Sweatshops and Activists

June 3, 2012

Sweatshops and the Issues

It seems likely that any thoughtful and studied person, examining the logic and the reality of experience, would conclude that, in general, globalization is good for the poor of the world. There are significant nooks and crannies of exception, but in a broad and general sense, it is well understood that more than a billion of the world’s population has risen from poverty across the last two decades, largely as a result of the growth of their respective national economies and that growth is largely the result of enhanced and accelerated globalization.

So, that being so undeniably true, why do the activists continue to rail against globalization and why do many look for ways to stop it?

One might ask a few questions to better understand this continuing and growing phenomenon: Do they deny that the above is true? Do they feel that while it is true, it is still appropriate to protest—they want more? If they want more, then who is best to protest against?

Let's use an example: If Walmart and Apple are perhaps paying above local custom and local law in their foreign manufacturing and satisfied that is the case in regard to the vendors they buy from in foreign countries, and if they are not engaging in employment behaviors which are abusive or contrary to local law or custom, then who is to be protested against? What do the protesters want?

It appears that the protesters want to see the employment in the foreign country adopt a set of compensation and management practices which are “foreign” to the foreign country. They have some kind of ideal employment situation in mind. Maybe it’s the best of the US employment situations, or it’s some modified version. It's usually not clear exactly what standard they are "exporting" to the foreign country.

Suppose it is common in China for employees to make 100 RMB per day. That’s only about $16 at today’s exchange rates, while here in San Francisco, minimum wage exceeds $10 per hour. Suppose it is common for factory workers in China to work 6 days per week, 10 hours per day (60 hours per week), whereas in the US it is common to work only 40 hours per week.

Further, let’s suppose the factory offers housing and food to its employees in China, many or whom elect to take this offer, because it is cheaper for them to take the factory housing and food than to rent and pay for food on the outside. Suppose the housing and food cost 50% of the gross pay, and thus the net available to the employee is then only 50 RMB ($8 per day).

Many of the factory workers in China are migrants from the countryside, having moved to the city just to work in the factory. Let's assume they have access to competitive information, a variety of factory jobs for which they could apply, and that they are capable of basic analysis. They can calculate what the factory job will mean in net income, vs. what they could earn in agriculture in the countryside. They have friends or relatives already working there. So, they anticipate that the $8/day is better than what they could earn in agricultural work in the countryside. They think they can send most of $48/ week back to their families in the countryside.

What is wrong with this picture? The migrant factory worker has improved his/her income and life style as a result of the employment offered, and that is as a result of growth and globalization. What is there to protest about? The workers have bettered themselves. They had choices and they chose this job. No one forced them to take these jobs. No one is locking the factory premises and forcing them to stay if they want to leave.

Still, it appears there are numerous protesters who do not accept this reality. Maybe to them, $48/week is horrendously unfair. Maybe they have in mind some far higher wage, closer to US wages. They think working 10 hours per day, 6 days a week, is a “sweatshop,” and they do not choose to acknowledge that if it is, then the work in the countryside, which might be 12 hours per day for 7 days per week, for less money, with far worse housing and food—that’s NOT a sweatshop…?

Let’s skip the process of protesting and who can be effectively protested against to change this seemingly beneficial and fair reality, for a moment, and assume the protesting is successful. Foir whatever reasons Apple moves its production and Walmart drops those vendors. Then, no one can dispute that those same factory jobs might well move to Bangladesh or Angola, and the protestors can start all over again. And, regardless of whether they move or not, the cost of goods to buyers throughout the world increases. When prices increase, as economists attest, there is reduced demand (price/demand elasticity affects most factory produced products). Thus, there is need for fewer factory jobs and fewer poverty stricken migrants from the countryside are able to start the process of climbing out of poverty.

No one disputes that the improved condition of these migrant workers are still difficult. They do not have enough money to hire child care workers back home. They must rely on relatives to care for their children. They do not themselves have access to the best schools where they work, because of China’s “houkou” laws which discriminate between locals and migrants in terms of many benefits. They can’t afford vacations, best health care, much entertainment, and things we all take for granted. So, by US standards, they would be considered in the bottom 20%, not far from homeless. No one disputes that.

Nevertheless, using our assumptions, they have choice, have made their choice, have improved their standard of living and are being compensated and treated in accordance with local custom in their country and in compliance with all local law. In fact, most multinationals are thought to pay wages that are 10-40% above local standards and thus, they are pulling wages up in the country—for two reasons: They pay more and their added demand for labor contributes to pressures that increase wages in the country.

No one disputes that there are situations which do not fit these assumptions, where muti-nationals are violating local laws or dealing with employees in abusive ways. These deserve protest and change, but it would be wonderful if we could reach agreement on how to deal with those which do fit these assumptions, because I think these are the majority and it seems a very significant amount of disagreement and energy is invested in trying to “fix” these, also.

So, back to the question of protesting. Notwithstanding the arguments above, protesting continues. Against whom? Is it right that the activists should protest Walmart and Apple? They are entirely in compliance with local law and custom (our assumption), even where some locals are not, simply because local law is not very well enforced. This is happening. Is it right that they protest the World Bank and the IMF when the multi-nationals are in compliance with the agreements of these organizations? It would seem not, unless the protest is aimed at changing those agreements. Why shouldn’t the protests be against the local country, where the minimum wage laws are determined, the length of the allowable work week, etc?

Why? Apparently because it is extraordinarily difficult for protesters in wealthy nations to effectively protest the Chinese (or any foreign) government. It’s so much easier to try to protest world organizations and the multinational. Mounting publicity which highlights the dramatized difficult lives of the migrant factory workers is not hard, and is so poignant when properly displayed in the wealthy developed country, especially when there exists a host of varied motivations to attach to any potentially significant effort to slow globalization, punish the Chinese, or effect a wealth transfer.

Finally, how many of the protesters would vote for increased tax in the country in which they live, which could be distributed to those workers who are underpaid—something coming from their individual paychecks? Doubtful many would. Who do they want to pay for the improved conditions of the migrant factory worker? Bill Gates? The US Government? If the US, who will pay that bill in the end? They want the "wealthy" multi-national corporation to pay the bill, thus reducing its profits, reducing the taxes it pays, reducing its competitiveness against other muti-nationals from Japan or elsewhere? In the end, doesn't someone pay for this wealth transfer? Shouldn't we address who that should be at first, and make sure it is fair on a global basis?