on the streets or herded off to the Third World hell-hole they came from.
It will be impossible to advertise openly to increase sales, also severely restricting the income from the business.
From these sorts of considerations, I have to conclude that if I were a do-gooder running such a business, my actions and policies would be indistinguishable from those of alleged “exploiters of wage slaves.” Because against these factors, the only part of my business plan that supports profit maximization (with or without assumed “exploitation”) is that these people have nowhere else to turn. It follows that to conclude from such appearances that a particular “sweat-shop” business must be exploitative of its workers is merely a matter of prejudice. 
Corollary: when a person really has “nowhere else to turn,” it is generally possible to find violence is being applied against him. In this case, it is state-violence of minimum wage laws (making bargaining for work illegal and subject to police violence) and immigration laws (making merely living in a place illegal and subject to police violence).
The Austro-libertarian prescription of preventing violence (even state-violence) against people who have not themselves perpetrated violence is obviously the corrective for this situation.