street-level labor inspectors: to not only block the low road but to pave the high road

In “Trading Up,” Michael Piore and Andrew Schrank report they’ve found an emergent model of labor market regulation for “easing the human costs of free markets.”  They say it “offers the possibility for a country to shift from a strategy of competing in world markets through cost-cutting and labor exploitation to a strategy of upgrading business practices to raise productivity, reduce inventory levels, and improve quality.” Read on here.

Street-level bureaucrats receive Rewards they don’t value

Street level bureaucrats such as teachers, judges or firefighters are powerful because society at large expects them to implement laws justly, to be firm, fair and not discriminate, and that they make betterment of society is their top priority. That power is played out in providing a service to society.  The public services street level bureaucrats offer require such specialized functions that society could not function without them, but it is at their discretion, most of the times.  For example, a police officer taking a bribe for not reporting an offense, because he values monetary compensation higher than the intrinsic motivation of helping society.

They are receiving rewards they don’t value. In my opinion the management of public service intuitions partly to blame when street level bureaucrats do not always perform to their full capacity. The challenge is creating incentives for these public servants to take actions that are consistent with achieving the organization’s goal. Research has indicated best performers in organizations tend to see a strong relationship between performing their jobs well and receiving rewards they value. The management team needs to figure out what rewards street level bureaucrats value. Then determine which kinds of behavior the organization desires, and try to connect desired outcomes to desired performances. Each desired outcome should seem reachable and attainable to them because they are already standing so far from creating the policies and objectives they have to implement.   Otherwise, their motivation to perform will be relatively low, and the quality of services we receive might not be the best.

street-level bureaucracy done right

There were a number of things in Michael Lipsky’s “Street-level Bureaucracy: Dilemmas of the Individual in Public Services” that I agreed and adamantly disagreed with.  He made a number of good points explaining how the differences between street-level bureaucrats and managers (interests, priorities, capacities, responsibilities and resources) can account for the lack of standardization in public programs.  He describes their relationship as “intrinsically conflictual” and of “mutually dependence”. Street-level bureaucrats are interested in “client-processing goals” and “maximizing autonomy” while managers care about “worker-management goals” and “minimizing autonomy” but they both need each other.  Managers rely on street-level bureaucrats to get the job done and for information while street-level bureaucrats need managers for recommendations, promotions, time-off, etc.

One of the largest discrepancies between street-level bureaucrats and managers is resources.  It is common knowledge that street-level bureaucrats have large case loads and substantially less resources to meet these demands.  Lipskys says that the increase in demand is more likely triggered by the perceived availability of services rather than the social conditions that may have affected demand.  I am not completely convinced by his arguments and his examples.  Medicaid, public housing, legal services, etc. are public programs that have increased since its creation but it is hard to believe that the perceived availability of these services alone resulted in its expansion given that population is not static and these services are very expensive in this country, especially in NYC.  But that is not to say that the free rider problem does not exist; it does.

I want to end on a positive note.   Unfortunately, it is too easy to think of cases when street-level bureaucracies have failed us but very difficult to change these bureaucracies into functional institutions especially in developing countries.   In my reading of The Fortune at the Bottom of the Pyramid, I came across a story of how Andhra Pradesh, a state in India, upgraded and improved a number of inefficient public services simply by modernizing and incorporating technology.  The government has a big presence in Andhra Pradesh as citizens depend on the state for a number of services including admission to schools, birth and death certificates, paying utility bills, taxes, drivers’ licenses and registering property.  However, the government was severely understaffed.  There were about 13/14 employees for 1000 citizens.  In 1998, Chief Minister Nara Chandrababu Naidu decided to use technology and the internet to reduce inefficiencies and to make government more accessible to citizens.  Kiosks were set up to allow citizens to assess and register their land, pay bills, etc. on eSeva.  These services serve an average of 1000 citizens a day.  It is a win-win situation for both the government and citizens as more service is provided in an efficient and cost effective way and bill collection is easier.

Change is possible; it begins with one person.  The hard part is convincing him/her that it’s worth taking.

