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Articles > Money July, 02, 2012

Why you should buy goods made in sweatshops

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Several times a year, human rights campaigners come together to urge evil capitalist Britain to do more in the ‘fight against sweatshops’. Whether this be forcing UK firms to withdraw contracts with firms who use sweatshops or by persuading consumers that they’re saving the world by boycotting brands such as Nike and Coca Cola.

Photo by Marissa Orton

Before I start, let me stress that I agree that the working conditions of sweatshops is appalling – but on the other hand I believe that they are a step in the right direction for the poor developing economies in which they exist.

They often argue that globalisation has encouraged the rise of these sickening and abusive institutions, and as a result feel they can conclude that the concept of globalisation is bad for everyone and should be immediately abandoned. Unfortunately, like those who campaign for multi-million pound wages for nurses, these human rights activists are wrong on so many levels.

Let’s look first at why there are as many sweatshops as there are – falling costs of transportation has lead to the rise of off shoring and outsourcing (where companies produce their products, or parts for their products abroad) particularly to poorer countries where the average minimum wage is low (normally because of a lack of successful industries and the existence of a large subsistence economy [self sufficient farming]). Tim Harford observed in his book “The Undercover Economist” that these countries and the companies operating within them do not have the money to pay western style wages and accommodate high standards of cleanliness in their work places, so as a result the cost of living, working standards and income are lower.

So how can we encourage these countries that until quite recently had been ‘left behind’ by the technology and industrial revolution that has swept much of the developed world, to conform to western labour laws. The simple answer is this – by enabling them to become richer – effectively letting them use sweatshops for now and trading with them (this could include foreign direct investment such as outsourcing parts of our manufacturing process to their countries). Only then will they see the injection of finance and infrastructure needed to begin improving standards.

Put bluntly – people in these countries would not work in sweatshops if the alternatives were better. This is one of the concepts a lot of people, however good their intentions, fail to grasp – the alternative for these people is far worse than their current situation. So bad in fact that on the topic of child labour in sweatshops, UNICEF concluded in their paper ‘State of the World’s Children‘ that “the alternatives are far more hazardous and exploitative”.

Look at India – a developing country with a massive population, the main alternative here to working in sweatshops is working on the rubbish dumps, a far more dangerous job with far less pay at the end of it.

When America enforced restrictions on garment imports from Bangladesh (produced in sweatshops) 100,000 lost their jobs and urged the US to reconsider. Regardless of this, people will still insist that these people should be paid more. As Daniel Viederman once saidFair work is a critical underpinning of social stability. Businesses that respect labour laws put more money into the hands of workers.” He’s right to a point – in the short term it would put more money into the hands of far fewer workers… and then in the long run the business would shut down because their new costs of production would be unaffordable. Economist Johan Norberg famously pointed out the irony that:

(sweatshop critics) say that we shouldn’t buy from countries like Vietnam because of its labour standards, they’ve got it all wrong. They’re saying: “Look, you are too poor to trade with us. And that means that we won’t trade with you. We won’t buy your goods until you’re as rich as we are.” That’s totally backwards. These countries won’t get rich without being able to export goods.

He’s exactly right – these countries will never achieve western levels of wealth unless we continue to support their developing industries – whether they use sweatshops or not is irrelevant, because as a country becomes richer companies can afford to pay more – the workers would also demand more because they would now have more options. This increase in wealth would ensure that standards in the work place would rise too – because firms would be able to afford better conditions. Pollution would also fall – western technology that ensures increased energy efficiency is an expensive investment in the short run – but as these firms grow they will recognise the long term benefits of such measures and press ahead. Going back to the subject of increased options – as a country’s wealth rises the banks have more finance available to lend to entrepreneurs, so workers can set up their own businesses.

But what if the activists got their way? What if a mass boycott of a company’s goods forced them to stop producing? Well plainly and simply, the sweatshops would close, developing countries would be left behind, leaving them unable to improve their infrastructure, education etc. They would also become more dependent on foreign aid and above all remain poor. On top of this millions would be made unemployed and poorer countries would never have the chance to become a successful economy.

There will be a lot of people who read this and simply dismiss it as theoretical predictions that attempt to quantify human suffering and dismiss it as a necessary sacrifice, but I think the following statistics from two major studies say it all:

  • In Cambodia, Haiti, Nicaragua and Honduras the average wage paid by a firm accused of being a sweatshop is more than double the average income in that country’s economy
  • In Honduras the average sweat shop worker earns $13.10 per day, yet 44 percent of the country’s population lives on less than $2 per day
  • East Asia embraced significant numbers of sweatshops, sub-Saharan Africa has not. The average income in East Asia has increased sharply ever since, whereas in sub-Saharan Africa average incomes have fallen significantly

Source: How have the world’s poorest fared since the early 1980s? (Shaohua Chen and Martin Ravallion – Development Research Group, World Bank)

Overall hopefully I’ve shown that long-term globalisation is about enabling all countries to develop together and benefit from long term interdependence. Short-term scaremongering about the negatives of globalisation will only ever be bad for the poor – the very people the campaigners are so dearly trying to protect. Instead, they should be pushing for an increase in trade with these countries, a removal of trade barriers on their goods and an end to any boycotts – these are the real issues facing developing nations.

