Third World Factories Aren’t All Sweatshops…

Nob Akimoto

Nob Akimoto

Nob Akimoto is a policy analyst and part-time dungeon master. When not talking endlessly about matters of public policy, he is a dungeon master on the NWN World of Avlis

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214 Responses

  1. Avatar Rod Engelsman
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    says:

    Thanks, Nob. Always good to get more information on important subjects. I found the following paragraph in the working paper revealing:

    Few consumers realize that the World Trade Organization (WTO) prohibits placing any
    restrictions on the importation of products solely because of the way in which they were
    produced. Forest products cannot be banned no matter how egregious the denuding of
    whole mountainsides, no matter how much erosion or contamination of rivers may have
    resulted, no matter what the labor conditions under which logging, milling, and finishing
    took place. Similarly, textiles and apparel cannot be banned because of the working
    conditions faced in factories abroad. Food products cannot be prohibited on the basis of
    the chemicals used in their production, not even when those chemicals are banned in the
    importing country, unless traces of the banned chemicals are actually found on the
    surfaces or in the preparations of the imported products themselves. The ways that
    products are produced, “production and process methods” or “PPMs” in the language of
    trade negotiators, were deliberately excluded from the Uruguay Round of trade
    negotiations that concluded with the agreement to create the WTO in 1993. At the time,
    negotiators believed that countries might use their disapproval for the ways that products
    are made in other countries as a “barrier to free trade.”

    I’m sorely tempted to go all FYIGM snarky at this point, but that wouldn’t be fair to the libertarians on this site until we get some feedback.Report

    • Avatar James Hanley in reply to Rod Engelsman
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      says:

      Rod,

      As unpleasant as that is, there really is a good reason for it. If the actual and sole purpose of such import bans was really to protect endangered species, I would wholly object to a the WTO standard. But the sole purpose of such import bans is not to protect endangered species; much of the purpose is to protect a country’s own industry, to the detriment of developing countries’ industries.

      For example, the U.S. requires shrimpers to use turtle-excluding devices in their shrimp-nets. This ups their cost of business because those nets are more expensive. This makes it harder for them to compete with developing countries’ shrimpers whose countries allow them to use cheaper turtle-killing nets. In a classic bootleggers and Baptists scenario, American environmentalists and the American shrimp industry collectively lobbied Congress to ban imports of shrimp caught in non-turtle-excluding nets. The problem is that the developing countries’ shrimpers can’t afford those nets, so the law works to limit their economic development.

      There’s a kind of catch-22. We want greater environmental protection, but we don’t want to put our own businesses at an economic disadvantage, nor do we want to put developing countries businesses at an economic disadvantage.

      But all is not lost, because the issue does not end right there. The inability to exclude imports “solely” on that basis forces the U.S. to engage in negotiations with other countries to try to come to agreement on improving standards, and as those countries continue to develop economically those higher standards become more affordable to them and garner more internal support.

      But simply banning the imports could do economic harm to countries that are trying to develop, for the benefit of firms in countries that are already developed (the ban would itself be an example of FYIGM). So the consequences of the ban are not exactly a liberal’s ideal outcome, any more than the environmental damage resulting from the damaging business practice would be (and I say that with no snark, but with much agreement with the outcomes liberals want for both the environment and third world development).Report

      • Avatar KatherineMW in reply to James Hanley
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        says:

        In some cases at least, James (particularly things like logging and mining), the production methods makes the lives of people in the developing countries a lot worse without actually contributing in any substantive way to economic improvements in their lives. If a mine leaves people’s water sources toxic, destroys the resources that they depended upon before the mine was built, and doesn’t produce any lasting economic development, they’re not being helped by its existence, they’re being harmed; whether trade restrictions prevented the mine’s existence or induced the company running it to follow better social and environmental practices, the local people would be better off because of them. Arguably the same case for agricultural plantations that cause soil degradation by destroying the natural environment and use pesticides that harm the health of the people who work there.

        These are places where process-related trade restrictions (especially by big potential importers in the developed world) could improve people’s lives by creating incentives for some minimum standards of conduct among companies – and wouldn’t harm the people, as they’d be preventing activities that do the locals more harm than good anyway. You must know that there are plenty of mines in the developing world that local communities don’t want and don’t benefit from and don’t have any choice about.Report

        • Avatar Kim in reply to KatherineMW
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          says:

          The developing world… you mean West Virginia? *ducks*
          CANADA fines their companies when they’re caught doing bad stuff in other countries.Report

          • Avatar KatherineMW in reply to Kim
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            says:

            We do?

            Most of what I’ve heard from this side of the border says that our mining companies have a pretty bad record – there’s some Latin American countries, like Chile, where people are quite upset with us because of them. They’re also heavily involved in the DRC, which is just an awful situation generally, and one where there’s a good cases that things would be improved by the mining companies not being there at all.

            Some of the left/liberal parties in Parliament tried to pass a law that would allow Canadian companies to be sued in Canadian courts for their actions overseas, but it didn’t pass.Report

      • Avatar Marchmaine in reply to James Hanley
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        says:

        There’s probably a dot or two that I’m missing, but if the cost of production for shrimpers to enter the US market is higher (owing to the more expensive netting), but the price received for turtle-free-shrimp is also higher (owing to the more expensive netting) – why does the equation not balance?

        I see this all the time in my side-business of organic farming… lots of folks would like the premium (or unfair competitive advantage) without the added cost of production.Report

        • Avatar James Hanley in reply to Marchmaine
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          says:

          The market price isn’t necessarily higher. It’s different than organic farming, which can charge more because it’s hitting a niche market of people who want that particular quality–organic–enough to pay more for it.

          Most shrimp is sold to large commercial processors, so it ends up at places like Red Lobster and in those bags of shrimp we buy from the freezer section at the grocery. The competition between the retailers–Kroger vs. Safeway vs. Wal Mart vs. Piggly Wiggly, etc. etc., keeps the price down. So the third-world shrimpers don’t get a price bump to offset the cost of the nets.

          And if there was a niche market in turtle-safe shrimp, it’s likely–although not inevitable–that the shrimpers in the developed world would fill it, leaving little room for the third-world shrimpers.

          What will change the game is a change in awareness that leads to a broadly distributed change in preferences–i.e., taking turtle-safe shrimp beyond niche market into a realm where mass consumers prefer and are willing to pay a premium for it, and will pressure their government to negotiate with shrimping countries for improvements. That’s what happened with dolphin-safe tuna, for example. And the fact that the U.S. is negotiating with some of shrimping countries suggests it can happen or already is happening in this case as well. It may not in all cases, but certainly in some.Report

      • Avatar Jonathan McLeod in reply to James Hanley
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        says:

        This.

        Also, Bootleggers and Baptists is going to be the name of my next alt-country band.Report

      • Avatar Mike Schilling in reply to James Hanley
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        says:

        There’s a novel by Richard Condon (best known for The Manchurian Candidate) called Mile High, which details the Mafia’s scheme to introduce Prohibition. It’s very good until it completely falls apart at the end.

        Gur puvrs tnatfgre vf nyfb n enpvfg, orpnhfr ur ungrq uvf qnex-fxvaarq Fvpvyvna zbgure sbe qrfregvat uvz! Naq uvf fba orvatf ubzr n oynpx svnaprr! Naq ur tbrf penml naq gevrf gb xvyy ure! Naq gurer’f n ovt, fpnel punfr fprar!

        Vg’f yvxr Pbaqba pbagenpgrq bhg gur ynfg frpgvba gb uvf qbt.Report

    • Avatar KatherineMW in reply to Rod Engelsman
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      says:

      Also very useful information, Rob.Report

    • Avatar James K in reply to Rod Engelsman
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      says:

      The quoted passage isn’t entirely true.

      WTO rules do permit restrictions on trade based on environmental or health concerns, provided A) scientific evidence of an environmental or health threat is offered and B) The rule does not discriminate against foreign producers.

      As for the conditions of manufacturing, it is true that generally this is not a permitted basis for restricting trade. The big exception though is slave labour, which is why many European countries ban import of good made in US prisons.Report

      • Avatar Rod Engelsman in reply to James K
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        says:

        The quoted passage isn’t entirely true.

        Thanks for your feedback, I was looking forward to you and James chiming in because most of what I know is what I hear on the radio and read on the Internet.

        WTO rules do permit restrictions on trade based on environmental or health concerns, provided A) scientific evidence of an environmental or health threat is offered and B) The rule does not discriminate against foreign producers.

        That’s good to know, though that sounds like a set of rules that lawyers can lots of fun with. For instance, take James H.’s example of turtle-safe shrimp nets. Does more expensive netting equate to discrimination against (some) foreign producers?

        On the whole, my primary objection to the WTO is the governance structure, which I understand to be constitutionally friendly to MNCs, with reps from those corporations sitting on the adjudicatory panels. I would love to be wrong on that because that just seems perverse to me.

        As for the conditions of manufacturing, it is true that generally this is not a permitted basis for restricting trade. The big exception though is slave labour, which is why many European countries ban import of good made in US prisons.

        Again, good to know, but some fine lines are being drawn, eh? From zic’s fine comment, below:

        There are some practices designed to force the worker to stay at the job even if the would like to leave, including debet accrued for provided housing/food (this is included under 2, withholding pay in exchange for services) and withholding some or all of wages for extended periods of time, sometimes a year or even more, before paying the employee, and refusing to pay those wages if the employee leaves the job before that time; which can be a problem for someone who becomes ill or has reason to return to their family. (Note: I’m not talking about a bonus, I’m talking about base wages.)

        At what point do exploitative practices like this approach the moral level of actual chattel slavery? It’s a continuum with not a lot of daylight between these cases and slavery that I can see. Given our Federal prison standards (to the extent they’re followed) our prison laborers may actually be in a more humane situation that many of the 3rd world sweatshop workers, which isn’t to say that their situation is good at all.Report

        • Avatar James Hanley in reply to Rod Engelsman
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          says:

          Does more expensive netting equate to discrimination against (some) foreign producers?

          The U.S. did lose the case, but my faulty memory didn’t give the whole story. This is straight from the WTO.

          In early 1997, India, Malaysia, Pakistan and Thailand brought a joint complaint against a ban imposed by the US on the importation of certain shrimp and shrimp products. The protection of sea turtles was at the heart of the ban.

          The US Endangered Species Act of 1973 listed [sea turtles] as endangered or threatened…and prohibited their “take” within the US, in its territorial sea and the high seas..

          Under the act, the US required that US shrimp trawlers use “turtle excluder devices” (TEDs) in their nets when fishing in areas where there is a significant likelihood of encountering sea turtles.

          Section 609 of US Public Law 101–102, enacted in 1989, dealt with imports. It said, among other things, that shrimp harvested with technology that may adversely affect certain sea turtles may not be imported into the US — unless the harvesting nation was certified to have a regulatory programme and an incidental take-rate comparable to that of the US, or that the particular fishing environment of the harvesting nation did not pose a threat to sea turtles….

