The Impact of Poverty and Corruption on Slavery

Correlation of corruption and economics on slavery

In understanding the economic setbacks that relate to modern day slavery in India, one must understand the direct contribution corruption plays in sustaining poverty. Without corruption, the ability to exploit the estimated 21 to 36 million slaves in the world today would be impossible (About Slavery: Slavery Today). Corruption permeates effectively both through organized activities and through utter disregard; the lack of law enforcement by the government directly permits the existence of the institution. Despite the prohibition of slavery in almost all constitutions and civil governments, enslavement as a means of labor persists.


The economic benefits of slavery are obvious, with modern-day slave labor enabling a $150 billion in illicit profits for the corrupt traffickers each year on a global scale (About Slavery: Slavery Today). Slavery permits businesses to unfairly drive the lowest prices into the market, thus enticing their competitors to also explore unjust business practices to remain relevant.


Profit is the monetary gain resulting from the employment of capital in any transaction. The pricing of products covers the expenses of production and labor. A laborer wage comes from the sale price. The higher the price, the higher their wage potential, and the lower the price, the lower their wage. Some business capitalists cannot resist the high profit potential resulting from below market prices and low to free wages. Slavery establishes this tempting maximization of profit.


History of economic demand

Slavery results from a history of economic demand. When the British supposedly abolished slavery in its colonies, India was excluded from the agreement, and the issue of the debt bondage with it. The entire system of production depended on the slaves that produced them, and as the British rule depended on the tax revenue coming from the unpaid, forced labor, the British disregarded India in the abolition. (Viswanath)


However, although the historical and current establishment of slavery directly correlates to economics, it is imperative to also note that the persistence of slavery is not solely due to the temptation of its economic benefits, but also due to the combination of social, economical, and political influences.


The Prevalent Issue of Poverty Statistical Facts

A common misconception exists suggesting the issue of poverty impacts an isolated number of people in remote areas of countries such as India and Africa, however, a few critical statistics illustrate the magnitude of poverty in the world today. There are approximately 7.3 billion humans on earth (US Census Bureau) and in 2012, almost 900 million of them lived on less than $1.90 a day which is described as living in extreme poverty (The World Bank). In addition, 2.1 billion people live in poverty in developing countries around the world, defined as being less that $3.10 per day (The World Bank). 60% of the world's hungry are women and daily 22,000 children die due to poverty related conditions. (The Hunger Project) In India specifically, approximately 363 million, or 30% of the total population, are living in poverty (Katval). To put this into perspective, the number of people in India living under $2 per day is more than the entire US population of 322 million (US Census Bureau).


93% of India’s population consists of the unorganized labor sector of which the majority is in agricultural work, of with most are deprived of welfare schemes (Bhattacharya). Other fields within this sector include construction, retail trade, textiles, land transport, etc. The unorganized sector produces 57% of India’s national produce, proving its significance to the national economy, and the majority of this sector, due to social and economic means, are a part of the underprivileged classes in India (Bhattacharya). It is no surprise that poverty levels are increasing around the world, and the exponentially growing population directly correlates to this issue. (Prasad)

These statistics prove the colossal gap between the rich and poor in India, and the lack of distribution of wealth. The reduced charity between the affluent individuals and corporations contribute to the inability to shrink this gap. In India, affluent individuals and corporations make up 10% of charitable giving in India compared to the 34% in the UK and 75% in the US. (Prasad)


Unorganized Labor Sector

The distinction between organized and unorganized labor is critical in understanding the ability for slave labor practices to so easily defy constitutional labor rights. Unorganized labor definition:

“The informal sector may be broadly characterized as consisting of units engaged in the production of goods or services with the primary objective of generating employment and incomes to the persons concerned. These units typically operate at a low level of organization, with little or no division between labour and capital as factors of production and on a small scale. Labour relations - where they exist - are based mostly on casual employment, kinship or personal and social relations rather than contractual arrangements with formal guarantees.”

–––National Statistical Commision Government of India, February 2012 (Report)


Similarly the first national Commission on Labour (1966-69) defined unorganized labor as:

“those who have not been able to organise themselves in pursuit of common objectives on account of constraints like casual nature of employment, ignorance and illiteracy, small and scattered size of establishments and the position of power exercised over them by employers because of the nature of the industry.”


