I found this article interesting because it is one of the few anti-sweatshop arguments I have heard that takes into account, and seeks to counter, the argument that boycotting sweatshop goods or even seeking to impose higher wage and work standards on sweatshops will result in higher unemployment. Fortunately the author is (implied to be) an economist so there is not too much appeal to hysterical weeping, but there is still something weirdly naïve and a little vacuous in his opinion.

First of all, he claims that it is presumptuous to assume that wage rates completely determine where international companies decide to set up factories, citing the fact that Nike, which manufactures in Indonesia, also has factories in Mexico, where industrial wages are about four times as high. A debateable point: while no doubt it is overall cost that counts, not just labor costs, I would be almost willing to guarantee, without having Nike’s total manufacturing outlay in front of me, that its industrial concentration in Indonesia far exceeds that in Mexico. I know that almost every athletic shoe I have ever owned was either made in Indonesia, the Philippines, or “Indochina” (and occaisonally, back in the ’80’s, Korea). Maybe raising the wages of factory workers in Indonesia from $2 to $2.50 per day would not necessarily result in all the multi-nationals uprooting and moving somewhere else, but it’s pretty hard to argue the general correlation between labor costs and industrial activity, and setting wages into a larger matrix of business costs should make that relationship more clear, not less so, as the author seems to think.

Which leads to a bigger flaw, or at least inanity, of the reasoning herein. The author’s attitude to wage reform is pretty much circular. For instance, he writes:

“Surely, Kristof and his allies are right that imposition of first world wage and hours standards on Asian and African workers would destroy jobs. Cost increases that are too great would cause rising prices and falling demand. But wages can be increased significantly without big price impacts. Sweatshop workers in Asia earn something like $2 a day, perhaps for twelve hours of work. Tratiwoon would love the opportunity for her son to earn that much. But does Kristof have any reason for assuming that, if Indonesian employers were forced to raise pay to, say, $2.25 or even $2.50 a day-leading to a big boost in workers’ living standards-this requirement would be so burdensome that sweatshop workers would lose jobs and join Tratiwoon in the garbage dump?”

By implication, his idea of a good wage reform would be the maximum wage increase which would not adversely affect the companies’ costs enough to fire the workers or leave. Therefore, his argument is essentially that raising wages will not cause workers to lose their jobs if wages are only raised just enough so that the companies do not fire them! This is maybe a pretty nice, humane idea. But he’s definitely kidding himself if he thinks that that is the essence of the anti-sweatshop movement. He writes:

“Today, organizational and financial support for student and consumer organizing comes from the labor movement itself. This gives rise to the charge that the demand for labor standards is not only self-indulgent on the part of spoiled, affluent college students, but is also protectionist, an attempt to keep investment and jobs from migrating to the third world. This charge is silly because the modest wage increases that might result from an effective international standards regime would not cause manufacturers to rethink their global sourcing strategies. No clothing assembler will move back from Jakarta to New York because of a requirement to raise wages from $2 to $2.50 a day.”

Yeah, no shit, but Third World sweatshops are hardly the only possible source of the products they manufacture. But I have talked to plenty of people who are opposed to “sweatshops” that think that the government should forbid the importation of sweatshop products or, barring that, that consumers should boycott them. I have seen ads on sites like the The Onion that advertise “sweatshop-free” clothing “made in downtown L.A.” It is obviously easier on the consumer’s side to simply eschew Third World-produced clothing altogether than to force the companies to move their operations (although the irony is that the U.S. is by no means sweatshop-free, and “made in downtown L.A.” is certainly no guarantee that the product wasn’t made in a sweatshop). Thus opposing sweatshops can dovetail with protectionist economic policy in ways other than the rather implausible possibility that factories will relocate to America from the Third World, and that opposition does not always confine itself within the bounds of the free market.

I should preface the third fallacy, which is practical rather than theoretical, by nonetheless making a theoretical point. After listening and reading all last year to French pundits pulling out their hair over the question of whether socialism or liberalism are better systems for living, I finally concluded that that is an irrelevantly abstract way of thinking about the issue. The issue is not which one is “better” (and on what standard are we all to agree?) but which one will survive. Actually the scenario became all the more acute when I visited Russia, where plenty of people (including Putin, apparently) are still willing to blather on about how disbanding the Soviet Union was a mistake. To which I wanted to reply, what choice was there? The Soviet Union was bankrupt, and continuing on was not an option. I certainly concede that Russia and the international financial institutions have made a lot of mistakes, but one would think that eventually a lurid light would break in upon a darkened understanding and all the grumpy Russian pensioners would realize that the reason (well, one of the reasons) that the country was bankrupt was precisely because of that inviolable and untenable social and economic security for which they are always reminiscing. I bring all of that up merely to suggest that in thinking about these issues it behooves one to be more Darwinist and less utopian in thinking about these things. If something is not viable and sustainable, it doesn’t matter in the least how nicce it would be. Which is why the analogy that the author makes in the article between the “sweatshop era” in the U.S. and the current international scene is rather imperfect. He goes through a great show of facts and figures to demonstrate why the imposition of the minimum wage and various labor regulations in America was helpful to the workers and not harmful to commerce, while neglecting to consider that probably the only reason it didn’t cause major contraction in the industrial sector was that businesses were not yet international enough at that time to move their factories overseas to minimize costs (except maybe to Cuba or Puerto Rico). In those days businesses had to submit to regulation because they had no choice. That is no longer true when a multi-national facing higher costs in Indonesia is being offered all kinds of concessions and bribes to move to Sri Lanka. The author himself acknowledges that “the possibilities are remote that transnational regulation can improve conditions under which third world workers toil,” but fails to be perturbed by the fact that the only other way that, say, the U.S. government can effectively try to regulate international working conditions is through protectionist trade policies. And somehow the embargo on Cuba has failed to teach him that American sanctioning by itself is not sufficient to force even the smallest of countries to do its bidding (well, granted, the Soviet Union bolstering added an equally artifical and opposite factor, but that ended 15 years ago). And so who, basically, is going to enforce these standards even if everyone does agree they are a good idea?

Finally, he sneers at “free-marketers” for opposing wage regulation abroad while not being “noticeably vocal in opposition” to the minimum wage and thinks of that nature domestically. Well, I happen to know plenty of people who are at least partially opposed to the minimum wage and various other guaranteed workers’ benefits in the U.S. for precisely the same reasons. Just because France’s 35-hour work weeks are a national joke doesn’t mean that it doesn’t actually face 10-12% unemployment. It is regularly acknowledged in France that because of that it is virtually impossible to start a small business there, and yet journalists and intellectuals still wander around searching for “le secret du dynamisme” of the American economy as if it were the philosopher’s stone. Here’s a key, three simple words that they teach on the first day of intro. economics: “low entry costs.” And beyond even that, it’s more than a little annoying that these activists throw out wage figures completely out of context, without mentioning an average living wage in the countries concerned. Given that the average yearly income in India is about $1,600, for example, it is almost assured that the programmers making $24,000 per year are doing better than a $100,000 or even $150,000 per year programmer in the U.S., where the average income is about $40,000.