Trading Up: An Embryonic Model for Easing the Human Costs of Free Markets
Michael J. Piore and Andrew Schrank
Boston Review September/October 2006 The conflict between the
social and the economic has long been recognized in economics itself where it has long been accepted that there is a trade-off between efficiency and equity. Traditionally, the way neoclassical, mainstream economists have absolved themselves of responsibility for this conflict was to argue that their duty was to ensure efficiency whereas it was society’s duty to ensure equity. That is to say, whatever income distribution society decided was equitable, the economists would then ensure efficiency within that socially determined income distribution.
With the assurgence of neoliberalism as crystallized in the Washington Consensus, however, even the traditional means of escaping responsibility for the social-economic conflict has been denied the economists: for the Washington Consensus demands that economic activity be governed, as far as possible, only by market forces and should be free from social interference through government action. Predictably, the violence done the social context by unfettered market operations—with their ceaseless reallocation of resources in commitment to profit above all else and their cavalier dismissal of fundamental indices to quality of life such as time for family, friendships, leisure, or even simple conversation—has eventually come to engender vigorous reactions.
A consequence of these reactions has been the emergence in Latin America of a nascent model for achieving greater balance between market and social imperatives. This model has to do with
labor practice inspection
systems that are, at bottom, modified derivatives of the Spanish model, which model itself traces its genesis to the French model. The Latin American labor practice inspection systems can be distinguished from their US counterpart in that they are administered by a single agency whereas the US system is multi-agency in implementation. Paradoxically enough, however, the Latin American systems, despite being more ostensibly centralized, in fact enjoy more flexibility than the US system because labor practice inspectors in Latin America are, by design, given more autonomous discretion in enforcing labor
standards than their US counterparts (who enjoy little or no discretion at all in discharging their duties). Another difference between the Latin American systems and their US counterpart is that the Latin American systems are compliance systems whereas the US system is a penalty system. That is to say, in the Latin American systems, firms that are found to violate labor standards are obliged to comply with those standards whereas in the US, payment of a penalty without compliance suffices.
The flexibility of the Latin American systems that ultimately derive from the French system gives the lie to the notion that enforcement of labor standard laws is necessarily bad for business. An example from France, itself, demonstrates this. As a French labor practice inspector relates, he has himself allowed a firm that, in violation of French law, relied excessively on temporary staff to man its operations. His reason: the firm had an informal arrangement in which a certain fraction of the temporary staff was eventually brought into the ranks of permanent staffers. As the inspector reasoned, the law should be viewed as a means, and not an end in itself. Similar examples are to be found in the decisions and actions of Latin American labor standards inspectors. The Latin American models suggests that labor practice inspection should be incorporated as a tool of economic development if such development is not to be needlessly brutal. If so, it is only fitting that the lead agency in such a development should be the International Labor Organization (ILO). After all, the ILO is older than the UN itself. Moreover, it has a unique tripartite structure that accommodates representation from government, capital and labor. Accordingly, the ILO should afford fairer hearing from all parties concerned than can be expected from the World Bank or the IMF, where bankers and businessmen rule.
More summaries about the Trading Up: An Embryonic Model for Easing the