The Pope and a ‘fair wage’ in Bangladesh

It is sad to see the Pope enter into the political and economic arena. He does not understand the issues and therefore has made wholly misguided remarks which are dangerous for the people of Bangladesh and other very poor countries.

According to the BBC,

‘The Pope said he had been shocked by reports that some of the labourers had been paid just 38 euros ($50) a month.

“Today in the world this slavery is being committed against something beautiful that God has given us – the capacity to create, to work, to have dignity,” the Pope said at a private Mass.

“Not paying a fair wage, not giving a job because you are only looking at balance sheets, only looking to make a profit, that goes against God,” he was quoted as saying by Vatican radio.’

His reaction is typical of people who have not understood the reality of the situation in Bangladesh and other extremely poor countries. Yes, of course it is shocking to those of us who come from relatively prosperous countries – and even most countries in South America are prosperous compared to Bangladesh – to hear of people being paid so very little. It appals us. He says it is not ‘fair’. But he does not appear to have thought about why it has come about in Bangladesh, when no such low wages exist in Hong Kong, Singapore, Switzerland, America, Germany and so on. Nor does he prescribe any solution.

The BBC, in ‘The World Tonight’ on Radio 4, quoted someone saying that the wages were ‘unacceptable’ and the line of questioning regarding the EU and Primark included the suggestion that we should not accept products of factories with such low wages.

This idea is terrifyingly wrong, misguided and potentially harmful to some of the poorest people on earth. As far as I am aware, the workers were there because the jobs were the best that they could get. That means that if they did not have those jobs, they would be even poorer. So by taking away your custom from Primark, you would make poor people poorer – the very opposite of what you want.

What does the Pope intend to do about it or think that others should do about it? Perhaps raise wages in Bangladesh by law? That would only create inflation that would quickly negate the rise in wages. You cannot dictate prosperity. If you could dictate, the whole world would be prosperous.

What about if we only buy from Bangladesh factories that pay a ‘fair wage’ – say ten times the actual wage? What would be the result? The result would be that garment manufacturers would source their goods from much more efficient factories and suppliers in much better organised countries where the wages may be similar but the other elements of production are better. Bangladesh would lose the one current reason why buyers go there – the low cost of labour. Bangladesh would lose the business. Again, the result would be that seriously poor people would be poorer. It would be horrible and cruel.

The way that I have seen countries all over the Far East improve their wealth and get out of poverty has been through successfully building up capitalist enterprises. That is what happened in Hong Kong and Singapore and, to a good but less spectacular extent, in Thailand, Malaysia and the Philippines. They built up businesses at the low, cheap end. Then, they moved up a level and started doing more sophisticated businesses. Wages kept on rising, year by year, decade by decade. In none of these countries did it happen overnight – just as it did not happen overnight in Germany, the USA and Britain in previous generations. It takes time. The more efficient the government and the more impartial and efficient the legal framework, the better. It has worked. All these countries have, to a great or somewhat lesser extent, risen out of poverty through capitalism.

So why not Bangladesh at the same time? Because it followed a largely socialist path and has been riddled with corruption for much of its short life. So its people have remained poverty-stricken.

What we can do for Bangladesh is to help their capitalist industries grow. We can buy from them with enthusiasm and thus give them jobs. We can encourage the people and government of Bangladesh to give capitalism every chance which includes having a non-corrupt government which is open to trade and keeps taxes low. The government should welcome foreign businesses with 100% ownership. Local ownership of businesses doesn’t matter. Local ownership will come with time as it did elsewhere. What matters is investment, profits and thus rapid economic development. It is the only way out of poverty. It is vitally important that we support the rise out of poverty rather than undermining it as some of these misguided responses would do.

It would be such a breakthrough if the churches of the world understood these things and spread this message.

This article originally appeared on The Welfare State We’re In website.

IEA Social Policy Fellow

James Bartholomew is a fellow of Social Policy at the Institute of Economic Affairs and is a regular contributor to The Spectator and The Telegraph. James trained as a banker in the City of London before moving into journalism with the Financial Times and the Far Eastern Economic Review. James has written on a number of issues in the field of social policy with The Welfare State We're In being the winner of the Institute of Economic Affairs' 2005 Arthur Seldon Award for Excellence.

3 thoughts on “The Pope and a ‘fair wage’ in Bangladesh”

  1. Posted 14/05/2013 at 18:59 | Permalink

    Dear Mr Bartholomew

    It seems some people wish to retain third world people in poverty, perhaps to allow them to be ‘compassionate’ or ‘charitable’ towards them and to denounce their ‘exploitation’ by evil capitalists and business owners.

    Allowing people in developing countries to actually develop appears to be anathema to them.

    It took centuries for the West to develop to the state we’re in. The Asian tiger economies achieved the same in a few decades until they reached the leading edge of development.

    Those countries immune to development, even to the point of regressing, have more than their fair share of political corruption, civil unrest and a government actively dissuading foreign investment, assisted by aid from foreign governments and charities.

    I haven’t heard of mass starvation in Bangladesh, so $50 a month appears to be sufficient to keep a family fed, clothed and sheltered.

    It would be interesting to see a comparison between wage rates in poor developing countries and those in Britain at an equivalent level of development, and the rate of development with the rate experienced in Britain during that time.


  2. Posted 16/05/2013 at 13:54 | Permalink

    I hope your line of reasoning stops at wages, which I have some sympathy with. The issue that’s recently been highlighted with Bangladesh and other low wage countries is that of working conditions, labour laws and health and safety standards. Relaxing these conditions may as you say improve what really matters i.e. investment, profits and thus rapid economic development, but is short sighted and morally dubious.

    In short, whilst a free wage market with empowered agents is commendable, a market in peoples lives is less so.

  3. Posted 17/05/2013 at 01:51 | Permalink

    Forcing they payment of a higher wage will only lead to inflation? What a load of nonsense.

    A higher wage resulting from a fairtrade style system will come from increased export incomes improving the country’s current accout position. This improved current account position is just as useful as allowing 100% foreign ownership to bring inward investment, as you advocate, provided industries are responding dynamically to the market signals.

    Of couse, the point about cost competitiveness is justified, but you would hope that a bit of cost pressure would help push factory owners towards greater efficiencies (and yes, jobs losses, but this redundent labour can meet the demand of those still in employment with additional income).

    Broadly agree with the rest of the article. Development isn’t always pretty, but in the long run it is the only solution.

Comments are closed.