Monday, June 11, 2012

Why the Reality of Developing Countries Provides Justification for Sweatshops

When you hear the word "sweatshop," what comes to mind? Long hours, low wages, worker abuses, exploitative multinational corporations, and a dirty, crowded, & dangerous work environment. By merely labeling the factories as "sweatshops," the stigma has already been attached, which makes it easy to fight against sweatshops. Any refutation of such conditions would be perceived as "defending the indefensible." However, a video at helped begin the process of me questioning my instinctively emotional response to sweatshops.

Considering the History of Economic Development
Would I want to work in a sweatshop? Of course not! I live in a developed country where my human capital is at such a place where working in a sweatshop would never cross my mind as a viable option. My situation is much different than that of a typical citizen of a developing country. Not to be tautological, but these developing countries are, well, developing.

Prior to the Industrial Revolution, all countries were predominantly agricultural. Poverty was commonplace and development in any sense was rare. Then along came the Industrial Revolution, which brought about a shift towards manufacturing. Sweatshops were a part of the process. As time passed on, sweatshops began to disappear because there was enough economic progress, technological advancement, and institutional development to do away with them. Even after the manufacturing sector became predominant, Western nations developed the service sector, and now that that sector has been well-established, Western nations are considered as developed nations.

It would be great if developing nations could simply bypass the less-than-desirable intermediate steps to becoming developed nations. However, without such things as rule of law, minimized levels of corruption, enforceability of contracts, and other necessary governmental and economic institutions, such a leap is not possible.  

Compared to What?
It should go without saying that working in such conditions is anything but ideal. As deplorable as these conditions are by Westerners, we have to realize how different life is for so many around the world. As long as a worker in the developing countries is voluntarily opting to work somewhere [and not being physically coerced into it], the worker will most likely choose the best-paying job, even with the "coercion of poverty." Rather than ask "How could this happen?", we need to ask ourselves "What are their alternatives?"

$30 a week might not seem much to those in the Western world. Even if paying those wages is either seemingly or actually unfair, the reality is that most sweatshops actually pay well above the average standard of living (Journal of Labor Research, Spring 2006). And what happens when you take away that option? I can tell they are not being replaced with high-paying jobs. A UNICEF study published in 1997 provides insight. In the early 1990s, Bangladesh passed laws that made child labor illegal in the garment industry. Rather than living "the good life," the children found work such as "stone-crushing, street hustling, and prostitution--all of them more hazardous and exploitative than garment production (p. 60)." The alternatives (e.g., waste management, subsistence farming, crime, prostitution) for those who work in sweatshops are considerably worse. Just ask revered, Left-leaning economist Paul Krugman.

Other Economic Factors
One of the things that these multinational companies bring with them is foreign direct investment (FDI). By opening companies, they bring capital and technology with them. That assists with development of the country. Success with these companies attracts additional companies, which begets more jobs, as well as further investments in the given country. The marginal productivity of labor increases over time, which increases wages. It's what makes comparative advantage and division of labor so wonderful in this situation.   

In summation, sweatshops are a symptom of poverty and poor governance, not the cause of it. Poverty has existed well before the existence of such companies. As morally egregious as conditions can be in sweatshops, sweatshops are by far the most optimal option for many laborers in developing countries. The development of these factories are a stepping stone in bringing about economic development. This is not to say that we shouldn't expect higher standards from multinational companies. We need to demand them when it's feasible. But rather than boycotting companies that use sweatshops, we should buy more products so that we can speed up economic development in these countries.

10-23-2016 Addendum: A recent study from the National Bureau of Economic Research sheds some light on sweatshops in Ethiopia. Yes, the study found that the working conditions were unpleasant, risky, and the wages were less than those in the informal economy. However, the research concludes that having these sweatshop jobs are better than not having them at all.

1 comment:

  1. You make some really great points here. Especially concerning the removal of emotional rhetoric from this discussion. I see the same thing in topics like abortion and it doesn't help resolve anything, it just makes people angry (some violent). I think this is a very healthy way to look at this, especially considering we went through the same periods in our own process of development, we can't look at where we are now and say "Why aren't these countries trying to be like us?", like you are saying, they are...and the process stands for any country pushing for development. Thanks for sharing this perspective!