Sweatshops R Good, M’kay?

[Puppycow]

Trade protectionists often raise the specter of sweatshops and try to make you feel guilty for buying Nikes or other products made in poor countries. I’m here to tell you that you shouldn’t feel the least bit guilty about it. Buying products made in developing countries helps poor people.

Would I want to work in a sweatshop? No, but that’s because I have better options available. Many in poor countries do not. So if you deny them the opportunity to work in a sweatshop, you are forcing them into something even worse. For example, in the Philippines, some people eke out an existence scavenging in a garbage dump for a few dollars a day. Sometimes they are buried by avalanches of garbage. I don’t know about you, but if that was my alternative to a sweatshop, I think I’d choose the sweatshop.

Sweatshops are a rung on the ladder of development. Developed countries used to have many sweatshops. Once most people are employed, wages and working conditions will begin to rise as employers compete for employees.

 

[CFLarsen]

I’m here to tell you that you shouldn’t feel the least bit guilty about it. Buying products made in developing countries helps poor people.

If you really want to help poor people in poor countries, why not pay a better price for their products, so they won't have to work in sweatshops, but in places with good working conditions?

 

[Puppycow]

If you really want to help poor people in poor countries, why not pay a better price for their products, so they won't have to work in sweatshops, but in places with good working conditions?

That's a nice thought, but unfortunately that's not how economics works. In the long run, competetive markets are best for everyone. People shop for price and value. Not everyone, even in developed countries, is in a position to afford to spend extra.

A coffee shop sold "fair trade" coffee to its customers for an extra 10 cents, but actually more than 90% of that premium didn't go to the coffee producers. Instead the company pocketed 9 out of 10 cents as extra profits, while posing as a good-guy.

If you want to do extra to help out poor people, then save your money and instead consider giving to a good charity.

 

[CFLarsen]

That's a nice thought, but unfortunately that's not how economics works. In the long run, competetive markets are best for everyone. People shop for price and value. Not everyone, even in developed countries, is in a position to afford to spend extra.

Extra, compared to what?

It isn't as if the cost of production is marginally lower in the under-developed countries, compared to our countries. It is drastically lower.

A coffee shop sold "fair trade" coffee to its customers for an extra 10 cents, but actually more than 90% of that premium didn't go to the coffee producers. Instead the company pocketed 9 out of 10 cents as extra profits, while posing as a good-guy.

Let's assume that is true: Do you think the coffee producers will get just as much without "fair trade"?

A little goes a long way, especially in those countries.

If you want to do extra to help out poor people, then save your money and instead consider giving to a good charity.

Isn't it better to create a place where people can make a decent living on their own, instead of them depending on charity?

"Give a man a fish; you have fed him for today. Teach a man to fish; and you have fed him for a lifetime."

 

[Puppycow]

Extra, compared to what?

It isn't as if the cost of production is marginally lower in the under-developed countries, compared to our countries. It is drastically lower.

If it were that simple, the undeveloped countries could develop pretty rapidly. Why aren't all these poor countries producing lot of cheap goods already? Often there is government corruption and other problems like instability that makes it unprofitable or risky to open a business there.

Let's assume that is true: Do you think the coffee producers will get just as much without "fair trade"? A little goes a long way, especially in those countries.

A few coffee growers may benefit but most will not. More often "fair trade" is protectionism in disguise. It's true beneficiaries are protected special interests in rich countries.

Fortunately for coffee growers, coffee cannot be grown in the US or Europe.
Sugar is another matter. Sugar subsidies of $1 billion dollars cost Americans $2 billion dollars and go to a few rich sugar farmers in S. Florida. This also harms the environment because Florida is not ideal for growing sugar cane and so it takes more fertilizer and pesticides to achieve the same result. The runoff polutes the Everglades.

Isn't it better to create a place where people can make a decent living on their own, instead of them depending on charity?

"Give a man a fish; you have fed him for today. Teach a man to fish; and you have fed him for a lifetime."

Yes it is, and free trade is more efficient at doing this. It turns out that the poorest countries have the highest tarriffs.

