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How Worrisome is the Race to the Bottom Argument?

Michael Greve’s recently released, The Upside-Down Constitution, traces the evolution of federalism in of our Constitution. He persuasively documents the transition from competitive federalism (a Constitution that protected the citizenry from exploitation by government at all levels) to today’s cartel federalism (one that empowers governments at all levels to exploit the citizenry).

One of several factors that encouraged this upheaval was the Progressive notion that competition encouraged a “race to the bottom”: relentless pressures to maximize profits would force businesses to employ abusive practices (such as child labor). An interesting argument that we still hear often today. It remains the basis for national and international regulation in fields ranging from global warming to religious freedom to human rights: Economic freedom leads to loss of egalitarian justice; political rules encourage a fairer world. But is it true?

Greve provides data on the extent of child labor in the period 1880 to 1930 (p. 188). In the early Industrial Revolution, child labor constituted 6.4 percent of the work force, a figure that began to fall by the turn of the century, reaching 1.4 percent in 1930. He notes it was not until 1938 (by which time child labor had largely disappeared) that federal regulations were enacted. Rising wealth allowed families to forgo putting their children to work (as did the shift away from agricultural employment) and that wealth also led to some prohibitory state rules.

In a world where states must compete for citizens, values other than profits are advanced. There is no race to the bottom. If anything, there is a race to (not the top; utopian ideals are not the stuff of reality) ever higher rungs on the ladder of human progress.