          In its report,the Appellate Body made clear that under WTO rules, countries have the right to take trade action to protect the environment (in particular, human, animal or plant life and health) and endangered species and exhaustible resources). The WTO does not have to “allow” them this right…

          The US lost the case, not because it sought to protect the environment but because it discriminated between WTO members. It provided countries in the western hemisphere — mainly in the Caribbean — technical and financial assistance and longer transition periods for their fishermen to start using turtle-excluder devices.

          It did not give the same advantages, however, to the four Asian countries (India, Malaysia, Pakistan and Thailand) that filed the complaint with the WTO.

          (Emphasis added by me–JH)Report

          • Avatar Rod Engelsman in reply to James Hanley
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            says:

            Huh. Well, again, that’s good to know. Thanks for the info, James!

            And that WTO complaint seems righteous to me. We should just give anybody and everybody the same consideration, particularly the technical aid.Report

            • Avatar James Hanley in reply to Rod Engelsman
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              says:

              Agreed. And my understanding is that’s what we’re moving toward, as we negotiate with the complaining countries.

              Of course that means you and I pay through our tax dollars for the assistance we provide to help them meet our standards, but what the hell, in the big picture that’s peanuts, and we are talking about a tragedy of the commons problem, which necessarily requires governance, not market, solutions.Report

      • Nob Akimoto Nob Akimoto in reply to James K
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        says:

        Right, but both those conditions combined effectively creates the environment that Michael was positing in the paper.Report

  2. Avatar Damon
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    says:

    I’ll take exception to number 3:
    “3.The physical location of the factory has inadequate means of evacuation and/or is a toxic environment for the employees.”

    I don’t necessarily agree. Western/1st world building codes, fire codes, and health codes are just that: Western/1st world. Other folks in different places may have different thinking. This rule should not necessarily be exclusionary…Report

  3. Avatar zic
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    says:

    I’d say that 1. is too narrow. There’s a world full of hurt between voluntary labor that garners a living wage and slave labor.

    There are some practices designed to force the worker to stay at the job even if the would like to leave, including debet accrued for provided housing/food (this is included under 2, withholding pay in exchange for services) and withholding some or all of wages for extended periods of time, sometimes a year or even more, before paying the employee, and refusing to pay those wages if the employee leaves the job before that time; which can be a problem for someone who becomes ill or has reason to return to their family. (Note: I’m not talking about a bonus, I’m talking about base wages.)

    3. is something that disturbs me a lot; a giant problem of NYMBism. And I think free-trade agreements should move in the direction of establishing base-line environmental standards that include workers. Otherwise, we’re just shifting pollution around to places where we don’t have to feel its burden (though it’s always wise to remember that we all live in the same nest). It means that other people are subsidizing our cheap goods with their health and environment.

    Thank you, Nob. I do agree, a third-world factory can also provide stability and prosperity in regions otherwise prone to turmoil and severe poverty, and so do a lot of good.

    And there are sweatshops here; places where inhumane and dangerous working conditions are exist because the workers feel they have no other economic options and lax inspection/regulation. I suspect some coal mines of this; food-processing plants with high numbers of illegal immigrants work; some of the service industry.Report

    • Avatar James Hanley in reply to zic
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      says:

      I’d say that 1. is too narrow.

      Zic, that was my first thought, too. But notice that he’s saying “some combination” of those three things. 1 doesn’t have to be present for it to be a sweatshop, but if it is present, then it’s a sweatshop. So it’s a sufficient condition, but not a necessary one.Report

    • Nob Akimoto Nob Akimoto in reply to zic
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      says:

      I probably should have worded it differently, but James has the right interpretation of what I meant. I think point 2 actually covers most of your concerns re: power imbalances, and I would argue that this would tip them into sweatshop territory.

      My more fundamental point I think is that the term sweatshop to mean developing country factory is wrong. As you rightly state there are in fact sweatshop practices that happen within the US, while there are admirable plants in developing countries that provide a solid foundation for community growth.Report

  4. Avatar North
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    says:

    What the sweatshop debate boils down to is that countries with lousy unrepresentative governments grow more slowly and make it very difficult to enforce labor standards either privately or through third parties. As BP put it eloquently in the original thread the sweat shoppers just build Potemkin villages and train their workers to lie to the inspectors. This doesn’t mean that such steps are useless but their efficacy is limited.
    What are even more ineffective of course would be blanket bans by first world governments on the importing of goods supposedly produced under sweatshop conditions. Then you just get even more evasions and likely impeded trade and possibly a trade war for your troubles.
    So we’re left with an unsatisfying muddle. Try conscientiously to buy goods made under humane conditions. Try to be informed about what you’re buying and who you’re buying from and console yourself that there’s good reason to believe that sweatshop manufacturing economies eventually grow up into non-sweatshop economies and often spawn much more responsible governments to boot.Report

    • Avatar KatherineMW in reply to North
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      says:

      How are you defining “representative governments”? A country can be a democracy and still have virtually no enforced labour, health or environmental standards.Report

      • Avatar North in reply to KatherineMW
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        says:

        I chose the word carefully. A representative government typically will begin to enact labor, health and environmental standards after a certain level of economic development is reached and the population begins demanding it. Starving stoneage countries have no compunction (neither their government nor their populace) about devouring endangered species, slash/burning rainforests or employing nine year olds in dangerous low paid manufacturing. But once they stop starving and begin working their way up whatever their collective hierarchy of desires is better wages, cleaner air and labor standards pop up as going concerns pretty quickly.Report

        • Avatar KatherineMW in reply to North
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          All Latin American countries but Haiti are defined as lower-middle or upper-middle income, so they’re not “starting Stone Age”, but enforcement of labour and environmental standards is still really bad in a lot of them, because they’ve been being told by the Bank, IMF, WTO, and everyone else for the last thirty years that those kinds of things are anti-markets and anti-development, and conditionalities on loans limit the amount of maneouvering room on policy.Report

          • Avatar North in reply to KatherineMW
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            says:

            Yes, those poor people also have really poor governmental structures. Rife with corruption, historic discrimination and a dreadful legacy of tin pot dictators and an awful start from colonial times. I’m sure it doesn’t help that hurricanes steamroll them every couple of years either. They can’t even keep the utilities on enough for them to be major manufacturing hubs. It’s very sad.Report

            • Avatar KatherineMW in reply to North
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              says:

              I was talking about Latin America in general, not Haiti. Unless you were too? (But a lot of South America is hurricane-free.)Report

              • Avatar North in reply to KatherineMW
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                says:

                I was mostly thinking the Carribean, alas.

                In Latin America in general we have a more mixed bag. Brasil, for instance, has been doing very well governmentally and their economy and living standards have been improving wonderfully. Other countries are having varying degrees of success generally connected to how well their governments have been behaving all the way down to Chavez and the utter mess he’s made of his country.Report

              • Avatar KatherineMW in reply to North
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                says:

                Chavez has improved living standards for the majority of the population to degrees that none of his predecessors even tried to do. He’s put oil revenues to work in the country rather than having all of them go overseas. His government’s been short-sighted in not pursuing greater investments in the non-oil economy for times when the oil money stops flowing, and he’s been too personalistic about things with the result that he doesn’t have a strong potential successor, but I think he’s done quite a bit of good.Report

              • Avatar North in reply to KatherineMW
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                says:

                We’ll have to agree to disagree then. I think he’s cannibalized the countries future to dole out populist red meat. That is great in the short term but when you’ve either chased off or eaten the businesses and the infrastructure you’ve been neglecting starts falling apart and the populist read meat eaters call for more red meat… well the party is over.
                But the bigger tragedy for Latin America is the pervasive bad government, ingrained classism and racism and horrible legacy of colonial scarring that collectively create the environments where Chavez’s can pop up and take root.Report

              • Avatar James Hanley in reply to KatherineMW
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                says:

                Katherine,

                Chavez has indeed done some good for the poor, but it’s a very calculated political move to buy their political support. (You know, just how Obama won re-election! Just kidding.) I’m not arguing that’s inherently wrong, but the problem with his approach is just as you say, he hasn’t invested in the non-oil economy, or indeed in much of anything that sets the stage for future economic development. So instead of growing the pool of wealth and continuing to ensure it’s well-distributed (by the metric of “well-distributed” that I think you’re using, others mileage may vary on that, of course), he’s just ensuring a good distribution of a somewhat stagnant pool of wealth. That imposes serious constraints on how much good for the poor can ultimately be achieved.

                Oil may in fact be a particular problem here, however much economic good as it does in the short term. There’s a concept called, iirc, the “oil curse,” that suggests countries that are benefiting well from oil (or perhaps some other natural resource they have in abundance) tend to end up over-relying on that source of wealth, and it causes them to not become aware of the need for more diversification. I won’t pretend, though, that I’m qualified to pass judgement on the strength of the claim.Report

              • Avatar KatherineMW in reply to James Hanley
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                says:

                I think the point is to compare the pre-Chavez situation to the situation under Chavez. Oil money going to the poor, as in the current situation, is better than oil money all leaving the country in the hands of the foreign oil companies, as was previously the case. Oil money also going into more sustainable economic investments would be even better, but that doesn’t invalidate the improvements that exist.

                And when you’ve got a large number of very poor people and a good amount of money flowing in, starting off by investing in their health, education and access to basic necessities – which, in addition to being good in its own right, generally increases their ability to contribute to the economy – before moving on to specifically economic investments is, in my view, a fine policy. A government that isn’t improving the lives of its citizens isn’t doing its job.

                And the line between “buying people’s political support” and “serving people’s interests, which results in their political support for you” is pretty thin. If the governing party does things that benefit the bulk of the population, and as a result the majority of the people vote for them, that kind of falls in line with how government is supposed to work, to my mind.Report

              • Avatar James Hanley in reply to James Hanley
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                says:

                I think the point is to compare the pre-Chavez situation to the situation under Chavez.

                Respectfully, I don’t think that’s the point. Because even though the current situation for the poor is better than under the pre-Chavez regime, the reality is that the Chavez approach does not set the country up for continued growth that would benefit the poor, and a different approach could have been chosen that would have improved from the pre-Chavez routine and set them up for continued growth. And frankly, that different approach is the sweatshop model. It seems harsher than the Chavez approach, but it works better in the long run. England, America, Taiwan and South Korea, among other countries, pretty clearly demonstrate that.

                Would I rather be a poor person in the Chavez regime than in the pre-Chavez regime? Sure. Would I rather be a poor person in the Chavez regime than in a sweatshop situation? Plausibly so. Which would my grandchildren and great-grandchildren prefer? The sweatshop regime, undoubtedly.Report

              • Avatar Jim Heffman in reply to James Hanley
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                says:

                “I think the point is to compare the pre-Chavez situation to the situation under Chavez.”

