Preston Says: You SOLE people shouldn’t have to pay fines, get arrested, or any of that junk. You should be required to take an introductory class in economics. After familiarizing yourself with the work of Adam Smith, look into some articles by Jeff Sachs. I wish the “invisible hand” could actually give you idiots the slap in the face that you deserve.

SOLE says: I’ll say a few words to Preston. It’s hard to gauge exactly what your complaint is, but you cite Adam Smith and Jeff Sachs, so I’ll try to divine from those names where your objections lie.

When you say Adam Smith, I assume you’re referring to The Wealth of Nations, not his earlier work Theory of Moral Sentiments. In Wealth, Smith posits that everybody acting in their self interest makes everybody better off. The baker doesn’t bake bread because he wants to feed people, but because he wants their money. Seems simple enough. But what is ignored in Wealth, but not in Moral Sentiments (which is more concerned with normative issues), are notions of human dignity and the value of suffering. I’ll elaborate. In countries with little social safety net, and a labor surplus, you can pay near starvation wages, and give workers quite a lot of abuse before it’s worse than having nothing. If your options are starve to death or take a job where you are worked in 18 hour shifts, sexually abused, threatened, and hit, but you can feed your children most days, it’s still the better option. Does this mean we have to cede morality to the invisible hand of the market? I believe it doesn’t. We have a responsibility to use our control over licensees to insure they don’t abuse their workers to within an inch of it being the chosen alternative to starvation, prostitution, drug trafficking, or other grim vocations.

Sachs writes along similar lines, saying that sweatshops are the first stages of industrialization and offer alternatives to downtrodden folks, and that the real impediment to development is insufficient sweatshops, as each new sweatshop increases the equilibrium wage. I don’t disagree entirely. I never said there shouldn’t be factories in the Third World. I said they should treat their workers with dignity.

Here’s a stylized model explaining why our demands will not decrease labor demand in the third world. Let’s say the only variable is wage. Nike, for instance, wants to have its clothes made where the equilibrium wage is the lowest. So it goes to the Domincan Republic. They unionize, which will raise the wage, so Nike moves on down the ladder to Bangladesh where the equilibrium wage is even lower. If we implement the DSP in this model, Nike will have to pay a living wage at whatever factory it uses. So it goes to the country where the living wage is the lowest. Which might be Bangladesh, or the DR, but it certainly isn’t the US or Western Europe. Nike’s costs have gone up and it passes it along to its customers (probably along the order of a buck or two), and since demand of college logo apparel is not strongly correlated to price, they need to employ the same number of people to keep up with demand. (What demand of college logo apperal is strongly correlated to? Sports team performance. I guess we should give Lloyd Carr a call if we want to stimulate labor demand in the developing world.)

Workers, like all humans, deserve to be treated with dignity and we will not be complacent in their abuse. We will keep agitating until it is in Nike’s financial self interest to treat people according to their intrinsic value as people who, like them, think and feel and long and love and sing their children to sleep.

Guy says: Preston, ignoring other, more pressing criticisms of global capitalism as an entire system–if you want to play a name-dropping game, read some Marx, Polanyi, and Bello–your dedication to free market dynamics is misguided both in theory and in practice. While there have been many arguments made regarding the necessity of sweatshops for the development of third world countries, empirical evidence consistently shows that they have either zero and, at times, negative impacts on prospects for development.

Mexico is often cited as an example of the successes of neoliberal reforms. A closer look at the data, however, shows that it is anything but this. The appearance of maquiladoras on the Mexican border has corresponded directly with a decrease in working conditions, and increasing unemployment in all sectors of the economy except for within the maquiladoras. Maquiladora employment has increased from 420,000 in 1990 to 1.3 million in 2000, and now accounts for 54% of all manufactured exports from Mexico. At the same time, average wages have actually fallen over the past decade–they are now below 1994 levels–and participation in unofficial industries and self-employment has almost doubled to 22.8% of the work force. The advent of maquiladoras has effectively decreased meaningful unemployment and increased the atrocities committed in the workplace in Northern Mexico.

In Southeast Asia, and especially the Phillipines, a concept known as the Export Processing Zone has become instrumental to plans for “development” by neoliberal economists, and have become requirements for IMF assistance. EPZs are built to attract MNCs to build factories and infrastructures, granting them such incentives as 5-10 year tax holidays, free flow of capital in and out of the EPZs, no tariffs, lower labor standards than in the rest of the country, and the outlawing of unionization. While in theory these EPZs would bring money into the country and act as a stepping stone towards more equitable development, the opposite has been true. Due to the tax holidays, a lack of tariffs on imports and exports, and no requirement that any materials used in the production come from the local economy, these EPZs act essentially as assembly plants, where manufacturers import materials, use cheap labor in slave-like conditions, and export the finished products. The impact on the actual economy of the Phillipines is miniscule, as the only money to remain in the country is the wages paid. Upon reaching the termination of their tax holiday, manufacturers stop production, close the plant, and open under a new name.

