This op/ed by Nicholas Kristof is a classic that Greg Mankiw links to. I use it in my class to make two points:
- The value of an extra dollar (or an extra Cambodian riel) can be extraordinarily high for someone who is very poor. (See my post “Inequality Aversion Utility Functions,” where I emphasize that almost all the benefits from redistribution are from helping the poor, not from transferring money from the rich to the middle class.)
- Caring about helping the poor does not always mean one should support policies recommended by activists who say they care about the poor.
A number of policies recommended by those who say they care about the poor have the common element of saying, in effect:
If you can’t or won’t create a good job, don’t create a job at all.
For some people, a “bad job” is a lifeline. And if we insist that only good jobs should exist, they will have no job.
I think there is another element behind opposition to sweatshops. When people in poor countries are suffering before the arrival of an American company in their backyard, that hideous suffering from poverty is out of sight for us in America. But as soon as the American company arrives to give the opportunity of taking what look like bad jobs to us, if they choose to, the somewhat lesser suffering of their poverty after taking the “bad job” seems like the fault of the American company for not making the jobs nicer. In fact the company has helped them, but we only see the suffering from poverty after, not the hideous suffering from worse poverty before.
One factor that can make it easier to blame the American company for the suffering left after providing the job is that some of the corporate executives involved in setting up and running the new factory in a poor country may, in fact, be uncaring, unfeeling people (though I doubt this is true anywhere near as often as people suppose). But even if many of the corporate executives involved in setting up and running the new factory are uncaring, unfeeling people, it doesn’t change the fact that, by their actions of setting up and running the factory, they have made people’s lives better. They could have made people’s lives better still if they had taken a bigger fraction of their personal earnings and donated it to helping the poor than they actually did, but that is something that can be said for almost every American.
One policy change that could increase what Americans do to help the desperately poor in other countries is the program of “public contributions” I recommend in my post “No Tax Increase Without Recompense.” That program of public contributions would dramatically increase the amount of assistance American give to the desperately poor in other countries. Government-funded foreign aid is very unpopular–and often is relatively ineffective because much of it is channeled through corrupt foreign governments. But many individuals (with whatever money they have set aside to donate to good causes) are attracted by the idea of helping the desperately poor.