                Which is actually a very funny thing to say because that’s exactly the argument that the sweatshop proponents are using.Report

        • Avatar Kim in reply to North
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          says:

          Slash and burn rainforests were Deliberately Asked For by dogooders in the First World.Report

        • Avatar Kim in reply to North
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          says:

          Oh, bullshit. Non-representative governments do the same thing. 😉 See China.Report

          • Avatar North in reply to Kim
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            says:

            The Chinese have been having some very interesting times lately Kimmy me dear. I didn’t say democracies, I said representative. The Chinese have a pretty unrepresentative government I agree but in the past few decades as the government has behaved in a more representative way (focusing on employment and living standards for their people rather than fixating on achieving the people’s post-economic paradise for instance) their economy has done well. They’ve got a lot of areas where they’re suffering and their poor legal environment and still far from responsive government is impeding their ability to develop into a better economy (no one is insane enough to want to base their finace companies in China’s economy for instance) but even still they’re paying some attention at least . I hear they’re imposing a carbon tax for instance.Report

  5. Avatar Roger
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    says:

    Great post, Nob. Awesome, in fact.

    I would strongly agree to rejecting any product or company which enslaved or abused people in the creation of products as defined by points one and two (though i am assuming the collective action intimidation/coercion standard applies both ways). On point three, I will agree, as long as this doesn’t creep into a backhanded way to preclude third world products by forcing unaffordable first world safety standards as a trade barrier. Devil in the details.

    In summary, if Sweatshop is used as defined here, I am strongly against them. Of course, in actual arguments, the term is frequently extended to any factory which pays less or has worse working conditions than wealthy people find appropriate.

    Great way to improve the conversation, Nob.Report

  6. Avatar krogerfoot
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    says:

    My friends in Thailand saw factory jobs for Western consumer goods as exactly what they were: Good jobs with decent pay and opportunities for advancement. The fact that well-meaning Westerners thought those jobs shouldn’t be available to Thai workers who wanted them was confusing. I was once one of those well-meaning Westerners who thought Third World + factory = sweatshop, but that idea now seems as provincial as a lot of the other misconceptions I had about what really goes on out in the world.

    That said, re Damon, I don’t see a lot of room for nuance with “inadequate means of evacuation and/or is a toxic environment for the employees.” Factory fires in Bangladesh make people just as dead as factory fires in the garment district. You can bet that multinationals look at plant safety as a factor when contracting work to foreign producers, if only to avoid seeing their name in the paper when something horrible happens overseas.Report

  7. Avatar M.A.
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    says:

    Very solid post but I have to quibble with this:

    This means of course that simply asking the multinational to pay more (and say that you’ll be willing to eat the increased cost) doesn’t work. The truly problematic element in the chain are the factory owners. They of course have every incentive to screw over their workers while taking home as much money as they can. Even if every MNC decided to pay them double the amount they’re paying now for shoes, the increase would just go into their pockets.

    Nike or the other MNC’s could, of course, require the factory owners to pay their workers X minimum wage and agree to regular inspections of the facilities to ensure that workers weren’t being put in needless danger.

    That they don’t is on the heads of the MNC’s who choose to deal with the disreputable factory owners and fail to place in the contract protection for the workers. Qui cum canibus concumbunt cum pulicibus surgent.Report

    • Avatar North in reply to M.A.
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      says:

      MNC’s often do require those things M.A. but falsifying balance sheets and fooling inspectors is extremely easy, especially in countries with rotten corrupt governments. So such steps aren’t quite the cure all one would think.Report

      • Avatar M.A. in reply to North
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        And if verification isn’t possible, that would be a very good reason to not do business in that country then, no?

        “Market solutions”, as the libertarians are so fond of whining about, could fix this. Those countries with corrupt governments and a habit of falsifying balance sheets and other abuses would learn not to do those things, if only the companies stopped doing business with them. Shape up or no business.

        But that’s not what libertarians ever really mean by “market solutions”, it seems. Or else the so called “market solutions” that libertarians talk about raising up everyone, the “rising tide lifting all boats”, does not in fact work as advertised (which is one of my general objections to the pattern of libertarian thinking very loosely, if ever, correlating with this thing called reality).Report

        • Nob Akimoto Nob Akimoto in reply to M.A.
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          I’ll probably return to this question later, but I think in this case there’s a necessity for groundwork to be laid that MNCs are actually looking for things like compliance monitoring and labor standards when they’re looking for a place to buy from. Simply by setting the standards and enforcing them rigorously MNCs do create an environment where countries will compete to set up those sorts of regulatory regimes in order to attract their business.

          The track record here is decidedly mixed, but in this case I think it’s perfectly compatible for a liberal to advocate for more third party governance structures, while hoping those also lead to government standards being adopted to those lines.Report

        • Avatar James Hanley in reply to M.A.
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          But in fact those third world laborers are being raised up. They’re better off than they were 50 years ago, and their situations continue to improve. I can readily understand feeling that the progress is too slow, and that the improvement so far is insufficient. But it doesn’t square with empirical reality to imply that the market isn’t lifting them up.

          As Charles Kenny says in the conclusion of his thought-provoking book, Getting Better:

          [G]lobally, rates of absolute income poverty have fallen dramatically, even as populations have grown. Every region has escaped the Malthusian trap. And in every region more children are being educated [and] people are living longer…”

          So as far as “correlating with this thing called reality,” we pro-market folks really have a pretty firm leg to stand on. There’s a long way to go, no doubt. But accomplishing all this requires wealth, and for all its flaws and ugly side–and I don’t deny the flaws and the ugly side–nothing produces wealth as effectively as markets.Report

        • Avatar krogerfoot in reply to M.A.
          Ignored
          says:

          To put it simply, the MNC’s don’t do business with the governments, they do business with the factories. What North said is right – it’s easy to fool or bribe inspectors and whatnot. But at a certain point, it just becomes easier to pay workers fairly than to pretend you are when you’re not. If MegaCorp feels that Factory Owner A is full of shit and there’s a chance that they’ll wake up to a “Dozens dead in SE Asian MegaCorp plant fire” story in the paper, they’ll put pressure on him to clean things up or they start discussions with Factory Owner B. I don’t mean to sound Pollyannish, but the idea that leading people around by the nose – “Well, Abdullah, if your government can’t guarantee that we won’t be embarrassed here, I guess we just won’t be able to do business in your country, hmm?” – is the only way to influence their behavior is not any closer to reality.Report

        • Avatar North in reply to M.A.
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          says:

          Oddly enough impoverished countries with bad governments (interestingly the two go hand in hand, you don’t see many impoverished stagnant countries with good governments) tend to become even more impoverished and acquire even worse governments when trade is cut off and businesses are banned from doing business there. They also are much more prone to going to war with their neighbors; I didn’t know you were such a war hawk M.A.

          Given the two alternatives: do business with them and they develop eventually into humane developed countries versus refuse to do business with them and let them wallow in endless human misery and generate war zones it seems to me like the former is the more conscionable choice.Report

          • Avatar James Hanley in reply to North
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            says:

            Too bad the U.S. hasn’t kept that argument in mind in its relations with Cuba.Report

            • Avatar North in reply to James Hanley
              Ignored
              says:

              If it ever was discovered that Jesse Helms had been receiving regular shipments of cash, rum and quality Cuban Cigarres hand signed by the Castros for his entire political life it would not surprise me one jot. The Communist government of Cuba has had no greater patron than the American Anti-Cuba brigade since at least the demise of the USSR.Report

        • Avatar Jaybird in reply to M.A.
          Ignored
          says:

          M.A. is doing yeoman’s work here. When I was a kid, “raising awareness” tended to mean “get people to look for the union label” and only buy American Made clothing instead of cheap foreign stuff.

          In my teens, “raising awareness” tended to mean “DON’T BUY FROM FOREIGN SWEATSHOPS! PUT PRESSURE ON COMPANIES AND MAKE THEM CLOSE THEIR FACTORIES!” and, of course, this resulted in a handful of factories being closed and people congratulating themselves on the awareness they raised.

          I was beginning to wonder if “raising awareness” now meant making sure that people know that “global trade is so freakin’ awesome that we need to get more people on board but also try to curb the excesses of some of the factory owners and make sure that conditions are safe and workers have regular bathroom breaks and then everybody in the world will benefit!” and feeling like I was in some weird libertopia.

          M.A., if nothing else, is making the argument feel familiar.Report

      • Avatar James Hanley in reply to North
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        says:

        And I think Plinko’s point (that Nob builds on) is that getting the money to the workers is a lot more complex than us first worlders demonstrating willingness to pay $X more for shoes, and Nike taking that $X and paying it to their shoe producers.

        If Nike came out and said “our research shows people are willing to pay $X more per pair of shoes, so we’re going to pay our third world producers $x more per pair, and that will equal $Y more per day for every worker in our producers’ factories,” we’d cheer and feel like we had done something good for third world labor. But that money might not actually make it to the labor because of the intervening links in the chain–the actual factory owners and managers.

        So to get more money–or better working conditions–to the labor, Nike has to, as M.A. notes, write the contracts to require those things. But it can’t stop there or there would be massive fraud on the part of the factory owners/managers–Nike has to spend money on enforcement, even if the enforcement is imperfect because of some degree of fraud/misrepresentation on the other end. (It’s not useless, since not everything can be hidden, but, yes, it’s imperfect–but that’s just another reason why our willingness to pay more doesn’t lead to as much improvement as we might like, and why that’s not wholly Nike’s fault.)

        Nike is willing to demand those contracts and do those inspections, because they’ve calculated that the cost of doing so is less than the cost of bad publicity (yes, it’s all greed-based, not good-heartedness, but the end result is the same). But of course all of Nike’s costs are ultimately paid by consumers.

        So here’s the kicker–to the extent we first worlders have successfully pressured Nike to require higher pay/better working conditions, we in fact already are paying for those things. We say we “would” be willing to pay more for it (and perhaps we would be willing to pay even more than we currently are), but we don’t always recognize that we actually already are; that we have already demonstrated our willingness to pay at least some amount for that.Report

        • Nob Akimoto Nob Akimoto in reply to James Hanley
          Ignored
          says:

          Exactly.

          Also, I think people are generally a bit too unfair on Nike. They’ve actually been leading on this front in improving and requiring verification from their suppliers and are probably the best of the major sports garment manufacturers in this regard.

          They do seem to have internalized a lot of the costs, I’m not sure how they’re doing it, but presumably they fired some designer here or sacrificed a CxO to the deceased spirit of Hayek or something to free up the necessary funds.

          The important thing really is to make sure companies regard this sort of brand image preservation as important, and for that consumers need to stay aware and picky.Report

        • Avatar dexter in reply to James Hanley
          Ignored
          says:

          James, How about insead of “first worlders paying more” we could hear how the corps would make less. I would love to hear a corp say,” we are going to pay more for labor and instead of making xbillion this year we will make .95x billion.”
          All this talk about how third worlders are doing better would be a good point if first worlders weren’t taking the brunt of the loss.Report

          • Avatar Jaybird in reply to dexter
            Ignored
            says:

            All this talk about how third worlders are doing better would be a good point if first worlders weren’t taking the brunt of the loss.

