Polanyi’s labor market blastocyst

Over at the Boston Review, Michael Piore and Andrew Schrank’s recent article (“Trading Up: An embryonic model for easing the human costs of free markets“) on labor in Latin America offers a spot of good news. They’ve been studying labor inspections throughout the region, from the Dominican Republic to Mexico to Brazil and Chile, and say they’ve found “an emergent model for reconciling market and social forces.”

Some background—and it’s the background they offer that got me interested in their article in the first place. Piore and Schrank are looking at Latin America through the lens of early-mid 20th century economist Karl Polanyi ideas expressed in his classic book The Great Transformation. I’ve been a fan of that book for years and recommend it highly. And while Polanyi still has decent name recognition among economists, there aren’t that many who rely on his ideas to guide their work. As P & S sum The Great Transformation up,

Polanyi described the economic policies of industrial society as the product of a “double movement.” The first movement is toward a free market, particularly in labor and land, and also in international trade. But free markets generate enormous pressures for the continual redeployment of resources, especially human resources. So Polanyi’s second movement is a response, an attempt to protect society from these pressures. While the movement toward the market is guided and directed by a coherent theory and the ideology of political and economic liberalism (the Washington Consensus is but its most recent expression), the second movement is visceral, an instinctive effort to rescue society from the ravages of unfettered economic competition and the constant redeployment of resources that destroys the context in which people understand themselves and create meaning and purpose in their lives.

P & S say that in today’s world, there’s no coherent ideology that promises to reconcile the two forces driving, on the one hand towards unfettered markets and on the other hand back towards the social meaning and cohesion that people rely on. Marxism, fascism, even Keynesianism have all been largely discredited throughout much of the world, and so can’t do the trick.

Now I’d like to throw in religious movements here as a possible candidate for playing the role of a Polanyi-esque ideology. In the U.S. in the last half-century or so, it seems that fundamentalist Christianity has served, for a significant fraction of the population, to help people accept the social disruptions that come with a market economy (particularly the markets for human labor, for jobs). While their economic fortunes have waned, the turn to a strong religion has helped them preserve a connection to the past (real or imagined) and to a community of peers. Similar arguments have been made for the rise of fundamentalism in the Muslim world as well.

Anyhow, P & S suggest that if there’s no ideology from above, as it were, for dislocated social movements to gravitate towards, maybe we can learn a new ideology from the actions of the social movements themselves.

In this unprecedented intellectual vacuum, one way to begin creating a coherent alternative would be to try to construct such a vision inductively, working from the changes that are actually happening on the ground. In studying what people are already doing locally in response to the conflict between market and social forces and identifying the particular institutions that are emerging in that process, we might find a way of working those institutions into the broader structure of the economy, using them as the starting point for an alternative model of social and economic organization.

And that’s what they report finding in Latin America, following Polanyi’s lead, in the realm of labor law and enforcement. There has been a strong increase in labor law enforcement in Latin America, they say, and the Latin American model of labor law enforcement (which, of course is not identical or consistently maintained throughout the entire region, but which shares some broad commonalities) is serving as a piece of the social struggle to protect people from being nothing more than wage slaves.

Furthermore,

the Latin approach to labor-market regulation is not only distinct from the prevailing U.S. approach but is also better able to reconcile the need for regulation with the exigencies of economic efficiency. Indeed, it offers the possibility for a country to shift from a strategy of competing in world markets through cost-cutting and labor exploitation to a strategy of upgrading business practices to raise productivity, reduce inventory levels, and improve quality.

Ironically, while they see advantages to the Latin American model over the U.S. model, one of the positive features they profile has been funded by the U.S. Department of Labor—the Regional Center for Occupational Safety and Health (Centro Regional de Seguridad y Salud Occupacional, or CERSSO), which is active in eight Central American and Caribbean countries (but not the U.S.).

A recent study of garment factories in El Salvador, Guatemala, and Nicaragua, for example, found that returns on safety and health investments engendered by the program [CERSSO] ranged from four to eight times the costs of the initial interventions.

Well, there’s no need for me to summarize their entire article, but I will leave off with another tidbit of theirs on just why this kind of intervention is necessary.

Price signals alone will not lead employers to protect their workers. Nor will altruism. In the absence of meaningful government intervention, ignorance, self-interest, and short-term thinking will rule the day. And professional labor inspectors are therefore needed not only to block the low road but to pave the high road as well.

Ah, the beauty of a win-win situation. Okay, so Latin American garment factories are still a long shot from being rose gardens, so all this rose-colored glasses stuff has got to be taken with a grain of salt. But still, if there is some progress being made it’s worth acknowledging and understanding. And if the progress is uselessly incremental, we ought to try to know that as well. Anyway, do read on; after all, I haven’t touched on how P & S see that

This last step crosses the threshold from a conception of labor inspection narrowly focused upon work standards to a notion of labor inspection as a much broader approach to social and economic policy. The agency then becomes a bridge between economic and social forces, at least one piece of an alternative to the Washington Consensus, or rather to the vacuum in which the reaction to the Washington Consensus is emerging….