Simultaneously, farmers have been flocking to these EPZs to find work as their land is confiscated to construct golf courses and as they face insurmountable competition in the form of subsidized, imported agricultural products from other countries. The advent of sweatshops in the Phillipines and in other Southeast Asian countries has had little to no positive impact on the economies of those countries, has seen an actual DECREASE in wages over the past two decades, and has seen an increase in unemployment and miserable working conditions.

There is one case where wages have appeared to increase slightly over the past decade: China. However, that increase in wages has been accompanied by a slashing of government programs, including health care, education, and more. When the cost of paying for these programs is subtracted from the wages, it becomes evident that the amount of real wages left after paying for essentials formerly provided by the government has actually decreased. In addition, China too is now seeing a loss of manufacturing jobs and an increase in self-employment and informal employment, as in Mexico.

Ignoring (completely legitimate) criticisms of sweatshops as violating human rights and placing the profit of a small number of people above the suffering of millions, they simply counter-productive to economic development. Ignoring the fact that these workers are largely young women, are regularly given forced pregnancy tests and fired if found to be pregnant, are fired routinely as they reach 25 or 30 years of age, and are often kept in military-style barracks with no recourse to the law when abused, these factories are simply not economically viable. Their operating costs are subsidized by the governments in which they reside, and all of the profits leave the economy entirely.

Before you leap to the easy criticism that people “simply don’t understand the way the economy works,” do some research on your own, and discover that there are many, many economists who would disagree with you. Simply regurgitating terms like the free market and the invisible hand don’t make you an economist, or intellectually superior. Furthermore, don’t assume that people concerned with human rights and justice haven’t taken introductory econ classes–or, for that matter, that they’re not economics majors themselves.

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John Ku says: Please think before you act.

Sweatshops are certainly not the ideal job but they exist because the alternatives are even worse. Boycotting sweatshops will only decrease much needed foreign investment into developing countries as companies take those jobs to slightly less poor and more stable economies elsewhere or simply replace those jobs with mechanization. That is why economists support sweatshops.

If you really care about the poor, you should support creating more sweatshops. As more companies compete for labor, the natural market forces will increase the wages offered. Investments will also be made in that country’s infrastructure and the path to development will have begun.

Blase Kearney says: I understand your concerns John, but we aren’t advocating boycotting sweatshops. We are advocating improvements in the conditions they currently face. Saying that is the best possible option isn’t an excuse for rape, force pregnancy tests, and extreme poverty wages.

We want to give them more money so the path to development is faster.

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Mary Alice Shulman says: What happens to the people, mostly women, who work in these “sweat shops” if they are closed down? Prostitution? Underfed children? Despair, having no place to turn?

SOLE says: We do not promote boycotting sweatshop products, and we do not wish for the university to take part in closing down these factories. Instead, the program which we wish the university to adopt rewards factories that allow their workers to unionize, which in turn allows conditions for workers to improve.

Chuck Warpehoski says: Mary Alice is an economist, so I understand where her concern is coming from. I also know that she is deeply concerned about the wellbeing of people in the two-thirds world.

It used to be that the frontline in the fight against sweatshops was Mexico and Central America. Now, whether the workers have organized or not, the factories are leaving and going to Indonesia, Bangladesh, or China. This creates the very conditions that Mary Alice is concerned about, factories that are shut down leaving the workers without jobs.

The Designated Suppliers Program protects against this by including provisions that discourage cutting and running. It actively works to keep current factories operating–but operating so that they pay their workers enough to live and provide humane working conditions.

S.A. says: Ms. Shulman,

The DSP secures business with factories that respect workers’ rights. It in no way promotes the closing down of factories. When workers attempt to organize and stand up for their rights large corporations cut and run and in THIS CASE there would be present the horror stories you speak of such as prostitution and underfed children. This is exactly what happened with the BJ&B factory in the Dominican Republic. BJ&B workers fought hard to gain unionization and in turn companies such as Nike and Adidas pulled out of the factory in attempts to undermine the rights that the workers had achieved. The Designated Suppliers Program, which is what the U of M students are asking for, would ensure that factories that respect their workers will continue to do business and will not be punished for doing the right thing.

Sit-inners,

I just want to let everyone know that you have tons of support from the outside. Students at campuses all over the country are in solidarity with you and most importantly the workers, like those that came to visit our campuses from the BJ&B factory, need students like you to continue to support their cause and demand that universities take a stand against worker exploitation. Stay strong and hopefully President Coleman will do what’s right and sign the DSP.

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