            Those poor first worlders!Report

            • Avatar dexter in reply to Jaybird
              Ignored
              says:

              Yes, America is wonderful, full of people who have no financial problems. There is no poverty or homelessness in America. There are no people dying because they can’t afford a doctor. All is well in WallyWorld. “This is the best of all possible worlds.”
              I am not trying to start a fight. I just think there is too much money in too few hands and the ones that controll the money have the morals of a hungry hyena.Report

              • Avatar Roger in reply to dexter
                Ignored
                says:

                Dexter,
                I completely fail to see why those providing jobs need to pay the cost of further enriching third world workers. You are in effect discouraging job creation.

                OK. They could all be philanthropic and agree (or more reasonably be coerced) into making twenty percent less profit. But the effect of this is to make investment in this industry substantially more than twenty percent less attractive. This means fewer competitors, fewer factories built, fewer workers hired and fewer and shorter shifts. In short it means less demand for workers.

                As someone who has been responsible for profit at a major corporation, these are the secondary and tertiary effects I expect if profit is reduced. What are the secondary and tertiary effects you are assuming?

                If you want third world workers to make higher wages, the actual path is via making the producers more profitable, thus starting the cycle of increased competition and investment.Report

              • Avatar KatherineMW in reply to Roger
                Ignored
                says:

                Workers have been getting more productive – both in America and worldwide – for the last few decades without seeing significant income growth. Your premise is not supported by facts.Report

              • Avatar North in reply to KatherineMW
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                says:

                It depends on how you measure it. In absolute dollars, absolutely wages have stagnated though in the US specifically it appears that the cost of healthcare has gobbled up a lot of those increases. If, on the other hand, you measure it in terms of purchasing power people are better off than they were. Their wages haven’t gone up but their expenses on a lot of things have gone down enormously (especially in terms of entertainment (never been cheaper ever anywhere), electronics, nutrition and consumer goods.

                And of course this is referring only to the developed world. If you include the developing world and Asia then the story goes from mixed to a fountain of rainbows and cherubs singing hosannas (though it’s not all good, ecologically Asia has taken a thumping).Report

              • Avatar Kim in reply to North
                Ignored
                says:

                Their expenses have gone up tremendously, and will continue to do so. That’s why people continue to press for paying the same amount of money for progressively crappier things. Entertainment is peanuts compared to housing, and people are paying more for less in that department. Ditto transportation.Report

              • Avatar Jesse Ewiak in reply to North
                Ignored
                says:

                I refer back to another comment thread from about a year ago, where things were explained by me and others (basically, flashy shiny things are cheaper, but the big stuff like health care and education is more expensive).

                https://ordinary-times.com/blog/2011/02/the-middle-class-isnt-dying/#comment-109166

                https://ordinary-times.com/blog/2011/02/the-middle-class-isnt-dying/#comment-109287Report

              • Avatar North in reply to North
                Ignored
                says:

                Actually Kimmy housing costs are quite depressed right now (much to the moaning chagrin of home owners everywhere), though there are indications they’re heading back up.

                Jesse, yes agreed, a lot of small things are cheaper and a couple big things are more expensive. I certainly wouldn’t claim all is hunky dory, just that the picture is more complicated than simply saying “our wages are numerically stagnant” suggests.Report

              • Avatar James Hanley in reply to North
                Ignored
                says:

                Jesse,

                And I renew my objection the implication in your comments that 50 years ago everybody in the middle class could afford health care or had access to health insurance. Playing fast and loose with the historical facts is not good grounding for criticizing the present.Report

              • Avatar James Hanley in reply to North
                Ignored
                says:

                By the way, iirc, that’s the post that drew me back to the League. So it’s all Jason’s fault. 😉Report

              • Avatar Kim in reply to North
                Ignored
                says:

                North,
                1) Housing prices right now are still above where they were in the 1990’s. Hell patrick’s calling it a bubble! (2002 pricing, roughly)
                2) If the quality of housing continues to decrease, as it has, the value can continue to plummet. Which It Has.

                If you want a real, decent home, it can be built. But it’s nowhere competitive with older housing stock.(my house’s replacement value is well upwards of $300k).Report

              • Avatar Kim in reply to North
                Ignored
                says:

                James,
                Can you cite some numbers as to how many could afford it?Report

              • Avatar Jason Kuznicki in reply to North
                Ignored
                says:

                Oh god that post.

                Suggest that people are not doing too badly after all? Commenters say you’re evil, so shut up.

                Talk about the middle class? Commenters say you’re hiding any discussion of the rich, which is proof of a conspiracy, so shut up.

                Suggest we could spend less on medicine? That’s because you’re a quack who thinks all medicine is a scam.

                Suggest that inequality matters less than absolute wealth? That’s because you love it when people are poor.

                Amazing how little has changed around here.Report

              • Avatar James Hanley in reply to North
                Ignored
                says:

                Kim,

                Yeah, probably, but not for several days at least. If I can pull together the stuff, maybe I’ll see if Tod will FP it.

                As a purely anecdotal point, though, I know my dad had minimal coverage when he fell of a cliff in ~1970 and spent over half a year in the hospital (broken skull (2nd of 3 times that would happen), broken neck (1st of 2 times that would happen), broken legs, arm, pelvis, ribs, and a punctured lung). My parents were digging out of that hole for years. And if anyone wants to use that as a story for why we need universal coverage, that’s all fair and good. My point is just to say it wasn’t all peaches and cream in health insurance for the middle class 40 years ago.Report

              • Avatar Rod Engelsman in reply to North
                Ignored
                says:

                James, wrt to health coverage now vs. 40 years ago. My anecdotal reference points are my wife’s kidney transplant in 1985 and her recent cancer surgery and treatment.

                In the first case we had coverage through my employer that had no employee contribution and a low deductible and copay. Something like a couple hundred $ deductible and about 5% copay. In the second case our copay is $400/person annually with a 20% copay and I pay about $600/month for family coverage.

                On the other hand, in the first case the insurance company said we’ll cover $X for said procedure and the hospital told us we were on the hook for the rest. So while the coverage sounded really good what actually happened was that a lot of the bill simply wasn’t covered because it exceeded the “standard” charges and even though the covered charges were almost entirely paid for we still ended up owing quite a bit at the end.

                With our current coverage (a PPO plan) the provider agrees to accept the negotiated amount so even though the co-pay is higher the end result is better. Also there’s a yearly max out-of-pocket limit beyond which the insurer pays everything. Of course there’s the matter of that $600/month from the get-go as well.

                Bottom line is that the coverages work differently but at the end of the day a major injury or illness is going to set you back a few grand either way. I think our current plan actually works better for us in our circumstances than the previous one despite the greater upfront costs and higher copays.Report

              • Avatar Kim in reply to North
                Ignored
                says:

                Rod,
                if that’s all it’s setting you back, consider yourself lucky.Report

              • Avatar Rod Engelsman in reply to North
                Ignored
                says:

                Well, Kim, when you add up it all up (employee contribution, deductibles, and copay and considering $3500 annual OOP maximum) my wife’s cancer treatment set us back about $16K. Although it probably isn’t fair to attribute all the employee contribution to her since it also covers me and our two eligible kids. We just haven’t used it much in comparison. And it’s that much because the treatment spanned two coverage years. She was still in chemo when everything re-booted January 1st and all the deductibles and copays had to be paid again.

                The real hassle isn’t so much the total amount as it is being hounded by a couple dozen separate providers–hospitals, doctors, labs, clinics, etc.–for anywhere from a couple hundred to a few thousand apiece. And they all want a “reasonable” payment schedule that when you add it all up gets very unreasonable really quickly.

                What I feel lucky about is she’s apparently cancer-free (knock on wood) and going to stick around to gently torture me for a good long while. It’s like the credit card ads — priceless.Report

          • Avatar KatherineMW in reply to dexter
            Ignored
            says:

            I agree. There’s a lot of room for the corporations to carry the increased costs and still make a profit. And in the long run it would benefit them in ways aside from image – the more money their workers make, the more they’ll be able to buy the things that they’re making, and given the share of the global population that’s in the the third world, that’s no small thing.Report

          • Avatar James Hanley in reply to dexter
            Ignored
            says:

            @Dexter,
            How about… we could hear how the corps would make less

            As a former Green Party registree, I do understand where you’re coming from. And even as someone who’s shifted in a libertarian direction, I honestly don’t care how much money a company makes. Hell, I don’t even care if a company fails to make money and goes out of business. So there’s no sympathy for the devil in my response here.

            The problem is that it is essentially an unworkable solution. What’s the mechanism for making it happen? There’s really no incentive for corporations to voluntarily reduce their profit, and mandating it is problematic for several reasons, including that corporations often run on thinner margins than most people think, that they need reserves for further research and development, and that limitations on corporate profits could send investment money in search of greener pastures. And as long as owners and managers have stock, they have a personal incentive to keep profits high, since that will increase the value of their stock.

            It would take a culture shift–because as much as those incentives matter, so does the culture; the two work in tandem, call it a chicken-and-egg problem–and while I won’t say a culture shift is impossible, the incentive structure makes that shift very difficult to set in motion. More difficult, I think, than changing consumer culture, because as consumers we pay for what we value, and if we value some non-material benefit we generally are willing to pay for it as long as we perceive (rightly or wrongly) a connection between the premium we pay and the attainment of that non-material benefit.Report

            • Avatar dexter in reply to James Hanley
              Ignored
              says:

              James, You are right. The mechanism for making it happen is a culture shift. Now, the incentive is to make as much as possible and damn the consequences. Yes, some counries are doing better, but at what cost. Did you see any of those smog photos from China a few weeks back? Did you hear about the factory with a high suicide rate and what the factory did was to installs nets. I saw a picture of a billion dollar house in India the other day. What percentage of Walmart workers are eligible for government assistance? The only way change will happen is if enough worker bees say “enough”. Instead of worshipping the megarich we should be shaming them.Report

        • Avatar zic in reply to James Hanley
          Ignored
          says:

          This is an interesting idea, but one that’s troublesome in the face of a corporation’s responsibility to maximize profits for shareholders. It’s far easier for a privately-held company to implement morally-led policies. Publicly held companies have some incentive to cut these corners; and policies that dilute profits in this manner would potentially have a negative impact on their stock values. I’d point to Dell, which has delisted from the stock exchanges and become private again because being a public company discouraged forward-thinking investment in R&D. If R&D is at risk in a publicly-traded corporation, I can only imagine how far down the priority list upscaling wages in this manner — more akin to profit sharing — might be.Report

          • Avatar North in reply to zic
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            says:

            Yeah. The fact of the matter is that if a corporation announced moves like this everyone would praise them to the skies then quietly go home and divest themselves of any ownership of the company they had and vote to fire the management.Report

    • Avatar Plinko in reply to M.A.
      Ignored
      says:

      Most MNC’s already do this. We can quibble about the sincerity of their efforts, but it’s simply always going to be far easier for vendors to obfuscate than it is for buyers to solidly verify as long as the local governance is either weak or uninterested in enforcement.

