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Specifically the companies stand accused of chasing cheap labor around the globe, failing to pay their workers living wages, using child labor, turn- ing a ...
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In r e c e n t years, t h e r e has b e e n a d r a m a t i c growth in the contracting out of p r o d u c t i o n by companies in the industrialized countries to suppliers in developing countries. This glob- alization of p r o d u c t i o n has led to an emerg- ing international division of labor in footwear a n d apparel in which companies like Nike and R e e b o k c o n c e n t r a t e o n p r o d u c t design a n d marketing b u t rely on a network of contractors in Indonesia, China, Central America, a n d the like, to build shoes or sew shirts according to exact specifications a n d deliver a high-quality good according to precise delivery schedules. As Nike's vice president for Asia has p u t it, "We d o n ' t know the first thing a b o u t manufactur- ing. We are marketers a n d designers." T h e contracting arrangements have drawn i n t e n s e fire from critics—usually labor a n d h u m a n rights activists. These "critics" (as I will refer to t h e m ) have c h a r g e d that the compa- nies are (by proxy) exploiting workers in the plants (which I will call "international sweat- shops") of t h e i r suppliers. Specifically t h e c o m p a n i e s stand accused of chasing c h e a p labor a r o u n d the globe, failing to pay their workers living wages, using child labor, turn- i n g a b l i n d eye to abuses of h u m a n rights, b e i n g complicit with repressive r e g i m e s in denying workers the right to j o i n u n i o n s a n d failing to enforce m i n i m u m labor standards in the workplace, a n d so on. T h e campaign against international sweat- shops has largely unfolded on television and,
Ian Maitland to a lesser extent, in the p r i n t media. W h a t seems like n o m o r e t h a n a handful of critics has m o u n t e d an aggressive, media-sawy cam- p a i g n w h i c h has p u t t h e publicity-shy retail giants o n the defensive. T h e critics have or- c h e s t r a t e d a series of s e n s a t i o n a l "disclo- sures" on prime time television exposing the terrible pay a n d working conditions in factories makingjeans for Levi's or sneakers for Nike or Pocahontas shirts for Disney. O n e of the princi- pal scourges of the companies has been Charles Kernaghan who runs the National Labor Coali- tion (NLC), a labor h u m a n rights g r o u p in- volving 25 unions. It was Kernaghan who, in 1996, broke the news before a Congressional committee that Kathie Lee Gifford's clothing line was b e i n g m a d e by 13- a n d 14-year-olds working 20-hour days in factories in Honduras. Kernaghan also arranged for teenage workers from sweatshops in Central America to testify before congressional committees a b o u t abu- sive labor practices. At o n e of these hearings, o n e of the workers held u p a Liz Claiborne cot- ton sweater identical to ones she had sewn since she was a 13-year-old working 12-hour days. According to a news report, "[t]his image, ac- cusations of oppressive conditions at the fac- tory a n d the Claiborne logo played well on that evening's network news." T h e result has been a circus-like atmosphere—as in R o m a n circus where Christians were thrown to lions. Kernaghan has shrewdly targeted the com- panies' carefully cultivated public images. H e
From Ian Maitland, "The Great Non-Debate Over International Sweatshops," British Academy of Management Annual Conference Proceedings, September, pp. 240-65, 1997. Reprinted with permission of the author.
