A recent front-page story in The New York Times was headlined: "In Ecuador's Banana Fields, Child Labor is Key to Profits." This is part of an ongoing orgy of indignation by the intelligentsia at low-paid labor in the Third World.
The question they never ask is: Compared to what? But people for whom indignation is a way of life seldom pause to compare the available options. Instead, they are ready to foreclose some of the options of poor people, who have painfully few options to begin with.
Buried on an inside page is the response of low-income Ecuadorians when their children were dismissed from the banana plantations, as a result of adverse publicity created by activists from wealthier countries. "They fired all the children, but the work they did helped us," an Ecuadorian mother complained.
In other words, the poor in Ecuador are now poorer, while the activists from affluent countries are triumphant. None of this is peculiar to this particular industry or to Ecuador. Whenever there is a World Trade Organization meeting, you can depend on affluent young people to engage in riots over such things as "sweatshop labor" in the Third World.
If the problem were "exploitation," as the critics claim -- and as The New York Times headline implies -- it would be hard to explain why multinational corporations invest overwhelmingly in more affluent countries that have higher wages. Less than one percent of American overseas investment goes to poverty-stricken countries in sub-Saharan Africa, for example.
The sad irony is that it is the self-righteous activists who are exploiting Third World people -- politically -- and the much demonized employers who hire them who are providing the poor with much-needed income.
According to The Economist magazine, multinational corporations typically pay about double the local wages in Third World countries. These wages are usually still well below what workers receive in wealthier countries. So is the productivity of Third World workers.
A study by an international consulting firm found that the average labor productivity in the modern sectors in India is 15 percent of that in the United States. In other words, if you hired an average Indian worker and paid him one-fifth of what you paid an average American worker, it would cost you more to get a given amount of work done in India than in the United States.