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Words to die by

April 29, 2013 - Harry Eagar
RtO considers that 2 rules dominate markets. You have read them here before:

Unsupervised markets crash.

If the free market thinks you are worth more to it dead than alive, it will see to it that you are killed.

The death count in the Bangladesh factory disaster is higher each time I look: 381 now.

Not a huge toll in the context of the number of people who are shot to death in Chicago or die in single-car drunken crashes, but the reason we pay attention (those of us who do, see a Bloomberg story [follow link] for those who don't give a damn) is that unlike single-car drunken crashes, factory disasters and gunshot deaths have their cheering sections. There are people who regard the collapse of an 8-story building as a feature not a bug.

(And here let me turn aside to one of my favorite books, Henry Petroski's "To Engineer Is Human: The Role of Failure in Successful Design." Petroski argues that it would be possible but inefficient to overengineer every structure and machine so that none ever failed. The cumulative cost to society would be large; whereas with the occasional collapse of a bridge or a building, because daring engineers were pushing for the most economical design, in the long run society is better off, and too bad about the people on the bridge. Perhaps so; it's the kind of argument that adults make. But the Rana Plaza building in Bangladesh was not pushing any design parameters. It was just a shoddy, murderous worker-killer.

(It is significant that the ground-floor businesses, including a bank, were evacuated when the building showed signs of cracking, while the garment factories above were kept working.)

The Bloomberg News story is not explicit about the argument, which is that ever-cheaper consumer goods are, in themselves, an unmitigated good and anything -- absolutely anything -- that makes them cheaper is desirable. However, the Bloomberg story does include a factoid that brings the deal down home:

"Clothing companies have come under increasing pressure to lower costs as the rise of fast fashion at cut-throat prices has trained consumers to expect $5 T-shirts and $6 bikinis. The cost of clothing in Britain has dropped 20 percent since 2005, according to the U.K.’s Office for National Statistics, while food is up 43 percent."

And if the price of the cheap bikini is paid by distant people of whom we know nothing, why then, it isn't a cost.

In a comment on my last post on guns, Bret said we could argue about the consequences of guns vs. not guns. Indeed we can. (The comment was made over at RtO's mirror site,; the posts are almost the same but the sites have different sets of readers and commenters.)

We can argue the consequences of any action, and, in the context of Rana Plaza, of any regulatory action. It is a matter of balancing the interests.

The Bangladeshi workers, who live in great poverty, have an interest in low-wage jobs -- which are not low by their standards -- but the unspoken component of the deal is that they should live to spend the money.

Modern methods have greatly benefitted the Bangladeshis. Because of the geography of the Bay of Bengal, cyclones blowing up from the south frequently submerge vast areas of the coastal lowlands. Up through the 1970s, for centuries these floods had killed people in the millions, sometimes several hundred thousand at a time.

Traditional society shrugged its shoulders and accepted this as a consequence of reaping the rich harvests available on the plain of Bengal. Modern society saw a cheap fix: build earthen berms high enough that people and their animals could shelter on them until the water receded.

The engineering of the berms was not difficult; it could have been done any time in the past 4,000 years. It was the modernist thinking that made them worth undertaking.

Free marketeers like to think of themselves, I believe, as advanced people, advocates of a modern attitude (despite that fact that their hero, Adam Smith, was the last representative of medieval scholasticism in Scotland).

They are not.

The free market is incapable of correcting this flaw. I recently came across a stunning statement about why not. It is in the CBS News documentary "Harvest of Shame," which was broadcast in 1959. I didn't see it then, but earlier this month I borrowed the DVD from my public library.

In it, a Florida farmer named Jones admits that his field hands are paid miserable wages and have to work in miserable conditions. At least, he says, they are guaranteed their miserable wages, while Jones may end up losing money when he brings his tomatoes to market.

This, to free marketeers, is a feature not a bug. Jones says he is not a free actor although he operates in a free market. If he paid decent wages, or if the state of Florida required him to do so, tomato growers in other places would not, and they would undersell him and he would go broke.

Too true.

That is why modern societies, at least those run by grown-ups, make it a point to balance interests and pass onerous regulations.

The free market is unsentimental. If it thought a banker was worth more to it dead than alive, it would have him killed. But the free market is class-conscious. It seldom or never finds bankers worth more dead. Factory hands are another matter.


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