OBJECTIVE OF THIS PAPER
THE CASE AGAINST INTERNATIONAL SWEATSHOPS
employee a n d his or h e r family." H e has said that wages in the maquiladoras of Mexico av- eraged $35 to $55 a week (in or n e a r 1993) which he calls a "shockingly substandard wage," apparently on the grounds that it "clearly does n o t allow an employee to feed a n d care for a family adequately."^17 In 1992, Nike came in for harsh criticism when a magazine published the pay stub of a worker at o n e of its Indonesian suppliers. It showed that the worker was paid at the rate of $1.03 p e r day which was report- edly less than the Indonesian government's fig- ure for "minimum physical need."1 8
Immiserization Thesis
Former Labor Secretary Robert Reich has pro- posed as a test of the fairness of development policies t h a t "Low-wage workers s h o u l d be- come better off, n o t worse off, as trade a n d in- v e s t m e n t b o o s t n a t i o n a l i n c o m e. " H e has written t h a t "[i]f a country pursues policies t h a t... limit to a narrow elite the benefits of trade, the promise of o p e n c o m m e r c e is per- verted a n d d r a i n e d of its rationale." A key claim of the activists is that companies actu- ally impoverish or immiserize d e v e l o p i n g country workers. They experience an absolute decline in living standards. This thesis follows from the claim t h a t the b i d d i n g war a m o n g developing countries is depressing wages....
Widening Gap Between Rich and P o o r
A related charge is that international sweat- shops are contributing to the increasing gap between rich and poor. Not only are the p o o r being absolutely impoverished, but trade is gen- erating greater inequality within developing countries. Another test that Reich has proposed to establish the fairness of international trade is that "the gap between rich a n d p o o r should tend to narrow with development, not widen." Critics charge that i n t e r n a t i o n a l sweatshops
flunk t h a t test. They say t h a t t h e increasing GNPs of some developing countries simply mask a widening gap between rich a n d poor. "Across the world, both local and foreign elites are getting richer from the exploitation of the most vulnerable." And, "The major adverse consequence of quickening global economic integration has been widening income dispar- ity within almost all nations... ,"^22 T h e r e ap- pears to b e a tacit alliance between the elites of both first and third worlds to exploit the most vulnerable, to regiment a n d control a n d con- script them so that they can create the material conditions for the elites' extravagant lifestyles.
Collusion with Repressive Regimes
Critics charge that, in their zeal to make their countries safe for foreign investment, T h i r d World regimes, notably China a n d Indonesia, have s t e p p e d u p their repression. N o t only have these countries failed to enforce even the m i n i m a l labor rules on the books, b u t they have also used t h e i r military a n d police to break strikes and repress i n d e p e n d e n t unions. They have stifled political dissent, b o t h to re- tain their hold on political power a n d to avoid any instability that might scare off foreign in- vestors. Consequently, critics charge, compa- nies like Nike are profiting from political repression. "As unions spread in [Korea a n d Taiwan], Nike shifted its suppliers primarily to Indonesia, China a n d Thailand, where they could d e p e n d on governments to suppress in- d e p e n d e n t union-organizing efforts."
EVALUATION OF THE CHARGES AGAINST INTERNATIONAL SWEATSHOPS
T h e critics' charges are undoubtedly accurate on a n u m b e r of points: (1) T h e r e is n o d o u b t t h a t i n t e r n a t i o n a l c o m p a n i e s are c h a s i n g
T h e same news reports also shed some light on the working conditions in sweatshops. Ac- cording to the Washington Post, in 1994 the In- donesian office of the international accounting firm Ernst & Young surveyed Nike workers con- cerning worker pay, safety conditions, a n d at- titudes toward t h e j o b. T h e auditors p u l l e d workers off the assembly line at r a n d o m a n d asked t h e m questions t h a t the workers answered anonymously. T h e survey of 25 work- ers at Nike's S e r a n g p l a n t f o u n d t h a t 23 t h o u g h t the hours a n d overtime hours too high. N o n e of the workers reported that they h a d been discriminated against. Thirteen said the working environment was the key reason they worked at the Serang plant while eight cited salary a n d benefits.' T h e Post r e p o r t also n o t e d that the Serang plant closes for a b o u t 10 days e a c h year for Muslim holidays. It quoted Nike officials and the plant's Taiwanese owners as saying that 94 percent of the workers h a d r e t u r n e d to the plant following the most recent break.... T h e r e is also the mute testimony of the lines of j o b applicants outside t h e sweatshops in Guatemala