Shall Atlas shrug or workers unite?

My Marx vs. Smith post generated a hitherto unprecedented flurry of emails and comments from political theorists. I’ve been getting lessons in Marx from left and right (pun intended) all week.

What is abundantly clear: I’m going to have to read my classics more closely these holidays.

I’ll take cover in the fact that the Marx vs. Smith angle was more an attempt to write a cute blog post, rather than the actual frame of the project. But this discussion has given me ideas.

I’m still processing the week of factory visits. I fluctuate between wanting to become a labor union organizer and thinking that Ayn Rand’s Atlas Shrugged was right all along. (Let loose the titans of industry!) I’ve met incredible entrepreneurs this week who do more for development in a year than I may accomplish in a lifetime.

Even so, I was unprepared for the lowness of unskilled wages in Ethiopian factories and farms—sometimes starting at less than a dollar a day (though that rises to about $2.50 when we account for purchasing power).

In a meeting with the general manager, the personnel manager expressed his belief that workers were exploited. The personnel manager!

I couldn’t let that comment slip without asking what he meant. I think his real meaning is close to my own opinion: factory jobs are better than the alternatives, but by no means do they pay a wage that pushes people out of poverty. At least not right away.

Skilled trades and small businesses pay two or three times the unskilled wage, but the work is irregular and unpredictable. A factory job, for all its challenges, is relatively secure.

I should not have been so surprised. With excess supply of labor, why would a factory pay an unskilled laborer any more than she can earn outside? In fact, because the wage is (in expectation) fairly steady and long term, factories can pay a lower wage and people will still line up for the stability.

The interesting dynamic I’ve observed (after a grand total of one week, mind you) is that new hires often receive lots of informal training, and enterprising workers learn how to do the job of the people one or two steps up on the ladder. Their pay rises as a result, if only to stop them from going to the competitor down the street. (This seems to happen a lot.) Within a few years their wage may have doubled or tripled. Others use their earnings to pay school fees, and attain a degree or diploma.

Do I expect a factory job to relieve poverty in one year? I don’t think so. But over a two or three year horizon, gains seem possible. Over a generation, it could be transformative, especially as unskilled labor gets scarce.

Now, off to Liberia for an opposite project: small businesses for ex-combatant street youth.

9 thoughts on “Shall Atlas shrug or workers unite?

  1. Interesting. I was struck by how much formal training or education counts in Ethiopia. I saw it this way: our office maid made a wage of about 2 dollars per day, which is typical. A young engineer might make 30 dollars per day (all unadjusted). So that education gap accounts for a factor 15 disparity in wages. Take the US. It would be a 1-2 factor difference between these levels.
    So many of my colleagues were studying at night to improve their credentials. A remarkable percentage. I can understand why.
    Good post,

  2. Okay, but why do you keep looking from the individual’s perspective only? One can never ‘understand’ development on the basis of whether some individuals will be able to afford education or health services because of factory jobs, and some others don’t – this is personal wellfare!

    Development is how a particular socio-economic system – the mode of production – in its entirety is able (or not) to create conditions that stimulate the production of economic value, and therewith the (hopefully indigenous) accumulation of profits/capital. This is what creates economic prosperity and development in the long run … and inequality at the same time. Think Victorian factory workers and overall working conditions at that time in England. The solution for the workers can only come in the long run, when there is no oversupply of labour any longer, i.e. workers gain economic and political power, and can struggle for better working conditions as it was achieved in Europe and is now (very slowly) on its way in Asia.

    This is the system, and it won’t be changed whether some workers can flee from it (e.g through education) or not, as it remains the basic foundation of production. To look at how some families can move up the social ladder, essentially by becoming entrepreneurs (capitalist), white collar workers or civil servants doesn’t change the fact that the productive system is based on the exploitation of labour … as your example illustrated and whether one likes it or not! In no developing society/economy can every person be either a civil servant or a capitalist (or a peasant for that matter). There will always have to be workers, and typically they will be brutally exploited especially in the early stages of development.

    Sorry, rant over! But I think this is a crucially important point that is always missing in development debates (and I’m not sure I conveyed it awfully well here, to be honest). Methodological individualism doesn’t do the trick (categorically) and one needs a systematic perspective to understand development.

    BTW: the macro vs micro dichotomy is no escape here, so please don’t say you only look at individuals because you’re a microeconomist … I’m a microeconomist too, but that’s beyond the point.

  3. Sorry, I’d rather finish on a more conciliatory note:
    I appreciate of course that your final conclusion is quite similar to mine. I just wanted to point out how I feel these relations have to be analysed in order to be fully understood.

    Keep up the good work, I think these discussions are very fruitful and inspiring … and certainly it’s rare enough that one can have them in the first place!

  4. I see a North American- vs. European school of thought in the unfolding here.

    I find it interesting that Marx tends to have been viewed in the light of some sectarian point of view when it comes to scholars from the States. It seems to me that you either hold Marx as some guru who had it all figured out, or didn’t bother at all to get aquinted with even the most basic of his writings. I haven’t ever had the pleasure to meet someone American who thought that some of Marx’s theories were usefull.
    Does anyone share my impression that even Ivy League scholars are more or less ignorant of theories that aren’t agent-based unless they were full-blown marxist (or foucauldian.. but that’s another post). And if I’m correct, why is that? .. or is it me who’s the ignorant?

  5. Chris, please don’t listen to these “theorists.” If they aren’t scientists, they probably don’t have anything interesting to say.

    We’re all experts in moral philosophy because we all can pick whatever axioms we want. But the science of how to act given a certain moral framework, that is difficult–that is what economics is about and what scholars in the humanities don’t understand.

  6. Steve, but surely the frameworks within which agents make decisions also require study? Individuals do not act in isolation of the social norms and groups which they are part of, and if these restrict the locus or impact of individual actions, they must be of crucial importance, no?

    Economics as conceived by modern economists focuses on the individual locus of action to the near exclusion of the group dynamics they are influenced by. While its part of the study we need to undertake to understand the world, it’s not the whole thing.

    It’s frankly a little closed-minded to argue that scholars in the humanities don’t look at both agency and structure (which have both been part of the discourse in the humanities for at least the last 150 years), especially when anthropologists and historians tend to be far more widely read in economics than vice versa.

  7. What if both? After all, it is the very rise of the proletariat riff-raff in political terms that caused the mass exodus of talent in Rand’s work.

  8. I think that you have to look at the individual situations as well as the systemic ones to try to understand the complexities involved here. Isn’t it beeter to see some people with a chance at a better life than looking at a system that oppresses and leaves you no chance? You have to be able to build on what is working to make the system better.

    There are no easy answers and it’s very difficult to find any fast track here. It took nations in the west a long time to get where they are and hopefully newly developing nations can learn from what developed nations have done and take the best ideas to speed up their development and repress the oppression.

  9. Nothing much unfolding here but Steve, didn’t you just prove my point? Whether you’re accepting Marx’s theories or not (or partly), discounting it as mere moral philosophy is simply wrong.

    (Personally I’m not too big of fan, mostly because of its reductionist totality, but for a gentle introduction to Karl Marx -as the non-cult figure- try have a look at his land rent theory for example. It should be appealing to most people interested in ‘development’ issues, and in my opinion certainly superior to its neo-classical counter.)

    Finally and as indicated by others than myself above, addressing the individual perspective without acknowledging that economic actors do not act, choose or live their lifes in vacuums frankly reminds me of a situation where a civil engineer wouldn’t be concerned with friction and gravity (which are, mind you, constants)