Normally I wouldn't link to a Times Select column, partly because I have no intention of paying for it and partly because most of the Times' columnists are rather dull. But I picked up the paper today and found Nick Kristof writing what must be his fiftieth or sixtieth column praising Third World sweatshops. Paul Krugman likes this argument too. It's "cute". It's also wrong. Here's an excerpt:
Well-meaning American university students regularly campaign against sweatshops. But instead, anyone who cares about fighting poverty should campaign in favor of sweatshops, demanding that companies set up factories in Africa. If Africa could establish a clothing export industry, that would fight poverty far more effectively than any foreign aid program....
The problem is that it's still costly to manufacture in Africa. The headaches across much of the continent include red tape, corruption, political instability, unreliable electricity and ports, and an inexperienced labor force that leads to low productivity and quality. The anti-sweatshop movement isn't a prime obstacle, but it's one more reason not to manufacture in Africa.That last sentence is insane. Campaigns against sweatshops may be a lot of things, but one thing they're not is omniscient. For every Gap and Nike they expose and vilify, there are ten other manufacturers who escape bad publicity altogether. If companies thought it was profitable to set up sweatshops in Africa, student campaigns couldn't deter them all. Clearly there are other reasons.
Kristof then talks about a garment factory in Namibia which was forced to close because it was cheaper to import clothes from China. But that's an argument for trying to raise labor standards in China, where working conditions are famously dismal, rather than for trying to force Namibia down to China's level. Writers such as Kristofand Krugmanseem to be under the impression that critics of neoliberalism are all idiots and don't realize that if you raise labor standards in, say, Namibia, manufacturers might flee to some more brutal country where working conditions are even worse. But of course we realize this. That's what the criticism is all about.
At any rate, it's not clear that manufacturers always and everywhere move to where wages are the lowest. Wages in Mexico are four times what they are in Indonesia, yet Nike has factories in both countries. There are specific reasons for that, of course, but it goes to show that countries don't necessarily need the lowest wages and worst working conditions on the planet to attract investment. Here's a good study by David Kucera finding a weak relationship between labor standards and foreign investment. And it's not at all obvious that specializing in low-wage garments is the only way for Namibia to develop (it might be one of the worst, in fact).
There's also the argument that industrialized countries had to go through their own sweatshop phase to get to where they are. Well, sure, some places did, but those places also saw serious fights for better working conditions at the same time. New York's garment workers battled against sweatshops for most of the 20th centuryremember the Triangle Shirtwaist fire?and consistently made gains until they were undermined by the Mafia and corrupt union bosses in the postwar period. Now sweatshops are flourishing in the city, which only goes to show that labor standards tend to worsen unless someone, somewhere, is fighting for them.