a n d H o n d u r a s. According to Lucy Martinez-Mont, in Guatemala the sweatshops are conspicuous for the long lines of y o u n g people waiting to be interviewed for a j o b. O u t s i d e t h e gates of the industrial p a r k in H o n d u r a s t h a t R o h t e r visited "anxious o n l o o k e r s are always waiting, h o p i n g for a chance at least to fill out a j o b application [for employment at o n e of the apparel plants]." T h e critics of sweatshops acknowledge that workers have voluntarily taken their jobs, con- sider themselves lucky to have them, a n d want to k e e p t h e m.... But they go o n to discount the workers' views as the p r o d u c t of confusion or ignorance, a n d / o r theyjust argue that the workers' views are b e s i d e t h e p o i n t. T h u s , while "it is u n d o u b t e d l y true" that Nike has given j o b s to t h o u s a n d s of p e o p l e w h o wouldn't be working otherwise, they say that "neatly skirts the fundamental human-rights
issue raised by these production arrangements that are now spreading all across the world."3 5 Similarly the NLC's K e r n a g h a n says t h a t " [w] h e t h e r workers think they are better off in the assembly plants t h a n elsewhere is n o t the real issue."^36 Kernaghan, a n d Jeff Ballinger of the AFL-CIO, c o n c e d e that the workers des- perately n e e d these j o b s. But " [ t ] h e y say they're n o t asking that U.S. c o m p a n i e s stop operating in these countries. T h e y ' r e asking that workers be paid a living wage a n d treated like h u m a n beings."' Apparently these work- ers are victims of what Marx called false con- sciousness, or else they would grasp that they are being exploited. According to Barnet a n d Cavanagh, "For many workers... exploitation is n o t a concept easily c o m p r e h e n d e d because the alternative prospects for e a r n i n g a living are so bleak."3 8
Immiserization and Inequality
T h e critics' claim that the countries that host international sweatshops are marked by grow- ing poverty and inequality is flady contradicted by the record. In fact, many of those countries have experienced sharp increases in living stan- dards—for all strata of society. In trying to at- tract investment in simple m a n u f a c t u r i n g , Malaysia and Indonesia and, now, Vietnam a n d China, are retracing the industrialization path already successfully taken by East Asian coun- tries like Taiwan, Korea, Singapore a n d H o n g Kong. These four countries got their start by producing labor-intensive manufactured goods (often electrical a n d electronic components, shoes, a n d garments) for export markets. Over time they graduated to the export of higher- value-added items that are skill-intensive and re- quire a relatively developed industrial base.3 9 As is well known, these East Asian countries achieved growth rates exceeding 8 p e r c e n t for a q u a r t e r century.... T h e workers in these economies were n o t impoverished by growth.
T h e benefits of growth were widely diffused: These economies achieved essentially full em- ployment in the 1960s. Real wages rose by as m u c h as a factor of four. Absolute poverty fell. A n d i n c o m e inequality r e m a i n e d at low to m o d e r a t e levels. It is t r u e t h a t in t h e initial stages the rapid growth generated only mod- erate increases in wages. But once essentially full employment was reached, a n d what econ- omists call t h e Fei-Ranis t u r n i n g p o i n t was reached, the increased d e m a n d for labor re- sulted in the bidding u p of wages as firms com- p e t e d for a scarce labor supply. Interestingly, given its historic mission as a watchdog for international labor standards, the ILO has embraced this development model. It recently n o t e d that the most successful devel- oping economies, in terms of o u t p u t a n d em- ployment growth, have b e e n "those who best exploited emerging opportunities in the global economy."^4 An "export oriented policy is vital in countries that are starting on the industri- alization path and have large surpluses of cheap labour." Countries which have succeeded in at- tracting foreign direct investment (FDI) have e x p e r i e n c e d rapid growth in manufacturing o u t p u t a n d exports. T h e successful attraction of foreign investment in plant a n d e q u i p m e n t "can be a powerful spur to rapid industrializa- tion a n d employment creation." "At low levels of industrialization, FDI in garments a n d shoes a n d some types of c o n s u m e r electronics can be very useful for creating e m p l o y m e n t a n d o p e n i n g the e c o n o m y to i n t e r n a t i o n a l mar- kets; there may be some entrepreneurial skills created in simple activities like garments (as has h a p p e n e d in Bangladesh). Moreover, in some cases, such as Malaysia, the investors may strike d e e p e r roots a n d invest in m o r e capital- intensive technologies as wages rise."
