Folks, we need to talk about sweatshops and I’ve got news for you: they aren’t as evil as you may think.
The problem with sweatshops is their reportedly bad working conditions. But before you burn your Nikes, consider that sweatshops are the symptoms, not the cause of poverty in developing countries. What’s more, developing countries need sweatshops if they ever hope to break out of poverty. And we, richer economies, need sweatshops so that we enjoy our higher standard of living.
Foreign direct investment or factories set up by multinational corporations in countries like Bangladesh provide jobs and feed families. We hear stories about terrible working conditions, long hours and low wages, but don’t forget that people go to sweatshops voluntarily, which implies that international factories must be providing better conditions and higher pay than the local alternatives, to say nothing of the illegal market (prostitution, drug dealing, organ sales and other crime).
Inevitably, some workers will perform better, and market forces will lead wages to rise as multinationals and other employers will compete for workers with best skills. They’ll pay higher wages, improve working conditions and invest in training. As workers earn money legally, the government will collect more in tax and will have money to invest in infrastructure, healthcare and education to attract more foreign direct investment. Gradually, the economy will strengthen and poverty will fall. South Korea is a good example of such a transformation. Tim Harford in his book Undercover Economist says that a typical South Korean worker earns five times as much as his father did 35 years ago.
Where do we come into the picture? It’s not just about us being able to buy cheaper t-shirts, thanks to the Bangladeshi competitive advantage in the textile industry. Both the US and Bangladesh need trade to grow their economies. If Bangladesh would not earn money from its t-shirts, it would not be able to buy US products, and the US would not have the market to sell its technology, its services and its films. In reality, it’s not about Bangladesh trading directly with the US. Bangladesh is selling textiles to Sweden, Sweden is selling furniture to Chile, Chile is selling wine to the US, the US is selling education to China, China is selling televisions to Russia, Russia is selling gas drilling expertise to Bangladesh. Each country can afford imports only if it produces enough exports to pay for them. Textile industry in Bangladesh isn’t competing with Swedish textile producers but with its furniture manufacturers.
Don’t sweat over a sweatshop, it’s a ticket out of poverty, and it helps you keep the job you are good at too.