Brief follow up:

1) This was written well over a year ago, before I started university and consequently I feel if I was to rewrite this post the emphasis on encouraging governments to be more responsible would be much greater.
2) I also categorically condemn the use of children in sweatshops, although above I mentioned that the alternatives may be worse – I would rather they were in education than sat in a factory. There is almost no economic or social benefit to children in sweatshops, so I would like to disagree with this section wholeheartedly in my original post.
3) I do not wish to condone the behaviour of sweatshops at all. What I intended to do through writing this article was encourage some discussion beyond the widely held belief that cheap labour and/or sweatshops are categorically bad. The fact that this has encouraged people to speak out shows that it has gone part way to instigating this kind of debate.

Originally posted December 2009

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  1. Allan

    Chuffed that you speak sense. I think you wrote well, unlike you’re trying to prove you’re super intelligent by using big words which I see a lot from student writers. You discuss good principal and logic, and it’s a pity people are still ignorant enough to think everybody who works hard in the world should get at least £5.80 per hour, regardless of living costs.

    I will attempt to put it very simply for some of you- Imagine you work at a pretzel stand, are a child but have no school to go to, and there are no other jobs available. Everyone decideds to criticise the stand owner for letting a child work, nobody buys his pretzels, he can’t afford to pay you, and you are left with no job, no better alternative, and can no longer afford food. Do you simply believe that by people stopping giving money to the stand, he will decide to start paying more, increase living conditions and still sell pretzels at the same price?

  2. Brief follow up:

    1) This was written well over a year ago, before I started university and consequently I feel if I was to rewrite this post the emphasis on encouraging governments to be more responsible would be much greater.

    2) I also categorically condone the use of children in sweatshops, although above I mentioned that the alternatives may be worse – I would rather they were in education than sat in a factory. There is almost no economic or social benefit to children in sweatshops, so I would like to disagree with this section wholeheartedly in my original post.

    3) I do not wish to condone the behaviour of sweatshops at all. What I intended to do through writing this article was encourage some discussion beyond the widely held belief that cheap labour and/or sweatshops are categorically bad. The fact that this has encouraged people to speak out shows that it has gone part way to instigating this kind of debate.

  3. steph robbins

    This is really bad i learnt about kids in loads of other foren countires make children make rebbok trainers and footballs for 10p or less a day!! Really bad upsetting i had dtopped buying rebboks in year 5 and will never again.

    • As a consumer you have every right to boycott company practices that you dissapprove of. But out of interest, did you also learn about the alternatives they face?

  4. Nathan

    Phil Knight, the chairman of Nike, is worth $14 billion. So if a pregnant woman working 14 hour days in an Indonesian sweatshop wants better working conditions he would be forced to close down factories? What a load of arse-water!

    • I appreciate your point but my article is based on the situation as it is, not how it should be. The world currently works in the way I outlined above, whether this is right or wrong is (unfortunately) irrelevant. The fact of the matter is: if wages are high in LDC’s then there is a lower chance of companies investing in them which in time would push up wages. The way the current world economy works doesn’t necessarily incentivise businesses to prioritise ethics over costs. There is definitely debate to be had, but I simply outlined the situation as it is – to pretend its not is naive.

  5. Ash

    Have to agree with ‘Wiki(etc)’. Really poorly written and what an unfortunate opening paragraph. Talk about bias and misunderstanding.

    • I’d encourage you to further explain what part of the article you felt was ‘poorly written’ instead of throwing it out as a general, unspecific assertion. Also, please see my response to the comment you agreed with.

  6. Shannon Gadd

    This article is good in that it does not strive to be politically correct. LEDCs need sweatshops simply because there is no alternative to working. Yes, the conditions are bad but what is the alternative? Sweatshops can’t be deemed unethical purely because of wages and working conditions because they are a part of global economy. In fact, if sweatshops are deemed immoral, business itself must also be immoral. Unfortunately, though, business is necessary. It may be wise to apply Milton Friedman’s view that normative ethics must be separate from business ethics. But, I really enjoyed the article!

  7. WIKIWWKWIWK

    Wow this is a bad piece of writing. This sentence is a horrible; “…like those who campaign for multi-million pound wages for nurses, these human rights activists are wrong on so many levels.” I stopped caring about your opinion on anything after I read this sentence. Who campaigns for multi-million pound wages for nurses? I think people just campaign for a fair wage for a hard job. This sentence shows your prejudices…

    • Thanks for responding even though I’m guessing you didn’t really enjoy my article. The first sentence when taken out of context does appear to be an extreme, really uninformed and disgusting conclusion. However, context is a wonderful thing. This post was originally published on my blog about a year ago, shortly after I had done a purely financial analysis on the feasibility of paying nurses multimillion pound wages. I’ll repeat, the analysis was purely financial. My personal opinion is drastically different; I have immense respect for the public sector and feel the majority are worryingly underpaid. The financial analysis I referred to was a piece that someone requested I do in response to an online petition calling for footballers wages for nurses. I started to receive abusive messages about the post a few months after its publication but decided not to delete it because I am personally self assured in the knowledge that that blog is not an attack on the public sector, nor is it an attempt to undermine the work those in the public sector do. I am not ashamed to say I once did a financial analysis of the practicalities of multimillion pound wages, because the point of the article was not to convince people that they shouldn’t be paid more. They should be paid much more. That’s the bottom line which I hope you appreciate. As for your assertion that you stopped caring about my opinion after the first line, I would ask you to be a little more open minded. It’s very rare that I agree with everything someone has to say, but that doesn’t mean I stop listening as soon as they say something I take issue with. On the final point about the personal bias you believe I have: having grown up with most of my family and friends working in the public sector, I can assure you I am in fact a strong supporter of the public sector and higher wages within it also. If there was going to be a bias, it’s in the other direction.