Are Sweatshops Good?

In the 2:10 section when talking about low skilled workers we got sidetracked talking about sweatshops where I made the comment sweatshops are good. Going in, I know this view is not in the majority, but at a minimum I ask that everyone keep an open mind.  I know a number of students are passionate about this issue, as am I, so please be civil.

When I think about sweatshops this article (and these here and here and here) come to mind. Are sweatshops good? No. When comparing the alternatives for people living in poverty sweatshops do offer one avenue for hope and in that scope they are good. We've seen millions of people come out of poverty because of sweatshops not despite of.

My point is that bad as sweatshops are, the alternatives are worse. They are more dangerous, lower-paying and more degrading. And when I struggle to think how we can really make a big difference in the development of the poorest countries, the key always seems to be manufacturing. (Kristof)

Impoverished families need to find sources of income, if we force firms into paying higher than market wages (multinational companies already pay 2-3 times the wages of domestic manufacturing firms) fewer workers will be hired (law of demand). This will leave a number of people unemployed, they will be forced to find alternative sources of income. This is where the real exploitation begins. Families will sell children into the sex trade. There is a growing problem with human trafficking, the solution lies in more manufacturing firms not less. If this means more sweatshops, then yes please give me more sweatshops. Here's Paul Krugman's take.

Workers in those shirt and sneaker factories are, inevitably, paid very little and expected to endure terrible working conditions. I say "inevitably" because their employers are not in business for their (or their workers') health; they pay as little as possible, and that minimum is determined by the other opportunities available to workers. And these are still extremely poor countries, where living on a garbage heap is attractive compared with the alternatives. 

Pressuring firms into paying higher wages will simply result in the firms leaving the least developed countries for middle income countries that offer the opportunity to shift production for low skill labor to machines. What happens to the workers in the least developed countries?

Now can we have less human trafficking while paying above market wages to manufacturing workers in developing countries? I don't know. So far the evidence suggests not. Would I like to see firms pay these workers higher wages? Yes, but the reality of our economic model (i.e. capitalism) places large constraints on firms that will likely prevent this from happening. Corporations face tremendous pressure to maintain high levels of profit. We bet on these firms to keep increasing profits which comes at an unfortunate cost. As long as society demands high returns and/or low prices we will continue to have sweatshops. The global recession will only increase this pressure. This does not mean countries can't outgrow the need for sweatshops. Export led growth has been hugely beneficial for many Asian and Latin American economies (Brazil, China, Singapore, Philippines, Indonesia, Japan, Taiwan, Korea, and many others). We've seen a number of economies grow from the stages of sweatshops into economic powers (including the United States). Sweatshops may not be necessary but so far they've proven to be sufficient. I'm not sure I want to experiment with an alternative model that may lead to more children being sold into the sex trade.

As a country we can do something. We can stop subsidizing agricultural production which will help restore jobs in many developing countries. The United States is responsible for destroying the lives of many farmers. Farm subsidies in the United States have created an excess supply of many agricultural commodities that we have dumped on the world market. This excess supply has created artificially low prices and forced a number of farmers off their land into manufacturing jobs (or into the U.S. as illegal immigrants). By removing farm subsidies a number of workers could leave factory life, return to farming, and wages will increase for those in the manufacturing sectors. This will help prevent the food shortages experienced across many developing nations. Here's another piece by Kristof.

Here are some good books on these issues:
Half the Sky by Kristof

In Defense of Globalization by Bhagwati

Making Globalization Work by Stiglitz
I love a few of his quotes:

As the nation-state developed, individuals felt connected to others within the nation—not as closely as to those in their own local community, but far more closely than to those outside the nation-state. The problem is that, as globalization has proceeded, loyalties have changed little. War shows these differences in attitude most dramatically: Americans keep accurate count of the number of U.S. soldiers lost, but when estimates of Iraqi deaths, up to fifty times as high, were released, it hardly caused a stir. Torture of Americans would have generated outrage; torture by Americans seemed mainly to concern those in the antiwar movement; it was even defended by many as necessary to protect the United States. These asymmetries have their parallel in the economic sphere. Americans bemoan the loss of jobs at home, and do not celebrate a larger gain in jobs by those who are far poorer abroad.

Most of us will always live locally—in our own communities, states, countries. But globalization has meant that we are, at the same time, part of a global community.