Opponents of globalization claim that when a Western company moves to a developing country in search of cheaper labor, the corporation is exploiting its new workers and taking advantage of Third World poverty. Is that really what’s going on?
Perhaps the best way to gauge if Third World workers think they are being exploited by Western employers is to ask them. In 2003, the Pew Center for People and the Press did just that, surveying 38,000 people in 44 nations touching every region on Earth.
When asked their views on multinational corporations, in nine out of the 10 African countries surveyed, at least 70 percent of respondents answered “good” or “very good.” The tenth, Angola, stood at 69 percent. In six of the eight Latin American countries surveyed, at least 60 percent of respondents answered “good” or “very good.” In six of the eight Asian countries surveyed, a majority of respondents held favorable views of multinationals. In Eastern Europe, only Poland and Russia had majority-negative views of multinationals.
The Pew survey results may be counter-intuitive for a Western audience inundated with tales of the horrors of “sweatshops,” but they come as no surprise to scholars who research trade and development.
University of Michigan professor Linda Lim, for example, visited Nike factories in Vietnam and Indonesia in 2000 and found that workers there earned on average five times each country’s respective minimum wage. University of Minnesota professor Paul Glewwe reports that per-capita consumption among Vietnam workers in foreign-owned companies is twice the national average. Edwin M. Graham of the Institute for International Economics found that the affiliates of U.S. multinational corporations pay on average twice the local wage in the developing world.
For laborers in the developing world, what we call sweatshop jobs may actually be the best of a series of bad employment options available to them, and/or the only or best option for supporting themselves and lifting their families out of poverty. Even minimal wages can dramatically improve the way people live. New York Times columnist Nicholas Kristof writes that just a couple of dollars in some countries can buy netting to thwart mosquitoes. For a Third World mother worried about her children catching malaria, such a small amenity can have an enormous impact on her quality of life.
Acknowledging that sweatshops are merely the best of a bad set of options in developing nations, removing them as an option can be devastating, setting emerging economies back for years and preventing the hurting people in these countries from taking steps toward a better life.
Consider these two examples from the British Empire. Economist and columnist Thomas Sowell writes that half a century ago, public sentiment in England came down hard on British firms who were paying low wages to West African workers. British lawmakers went to work, requiring the companies to pay artificially high wages. Of course, many British firms decided the new wages weren’t worth the investment, and pulled out. As for West Africans themselves, Sowell writes, “they did not get the work experience that would have allowed them to upgrade their skills and become valuable and higher-paid workers later on.”
Today, West Africa continues to fester in abject poverty.
Contrast West Africa to another British protectorate, Hong Kong. There, the British Crown adopted a largely laissez-faire approach to the Hong Kong economy. Hong Kong soon found its economic footing in manufacturing — sweatshop labor. Today, Hong Kong has long moved on from sweatshops, and boasts one of the world’s strongest economies. Where it took the U.S. and Western Europe a century or more to rise from agrarian, subsistence economies to dynamic, high-tech industry and high finance, it took Hong Kong just 25. Provinces in China that allow sweatshop labor are doubling in per-capita income every few months.
The issue of child labor has long been a flashpoint in the globalization debate. As repellant as the notion of child labor is, the harsh truth is that a Western company that stops using child labor in some Third World nations does not change the economic conditions that had those children working in the first place. Nor does it change the local cultural standards that accept and expect child labor. Unfortunately, in many corners of the globe, closing the factories and sweatshops to children often just seals for them a far worse fate.
In the early 1990s, for example, the U.S. Congress considered legislation that would have imposed sanctions on corporations who benefit from child labor. The bill never got through Congress, but it did trigger enormous political pressure on such companies. One German company buckled under pressure from activists, and laid off 50,000 child garment workers in Bangladesh. The British charity group Oxfam later conducted a study on those 50,000 workers, and found that thousands of them later turned to prostitution, crime, or starved to death.
In 1995, anti-sweatshop activists persuaded Nike and Reebok to close down soccer-ball manufacturing plants in Pakistan to thwart planned protests during the 1998 World Cup. The closings laid off tens of thousands of Pakistanis. Additional activist-inspired closings laid off hundreds of thousands more. The UPI reports that the mean family income in Pakistan soon fell by more than 20 percent. In Tomas Larsson’s book "Race to the Top," University of Colorado economist Keith Maskus says the Pakistani child laborers who lost their jobs were later found begging, or getting bought and sold in international prostitution rings.
UNICEF reports that an international boycott of Nepal’s child-labor supported carpet industry in the 1990s forced thousands child laborers out of work. A large percentage of those child laborers were later found working in Nepal’s bustling sex trade.
In a world full of robust, stable economies, abundant natural resources and highly skilled workforces, cheap labor is the developing world’s only real bargaining chip. While it may make us feel better to demand that Western corporations invest only in countries with high labor standards, in reality such policies rob the world’s poorest people of their only marketable asset.
We should let employers seek out willing laborers wherever they can find them, but the key word there is "willing." "Free" trade that utilizes slave or coerced labor isn't free, it's theft. But if people living in poverty are willing to work the wages multinationals want to pay them, we shouldn't stand in the way. Corporations get cheaper labor. The world's poorest people can begin to inch their way out of poverty. Western consumers get cheaper goods. And we begin the process of moving the world's poorest economies down the road to prosperity, which benefits all of us.
Radley Balko is a policy analyst with the Cato Institute and publishes a Weblog at TheAgitator.com.