      I think the focus on minimum wages to be, at best, misguided. We should be focusing a lot more on ensuring employment is voluntary and remains so (see zic’s notes on pay practices that entrap workers).

      I’m sure I’ll have more to say on the post and the comments later tonight when I can sit down and focus.Report

      • Nob Akimoto Nob Akimoto in reply to Plinko
        Ignored
        says:

        I’d definitely welcome your input.

        On the subject of verification, from what I understand verification processes for the first step of manufacturing is relatively mature. There are examples of lying or obfuscation here, but it’s not the primary cause of “Potemkin villages”.

        Rather the problem comes with multi-step chains where there are subcontractors to the supplier, who may be underbid themselves and working on low margins and where effectively the supplier “out-sources” the worst abuses.Report

        • Avatar Plinko in reply to Nob Akimoto
          Ignored
          says:

          Subcons are the buzzword of the moment, thanks to Tazreen. But, like ‘sweatshops’ – the word ‘subcon’ term is kind of used interchangeably for two similar concepts that contain large, critical difference.

          The negative term, used to describe when a contracted vendor actually subcontracts the major assembly to another company, generally without the knowledge of the purchasing company.
          The legitimate reason for subcontracting of this kind is generally managing production peaks. Outsourcing in general is supposed to help with this, but it’s still true that most companies want to launch all their new stuff at the same time, so everyone is still competing for scarce production resources at the same time. So, when peak demand comes each season, factories take more orders than they can handle (to be fair, at least partly because many US and European brands are well known to suddenly cancel orders). When they find they guessed wrong, they can’t just turn down the order after they’ve taken it the way airlines can bump passengers when a flight doesn’t have as many cancellations as their model predicted, so instead they go and dole the work out to some factory that isn’t overbooked.
          It’s not Potemkin villages per se, the factory is real, but for various reasons the work is sometimes actually done somewhere else. Naturally, your contractor wants to pay less for the work than he’s getting paid, so the subcon will necessarily be substandard.

          That’s what apparently happened to Wal-Mart with Tarzeen – they were contracting to factories that apparently met their standards, but those factories were shipping the work out to factories that Wal-Mart hadn’t approved – one of them was Tazreen.

          Now, the other connotation of ‘Subcon’ is more like what we mean in construction here in the US, a general contractor takes the job but employs specialists to do parts of the work that the main contractor doesn’t have either the expertise or manpower to do. In apparel, almost every factory is not capable of supplying all possible work (there are some China SEOs that might qualify but they’re clearly an exception), so they all use these kinds of subcons – they buy fabric, trims and threads from other companies. They send out cut pieces for embroidery or printing or for garment washing. All of these are also ‘subcontractors’ in the literal and figurative sense.

          So the news is that Wal-Mart has set an aggressive policy to all suppliers (including US brands that sell to them), that their orders need to be at disclosed and evaluated factories for every order. Violations to result in cancellation of all existing contracts and the supplier will also be forbidden from taking any future orders, either.
          This means both connotations of the word I’ve described above. Of course, the industry is in a tailspin about this, mainly with everyone trying to figure out how long this will last before Wal-Mart figures out this is more hassle than it’s worth and loosens either the rules or the punishments. It will be an interesting case study for those who believe in voluntary compliance regimes.Report

          • Nob Akimoto Nob Akimoto in reply to Plinko
            Ignored
            says:

            Thanks.

            It’s interesting to look at how Wal-Mart is approaching the supply chain verification issue. Particularly given that they have more reach and control than almost every IGO and many governments do due to the sheer scale of their purchasing power. They are in some sense a case study of how market power can impact the structure of a market, and they’ve tried (with mixed success) to improve their practices in the last few years and have been a bit bull in the china shop like.Report

      • Avatar James Hanley in reply to Plinko
        Ignored
        says:

        it’s simply always going to be far easier for vendors to obfuscate than it is for buyers to solidly verify

        Yeah, as a general rule, the monitors are always playing catch-up to the cheaters. The pressure gets too hot on the moonshiner and he hides his still in a new location. When the sports drug compliance agencies learn to test for one drug, the Lance Armstrongs shift to another one. The difficulty of monitoring third-world vendors is just one more case study of the application of a general rule.Report

        • Avatar Patrick Cahalan in reply to James Hanley
          Ignored
          says:

          This.

          Security is an arms race, and the bad guys are usually ahead by at least a little bit. That’s just economics.Report

          • Avatar North in reply to Patrick Cahalan
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            says:

            Well look at the incentives: If I’m in private industry and I develope a clever new quasi legal loophole to evade costly regulatory oversight the industry will beat a path to my door, I’ll be promoted, lavishly paid and praised to the skies.

            If I’m in the public or even private third party monitoring sphere and I figure out a way to close a quasi-legal regulatory loophole the corporations will say I’m satan himself. I’ll get no significant financial payout and it’s highly likely that my boss or bosses boss is going to get a lot of phone calls from angry influential people.Report

            • Nob Akimoto Nob Akimoto in reply to North
              Ignored
              says:

              That’s not necessarily true in the third party monitoring sphere. Remember that your clients are also corporations who have serious brand consciousness concerns and having suppliers pull xyz on you through a loophole actually hurts you substantially. So there’s a pretty big incentive for certifiers and verification parties to be vigorous. There’s a two fold dynamic, where producers want one set of verification practices while consumers/buyers want another.Report

      • Avatar Kim in reply to Plinko
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        says:

        How much do MNCs deliberately weaken local governance?Report

        • Avatar James Hanley in reply to Kim
          Ignored
          says:

          Not as much as most people think. There are certainly notable examples that can be highlighted, but all my chats with international businessmen show that most of them prefer to work in countries that are not corrupt and have predictable rules because corruptible government officials are just as likely to screw them over as anything else–the corruptible officials aren’t actually in bed with the corrupting capitalists, they’re just using the capitalists for their own benefit, and will turn on them as soon as that works to their benefit. The pure economics of a business deal will sometimes dictate that they work in countries without those qualities, but that’s not really their preference in most cases.

          A great case in point is what happened in Russia. After the collapse of communism and the apparent rise of democracy and capitalism there was a rush to invest. Then the government turned out to be every bit as corrupt as before, and western firms were facing having their property taken for the benefit of a governing elite, false charges of criminal conducts, etc. So they all pulled out and caused an economic crisis in Russia. I’ve heard lots of people blame the capitalists–and even have heard people say the capitalists did it on purpose–but the real cause was the corruption, and the western capitalists’ preference to not get fished over by corruption.

          As usual, it’s usually better to try to understand another person’s incentives than to assume an evil motive. Not that the latter never exists; just that it’s not nearly as often correct. It’s a matter of parsimony.Report

          • Avatar Mike Schilling in reply to James Hanley
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            says:

            As usual, it’s usually better to try to understand another person’s incentives than to assume an evil motive.

            In conditions where employers have vastly more power than workers, there will be widespread abuse. Some of these abuses have clear economic motives while others are just because they can. You canot assume that, because profit is involved, all behavior is rational.Report

            • Avatar zic in reply to Mike Schilling
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              says:

              You canot assume that, because profit is involved, all behavior is rational.

              Bravo.Report

            • Avatar M.A. in reply to Mike Schilling
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              says:

              You canot assume that, because profit is involved, all behavior is rational.

              A one-sentence takedown of the entire libertarian manifesto. You, sir, are a genius.Report

              • Avatar James Hanley in reply to M.A.
                Ignored
                says:

                That’s not the libertarian manifesto at all. But understanding the real libertarian manifesto would take a lot more work than writing a one-liner does.Report

              • Avatar Mike Schilling in reply to James Hanley
                Ignored
                says:

                Even picking it up is a lot of work.

                I’ll make a weaker claim: libertarians underestimate the harm caused by non-governmental power imbalances. My comment above is one example. Insisting that liberal distrust of the obscenely wealthy is based on envy is another.Report

              • Avatar Kim in reply to Mike Schilling
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                says:

                Distrust he calls it! *snorts* Once burned, twice shy, as are we all.Report

              • Avatar James Hanley in reply to Mike Schilling
                Ignored
                says:

                I’ll make a weaker claim: libertarians underestimate the harm caused by non-governmental power imbalances.

                That’s a claim that can be defended, unlike the one that preceded it.Report

              • Avatar Mike Schilling in reply to James Hanley
                Ignored
                says:

                I completely stand behind what I wrote at 12:48. I never claimed it was a complete refutation of libertarianism.Report

              • Avatar Jaybird in reply to James Hanley
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                says:

                I just wanted there to be at least one reference to how Objectivism and Libertarianism aren’t the same thing in this thread.Report

              • Avatar zic in reply to James Hanley
                Ignored
                says:

                I’m not sure why a line questioning the assumption that profit motives are always rational is a problem, to be honest, James.

                I did way too much business writing, talked to too many business owners and beguiled investors to have an illusions about their rationality.

                It was often irrational because of profit motive. Just ask people who invested with Bernie.Report

              • Avatar Jaybird in reply to James Hanley
                Ignored
                says:

                The problem isn’t that “You canot assume that, because profit is involved, all behavior is rational” isn’t true.

                Of course it’s true!

                The problem is that the statement was interpreted as a slam against, ahem, “the entire libertarian manifesto”.Report

              • Avatar Mike Schilling in reply to James Hanley
                Ignored
                says:

                OK, just the “capitalism is space awesome” part of the manifesto, not the “government blows” part.Report

              • Avatar Roger in reply to James Hanley
                Ignored
                says:

                Just goes to show that after a few years chatting with libertarians, they do have us figured out.

                Manifesto page one, paragraph one, and I quote…

                “Profit, regardless of its source, is always good, and the pursuit of profit always leads to rational outcomes. Anyone who doubts this is a commie or, worse, a mercantilist stooge.”

                Page three, paragraph six…

                “Businessmen are libertarians. So anything that is good for a particular businessman is intrinsically good as it helps us exploit workers and keep union apologists in their rightful place.”

                Page twelve, paragraph four..

                “Capitalism is the pursuit of profit. Never forget it. Capitalism is good. ”

                Page twelve, final paragraph….

                “Ayn Rand is a sex goddess. All hail her eternal spirit.”Report

              • Avatar Mike Schilling in reply to James Hanley
                Ignored
                says:

                It’s not as if the first response from our resident libertarians to “Sweatshops need fire exits.” had been “They cost money and just encourage pilfering and socializing on company time.” instead of “We need to find a non-coercive way to encourage building them.”Report

              • Avatar Roger in reply to James Hanley
                Ignored
                says:

                I’m trying to come clean. You got us. Guilty as charged.

