The Morality of the Global Economy

A student from Williston Northampton School emails me some questions about the global economy. He writes:

Is it fair for countries to have a comparative advantage because they compensate their workers in a different manner than we Americans do?...I think it can go without saying that corporations such as Nike are paying wages to factory workers abroad that provide a standard of living that most Americans would describe as intolerable....Can this new global economy ethically balance efficiency and equity without a way to standardize the minimum standard of living internationally, so that all people can eventually sustain an acceptable (tough to define) way of life?...It just seems to me that the exploitation of workers, while arguably good for economic efficiency, is in fact a market failure.

These are important questions. A brief off-the-cuff answer from me on this blog would be glib and unsatisfying. So instead let me direct you to a few of my favorite writings on this general topic.

1. I would begin by reading Two Cheers for Sweatshops by journalists Nicholas D. Kristof and Sheryl Wudunn. (alternate link)

2. Next, I would read the essay by Paul Krugman called In Praise of Cheap Labor. (alternate link)

3. Finally, for an article about why the theory of comparative advantage is so often misunderstood, I recommend Krugman's longer essay Ricardo's Difficult Idea.

After reading these three pieces, you will have some good answers to your questions.