The loosely defined unorganized labor sector is generally excluded from critical labor and wage protection laws. For instance, minimum wage legislation has been fairly effective in the organized sector, providing protection to workers including periodic revisions for cost of living adjustment. This has not been the case with the unorganized workers, who mostly fall outside the scope of minimum wage legislation and have limited to no enforcement mechanisms for the laws that do apply. (Minimum) In fact, 458 million workers in the unorganized sector in India are not covered by any social security measures, including the Minimum Wage Act 1948. (Bhattacharya) There are several loop holes that can be used to circumvent labor laws such as creating many sister corporations to employ fewer than 19 employees and thus be exempt from social security benefits, or having employers simply ignore minimum wage rules as no minimum has been prescribed for their particular industry, thus they are free to pay at their discretion. (Iyer)


History and Impact Today

Although poverty existed in India since the beginning of its civilizations’ history, an increase in poverty levels occurred with the rule of British. In the 1600s India’s economy was twelve times the size of Britain; however, in 1947 Britain was 25% larger than India’s (Prasad). Many factors contributed to Britain’s successful economy, including international trade, the industrial revolution, and others; however, under British rule in India, an immense amount of India’s net savings was extracted and taken by the British. (Prasad)

The exploitation of the poor may have been expedited during the British rule, however, the core reason poverty plays such a pivotal role in the industry of slavery today is the same: “Money is Power.” And power entails the ability to exploit another human being’s life. Money provides options, stability, security, and the ability to chose freely when determining ones living. The introduction of money into our society has created a competitive atmosphere and social hierarchy of classes—a subject of which I will dissect in a later paper—with the moneyless on the bottom of the hierarchy left vulnerable to exploitation. Without the finances to be socio-economically independent, millions remain suspect to exploitation and trafficking.


“Voluntary” Slavery: Debt-bondage

The most common form of slavery in India today is debt-bondage, which is highly concentrated in the agriculture industry. Multiple factors contribute to individuals voluntarily placing themselves in debt-bondage, such as a lack of a better alternative or any alternative at all. For the purpose of pure survival or for the need of an immediate large sum of money (marriage dowry, medical bills, paying off a family member's debt, etc), individuals often take loans and naively they voluntarily pledge their labor to pay off the loan.

Debt-bondage is a major problem in India today, because a significant portion of the population has no access to formal credit, and/or their lack of eligibility or identity contributes to their inability to receive credit from formal sources. Therefore, many individuals result to taking loans from informal credit sources such as landowners, shopkeepers, etc., and often times do so aware of the inevitable exploitation. In other situations, individuals’ lack of education leads to their falling into exploitative situations, as their inability to read loan documents allows the corrupt landowners to increase their debt through unreasonably high interest rates, keeping the bonded laborers in an unbreakable cycle of debt. (Prasad)


Another factor that contributes to the voluntariness of bonded laborer is the inability to work on other lands. Often times in impoverished villages, a single landowner owns an entire village, including all of its housing properties and agricultural fields. This form of monopolization, or vertical integration, gives these landowners an immense power and the ability to exploit the villagers. Families lose the ability and security to grow their own basic foods to live on. The ownership of these properties puts laborers in a sensitive situation, as the laborers are tied to the land, unable to leave for better work. If the laborer wanted to find work elsewhere, they would have to leave the village. This is difficult not only because of the expense but also because their entire family unit resides in the village. Relatives, grandparents, cousins, second cousins, have lived in that village for generations; the mere threat of losing ones home and family gives the landowner great power.

The aspect of bondage labor that makes it unique from other forms of slavery is the loan. A loan is taken from a laborer often to repay another loan or financial need. To many this action may seem legal, justified, but what makes the loan a bondage is the lack of a better alternative and inability to repay the loan. Landlords take advantage of the laborers, pressing high interest rates, changing original documents to increase the debt, paying lower wages than the minimum wage law requires, and charging the laborer for other expenses such as equipment, tools, food, rent, and clothes. These exploitative actions result in the unbreakable cycle of debt that bonds the laborer to the land. Even if the laborer knows he is being taken advantage of, he or she has no other choice of work, as the landowner owns all the land property in the area, and the local government usually turns a blind eye or sides with the landowner even in highly abusive situations.

As the families tied to these situations are in the most extreme depths of poverty, landlords often defend their cases by arguing that by charging labor in exchange for food, shelter, and minimal clothing, they are benefiting the laborers. In many cases being a slave is better than being a free worker. A bonded laborer has guaranteed work whereas a freed worker might have more risks, often resulting in a freed bonded laborer to return to bondage. However, the reason for their return is not because they were satisfied with their payment or treatment, but because they had no better alternative for work or survival.


Bondage can be an interminable cycle, and can elongate when the debtor passes his debt onto the next generation to continue repayment (Genicot). This practice was born in ancient Hindu Law and makes a son morally (and legally at the time) obligated to clear his father's debt. It was not until the Hindu Succession Act of 2005 that this practice of clearing a father's debt based on religious obligation was outlawed, yet in villages the ancient Hindu law is still regularly enforced.