                FTIGM or whatever.Report

              • Avatar Mike Schilling in reply to James Hanley
                Ignored
                says:

                It did amount to FTIGM. Make light of that if you like.Report

              • Avatar Jaybird in reply to James Hanley
                Ignored
                says:

                Well, perhaps I can now destroy the philosophy of centralized statist control by pointing out “You canot assume that, because profit isn’t involved, all behavior is rational.”Report

              • Avatar Mike Schilling in reply to James Hanley
                Ignored
                says:

                Perhaps that’s better stated as

                Well, perhaps I can now destroy the philosophy of liberalism by pointing out “You canot assume that, because profit isn’t involved, all behavior is altruistic.”

                Insisting that fairly awful things are rational, as anyone who hasn’t been brainwashed by the nanny-statists would see, is a libertarian tic, not a liberal one, and there’s basically no one left who rationalizes atrocities as necessary for the triumph of scientific socialism.Report

              • Avatar zic in reply to James Hanley
                Ignored
                says:

                JB, I feel blessed that I don’t live in an ideology where I’m constantly looking for insult, and am (to some limited ability) able to see the weaknesses of my preferred policies.

                And then there’s the being a woman thing. Now that’ might rise to the level of assuming insult that Libertarian Manifesto seems to evoke.

                We each have our paranoia as a cross to bear, one that slips down over our eyes and blinds us or puts visions in our heads like a pair of trendy google glasses filled with liquor.Report

              • Avatar Roger in reply to James Hanley
                Ignored
                says:

                i will drink to that!Report

              • Avatar Roger in reply to James Hanley
                Ignored
                says:

                So when we say. Let’s allow those closest to the decision and most directly involved decide because they know their utility trade offs, you hear “f them”?

                It is one thing to disagree with us. This is something else.Report

              • Avatar Jaybird in reply to James Hanley
                Ignored
                says:

                Insisting that fairly awful things are rational, as anyone who hasn’t been brainwashed by the nanny-statists would see, is a libertarian tic, not a liberal one, and there’s basically no one left who rationalizes atrocities as necessary for the triumph of scientific socialism.

                Well, so long as there aren’t *THAT* many people left who explain the need for broken eggs.

                In any case, the libertarian tic isn’t exactly what you or zic seem to be communicating what you think it is.

                The tic, as I see it is this:

                I shouldn’t tell you how to live. I shouldn’t force you to live a certain way because of whatever religious intuitions I have or whatever taboos I happen to have.

                Perhaps we can argue over my obligations to protect you from harm at the agency of others… but when it comes to your life? I should exercise the most extreme caution before I start forcing you to live according to my personal inclinations… because I know that I am very, very likely to be a tyrant.

                And, to be honest, I don’t really have reason to believe that you’re a better person than I am.Report

              • Avatar Mike Schilling in reply to James Hanley
                Ignored
                says:

                Yeah, when I hear let’s let the wolves decide what’s best for the sheep, it’s certainly none of my business, and those sheep are lazy thieves anyway, I hear F the sheep.Report

              • Avatar James Hanley in reply to James Hanley
                Ignored
                says:

                I completely stand behind what I wrote at 12:48. I never claimed it was a complete refutation of libertarianism.

                Sorry for the confusion. My “more defensible than” statement was actually referencing “complete refutation claim,” not your prior claim, and I know you’re not the one who made the “complete refutation” claim.Report

              • Avatar James Hanley in reply to James Hanley
                Ignored
                says:

                I will add, though, Mike, that it’s a bit disappointing after all this time you still don’t know what we mean by rational. Or else you’re purposes substituting a different meaning for it, and using that different meaning to say we’re wrong about people being rational in the way we mean the word. Either way, from the perspective of someone who uses the rational choice approach to understanding rationality, your comments about rationality here don’t actually amount to even a coherent critique, much less a compelling one, because you’re just flat out using the word to mean something different than we do.Report

              • Avatar Mike Schilling in reply to James Hanley
                Ignored
                says:

                Was I unclear? OK, given the way “rational” is used in economics, which includes spending your entire paycheck on meth, if that genuinely gives you more utility than food and shelter, abusing your employees can be rational. But abuse is not an optimal profit-seeking strategy; it satisfies other, much uglier, motives entirely. And it’s an example of the more general observation that things done, as part of a profit-seeking enterprise, in the name of profit maximization, may be done for reasons that are, in the less technical sense of the word, irrational.

                Better?Report

              • Avatar James Hanley in reply to James Hanley
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                says:

                Mike,

                More accurate, but I don’t get what your point is other than venting. I don’t think you’ll find a libertarian here who thinks rationality is only found in the profit motive, rather than being found in any pursuit of goals. If you do think that’s what folks here are saying, then there’s been a substantial miscommunication.

                And if your claim is really that they’re inaccurately suggesting that locking fire doors increases the firm’s bottom line, well, that’s an empirical question, isn’t it? They’ve provided a not-implausible explanation for their position, and you reject their explanation. That’s all fair. I don’t which of you is right. But it doesn’t mean they’re totally wrong to ascribe that action to the profit-motive rather than just a desire to abuse. They may have potentially overstated their case, but it’s not self-evidently false.

                You seem to get really irritated whenever the subject of rationality comes up, so it’s really hard to have a decent discussion with you about it. I’d like to, but it’s not yet happened. I don’t know, I’m penning a post explaining the concept of rationality as rational choice theorists understand it. I’m not sure whether to bother posting it or not. I’ve really come to think this is one of those subjects where the emotional commitments are just too high to have a good discussion about it.Report

              • Avatar Jim Heffman in reply to James Hanley
                Ignored
                says:

                He wants “rational” to mean “nice”, and since he hasn’t yet learned to separate economics from dollars, he doesn’t understand how “I want everyone to be nice” can be an expression of economic preference.Report

              • Avatar Chris in reply to James Hanley
                Ignored
                says:

                James, I think such a post would be helpful, given that we’re probably all working with different definitions of “rational.” This not surprising, since rational means something different in psychology, philosophy, and economics, and even within those disciplines can have multiple, sometimes incompatible definitions.Report

              • Avatar Glyph in reply to James Hanley
                Ignored
                says:

                Having a bunch of different definitions for the same word is just not…well, it don’t make no sense. 😉Report

              • Avatar James Hanley in reply to James Hanley
                Ignored
                says:

                Chris,

                Well, in it there’s a call-out to you to chime in with some Psych lit, if I decide to send it in. I just have a bad feeling the discussion will go all wrong.Report

              • Avatar Chris in reply to James Hanley
                Ignored
                says:

                Glyph, it’s even worse, too, since the definitions in those disciplines often bare little resemblance to the meaning of the word in everyday English.Report

              • Avatar Glyph in reply to James Hanley
                Ignored
                says:

                Oh, believe me, I know, I was just making a joke.

                But if you guys decide to go for it, it might be helpful around here; the definition of “rational” in the context of economic or libertarian thought is definitely a word I have struggled to make a good friend of mine understand when we have political discussions, but he keeps reverting to the more common everyday usage (which, to be clear, I totally understand – I wish there was another word that could be used, or maybe a clarifying modifier?)Report

              • Avatar James Hanley in reply to James Hanley
                Ignored
                says:

                Chris,

                Yes, yes, and yes. In a nutshell, that’s my point. There’s nothing wrong with those more common plain language definitions of the word. But you can’t use them to say an economic definition of the word has proven wrong.

                It’s as if I was going to “toll” the bell, and somebody said my use of the word was proven wrong because I didn’t have to pay to use the bell.Report

              • Avatar Jaybird in reply to James Hanley
                Ignored
                says:

                Yeah, when I hear let’s let the wolves decide what’s best for the sheep, it’s certainly none of my business, and those sheep are lazy thieves anyway, I hear F the sheep.

                Ah, yes. The Wolves, Sheep, and Sheepdogs argument. This was a big hit after 9/11. Team America: World Police used (redacted), (redacted), and (redacted).

                I’m uncomfortable making the argument that I am obviously one of the sheepdogs because I know I’m not a sheep and I know I’m not a wolf.

                I’m more comfortable saying that I know I’m not someone who ought to be trusted with power to tell others how to live because I know that I am likely to abuse it. When I see someone argue that, no, *THEY* should be trusted with power to tell others how to live because, hey, those sheep need to be protected?

                Gotta admit: I hear things that I might be tempted to say.Report

              • Avatar Glyph in reply to James Hanley
                Ignored
                says:

                Everyone else seems afraid to say it, but those sheep are kind of a-holes, right? 😉Report

              • Avatar James Hanley in reply to James Hanley
                Ignored
                says:

                Yeah, when I hear let’s let the wolves decide what’s best for the sheep, it’s certainly none of my business, and those sheep are lazy thieves anyway, I hear F the sheep.

                So let’s get some sheepdogs and let them be responsive to whichever has the most influence, the wolves or the sheep. That will fix it all.

                I know, I know, that’s unfair. The proper understanding is that if the sheep will just recognize the problem and their potential when they all stand united, they’ll finally manage to outdo the wolves! (Although in that case, it’s not exactly clear why the sheepdog wer needed in the first place.)

                Messing with bad metaphors is a party game, folks. Drink!Report

              • Avatar Kim in reply to James Hanley
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                says:

                You have sheep, and you have lions, and then you have foxes.Report

              • Avatar James Hanley in reply to James Hanley
                Ignored
                says:

                Don’t forget the hawks and the doves (and the chickenhawks).Report

              • Avatar Stillwater in reply to James Hanley
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                says:

                Nobody asked my, but I’ve got two shiny pennies to throw into the kitty…

                Seems to me what Mike was trying to highlight in some overly short comments upstream is a distinction between two aspects of rationality which are in constant tension: the subjective and the objective. If our only concept of rationality in play is that an action or belief A for individual I is rational if and only if I believes A maximizes his or her individual utility relative to any other presented option, then there’s no situation under which individual decision-making can ever be viewed as irrational.

                But that strikes us – most of us – as absurd, since there are other conceptions under which rationality is objectively measured: an action is rational if and only if that action is minimally not inconsistent with goals the individual wants to attain.

                I don’t think we need to go outside the confines of an individual mind to make the point, either. An example: suppose someone took a part time job to enhance their stock portfolio but instead of investing the received income with Barclay’s they bought a five dozen Shamwows. Subjectively, the person’s actions were rational (since by definition any decision a person voluntarily makes upon reflection maximizes their expected utility (otherwise why would they have made it???). Objectively, we might be inclined to say, and in a limited but very real sense are justified in saying, that the decision to buy Shamwows is irrational since it’s inconsistent with the purpose of taking the part time job to begin with.Report

              • Avatar Chris in reply to James Hanley
                Ignored
                says:

                There are duckbilled platypuses and there are mouse lemurs. Which are you?Report

              • Avatar Stillwater in reply to James Hanley
                Ignored
                says:

                Not that those conceptions of rationality are exhaustive, mind. Just that those are two conceptions which highlight the point I think Mike is trying to make.Report

              • Nob Akimoto Nob Akimoto in reply to James Hanley
                Ignored
                says:

                Pretty sure I’m a platypus. An amalgamation of strange bodyparts and weird pieces.Report

              • Avatar MikeSchilling in reply to James Hanley
                Ignored
                says:

                You seem to get really irritated whenever the subject of rationality comes up, so it’s really hard to have a decent discussion with you about it.

