Ending Human Exploitation with Economics

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When I was an undergraduate, I volunteered in a Bosnian refugee camp in the former Yugoslavia. It was there that I first heard about modern-day slavery.

After I graduated, I became an investment banker and got my MBA. But I remained haunted by those stories.

I knew that very little was being done to stop the industry of human trafficking and exploitation and that its size and scope were only increasing with time. So I made a radical decision.

I thought: There are a lot of MBAs in the world, but there don’t appear to be many applying their business backgrounds to solve the problem of modern-day slavery.

So, in the summer of 2000, I decided to set aside my corporate aspirations and embarked on a series of research trips. For the past eight years, it’s been my mission to decipher how best to attack the economic forces that perpetuate human exploitation, specifically, sex slavery.

To my surprise, there was almost no hard data and no cogent analysis of how the sex-slave industry worked globally. I realized that someone with a business background needed to analyze how the industry works from an economic perspective, because that’s the best way to ascertain how to eradicate it.

The essential economic formula of slavery is to minimize the cost of labor so as to maximize profits (the cost of labor represents 60 to 75 percent of the cost structure of most legitimate businesses). Sex slavery takes this equation and puts it on steroids, because the operating costs are paltry compared to the massive revenues generated by millions of consumers purchasing sex from slaves every day.

In the unit economics of a sex-slave operation, there tend to be modest up-front fixed costs (mostly slave acquisition), minimal operating costs and almost no cost of risk (the penalties for being convicted of running a slave operation). Entrenched socioeconomic factors, such as global poverty and bias against gender and ethnicity, create an enormous supply of potential slaves — putting the up-front cost of slave labor at historic lows. In the United States before the Civil War, slaves were purchased for about $40,000 to $50,000 and might generate a return of about 5 to 10 percent per year. Today, sex slaves can be bought for as little as $200 throughout Asia to up to $10,000 in parts of Western Europe and the United States but can generate annual profits of greater than 1,000 percent.

The supply side of the global slave industry could take generations to ameliorate, therefore short-term abolitionist tactics should focus on the market force of demand. To materially disrupt demand, we have to create an upward shock in the cost structure of operating a slave business, and the most vulnerable component of this is the real cost of risk — which is now basically zero around the world.

The most poignant aspect of my research in the midst of all this economic analysis has been the humbling, inspiring courage of the victims. Some of these slaves recounted their experiences for the first time to me and a translator, believing their stories might make a difference. I hope these stories will motivate people not only to be outraged but also to be part of the targeted steps that are required to abolish slavery once and for all.


Based on his eight years of international research, Siddharth Kara’s book Sex Trafficking: Inside the Business of Modern Slavery will be published in January 2009 by Columbia University Press.

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