According to the World Bank, the rapidly growing Asian economies (including I n d o n e - sia) "have also b e e n unusually successful at sharing the fruits of their growth." In fact, while inequality in the West has b e e n growing,
it has b e e n shrinking in the Asian economies. They are the only economies in the world to have experienced high growth and declining inequality, a n d they also show shrinking gen- der gaps in education....
Profiting from Repression?
W h a t a b o u t t h e c h a r g e t h a t i n t e r n a t i o n a l sweatshops are profiting from repression? It is u n d e n i a b l e that there is repression in many of the countries where sweatshops are located. But economic development appears to be re- laxing that repression r a t h e r t h a n strength- e n i n g its grip. T h e companies are supposed to benefit from g o v e r n m e n t policies (e.g., re- pression of unions) that hold down labor costs. However, as we have seen, the wages paid by the international sweatshops already match or exceed the prevailing local wages. N o t only that, b u t incomes in the East Asian economies, a n d in Indonesia, have risen rapidly.... T h e critics, however, are right in saying that the Indonesian g o v e r n m e n t has opposed in- d e p e n d e n t u n i o n s in the sweatshops o u t of fear they would lead to higher wages a n d labor unrest. But the g o v e r n m e n t ' s fear clearly is that u n i o n s m i g h t drive wages in the m o d e r n industrial sector above market-clearing levels— or, m o r e exactly, further above market. It is ironic that critics like Barnet a n d Cavanagh would use the Marxian t e r m "reserve army of the u n e m p l o y e d. " According to Marx, capi- talists deliberately maintain high levels of un- e m p l o y m e n t in o r d e r to control the working class. But the Indonesian government's poli- cies (e.g., suppression of unions, resistance to a higher m i n i m u m wage, and lax enforcement of labor rules) have b e e n directed at achieving exacdy the opposite result. T h e g o v e r n m e n t a p p e a r s to have calculated t h a t h i g h u n e m - p l o y m e n t is a g r e a t e r t h r e a t to its h o l d o n power. I think we can safely take at face value its claims t h a t its policies are g e n u i n e l y
CONCLUSION: THE CASE FOR NOT EXCEEDING MARKET STANDARDS
well-intentioned policies that improve on mar- ket outcomes are likely to have the opposite effect. W h e r e d o e s this leave the i n t e r n a t i o n a l manager? If the p r e c e d i n g analysis is correct, t h e n it follows that it is ethically acceptable to pay market wage rates in developing countries (and to provide e m p l o y m e n t conditions ap- propriate for the level of d e v e l o p m e n t ). T h a t holds true even if the wages pay less than so- called living wages or subsistence or even (con- ceivably) t h e local m i n i m u m wage. T h e a p p r o p r i a t e test is n o t w h e t h e r t h e wage r e a c h e s s o m e p r e d e t e r m i n e d s t a n d a r d b u t whether it is freely accepted by (reasonably) in- formed workers. T h e workers themselves are in the best position to j u d g e whether the wages offered a r e s u p e r i o r to t h e i r n e x t - b e s t al- ternatives. ( T h e s a m e logic applies mutatis mutandis to workplace labor standards). I n d e e d , n o t only is it ethically acceptable for a company to pay market wages, b u t it may be ethically unacceptable for it to pay wages that exceed market levels. T h a t will be the case if the company's above-market wages set prece- dents for other international companies which raise labor costs to the point of discouraging foreign investment. F u r t h e r m o r e , companies may have a social responsibility to transcend their own narrow preoccupation with protect- ing their b r a n d image a n d to publicly defend a system which has greatly improved the lot of millions of workers in developing countries.
NOTES