Profits of Sex-slavery:

Sex-slavery is one of the most profitable industries in the world with an estimated 4.5 million victims of forced sexual exploitation (International Labor Organization). The total slavery business around the world brings in $150 billion a year (Luscombe), with annual profits per sexual exploitation victim at $29,210 (Kara: Sex Traffickingjjj). The total amount generated for sex-slavery alone, although only consisting of 4% of the slave industry world-wide, is $99 billion (Luscombe).


The incentives behind slavery are simple and twofold: sex and profit. Demand drives the sex supply, while businessmen and exploiters reap with profits. The business of sex-trafficking, although appearing complicated, is actually quite simple involving the two pushes and pulls that applies to every business—supply and demand.


Without a demand, there would be no sex-slavery today; however the extreme demand for sex around the world pulls for a large supply, and supply increases with the availability of resources, which in this case is women and girls who make up 98% of the supply (International Labour Organization). Sex slaves, unlike any other resource, are extremely profitable because they can be used over and over again, earning the same price. 


In India, sex trafficking has increased, as the demand for cheap sex rises, and the industry expands their supply to meet this demand for cheaper sex. In India, prices have decreased over 50% in the last two decades, as a result of increased trafficking in rural India (Kara: Sex Trafficking). As slavery is the cheapest possible form of supply, prices have dropped, allowing buyers such as in the rickshaw driver class, who may not have been able to afford purchasing sex before, to support the business. One might think that as such a profitable business there must an immense population of customers involved in the cycle; however, to maximize the capacity of today’s profits, only 0.5% of adult males need to purchase sex on a given day, and 6-9% of males world-wide do purchase sex at least once a year (Kara: Sex Trafficking).


The global average purchase price of a slave is $1,895 but sex slaves sleep with up to 30 customers a day, usually 6-7 days a week, for an average of 10-20 years, unless perishing before then; therefore, the cost purchase for a brothel owner (malak) to buy a trafficked slave is quickly repaid (Kara: Sex Trafficking).


Sex-trafficking embodies the utmost form of slavery, as impacted individuals are often entrapped through kidnapping or being sold. They are then transported into a life of being beaten, drugged, and coerced into their work with no chance for escape. In reality, many forms of coercion populate the slave trade, including “voluntary” slavery. The quotations are there, because although individuals agree to “voluntarily” sell themselves into slavery, they are forced by an invisible hand called survival.


Voluntary slavery occurs in the sex industry as well. When recruiters come to impoverished, corrupt towns to offer false promises, the families and women being enticed often know they are being manipulated and lied to. They know the false promises such as going to China to work in a restaurant, are in fact false hopes, but the women and girls also have no choice but to take the chance, as the life they are currently living could not be any worse. In many cases, the girl already faces abuse and rape in her village or town; therefore, believes that she might as well get paid for the same treatment; therefore, she sells herself into slavery hoping that one day she can earn money.

All Profit, No Risk

The incentive to enter into the commercial sex-business is high, as the business provides all profit with limited to no risk. High risk generally prevents exploitation, as the risk outweighs the potential benefits; however, in India’s case, and in the case of many other countries such as Thailand, Cambodia, Nepal, and Bangladesh, the government policy and practices lack the appropriate punishment for participating in trafficking and using slave labor.


Even when abusers are convicted for their crimes, which happens infrequently due to corruption in local government and police, the penalty for this crime is minimal (up to $44 and 3 years in prison) (Kara: Sex Trafficking). However, this penalty is almost never enforced to the small few dozen who are convicted each year. A slave bringing in $12,900 a year is 291 times the penalty risk (Kara: Sex Trafficking). This disequilibrium between penalty and profit encourages the business instead of hindering it.


Potential Solutions

Although outlawed, slavery remains a prevalent issue in India, and the written prohibition in the constitution does nothing to attack the root causes that continue the cycle of injustice. Poverty remains one of the core causes, as it leaves children, men, and women vulnerable to trafficking and in many cases subliminally forces them into bondage. Without tackling the issue of poverty in India, slavery will prevail. A potential alternative rather than passing more policies and laws that simply restates a restriction rather than enforcing one, the government needs to provide impoverished families and communities with accessible sources of credit. These options include small-scale consumption loans, microcredit organizations, as well as other welfare options that protect individuals with health and life insurance. As most of the current legislation has loopholes that exclude unorganized workers from these government benefits, they need to revise current welfare policy to benefit the rest of the population (Gdenicot).


In the case of sex-trafficking laws, policy plays a much more pivotal role in its ability to hinder the incentive to partake in the risks of the industry. As long as the retribution is limited and less than the profits gained, the incentive to partake in the most profitable industry in the world will continue to rise. However, once again, policy only goes so long without enforcement, and until the government carries out the penalties, the exploiters will manipulate and ignore them (Kara).