Easing the Human Costs of Markets

Also in Boston Review, Michael J. Piore and Andrew Schrank on how a labor inspection system can ease dislocations and other human costs of free markets.

The operation of the labor market affects workers concretely and immediately, and hence is a flashpoint for clashes between social forces and economic exigencies. While many of the policies promoted by the Washington Consensus are only now beginning to encounter determined resistance, Polanyi’s second movement has been underway for some time in the labor market—and labor-law reform therefore constitutes something of a Waterloo for the forces of neo-liberalism. In fact, the labor-law reforms anticipated by proponents of the Washington Consensus have not only been “limited to a few countries,” according to Eduardo Lora and Ugo Panizza of the Inter-American Development Bank, but have arguably been more likely to expand than to curtail the scope of worker protection. For example, Brazil, Chile, Costa Rica, and the Dominican Republic have rededicated themselves to labor-law enforcement in recent years. And potentially more fundamental reforms are underway from Argentina, where they are motivated by domestic party politics, to Central America, where they are a product of transnational pressures emanating from the campaign for a U.S.–Central America Free Trade Agreement.

The results are neither trivial nor cosmetic. In the 1990s the Chileans hired new inspectors and thereby doubled the size of their enforcement division. And the Dominicans not only tripled the size of their own enforcement division but simultaneously adopted new hiring criteria—including legal credentials and competitive examinations—as well as wage and employment guarantees. By the early 21st century, therefore, one of the Dominican Republic’s least reputable regulatory agencies had been transformed into a model of administrative reform, and the island nation’s inspectors were fanning out across the region to impart their lessons to their neighbors.