                Do I? I don’t think it’s a subject I’m irration…, umm, overly sensitive about. At any rate, I meant “rational” in its colloquial meaning of “reasoned rather than emotional”, not in any technical sense; I didn’t mean to attack ration choice theory, deny that people are “rational actors”. I do mean to say that when people drape themselves in concern for the bottom line, they are as likely to be full of shit as if they’d draped themselves in the flag.

                I do admit that the economic sense of “rational” seems tautological to me, so your post could be helpful in dispelling that.Report

              • Avatar Kim in reply to James Hanley
                Ignored
                says:

                This is true.
                M.A. might I suggest you look at David Brin’s blog?Report

              • Avatar zic in reply to Kim
                Ignored
                says:

                ehhh. Brin’s a bit off in his own paranoid view of the world.

                and I say this as someone who’s purchased nearly all of his books in hardcover upon release, who’s been to hear him speak, and had several run-ins with him on various blogs about the internets; we keep crossing paths, and he backs off with any sort of logical challenge, turns it into fodder for the totes cray.Report

              • Avatar Kim in reply to zic
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                says:

                There’s reasons why Brin’s not citing his sources (I should know, I know some of them!)… Sometimes he’s a little off in the raggedity edges of “implausible” (but, then again, he’s an author. the more implausible it sounds the more likely it is he’s telling the truth). But then again, I know where the Knights Templar hang out (My point being: there are plenty of conspiracies. most of them are pretty boring).Report

            • Avatar Kim in reply to Mike Schilling
              Ignored
              says:

              Assuming rationality is often foolish.Report

            • Avatar Jim Heffman in reply to Mike Schilling
              Ignored
              says:

              It’s not a takedown of libertarian anything. “rational” and “likeable” are not the same thing, except in the mind of a carebear.Report

              • Avatar Mike Schilling in reply to Jim Heffman
                Ignored
                says:

                Insisting someone work for 10 hours without a meal or bathroom break isn’t rational: they’d more more productive without that artificial privation. It’s pure Room 101 sadism: a boot stamping on a worker’s face, forever. That’s fishing obvious. The fact that understanding it counts as being a “carebear” says loads about “realists”.Report

              • Avatar DRS in reply to Mike Schilling
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                says:

                It wasn’t until North American workers started getting treated with respect (not untinged by suspicion and fear) that they entered the middle class. Carebearing works!Report

              • Avatar Jim Heffman in reply to Mike Schilling
                Ignored
                says:

                “Insisting someone work for 10 hours without a meal or bathroom break isn’t rational…”

                Are you a vegan? If not, why? Is it *rational* to expect that animals give up their lives just so that you can get protein from meat rather than tofu?Report

              • Avatar Mike Schilling in reply to Jim Heffman
                Ignored
                says:

                I kill animals because I enjoy meat. You insist your employees work under conditions that makes them less productive because…?

                Oh, OK. Because you value controlling them more than you value their production. I suppose that’s perfectly rational.Report

              • Avatar Citizen in reply to Mike Schilling
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                says:

                Mike,
                I would suggest that the missing element here is what would a libertarian organized labor force look like? When talking of sheep and wolves you have to be good at vector addition. Although no blood has been spilled on that front in considerable time is probably due to the power imbalance resting within the government. Why hasn’t blood been shed recently on this front?

                Eventually “the worse is better” as applied to suppression.Report

              • Avatar Jim Heffman in reply to Mike Schilling
                Ignored
                says:

                “Because you value controlling them more than you value their production.”

                You really really want me to agree, unargued, that acting in a way that maximizes your own benefit is irrational. To agree that, somehow, being a jerk is irrational.

                Then you tell me you kill animals because you like to eat them. Lotsa people out there figure that killing animals is an irrational, jerkish thing to do. So, you’re an irrational jerk, then?Report

              • Avatar Kim in reply to Mike Schilling
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                says:

                Citizen,
                Blood has been shed recently, during organization efforts.Report

          • Nob Akimoto Nob Akimoto in reply to James Hanley
            Ignored
            says:

            Compliance is one of the most expensive and headache inducing things related with global supply chains. Ever since SarOx was introduced in the US and J-SOX in Japan, the sheer amount of internal financial compliance that subsidiary manufacturers have to comply with in every conceivable circumstances have created a cottage industry of compliance inspectors.

            And this is before we get into the fun part of MNCs that source things from foreign factories.Report

  8. Avatar Chris
    Ignored
    says:

    Nob, I think this is a good post, but your definition is incomplete. You need something about child labor and something about compensation levels.

    Matt Zwolinski has done a lot of work on sweatshops, including discussing issues related to the definition. I recommend checking out his work:

    http://home.sandiego.edu/~mzwolinski/

    Many of his papers are available through that website.Report

    • Avatar Chris in reply to Chris
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      says:

      Also, the primary influence on these markets isn’t the MNC that contracts directly with the factory. It’s the retailers.Report

    • Nob Akimoto Nob Akimoto in reply to Chris
      Ignored
      says:

      This is what I get for writing at 4 in the morning.

      I agree that age of the laborers is an important element, but I tended to assume it was related to the voluntary nature of the employment.

      I’ll take a look at Zwolinski’s work.Report

      • Avatar Chris in reply to Nob Akimoto
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        says:

        I should note that I disagree with many of his conclusions about sweatshops, but his work is very thorough.Report

      • Avatar James Hanley in reply to Nob Akimoto
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        says:

        I think you’re right that age is related to voluntariness. It should be added, but probably as an extension of 1 or 2, rather than a separate principle.Report

        • Avatar Chris in reply to James Hanley
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          says:

          I’m cool with that.Report

          • Avatar James Hanley in reply to Chris
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            says:

            I’m glad you brought it up. It was a good point.Report

          • Avatar Roger in reply to Chris
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            says:

            I haven’t even clicked on the links yet, but I am amazed Chris is linking to Matt Z. Consider me intrigued!Report

            • Avatar Chris in reply to Roger
              Ignored
              says:

              If you want to do a lit review on sweatshops, he’s the best place to start, at least for a non-economist like me (the philosophy literature is easier for me to navigate). Obviously, he’s a libertarian and I’m something akin to the opposite of a libertarian, at least on economic issues, but like I said, he’s very thorough, and he’s written on, among other thing, the complications surrounding a definition of sweatshops. You’ll notice that even those who do empirical work that leads them to conclusions different from Zwolinski’s tend to cite him, for these reasons.Report

            • Avatar Chris in reply to Roger
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              says:

              And I should note that the empirical work does tend to lead to conclusions different from his. For example, it shows that even relatively large increases in wages have a small impact on prices, and little or no impact on employment levels (whether it’s little or no impact depends on where and what).Report

              • Avatar Patrick Cahalan in reply to Chris
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                says:

                Is this time linked?

                Because in the short term, I’d expect this to be the case. You have sunk costs in an outsourcing agreement. You’re not going to change them for a good reason, and an uptick in product price matters only to the extent that your pass-through isn’t working.

                If my supplier doubles his price, and my customers are willing to double their price, I don’t care much. It’s when the competitors start eating away at my customer base that the next round of efficiency must occur.Report

              • Avatar Chris in reply to Patrick Cahalan
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                says:

                No, it’s not time linked. Basically (as I think others have noted here in previous sweatshop discussions), large increases in factory employee wages get passed on to the suppliers and retailers, who raise prices by a small amount. There is sometimes a short-term drop in employment rates, but it’s significantly smaller than sometimes assumed by libertarian-types in the literature (or here). But since the suppliers/retailers, and ultimately the customers, ultimately absorb most of the cost, and since the cost they’re absorbing is very small (and easily within the levels that the market will allow), employment isn’t really affected.

                Plus, one are where libertarians and I disagree is that sweatshops, even if they are an improvement on living conditions, are a real moral issue, and that exploitation is still involved.Report

              • Avatar Plinko in reply to Chris
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                says:

                I need to stop watching the comment e-mails as it’s hard to resist chiming in. . .

                I’ve read some of Zwolinski’s stuff and he’s done a fair amount of good research. But I also find some of his conclusions to be a bit blinkered because he, like most everyone out there, doesn’t try to account for how retailers and their agents actually operate and therefore misstate what are prices, costs, markups and margins.

                I’m pretty you’re wrong on the typical development process of general wage increases and where they go. In apparel, anecdotally, productivity increases generally outstrip wage increases (something we’ve also seen well here in the U.S.).

                Workers earn more, but they also produce a lot more. I can write up a lot more detailed explanation of the hows and whys when I have time but I thought I should nip that notion in the bud.

                We’ve been in price deflation for about 14 of the last 15 years in apparel despite huge average wage increases over the same period.
                We’re in an interesting time because the industry now believes that long period of deflation either has ended or is about to end.
                Companies know superficially they’re going to have to adjust to this reality, but most don’t even have an idea of what it will mean to them much less how they will manage.Report

              • Avatar zic in reply to Plinko
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                says:

                We’ve been in price deflation for about 14 of the last 15 years in apparel despite huge average wage increases over the same period.
                We’re in an interesting time because the industry now believes that long period of deflation either has ended or is about to end.

                I haven’t looked into this seriously, but I do follow a lot of writing on the fashion industry. There seems to be a growing awareness that there’s an extreme amount of excess production that simply never gets sold to a consumer — millions of tons of crap made that’s unsellable — despite the vast market of shoddy shit sold in almost every store in America.Report

              • Avatar Kim in reply to Plinko
                Ignored
                says:

                +1, zic.
                The problem is accursed “fashion” … it’s what makes women’s clothes cost 3x what men’s clothes cost. (Not that there aren’t legitimate reasons for women’s clothes to cost more, but not that much more…) [Women dont’ buy half the stuff on teh racks, and when they do its often on major clearance. Someone tried the costco model of “no sales” but the customers wouldn’t bite…]

                Plus, we could actually have sizing that fits women, instead of machines…

                Also, the “fashion engineers” figured out that women would just throw their clothes out after a year or two (or could be marketed into doing just that), and buy More Crappy Clothes!

