First steps on the ladder

Tyler Cowen links to the story of a booming Peruvian town that faces labor shortages due to to its phenomenal success at industrializing modern agriculture:

Ica, in southern Peru, is known as a city of zero unemployment…Work is so plentiful that men with megaphones ply the city’s neighborhoods offering jobs. Thousands of mostly indigenous Peruvians from the central Andes have flooded the coastal community, attracted by radio ads and word of mouth, successfully joining the ranks of the employed.

International workers’ rights groups and globalization critics often suggest that while entering an upward spiral of increases in productivity and wages was the way all developed countries got wealthy, the mean multinational corporations will somehow keep their factory workers in poverty even while there is a shortage of labor. But supply and demand seem to hold at least in this Peruvian town, so that increased demand for labor raises the offered benefits for workers:

At Chlimper’s Ica farms, about 4,500 employees help grow and export 1.4 million 11-pound crates of asparagus and more than 8,000 tons of table grapes annually. Chlimper pays bonuses for extra production, and over the years his company has improved meals and transportation for employees…It’s all designed to keep workers happy and to attract more, Chlimper says.

Wow. This sounds like the self-interest of the capitalist and the use of modern technology lead to more jobs and higher wages – somehow the appeals to international charity and leftist critiques of globalization always get the signs of those effects wrong, claiming them to go in the opposite direction. Similarly, the author of the article can’t really let that kind of cold-hearted capitalist-led development stand and tries to find out what’s wrong with it:

In fact, there has paradoxically been an increase in disease and decline in education going hand in hand with the proliferation of jobs…Yet there is also an ugly side to Ica’s full employment. Although the city now has two huge shopping malls and a third is under construction, poverty remains a nagging problem, especially among those who have traveled from the Andean highland regions of Ayacucho, Huancavelica and others, areas devastated by political violence in the 1990s.

The paradox is probably just a consequence of migrants from more destitute areas moving in and thereby impacting the disease and education statistics of the area without actually lowering the living standard of previous residents. Even if education declined and disease levels increases due to the migration, the continued influx should be evidence enough that the quality of life for migrants is still higher in Ica than where they are coming from.

Let me try and understand the second part of the quote: These migrants used to live in abject poverty and threatened by violence in the highlands. Then they voluntarily moved to Ica, found work there, and now they earn more money than before, but there is inequality of wealth because some people benefited even more from the boom. That doesn’t sound ugly, but rather like the first chapters of a stunning development success story to me. What did the author expect? That they move from the slums straight into mansions with cars without any transitional period in between? One interviewed woman summarizes it well:

Nelida Mendoza, 20, joined her father in the fields picking onions after the family fled the desperation of Ayacucho. She lives under tarps and a bit of corrugated tin with her parents, a couple of siblings and her two small children, whom she must leave behind during the long days digging in the soil. The alternative would be worse, she says. “I wouldn’t have money for anything,” she said.

For a real paradox, consider what the policy change was that led to these improvements in the lives of the workers:

Agribusiness really took off in the Ica Valley after a law was enacted in 2000 encouraging outside investment and limiting workers’ rights.

To summarize figuratively, when poor people are taking the first steps on the ladder to prosperity, well-meaning rich people like us should refrain from kicking over their ladder while complaining that there is no express elevator available.

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