The cost of doing business

The cost of doing business

I suppose I should have been shocked to read about the charges of slave labor against Brazilian producers of charcoal, supplied to pig-iron smelters in that country, which emerged in a recent news journal. The fact that the metal is traded by domestic U.S. suppliers, and consumed by a number of large ferrous foundries here, and at least one electric steelmaker, makes it relevant to us, and adds news to the story. It generated enough appropriate condemnation to lead Ford Motor Co. to delist one pig-iron supplier but the episode does more to confirm our understanding of global supply chains than to open our eyes to some new calamity. And that is the shame.

What was revealed, in short, was this: in Brazil s remote forests, destitute workers toil away in deplorable conditions to produce charcoal in return for very little money. Much of what they earn is withheld from them for debts they supposedly incur with the kiln owners, for food and housing. The workers are desperate, and somewhat ignorant of their rights, so they remain in misery. The charcoal is shipped to iron smelters in Brazil s larger cities, who use it to produce pig iron. The iron is exported around the world. It s bought and traded on a commodity basis by U.S. operations.

It s important to state clearly that the foundries that have consumed this tainted pig iron are not responsible for the unethical practices of an organization that s at least three stages removed them in the supply chain, and thousands of miles away from view. Pig iron has to come from someplace, and it s reasonable for an honest buyer to trust the ethical provenance of commodity goods. I don t pause over the coffee I drink. After all, a free market is supposed to support fair trade, meaning fairness to all parties workers,, consumers, everyone in between.

I am not shocked by the revelations, and not only because I have been to such places where the working conditions for less skilled trades are plain to see. In addition, we know that there are countries whose industrial policies and civil rights are a greater outrage than what has been discovered in Brazil. There, at least, officials make efforts to end the sorts of violations that result in cheap charcoal.

The reason I am not surprised by this news is that it is the obvious outcome of the widespread commodification of labor. Don't suppose I'm making a proletarian lament; it is an explanation of what has happened in the new economy since productivity became the standard of performance.

Productivity is the way the new economy establishes whether or not a company is getting a strong return on investments in raw materials, equipment, and especially labor. That means that you and I, and millions of others, have been identified as cost factors. This is one explanation for the fact that even people with good, steady jobs are so stressed. It s unnerving to have every monthly economic report identify you as a continuing liability.

More to the point, maintaining strong productivity is exhausting. Those of us with desk jobs may remember when there were assistants to receive and send correspondence, aid with research, and so forth. Those whose jobs require more physical skills know that there are fewer hands available to achieve the output levels that will confirm an acceptable level of productivity.

This isn't a new economic phenomenon, but the fact that news and information move so fast, and that the whole world is an open market particularly in raw materials and basic manufactured goods means that every cost factor is subject to replacement once a cheaper alternative is located. Obviously, labor costs can sink pretty low if nothing, or nobody, stands in the way.

All of the optimism that swirled around the new economy 10 years ago centered on consumer choice and market efficiency. Now we know that we re more than just consumers; we re producers, too. And we know the choices available to us have implications we must be willing to accept. Or reject.

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