What is a sweatshop? Should they not exist?

MI Touring Nike's Factories
**FILE**Workers at a Nike factory on the outskirts of Ho Chi Minh City, Vietnam, assemble shoes in this Oct. 10, 2000, file photo. Michigan State, among many schools with sponsorship agreements with Nike and the school will have senior associate athletic director Mark Hollis joining Nike officials for an upcoming tour of manufacturing facilities in Vietnam and China. (AP Photo/Richard Vogel)

The fundamental question on the existence and morality of sweatshops through this podcast, as presented by Economist Ben Powell, who is located in my hometown of Lubbock, Texas at the Free Market Institute of Texas Tech University and happens to be a friend of a friend, provides a thought provoking view of sweatshops and whether we should focus our philanthropic energies on shutting them down, demanding higher wages and better workplace conditions, and/or boycotting the goods produced out of sweatshops. One would expect an economist to point out the unintended consequences of utopian decisions we would like to impose. Powell does a remarkable job of distilling economic frameworks such as price theory and immigration to their reducible and translatable components so that even the layman can enjoy and learn from them, hence my pitch to my friends and followers to give it a listen since one can rarely find economics topics presented with such clarity for the non-economist.

One of the chief insights in the podcast is that we must not fail to keep philosophy (in this case, perhaps we should call it humanism) from a connection to economics when evaluating policy and what we advocate for and support. While those of us in the West might get tremendously squeamish about sweatshop conditions and profess a knee-jerk reaction that of course they should be shut down (our humanism instincts), we must consider the unintended consequences of what would happen if we could in fact enact our plans. Economics + Philosophy must guide our knowledge, thoughts, and responses to such issues.  This ultimately forces us to consider what the next best alternative of the sweatshop worker is and to more critically examine why the individual chooses employment there. It must be stated that nobody should support slave labor, so let’s put that red herring to rest since in the vast majority of cases individuals choose to work in these factories that we in the West would admittedly deem abhorrent conditions. Thus, there is in fact an element of localized choice in these cases that we must consider. The great challenge and the deeper level to focus on is the fact that the overall range of employment options for these individuals is remarkably poor and sweatshops likely offer the best alternative on hand for them to be able to feed themselves and their families. In essence, the choice can often be working in a sweatshop or working in subsistence farming, which often offers far less money and far more grueling conditions, nor does farming provide a step onto the industrial skills ladder that sweatshop work often provides. While we may reflexively want to attack a symptom, the broader disease is nations with venal and corrupt government that have little institutional foundations that support an open and growing society that would facilitate the individual escaping their condition. The essential foundations for such a dynamic society can be summarized as limited and competent and non-corrupt government, individual property rights, the rule of law and freedom from arbitrary prosecution and perspection, freedom of contract, and a strong and impartial judicial system.

As it relates to individual choice, one might easily be led to believe that sweatshop workers should be given better working conditions such as more time off, more vacation, and safer and more elegant working conditions. Such a simplistic analysis would miss the point of economic tradeoffs. One might ask anyone in this world whether they would like more pay and better working conditions and all except for the world’s few true masochists would provide an invariable “yes” as an answer to that trite question. When pressed as to whether workers would trade off lower wages in order to receive those benefits, the vast majority of people working in sweatshops would invariably say “no” given their high dependence and relative value of cash in hand. Furthermore, to explore and get to the heart of how a worker in Bangladesh could get paid substantially far less pay than a textile worker in North Carolina, it is also absurdly simplistic to compare hourly wages. A true analysis must look at wage rate/productivity ratios for the differences between these two types of workers. Intuitively, the highly paid North Carolina worker is going to produce a tremendous amount more than their Bangladeshi counterpart through a combination of higher skills and better use of capital, dictating a higher relative wage. If a Bangladeshi is not paid significantly less, then their alternative choice to the sweatshop becomes unemployment.

Another interesting insight from the podcast is the alcohol prohibition analogy of Baptists and Bootleggers in grouping the cast of characters in the sweatshop debate. Baptists are the NGOs and philanthropists who are actually committed to the cause of reform, at least making them morally principled. They just often have wrongheaded and misinformed notions of policy prescriptions that should be pursued as a result of their convictions and their effectiveness. Bootleggers are the Unions and others who have a tremendous vested interest in pushing sweatshop wages to a higher point such that they are rendered uncompetitive, thus boosting their own wages. Bootleggers will thus remain unrepentant hurdles to reform while cynically acting as if they have the sweatshop worker’s interests at heart. The intent of the podcast is implicitly to convince the “Baptists” that they will do more harm than good with their approach and to direct their energies elsewhere.

This begs the question of where the concerned over the plight of sweatshop workers should direct their focus. As Powell indicates, the most effective policy reforms would be to support more open forms of immigration. This simple act of changing one’s domicile from a nation lacking the foundations I listed above to one that does (i.e. from Bangladesh to America) increases their wage earning potential 1000% overnight, according to Powell. In the long run, policies that support institutional and government reform will greatly aid in lifting millions from their plights within their native lands. What is clear is that demanding higher wages could very well result in no job and is therefore the opposite of what we should be advocating. Similarly, demanding safer workplace conditions will result in lower wages, which will harm those most in need of straight up cash.

As an aside, I can’t help but notice that Libertarianism.org uses some of the same visuals that I do for this blog – Washington’s crossing of the Delaware and Plato’s Academy. I am not sure whether I should feel validated or concerned that people will assume that I am a copycat, but I assure you that the usage is purely coincidental. I began the blog back in October and just recently picked up the podcast. Great minds think alike…

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