 

[CFLarsen]

If it were that simple, the undeveloped countries could develop pretty rapidly. Why aren't all these poor countries producing lot of cheap goods already? Often there is government corruption and other problems like instability that makes it unprofitable or risky to open a business there.

Sure, there is government corruption, instability and lots of other problems. But in those countries that do have sweatshops (that's what the thread is about), why not open sweatshops with a little less sweat and a little for in the workers' pockets?

That way, they get more money. More buying power. Stronger economy. Stronger middleclass. Who want a stable, uncorrupted government.

Hm?

A few coffee growers may benefit but most will not. More often "fair trade" is protectionism in disguise. It's true beneficiaries are protected special interests in rich countries.

Now is the time for you to provide evidence of this.

If you know which coffee growers will benefit, why not buy those products? That'll show other producers that they can get better prices for a fairer share.

Fortunately for coffee growers, coffee cannot be grown in the US or Europe.
Sugar is another matter. Sugar subsidies of $1 billion dollars cost Americans $2 billion dollars and go to a few rich sugar farmers in S. Florida. This also harms the environment because Florida is not ideal for growing sugar cane and so it takes more fertilizer and pesticides to achieve the same result. The runoff polutes the Everglades.

That is an entirely different issue than sweatshops in poor countries.

Yes it is, and free trade is more efficient at doing this.

You don't have "free trade". You have never had "free trade". You will never have "free trade".

It turns out that the poorest countries have the highest tarriffs.

Evidence?

 

[corplinx]

"Sweatshops" are relative. Here in the US, Walmart is known as an IT sweatshop. EA is known as a games development sweatshop.

The truely sick sweatshops to me are the textiles business on offshore US territories where people are lured to work in a bait and switch technique. I'm sure someone else can remember the particular island infamous for it.

 

[Puppycow]

Sure, there is government corruption, instability and lots of other problems. But in those countries that do have sweatshops (that's what the thread is about), why not open sweatshops with a little less sweat and a little for in the workers' pockets?

That way, they get more money. More buying power. Stronger economy. Stronger middleclass. Who want a stable, uncorrupted government.

Hm?

Well actually, the term "sweatshop" is somewhat of a loaded term bandied about by protectionists. When foreign companies open local businesses, they actually tend to offer better wages and conditions than local alternatives. They have to to attract employees, and if the want the best employees, they have to offer better wages..

Now is the time for you to provide evidence of this.

Let me start by just telling you where my ideas are coming from. I am currently reading "The Undercover Economist" which explains all of this in depth. It is a pretty easy read, but it would nonetheless be hard to condense it all into a forum post. I don't have all the time right now to track down all the evidence, but I recommend you get the book, read it, and judge for yourself.

If you know which coffee growers will benefit, why not buy those products? That'll show other producers that they can get better prices for a fairer share.

As coffee prices rise, more coffee producers will enter the market, which will drive down prices.

You don't have "free trade". You have never had "free trade". You will never have "free trade".

If you mean perfectly free trade, yes. We can only strive for relatively freer trade by gradually phasing out tarriffs and harmful trade-distorting subsidies. Free trade is not binary like pregnancy, but falls somewhere on a continuum.

Evidence?

I can't find a link to a good page now. It's in the book. Maybe I can find the info later.

 

[TragicMonkey]

"Sweatshops" are relative. Here in the US, Walmart is known as an IT sweatshop. EA is known as a games development sweatshop.

The truely sick sweatshops to me are the textiles business on offshore US territories where people are lured to work in a bait and switch technique. I'm sure someone else can remember the particular island infamous for it.

I think it's the Marianas, and those "trust territories" someone apparently trusts the US with.

But there are no sweatshops there. Tom Delay and his family and friends and some other legislators and their families and friends flew out there on the textile companies' dime for a long vacation, and concluded that everything's fine. We can trust that, of course.

 

[egslim]

Sweatshops are a rung on the ladder of development. Developed countries used to have many sweatshops. Once most people are employed, wages and working conditions will begin to rise as employers compete for employees.

The difference is that the old sweatshops in now-developed countries were owned by local capitalists, who used the profits to invest in more productive facilities in said countries.