Peeling back the banana workers’ struggle: how much is the rule of law worth?

It’s commonplace these days to blame—or justify—most everything on the bad economy. You robbed your grandmother? Well, it’s a bad economy. Forgot your wife’s birthday; it’s the economy. In the same way, it’s easy to blame everything on capitalism, even the weather. Something of this, it seems, is at play, in the trend of U.S. companies taking advantage of developing countries with inferior labor standards/enforcement and weak judicial systems.

The NY Times article “International Business; Banana Workers Get Day in Court” explained how the hazardous pesticide DBCP was banned for use in the United States when it was found to cause sterility and other illnesses—yet, no surprise, wicked American companies consciously ignored these risks in favor of the bottom line, and continued to sell and use the poisonous chemicals in Nicaraguan banana plantations [insert moral outrage]. That U.S. corporations would continue to endanger human lives with potentially lethal chemicals—even if the Nicaraguan banana workers willingly accepted the risks attached to much-needed jobs—is, in my opinion, practically comparable to assisted suicide by pesticide. In this case, the bad economic situation of Nicaragua exacerbated the moral hazard.

In many developing countries, the legal incentives for corporate responsibility are virtually non-existent. As a result, workers who suffer the adverse effects of economic development are left holding an empty bag. At the same time, this raises serious questions about the ethics of a legal system that permits U.S. corporations to establish operations in developing countries, but blocks the victims of hazardous chemicals from seeking a fair legal remedy in the home country of the offending corporation. This tactical device—arguing that cases should be heard in the country where the purported injuries occurred—is used to close the door of American courts to developing-country plaintiffs injured by U.S. corporations; to employ a ghastly double standard; as a way for U.S. corporations to conveniently evade liability for activities carried out abroad. In the context of today’s global economy, isn’t it time that these procedural barriers to corporate accountability are changed? If a corporation’s economic activity crosses national borders, then so should its moral and legal responsibility. Of course, it wasn’t the concern of the U.S. courts that Nicaragua did not have the necessary legislation under which to try the cases.

Enter the rule of law. Ideally, law helps to even the stakes where there are power imbalances between economic actors. It’s a nice ideal. In reality, the rule of law takes a back seat to the rule of politics, and rests on the golden rule: whoever has the gold, rules.

In “Mythmaking in the Rule of Law Orthodoxy,” Frank Upham challenged the rule of law orthodoxy, which contends that “sustainable growth is impossible without the existence of the rule of law: a set of uniformly enforced, established legal regimes that clearly lays out the rules of the game” (p. 1). Upham pointed out that neither the United States nor Japan embody “formalist rule of law—that is, regimes defined by their absolute adherence to established legal rules and completely free of the corrupting influences of politics” (p. 7). Formalist rule of law, he posited, “could actually inhibit foreign investment in developing countries, since doing business through courts could be more expensive than using effective, informal systems of dispute resolution” (p. 32). Nicaragua is a case in point. When the country passed a law that enabled DBCP victims to hold U.S. companies accountable—tipping the scale of justice in its favor—this was labeled as a trade barrier, which U.S. companies said “would hurt the foreign investment climate.” And so the story goes: a race to the bottom. In the same vein, consider also the human and economic costs of enforcing the law in New York State, as reported by the Enforcement Task Force on Employee Misclassification.

In comparing the cases of the United States and Japan, Upham suggested that the Japanese legal system—which relies principally on informal mechanisms—might serve as a more useful model for developing countries (p. 32). He maintained that the U.S. model is vastly more expensive to adopt and more likely to undermine functional indigenous institutions. In my view, though, it seems unlikely that developing countries could afford to follow the Japanese model either. Unlike Japan, developing countries tend to rely heavily on foreign investment. Moreover, Upham did not present the full context of the Japanese growth experience—e.g., a stable political system, supported in part by the U.S. occupation—restricting the transferability of this model to developing countries.

