"Workers Need Protection Against Slave Labor."

Gary North - August 01, 2012

Update: 4/16/20

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 person who invokes 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. Yugoslavia was a Communist society. It was 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.

The major slave societies of the twentieth century were Communist societies: China, North Korea, the Eastern bloc of the USSR, and the USSR itself. They exported almost nothing of value. The myth that the USSR exported manufactured goods of marketable quality was destroyed by the three-volume academic study by Anthony Sutton in the early 1970s: Western Technology and Soviet Economic Development. Something in the range of 95% of Soviet technology was either stolen from the West or exported from the West.

RAW MATERIALS

Workers in advanced societies do better when they can buy domestically manufactured goods made with low-cost raw materials. Raw materials are the only marketable exports of societies that can plausibly be regarded as slave societies. 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. These tariffs go back to the 1790s.) Never do we hear of import restrictions on foreign-produced oil. So, the argument that Western workers must be protected against slave labor is refuted by the open import of minerals and other raw materials, which are then used by free-market workers to produce valuable goods. Free-market workers become the beneficiaries of the imported raw materials and oil. So, the one plausible example of the truth of this cliché of protectionism is never found in actual practice.

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 few government restrictions against hiring these workers. There is almost no social welfare system imposed by the state. This is one of the reasons why Western manufacturers are having so much trouble competing against Chinese workers.

CONCLUSION

“American workers need protection against slave labor.” The argument has never been defended seriously by any economist that I have heard about. It is a knee-jerk objection offered by somebody who has never studied international trade or economic theory you know instantly the moment you hear anybody raise this objection to free trade that this person knows virtually nothing about economic theory.

If you ever hear this argument, ask the person to name which slave societies your nation trades with. He will not be able to name any. If he does, ask them what we import from that nation. He will have no idea. If you really want to fluster him, ask him to not identify the three nations that constitute the bulk of foreign trade with his nation. First, he has no idea which three nations are the major trading partners are. As soon as you show him which nations these are (Wikipedia probably reports it), 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 large trading nation trades mainly 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.