“I, Pencil” is a clever story to explain the fascinating aspects of how the market works. The market brings together dispersed individuals, who, by pursuing their own self-interest, can serve each other by using their gifts. In so doing, they create products as seemingly simple as pencils or as sophisticated as smartphones.
The lesson here is that no one person, no matter how smart or how wealthy, possesses the knowledge required to make these things.
Even the brilliant and successful Steve Jobs did not have the knowledge to make an iPhone from beginning to end. He had the revolutionary idea for the iPhone and other Apple products, but he couldn’t execute that idea by himself. And no one directed him in this pursuit. There was no government comptroller of innovation who presupposed the idea and commanded it to be so.
Thinking Critically about Market Concerns
In spite of the obvious benefits of the market process, some have serious concerns about how the market (in a capitalist system) bestows benefits on its participants.
In his chapter, “Is Capitalism Exploitative” in the upcoming book Counting the Cost: Christian Perspectives on Capitalism, Joseph Connors explores the topic of sweatshops and recounts the alarming stories of terrible work conditions and child labor in developing nations.
As Christians commanded to love our neighbor (Matthew 22:37-39), how are we to respond?
Economic thinking can help us discern these issues. The first question an economist asks is, “what are the alternatives?” However, in trying to help, sometimes unintended consequences provide a less acceptable alternative.
For example, we should be conscious of the unintended consequences of legislation which attempts to help raise living standards in poor countries. In his New York Times op-ed, Paul Krugman perfectly illustrates what can happen:
In 1993, child workers in Bangladesh were found to be producing clothing for Wal-Mart, and Senator Tom Harkin proposed legislation banning imports from countries employing underage workers. The direct result was that Bangladeshi textile factories stopped employing children. But did the children go back to school? Did they return to happy homes? Not according to Oxfam, which found that the displaced child workers ended up in even worse jobs, or on the streets — and that a significant number were forced into prostitution.
It is also important to ask yourself:
- Are the people working in these conditions doing so voluntarily, or are they being coerced?
If the employment is voluntary, then we can assume that the choice to work in a manufacturing plant in China, for those choosing it, is better than the alternatives those people have.
If the employment is a better alternative, then it might be a good thing that U.S. companies choose to locate in depressed economies.
Markets and the Path to Human Flourishing
Another unintended consequence is that sometimes we take away an opportunity for people in that country to make their lives better:
- As they work in these conditions, they gain skills.
- As they gain skills, their productivity increases.
- As their productivity increases, so do their wages.
Think about it this way: the United States economy prior to the Industrial Revolution was very similar to what we see in developing countries today. Cotton farming, coal mining, and factory work were characterized by low wages, long work hours, and often dangerous conditions. Child labor was the norm and children often worked 12-14 hour days, six days a week.
This mirrors what we currently see in developing countries that have not experienced an Industrial Revolution. Because the U.S. embraced economic freedom, it experienced economic growth and has largely overcome these conditions.
I would argue that the high levels of wealth and growth in the U.S. are what have and continue to provide hope and actual opportunity for those in the poorest countries. Competition for employment will only benefit workers in these countries; the market motivates business owners to make these decisions through the competitive process.
In his Counting the Cost chapter, Connors argues that markets are not the cause of exploitation and that a capitalist system with strong property rights and the rule of law is the best path to human flourishing in developing countries,
The record of capitalism is straightforward and simple: declining exploitation and increasing human flourishing…Christians should labor to bring capitalism to the poorest parts of the world where it is needed most.
At IFWE, we aim to analyze these issues first and foremost through the lens of scripture. We realize that there are well-intentioned Christian brothers and sisters who, like us, are seeking to find solutions but may end up with different conclusions. We invite you to join us in what, we pray, is both a productive and respectful dialogue.
Editor’s Note: Read Joseph Connors’ article, “Is Capitalism Exploitative?” in Counting the Cost: Christian Perspectives on Capitalism (Aug. 8, 2017, Abilene Christian University Press). Save $5.00 by pre-ordering a copy today in the IFWE bookstore.