Sweatshops: What You've got Wrong

There is a somewhat dark dimension of the global economy (one of many) that makes (some of) us uncomfortable. These are sweatshops, that I had spoken about in one of my previous articles, ‘The underbelly of the fast fashion industry’, ‘A flank-off International trade’. The article seemed to hit two particular narratives among the people who read it. One, that was empathetic- acknowledging the cost of our day to day choices, and that of fast fashion. While the other, burdened under the weight of their ‘rationality’, like apathetic voices often are, asked a pertinent question- “But how else will the workers earn?”

I believe that the issue of sweatshops is one that operates at the crossroads of international trade and development. Check out Comedian John Oliver’s take on sweatshops here- as he partakes in the anti-sweatshop movement.

There are economic theories that argue, low wage employment in developing countries is actually beneficial, an ‘escalator out of poverty’. Two most commonly cited reasons for this being, over time a booming industrial sector is bound to raise wages, and that factory jobs are a better option than their even lower paying alternatives. These arguments are often quoted along with Joan Robinson, “The misery of being exploited by capitalists is nothing compared to the misery of not being exploited at all.”

One of the major issues with this common economic rationale is that it does not incorporate what it means to be a sweatshop, which is the basis of anti-sweatshop movements. The argument does not determine whether the factory is actually a sweatshop or if the workers at the factory are being exploited. So now, to this front, I think we can all agree, that this argument, to some extent takes for granted, the basic labour laws that should be granted in these sweatshops. That perhaps, there should be some overarching laws that could protect the workers, laws that are beyond the bounds of sovereignty of a nation, or even local laws that are somewhat similar, but implemented to the tee. But, relying on these legal prescriptions becomes somewhat problematic in countries where the local labour laws don’t match up to even the minimum of internationally agreed upon standards.

For those who take pride in rationality of economics in the face of human rights violation, consider this: The OECD led a study to find the relationship between labour laws as implemented in a country and its impact on macro variables. They found that countries that strengthen labour standards, can actually increase growth and efficiency. Another study, by Prof. Dani Rodrik finds that low labour standards may increase the comparative advantage of the country in the production of labour-intensive goods, but also deter FDIs.

An analysis by John Miller strikes at the mainstream argument that “all developed nations go through the sweatshop phase in their development” with a response that Jagdish Bhagwati submitted to a New York Times article—

Your June 22 Week in Review article on sweatshops quotes some prominent economists to the effect that sweatshops, which they confuse with "low-wage factories” are "an essential first step toward modern prosperity in developing countries” Sweatshops indeed existed in 19th- century Britain during early industrialization, leading to a burst of social legislation to rid the country of these ills. But nothing requires us to go that route again. Nations should join nongovernmental groups like the International Labor Organization to rid the world of sweat- shops. In addition, we can require multinationals to apply our own labor, safety and environmental standards when they manufacture abroad. In Rome, they must do not as Romans do but as we do. Their example would spread