Laissez-faire and the Triangle Shirtwaist Fire

Here’s a story illustrating the need for some level of regulation on businesses. It's not about needing more or less necessarily, it's that there's an optimal level above none. 


The Triangle Shirtwaist Company (TSC) was one of the largest of nearly 500 garment factories on Manhattan in the early 1900s. It was a competitive industry, with no monopoly power. Around 70% of the workers in the garment industry in New York City were female. Most of the women were recent immigrants, or their children. They worked 7 days a week at least 11 hours a day for around $1 to $2 a day[1] minus what their employer deducted for electricity and supplies (adjusting for inflation, $1 back then was worth around $24 today). Given that 20% of the world population still lives on less than $1.25[2] a day, the wages paid, while low and for sweat-shop work, were still an initially attractive way out of poverty. 

But the women and some men of the garment shops came to believe they were paid too little given the value of their output.

Workers at individual garment factories started forming unions and striking. In response, companies hired prostitutes and thugs to start fights and intimidate strikers. The police were bribed to not break up fights and arrest the striking workers for starting them, if not beat them themselves. 

Samuel Gompers addressing garment workers

In late November 1909 garment workers met to discuss an industry wide general strike. Samuel Gompers, president of the American Federation of Labor, spoke at the meeting. He warned the women about what a general strike entailed. The women would have to forgo wages their families depended on, while their bosses could rely on their wealth. The strikers would be attacked and vilified. 

Clara Lemler is unimpressed

Unimpressed (see picture), a young woman named Clara Lemler spoke. She still had six broken ribs from being attacked while participating in a strike. The time for talking was over, she said, it was time to act. And over 20,000 garment workers went on a unified strike.

Anne Morgan, J.P. Morgan’s daughter, and Alva Belmont, William Vanderbilt’s ex-wife, lent their support to the striking workers[3]. They formed a committee to bring awareness to police brutality, and positive media attention to the women. They helped raise money and enlist other socialite women to join the picket lines as a way of reducing attacks on strikers. 

Rich lady picketers

By mid-February the strike was essentially resolved. The women at the TSC returned to work 8 hour days six days a week at higher pay. This is the market mechanism at work. As excess cheap labor is utilized, workers compete less with each other and demand higher wages and better conditions. They can peacefully assemble, as any American can[4], to achieve their goals. If their goals are unreasonable, and a business can’t be profitable with them, it doesn’t lose anything by not giving in[5]. If businesses are unreasonable, it isn’t worth it for the strikers to go back. Despite a rigged game, where the local government intervened on the side of business, the women were successful, and the garment industry continued to be profitable.

A year later, however, 146 workers would die in a fire at the TSC. The fire was started by a cigarette, and spread quickly. The only safety measure was buckets of water kept in the corners, which were useless by the time the fire was discovered. The main stairway out became blocked by the fire; other exits were locked to prevent theft, leaving only a fire escape and two elevators. The fire escape soon detached from the building and collapsed; and the elevators could only complete two runs before it was too late. 

This is the market mechanism at work[7]. The women had a year ago succeeded in the largest strike the garment industry had seen, yet their workplace was still unsafe. Locked exits and shoddy fire escapes only matter in unlikely events, whereas wages and hours matter every day. Competitive markets aren’t very good at dealing with rare events with large consequences. If the TSC spent money on fire safety above what was standard at the time they would lose out to their competitors, who most likely wouldn’t burn down. If the unions agitated over minute safety regulations they would probably gain nothing at the expense of agitating over daily conditions and wages. Not to mention a garment worker would lack the expertise to inspect a fire escape. 

The solution is government intervention in businesses to protect the safety of the people who compose them[7]. In New York, the Factory Investigating Commission was created to look into fire and other safety conditions in New York, report on conditions and recommend safety regulations. The New York City Fire Department began investigating factories and reporting their results. Many of the commission’s recommendations became law, including regulations on access to exits and fire escapes, fireproofing, and fire prevention methods such as alarm systems, automatic sprinklers, and fire drills. Laws were also passed concerning the sanitation of and access to bathrooms and eating areas.

The moral of the story is that laissez-faire is plainly not optimal. While an economy based on markets is best, and the optimal level of regulation is an open question subject to much debate; it is an empirical one not a theoretical one. It is clear that there must be some level to cover what markets fail to cover themselves. 

1. At the TSC they made around $2 a day for up to 14 hour days

2. At 2005 Purchasing Power Parity dollars, as in they make enough to purchase what $1.25 would purchase in 2005, as best as can be estimated.

3. They eventually withdrew their support as garment businesses started negotiating with the strikers. They felt the offers were fair and did not want to lend support to the more “socialist” workers who wanted union only shops.

4. Well, I mean that this is what the Declaration of Independence says is an "inalienable right", which every resident of the United States should defend regardless, like that Voltaire quote.

5. See Hostess, which sold off its assets and went out of business rather than continue to operate at a loss after failed union negotiations

6. This is also the market mechanism continuing to work

7. This is because to a business, an employee is worth their marginal contribution to output. Whereas, even purely economically, an individual has a higher value to society than their wage (consider volunteer work, work done in the household, impact on children, etc.) so a business where workers are easily replaceable will under-invest in their safety. To leave such issues of safety up to the markets begs the question of how many and how often workers need to die for labor demands to shift to tail risk events like fires.

Sources include the PBS Triangle Fire documentary and NYUs "Price of Fashion" and "Shirtwaist" exibits