Upham argued that law is inherently political; separating politics from law and legal institutions is impossible. In fact, the U.S. legal system, he said, is “not a failure of execution, the inevitable falling short of an ideal. On the contrary, it is the result of…conscious choice” reflected in the political selection of judges, federalism, the jury system, attorney loyalty to client over the law, etc. (p. 19). Rule of law orthodoxy overlooks the reality that laws may exist on paper but not in practice unless, for example, the poor banana workers or their allies push for the enforcement of laws. At the same time, informal justice systems are not immune from political influence or elite capture. Both formal and informal justice systems alike may reinforce existing power hierarchies and social structures (e.g.,gender bias) at the expense of disadvantaged workers. From an economic point of view, the implication, then, is that political stability (an attribute that both the U.S. and Japan have in common), more so than formalist legal institutions, is key to development. Finally, as for the banana workers, who knows how long they’ll wait for “whoever has the gold” to get a conscience.

“The Union of Concerned Executives”

Some thought provoking articles from a 2005 issue of The Economist on CSR.

Here.

Regulation, drama, and the Roundtable on Sustainable Palm Oil

Muhammad Cohen writes succinct, hopeful, coverage of the ongoing debate for sustainable palm oil “Palm oil tested on sustainability” for the Asia Times in early March 2010.  He describes the International Conference on Oil Palm and Environment (ICOPE) as “one move toward making the industry part of the solution.”  (ICOPE, good name for a CSR initiative, isn’t it?)

Cohen writes:

“At one extreme, sustainable palm oil production is considered an oxymoron. The opposite fringe sees critics of palm oil as dupes of a developed-world plot against poor farmers, built on myths of species extinction and climate change, funded by palm’s rival oil and fat producers.”

One attempt at mitigating the problem in Indonesia has been to put restrictions on permits to loggers who pledge to replant the land when they have finished their business.  But, Cohen notes that “severely curtailing logging permits” has made ‘industrialists’ into ‘environmentalists’ only insofar as they” feign interest in palm oil development as a cover for logging” – then desert the land after deforesting it.

But, what happens when consumers pressure the industry, the industry searches for sustainable products and current producers respond?  A palm oil trade group in Malaysia is calling declarations by Nestle and Marks & Spencer to use only sustainable palm oil by 2015 “misinformed, malicious attacks on struggling tropical farmers by rich country interest with shadowy agendas” (see also, CSR).

Cohen concludes that,

While a handful of producers are receptive to producing sustainable palm oil, Arif [Greenpeace Southeast Asia] urged Indonesia’s government to take the lead. Otherwise, he cautioned, Indonesian producers may be left behind as consumer companies establish their own standards: “We have to lobby the government with the industry to do what the market demands.”

Get the full article here.  http://www.atimes.com/atimes/Southeast_Asia/LC04Ae01.html

See also, more coverage from Global Voices Online.  “Malaysia: What’s the real deal with palm oil?”  http://globalvoicesonline.org/2010/03/21/malaysia-whats-the-real-deal-with-palm-oil/

Nice page of links, here.

amyrf

“Price is a Better Climate Committment”

New article from The Economist’s Voice from Peter Cramton and Steven Stoft at the Berkeley Electronic Press.  Here.

Will it work?

Abstract

Developing countries reject meaningful emission targets (recent intensity caps are no exception). This prevents the Kyoto Protocol from establishing a global price for greenhouse gas emissions and leaves almost all new emissions unpriced.

This paper proposes a new pair of commitments—a commitment to a binding carbon-price target and to a Green Fund financed by a form of carbon pricing. The result is a price mechanism that neither requires developing countries to accept emission caps nor requires industrial countries to accept carbon taxes.

We demonstrate that the cost of complying with these commitments can be guaranteed to be inexpensive. The combined cost of a $30/ton price target and the Green Fund is only 23 cents per person per day for the United States and is negative for India. These advantages should greatly increase the chance that developing countries will commit to a substantial carbon price, and this should increase the chance of cap and trade passing the U.S. Senate.

Yellow Books?

I looked at my bookshelf recently and noticed a pattern.  Why am I only interested in buying books that are yellow?  Well, anyway, I recommend these books (some got me thinking about labor, some about regulation, and all about behavior) and wonder what everybody else is reading – yellow or otherwise.