Modern sweatshops however, are often owned by foreign capitalists who don't. They either build more sweatshops in the same country, or move to another before wages begin to rise. Capital doesn't accumulate in these developing countries, nor are investments in more productive facilities made. Hence they are stuck on the same rung of the ladder.
Emperically there is insufficient demand for the cheap goods from sweatshops to create competition for employees. And with these developing countries stuck on the ladder we have a chicken and egg problem.

China got it, by limiting foreign ownership of Chinese facilities they forced the creation of local capitalists, who are developing the country beyond sweatshops.

Personally I don't mind sweatshops, they keep consumerprices low here and if you're an investor the money is returned to you through dividends.

 

[tkingdoll]

It depends on the sweatshop. Some pay ridiculously low wages, have cramped and dangerous working conditions, and extremely long working hours. Those are the good ones.

You do understand, though, that slavery exists in abundance in the world today? There are sweatshops producing goods made by slaves. People who went to look for work and are now working for no wages, barely any food, at risk of them and their families being killed if they don't.

 

[JoeEllison]

In the long run, competitive markets are best for everyone.

That is a nice dream, too bad it doesn't have any basis in reality. The end result in reality is that employers engage in a "race to the bottom" in terms of wages, benefits, and product quality, in order to provide competitive profits to their investors. This is best for investors and executives, and bad for employees.

One counter-argument is that lower prices are "good for consumers"... which would be valid except for the fact that nearly all consumers are also employees. Any benefits are matched by the detriments of the system as it stands now.

 

[Ladewig]

I'm a bit confused. You start a thread with a joke title, but you are seriously arguing for dangerous, unhealthy, and sometimes life-threatening conditions.

A coffee shop sold "fair trade" coffee to its customers for an extra 10 cents, but actually more than 90% of that premium didn't go to the coffee producers. Instead the company pocketed 9 out of 10 cents as extra profits, while posing as a good-guy.

You've been a member of this board for years and you are throwing out a single anectdote as evidence against a particular classification of a products?

Well actually, the term "sweatshop" is somewhat of a loaded term bandied about by protectionists. When foreign companies open local businesses, they actually tend to offer better wages and conditions than local alternatives. They have to to attract employees, and if the want the best employees, they have to offer better wages..

Why are you assuming that they are using higher wages to attract the best employees? It is possible that they are not interested in hiring the best employees. It is also possible that they lie about higher wages or better working conditions to attract the best employees (see Marianas Islands example where workers were lured from other countries and then did not have enough money to return).

 

[CB1]

You seem to be offering a very rosy picture of sweatshops. But this is the problem with economics in my opinion. Economics does not take into account people. It treats people as labour, no more, no less. These “tools” as economics sees them do not have lives that need worrying about. They do not have health problems that need addressing. They do not have wants, needs, desire, dreams and hopes, they are simply there to further profits and oil the wheels of the vast capitalist machine. So yes, if people are only for that purpose, then I agree that sweatshops are a fantastic idea. However, anyone who thinks people deserve more, anyone who desires to see clean drinking water, desires free health care for all and wants everyone to have a chance at living a full and happy life, then sweatshops are not that great. Personally, my own desire to see an end to suffering and greed, will always take priority over cold hard cash.

Cheers

CB

 

[Darat]

I have to say I do tend to have an opinion about sweatshops based on what I know of my family history.

Just as one example - one of my great-grandfathers was in a pit accident, he lost an arm. The pit owners of course did not pay for any medical treatment (luckily his local Chapel funded what medical treatment he did get), they also fined him (after all he was part of the crew that had had the accident), he also lost his job - a one armed miner was useless to the pit owners, which meant he and his family also lost the tied house that was their home. (ETA and a detail I forgot about - his daughters also lost their jobs as pit brew lassies since the owners didn't what them grumbling about what had happened to their father.)

So no I do not think sweatshops are "good". At the very best I can consider them a step above the alternative i.e. starving to death.

 

[Puppycow]

I'm a bit confused. You start a thread with a joke title, but you are seriously arguing for dangerous, unhealthy, and sometimes life-threatening conditions.

