There’s a significant movement arguing that all companies should be examining their supply chains to make sure there are no nasty subcontractors who use child labor, use slavery, pay less than a living wage, and so on. But there’s a problem with this — it’s impossible for us to solve these problems by examining corporate supply chains.
But if any of these nasty subcontractors exists, then it’s part of everyone’s supply chain. Therefore, we need to get rid of, say, child labor, rather than agonizing over who buys what from whom.
Here’s an example of this from the United Kingdom. There’s a concern that the National Health Service buys medical instruments that may have been made with child labor in Pakistan. Child labor is such a horror that something must be done. But it’s still true that examining supply chains isn’t the way to do it.
Milton Friedman was hugely fond of Leonard Read’s I, Pencil — and if it’s good enough, for Saint Milt, it’s good enough for me. The essential point is that no one knows how to make a pencil. No one person does know how to grow, cut down, and shape the trees, mine the graphite and copper, make the paint, and tap the rubber tree. And absolutely no one at all knows how to do all of the making of the machinery with which those things are made. It’s entirely impossible to know everything about how to grow the food for the people who make those machines, and so on. The point being put across is that since no one can know these things, then no one can plan them — we’re left with having to use the market economy to coordinate the activities.
This conceit works the other way around, of course. It’s not possible for us to examine our supply chain. Because once we get past a level or two, that supply chain is the entire global economy. For example, if my hip replacement was done by the NHS with these child labor-derived tools, then your reading material (this article) used child labor in its supply chain.
The current movement that we should all be checking our suppliers fails for the same reason that central planning did last time around: We simply cannot examine the global economy in enough detail to find out who is doing what and where.
This does pose a certain problem, of course, if some people out there are doing something we consider morally reprehensible. Because this very interconnectedness of this modern economy means that all products, everywhere, are contaminated by that moral pollution if we look at enough iterations of the process. The answer to this is actually pretty simple.
Child labor and slavery are actually very inefficient, unproductive forms of labor — so much so that they disappear at rather low levels of economic development. So the goal is to get the currently poor countries, where those horrors still exist, over the hump and into the sunny uplands of being too rich a place for them to exist.
As so often is the case, economic development will solve this problem for us. For example, child labor exists only because without going to work, the kids will starve. Living standards rise just a little bit and parents will gleefully send them to school instead — poor people love their children and want the best for them, just as much as we do our own.
Leonard Read wrote I, Pencil in 1958, when it was the general and widespread belief that planning was the way to go for the economy. Today the general belief is that examination of supply chains is going to abolish, say, child labor.
The answer to both delusions is that it is market economies which are the way to go. The failures of the Soviet Union conclusively proved that about planning and the entire absence of child labor — and it would be absent even if the law allowed it — in rich countries shows the same again. Get on with the economic growth and these problems will solve themselves, just as they did for our predecessors in the now-rich countries.
Tim Worstall (@worstall) is a contributor to the Washington Examiner’s Beltway Confidential blog. He is a senior fellow at the Adam Smith Institute.
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