Gig: Americans Talk About Their Jobs, A collection of essays from working stiffs.

Nudge. Behavioral economics for beginners.

Born to Be Good. Pro-social behavior and the biological basis for altruism.

No one belongs here more than you. Fiction, not about environmental or labor standards, but still yellow.

law is overrated

Last June, the president of Honduras was ousted. He was sent to Costa Rica because the Supreme Court deemed his attempt to hold a national poll unconstitutional (it was NOT a referendum… the results were not binding). It was troubling to me to think that asking people what they think would be considered unconstitutional in a democracy. However, there were many powerful actors behind the coup and despite utter and widespread condemnation, the president was never reinstated. Very powerful actors, indeed, huh? There is, of course, much more to this case… political alliances with questionable leaders in South America, real intentions of the president, etc. However, the point I want to make is that the rule of law is both overrated and ineffective when surrounded with more powerful institutions. Upham alludes to some of these failures in his paper Mythmaking in the Rule of Law Orthodoxy and the examples from Central America and New York exemplify the similar points. But, what does this mean for environmental and labor standards?  Of course, there is no simple answer. My sense is that the law in many of the poorest countries is set up to attract and protect investment and companies. Banana companies in Honduras received concessions of up to 100 years… they didn’t pay taxes during that time. They also took advantage of farmers by paying them with coupons that they could only redeem in the banana company supermarkets. That was mostly in the mid 1900’s, but even currently, food franchises in Honduras do not pay taxes either. In addition to laws that protect businesses, many of the social protection institutions in the country were dismantled by the structural adjustments of the Washington Consensus. So, not only do the laws favor corporations, but too often workers are not properly organized to demand protection of their lawful rights. So even when proper laws exist, there are structural problems that impede their rightful application. As a result, the rule of law in the midst of great inequality and power imbalance is nothing but the rule of the powerful.

Another point I’d like to raise is that the application of the law occurs after violations (when harm has already been done) and is most often punitive. The environment and human life can and should not wait for compensation after a major screw up. They way the system is set up, laws and rules are a treatment of the symptoms of a greater illness. A more interesting focus would be to question why companies, governments, institutions or individuals break the law in the first place. What incentives do they have to act in that manner? Perhaps a more positive approach would be more effective considering that, as this week’s readings and other evidence suggest, many continue breaking the law under the current ‘rule of law’ paradigm.

Are Governments run backwards?

The banana workers in Nicaragua is a story that is all too similar, in that once a problem hits is when rules or regulations are enforced.  The drug used in many banana producing factories and farms that service grocery stores around the country are proven to be dangerous to health, yet they are used until thousands of people were able to cause enough of a stir.  The rule of law appears here as a backup, not to help prevent the problem of infertility and cancer from happening in the first place, but to clean up the mess that was left behind.

Society in America likes to think they are very removed from sweatshops and other practices of the sort, but New York City is home to scores of basic workers rights lapses.  Millions of dollars of unpaid or underpaid wages to New York City workers were uncovered as well as millions of dollars in tax payments (like unemployment tax), which are themselves very important to the workers.  This sly of hand practices of paying under the table or not paying over time prevent mobility in the job market and keep workers suppressed.  The examples in New York City may not be as harsh or severe as the infertility cases of those in Nicaragua, but the end point is clear that the rule of law in these cases seems to be coming in at the very last possible minute.

It is difficult to try to reform systems like conditions for banana workers, developing countries, and even in New York City if there is not accountability placed on knowing the laws in advance and being responsible for carrying out those laws.  Therefore people working in situations in both Nicaragua and New York City become stuck in a situation where they cannot alone fight the large company which employs many people on their own.

What can we do? With the rule of law – Do we try to enforce laws and regulations up front? Or do we work to provide a system where workers can report unfair working conditions? Would that  be an option in developing countries or for our banana workers? Or do we say the law is in place and call it a day? (I hope we don’t go for the last one)