The title was meant to be provocative to spark a discussion, what I'm really arguing for is free trade. I'm saying that sweatshops are a bogeyman used by protectionists for thier own narrow economic interests, not the good of poor people in developing countries. No, I'm not "seriously arguing for dangerous, unhealthy, and sometimes life-threatening conditions." In fact such conditions are uneconomical. Of course companies should do what they can to improve working conditions. But if they cannot make a profit and the company withdraws, then the employees are back to fending for themselves. What I am actually trying to say is that when these multinational corporations like Nike and Gap open a business in a developing country, it benefits the employees. (Leaving aside predatory practices). China is a good example of how this can work . Good government policies are essential.

Some countries are so corrupt, that economic development is practically impossible, because the government steals all the profits and doesn't use them for the public good. Those countries do not receive much FDI. China receives 40% of the world's FDI because it has policies that mean companies can actually get a return on investment and not have it immediately stolen or taxed away. Why on earth would a company invest if it doesn't expect a profit?

 

[Puppycow]

That is a nice dream, too bad it doesn't have any basis in reality. The end result in reality is that employers engage in a "race to the bottom" in terms of wages, benefits, and product quality, in order to provide competitive profits to their investors. This is best for investors and executives, and bad for employees.

Free markets provide information in the form of market prices which allows producers to know exactly how much of a certain product to make. Planned economies cannot get this information because prices are set by central planners. Market prices tell producers what products and how many of them to produce (until the marginal benefit equals the marginal cost).

One counter-argument is that lower prices are "good for consumers"... which would be valid except for the fact that nearly all consumers are also employees. Any benefits are matched by the detriments of the system as it stands now.

The thing is that lower prices are good for everyone (notice how nice it is that high tech gadgets like your computer or ipod keep getting better and cheaper due to competition) while uncompetative markets (monopolies or oligopolies) disproportionately benefit a only a few.

 

[Puppycow]

I have to say I do tend to have an opinion about sweatshops based on what I know of my family history.

Just as one example - one of my great-grandfathers was in a pit accident, he lost an arm. The pit owners of course did not pay for any medical treatment (luckily his local Chapel funded what medical treatment he did get), they also fined him (after all he was part of the crew that had had the accident), he also lost his job - a one armed miner was useless to the pit owners, which meant he and his family also lost the tied house that was their home. (ETA and a detail I forgot about - his daughters also lost their jobs as pit brew lassies since the owners didn't what them grumbling about what had happened to their father.)

So no I do not think sweatshops are "good". At the very best I can consider them a step above the alternative i.e. starving to death.

That's a tragic and unjust story, but practically speaking he must have considered that job to be his best option at the time, right? He would not have taken it had better alternatives been available, would he?

There is the unfortunate problem that a large proportion of humans all over the world have little empathy for their fellow man and are almost completely self-interested. Liberal capitalism works because it is honest about human nature. Planned economies assume that most people are altruistic despite evidence to the contrary.

 

[Kerberos]

That is a nice dream, too bad it doesn't have any basis in reality. The end result in reality is that employers engage in a "race to the bottom" in terms of wages, benefits, and product quality, in order to provide competitive profits to their investors. This is best for investors and executives, and bad for employees.

One counter-argument is that lower prices are "good for consumers"... which would be valid except for the fact that nearly all consumers are also employees. Any benefits are matched by the detriments of the system as it stands now.

That’s a nice nightmare, to bas it has no basis in reality. Anyone with the faintest clue about economic theory or economic reality, can see that your assumptions are absurd. Producers do not just compete on price they also compete on product quality. Also they do not simply compete on selling their goods, they also compete for attracting workers.

In your fantasy producers would reap huge profits. However any one of them who was willing to raise the wage or improve the workplace conditions could attract all the labour on the market and thereby reap even bigger profits. Until one of his competitors figured out the trick and raised his wages and workplace conditions a bit further. This cycle continuous until an equilibrium wage has been reached.

Anyone who's seen my posts on this forum will know I'm hardly a defender of anarcho-capitalism, but your post is simply total utter nonsense.

 

[CB1]

Am I the only person who finds it strange that we are still considering human beings as no more than money making tools??

The beauty of "free market" economics, is that employers become "free" to exploit people.

CB