"Workers Need Protection Against Slave Labor."

Gary North

August 1, 2012

For over 50 years, I have heard this justification for the imposition of tariffs: "American workers need protection against foreign slave labor."

Of all the criticisms of free trade, this one is not only the stupidest, it is the least defensible factually. It assumes that governments have always imposed tariffs or other restrictions against the output of slave laborers. What we find, on the contrary, is that governments virtually never impose tariffs or restrictions on imports of goods by slave laborers. This is because the main exports of slave labor societies are raw materials. In other words, the argument does not conform to the facts. The person who uses it has never looked at the facts. He is mindlessly repeating an argument that sounds moral, but which in fact is stupid.

Let me summarize the position, in terms of the economic assumptions lying behind the argument. Let us strip the argument of all sense of moral indignation, which is utterly fake.

"We know that slave labor is highly productive. Free enterprise cannot compete with slave labor. There is no way that a free society can compete, head-to-head, against a slave society. The centralized planning of slave societies is just too productive. No worker operating in a capitalist nation can defend himself and his job by means of his own economic productivity. He needs someone standing at the border with a badge and a gun to prohibit the import of goods produced by slaves.

"Anyone who argues that the free market system is highly productive, and is fully capable of competing against slave labor, is completely ignorant about the enormous productivity of slave labor. He is equally ignorant about the pathetic productivity of the free market.

"Slave societies are highly productive. There is nothing like a man who is forced to work at the point of a gun, and who is threatened with starvation if he refuses to work, to become a master craftsman, a highly efficient producer of specialized goods and services, or a master designer of high-technology goods.

"The enormous productivity of slave labor is such a threat to peace-loving people in the rest of the world, that it is imperative that politicians send out people armed with badges and guns to prohibit the import of goods that have been produced by hordes of slave laborers. If this is not done, the pathetically inefficient workers living under free-market capitalism will see their wages collapse due to the incomparable productivity of slave labor."

Does this argument sound ridiculous? Of course it does. It is an implicit attack on the efficacy of free market institutions. It is an implicit attack on the productivity of workers who have been empowered by the enormous investment of capital made in the West over the past two centuries. It is arguing that slave labor is productive, and free labor is unproductive. So preposterous is this argument that no one ever states it clearly. The person either does not understand the implications of his argument -- that workers in free societies must be protected against the output of slave labor -- or else he really believes that slave societies are enormously productive, and that free societies simply cannot compete with them.

The argument is ludicrous. It is also deliberately deceptive. The person who makes this argument never provides any statistical evidence that the goods produced by slave laborers are bought by customers in free societies. The person cannot point to products that are made by slave laborers, and then show that these products have a significant market share in free-market societies. In most cases, the person cannot name a single product that is produced by slave labor that anybody has ever heard of. To the extent that Yugoslavia was a Communist society, and therefore dependent on coerced labor, the most famous product it ever produced was one of the great laughingstocks in the history of automobile production: the Yugo.

RAW MATERIALS

The only examples of imports from slave labor societies that might be used as examples of goods that have penetrated Western markets are raw materials, especially oil. The value of these exports from slave societies is almost entirely due to the economic value imputed by Western customers to the raw materials. The labor component of these exports is insignificant. Coerced laborers are able to extract minerals and other raw materials from the earth. This is unsophisticated labor. The output of these slave-based extraction industries would be much greater if the planners allowed free-market capitalism, but the high value of the raw materials offsets the low value of the labor that was used to produce them.

We rarely hear of any Western society that imposes tariffs or other restrictions against the import of industrial minerals and raw materials. (American tariffs on sugar are an exception.) Never do we hear of import restrictions on foreign-produced oil. So, the argument that Western workers must be protected against slave labor is in fact denied by the open import of minerals and other raw materials, which are then used by free-market workers to produce valuable goods. The free-market workers become the beneficiaries of the imported raw materials and oil. Therefore, the one possible example of the truth of this cliché of protectionism is never found in actual practice.

If you ever hear this argument, ask the person who offers the argument to name the five nations that constitute the bulk of foreign trade with his nation. First, he has no idea which five nations are the major trade nations with his nation. Second, as soon as you show him which nations these are, ask him to identify which of these nations relies on slave labor to produce the goods and services that it exports. As soon as he sees the list, he will be stuck for an answer. Every major trading nation in the world trades with other nations that are marked by the free mobility of labor, highly developed capital markets, sophisticated research institutions, and capital-intensive productivity. None of these characteristics is found in a slave labor society.

In short, the argument is preposterous both in terms of economic theory and in terms of economic facts. No slave labor nation finds markets in the West for its manufactured products. Its products are too shoddy to penetrate the markets in the West.

CHINA

Sometimes the defender of tariffs against slave laborers will use the example of China. This has to be one of the dumbest arguments in the history of economic reasoning.

During the period in which China was under the rule of Comrade Mao, it had virtually no foreign trade. It had no products that could find markets in the West. The nation could barely feed itself. In some time periods, it could not feed itself. It had nothing of value to export. It had no foreign exchange reserves. It had no large-scale industrial production at all. It was a Third World nation. The only thing it could produce in large quantities was weaponry. It did not export anything to the West.

Today, China is a major competitor in Western markets. Its economy is basically Keynesian. Its workers can move wherever they want. We are seeing the largest migration in the history of man from rural poverty to urban middle-class living. Hundreds of millions of people have moved from the rural countryside to large cities. This is not slave labor; this is free labor. There are no government restrictions on the movement of laborers. There are very few government restrictions on hiring these workers. There is almost no social welfare system imposed by the state. The Chinese labor market is vastly freer than labor markets in the West, which are dominated by trade unions that have gotten government support, meaning the threat of violence, to support the demands of union members. This is one of the reasons why Western manufacturers are having so much trouble competing against Chinese workers.

Chinese workers are free to move from job to job, and Chinese employers are legally allowed to hire anyone they want. Under these conditions, it is the Western workers who are closer to slavery than Chinese workers are. Western workers who are not trade union members in Western Europe are forced to take less desirable jobs, because labor union members have locked out competition from nonunion workers. Unions have used the government to send out people with badges and guns to prohibit employers from hiring nonunion workers. This is not the free market; this is a government-rigged market.

So, the next time you hear someone argue that Western workers need to be protected against foreign goods produced by slave labor, point out to him that the reason why Western workers want protection is because they are the slave laborers. They are finding it increasingly difficult to compete against workers who live in a nation that honors the principle of the free mobility of labor and voluntary contracts between employers and employees. China is a fierce competitor, not because it is a slave labor society, but because it is competing against workers who live in a regime of government-rigged labor markets.