                Recession cuts into that a lot.Report

              • Avatar James Hanley in reply to Plinko
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                says:

                {Furiously planning how I can bring Plinko to Michigan so he can talk to my sometime-in-the-future Globalization class, and make him bring his gravatar with him.}Report

              • Avatar Plinko in reply to Plinko
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                says:

                zic – in my experience even mass-market brands (the kind where I work), have terrible, terrible, inventory management practices. This is partly because a lot of principles of good inventory management are really, really hard to apply to apparel – sizing (and to a lesser extent, color) along means SKU complexity is tremendous. Add in the fact that pretty much all products have an intended lifecycle of about a quarter of the production leadtime and you can never really order with knowledge.
                Now, the more fashion-driven the brand, they have even less ability to try and manage their inventory. From what I understand, they mainly operate on a Hollywood model of a few hits making up for a lot of small losses.
                To tie this back to the recent history of deflation – companies have had it easy for years – knowing that the next production cycle would be as cheap or cheaper than the last. So all your decision making is easy – how to invest the surplus – generally a split between increased margins for the company and added product value (finer yarns, fancier embellishments) all while able to absorb big price cuts on what doesn’t sell. There’s been almost no incentive to keep inventory tight.
                Now, will there be? At mass-market brands – I think there needs to be. Such companies will need to preserve margins by making fewer mistakes and/or doing better with hits. I am not sure sure more fashionable companies will feel the pressure at the same time I do.Report

              • Avatar Plinko in reply to Plinko
                Ignored
                says:

                Also – this is where Inditex (who owns Zara) becomes so fascinating a company for us. They are clearly a mass-market company that seems to have squared the circle on getting reads and adjusting production. They’ve done so with heavy reliance on near-shore production to reduce leadtimes and allow themselves to chase additional production of winners and avoid needing to make big purchases without knowing what will and won’t succeed.

                Also, James, I hope we can discuss that over drinks in Chicago in June!Report

              • Avatar Michael Drew in reply to Plinko
                Ignored
                says:

                We’ve been in price deflation for about 14 of the last 15 years in apparel despite huge average wage increases over the same period.
                We’re in an interesting time because the industry now believes that long period of deflation either has ended or is about to end.
                Companies know superficially they’re going to have to adjust to this reality, but most don’t even have an idea of what it will mean to them much less how they will manage.

                Plinko,

                I’m just a little lost here. We’re talking about production factor prices here, or not? Or retail? Which prices exactly?Report

              • Avatar Plinko in reply to Plinko
                Ignored
                says:

                Production factor costs. We generally buy widgets for less than they cost us in 1998.

                This has, naturally, also led to a lot of retail price deflation over the same period as well.

                Although, as the flip side of inflatgion scenarios, there’s a fair amount of substitution that’s gone on – only in the case of apparel we substitute more expensive materials in place of allowing all the surplus to go to consumer prices so we can try to keep some of it for ourselves.Report

              • Avatar Michael Drew in reply to Plinko
                Ignored
                says:

                Thanks!Report

              • Avatar Roger in reply to Chris
                Ignored
                says:

                Chris

                Could you refer a few specific papers?Report

              • Avatar Chris in reply to Roger
                Ignored
                says:

                Roger, sure. I think I may have linked this one in our last discussion of the topic:

                http://papers.ssrn.com/sol3/papers.cfm?abstract_id=333325

                I’ll look for some others in a while, but I had that one open on my computer already because I was looking for a cite in it.Report

              • Avatar Roger in reply to Roger
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                says:

                Thx bro’.Report

              • Avatar Roger in reply to Roger
                Ignored
                says:

                Chris and all,
                Probably too late, but thanks again for the link. They argue persuasively that higher wages wouldn’t substantially raise prices.

                The bigger issue which I wish they addressed though, is the question of how above market rate wages would affect employment of the least skilled. The real question is why would I hire a dollar an hour employee at two dollars an hour when I can hire a two dollar an hour employee at the same wage. Why would I build a factory in a one dollar an hour wage rate area, when I am going to pay more?

                They seem to miss the real argument against above market wages, namely it redirects employment offers to others, and thus hurts those it pretends to help.Report

              • Avatar Kim in reply to Roger
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                says:

                Roger,
                Does the word Churn mean nothing to you? 😉Report

              • Avatar Plinko in reply to Roger
                Ignored
                says:

                Roger, those are the conclusions I mean when I say these sort of papers fail.
                They don’t understand the supply chain well enough to know the math they present is wrong (they’re doing the wrong equations). When the math is wrong, you get junk conclusions.Report

              • Avatar Roger in reply to Roger
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                says:

                Yeah, the sums add up, but they are asking the wrong question.Report

  9. Avatar Kazzy
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    says:

    An excellent and very informative piece, Nob. Thank you. I didn’t realize that the MNC’s had so little control over wages. Perhaps that is a way that a company get differentiate itself: centralized control over production. Rather than find a factory that makes shoes, build a factory that makes shoes. This will give them greater control and allow them to say, “We assure our workers of standards X, Y, and Z.” They are not entirely helpless in the matter but are also not as complicit as is often believed.Report

    • Avatar Roger in reply to Kazzy
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      says:

      My only fear is we will get a class of well informed mercantilists.Report

    • Avatar James K in reply to Kazzy
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      says:

      That can actually be impossible in many countries, as many countries have restrictions on foreigners buying local land or businesses.Report

      • Avatar Kazzy in reply to James K
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        says:

        Sure.

        I’m referring to companies that want to build their brand in part around how they treat their employees. If you want to run Hippie-Feel-Good-TShirts, Inc. and your tagline is that every one involved in the making of your shitty hemp threads is paid a living wage, you opt not to manufacture in those countries.

        Highly-Profitable-Pants-Co., on the other hand, will.

        And both should (presumably) have the right to make that decision for themselves.

        What I would not be sympathetic to is HFGTInc. making that claim, having folks involved in the process making less than a living wage, and then insisting, “Well, we had no control! We don’t own the factories!” Because if having that control is important to them (and I realize it is not for all companies), it is available… but at a price.Report

  10. Avatar KatherineMW
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    says:

    That was a very valuable explanation of how the production and purchasing system works. Thanks for the information, Nob.Report

    • Nob Akimoto Nob Akimoto in reply to KatherineMW
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      Thanks.

      I would really commend though that you check out Michael’s work. Branded! is an engrossing read and his work into the field of certification and verification is top notch and sheds new light on how things work. I’m sure Plinko will find things to quibble with (which is always good) but in general I want more people involved in this field, as it helps moves things forward and is a way for governance to work despite the lagging indicators of government action.Report

      • Avatar KatherineMW in reply to Nob Akimoto
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        I’ll check it out. I tend to be a real skeptic on the idea of corporate social responsibility, though (seen too many cases of companies that do dreadful things papering it over by donating to pretty causes – one of the worst is Nestle, which has been implicated in use of child slave labour in producing its chocolate, trumpeting its donations to UNESSCO. The oil companies are also pretty egregious).Report

  11. Avatar James Hanley
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    says:

    I’d like to add that I appreciate these discussions–all sides of them–because I am developing a course on globalization. It’s not a real area of expertise for me, but for boring institutional reasons I won’t detail my department has a need to offer it more frequently (we last offered it about 7 years ago), and it is something I’m interested in, so I’m going to take a stab at it in a year or two. And the sources folks link to and the arguments you all make–whichever angle they come from, whether supportive of international markets/WTO or critical–are really helpful in developing my understanding of all the globalization arguments, pro and con, so that I’ll be able to explain them thoroughly and fairly. So thanks all, especially those I find myself arguing against.Report

    • Nob Akimoto Nob Akimoto in reply to James Hanley
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      If you get a textbook contract out of it, we’re gonna want a cut of the royalties! :pReport

    • Avatar Chris in reply to James Hanley
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      says:

      but for boring institutional reasons I won’t detail my department has a need to offer it more frequently (we last offered it about 7 years ago)

      Is one of those boring institutional reasons that everyone who took the course last time has graduated, so no one currently enrolled has had the opportunity to do so? 😉Report

      • Avatar James Hanley in reply to Chris
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        Nah. It mostly has to do with an effort to try to revive a dormant International Studies major and an on-going concern with linking our department in with others to ensure our on-going value to the school, in an age when budgetary constraints are forcing small private colleges to take a hard look at whether they should eliminate some departments. My department is under no immediate threat of any kind, but a hard-nosed objective look at the realities for small schools, and our situation vis a vis other programs at our school tells me we need to be proactive (sorry, is that another of those business-speak words we all loathe?).

        Plus I’m interested in the issues, and I’ve grown bored with a couple of my other classes. I know I spend way too much time developing or half-developing new courses, not all of which end up getting taught. But I look at folks who teach 2-3 classes a year, and it’s always the same ones, and I wonder how the hell they don’t bored to the point of despair. I suppose it’s a difference in temperament. I’ve never been a great primary scholar, but I’ve always enjoyed being a student, and developing new courses, even if I never teach them, allows me to keep learning new things.Report

    • Avatar zic in reply to James Hanley
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      I wrote for an international trade mag for a while; which job had me speaking to US and foreign consulates on global trade; particularly to identify sources in the countries I wrote about.

      First thing that struck me was how very different the on-record/off-record portions of the interview were. On record, folks were speaking the approved line, ‘great place to do business, here’s the resources to help you get started.’ Off record, there was an endless litany of the bribes necessary to get a foothold in many 3rd world countries.

      That tone would, I presume, bleed over into all business dealings, including inspectors working to make certain minimum humane standards are met.

      I pretty much view all such conversations about global markets with an enormous degree of skepticism; who you pay, you’re willingness to pay, and the ease with which officials expect/demand that payoff is #1 rule of success from what I could tell. So in putting such a course together, finding some inroads into the pay-to-play nature of global trade seems worth a bit of investigation.

      I’d also recommend reading James Fallows book on China; I haven’t read it, but I’ve read enough of his blogging about things Chinese to think it worth some time.

      Finally, there’s a database of US customs data maintained by a University in MA; I think it might have changed homes, but I recall it was at U. Mass Amherst, but I’m sure I could find it if you’re interested. At the time I was writing, they gave me access to it; and it’s a pretty amazing resource for what passes through customs based on US Customs code; you can pretty much identify everything moving through customs with it. They sell access to companies for a lot of $.Report

  12. Avatar Michael Drew
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    says:

    Nob or others –

    Is it your view that the definition of “sweatshop” is also the description of the ‘ceiling’ as it were over the set of working conditions and wages that we in the rich world ought deplore and /or be concerned about to the point of treating as a policy issue of high moral importance? Or is sweatshop just a particular terms that is used imprecisely whose definition you’re trying to clarify, but that is more or less incidental to determining what that set of conditions and wages (in combination or separately) is?Report

    • Avatar James Hanley in reply to Michael Drew
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      I can’t speak for Nob, but for myself I’d see it as just clarification of what we’re talking about. I don’t think I can tell you what you ought or ought not deplore and be concerned about. But if two people are talking about “sweatshops,” and one person is mentally defining it as a place where people are literally chained to their work stations and the other is mentally defining it as a place falling well short of first world workplace standards, then they’re not really talking about the same thing.

      This is one of the primary causes of people talking past each other, the others being a) those irresolvable differences in fundamental values and 2) people who can’t recognize chickens. 😉 (If you’re not Michael Drew, don’t ask.)Report

      • Avatar Michael Drew in reply to James Hanley
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        says:

        No doubt, it’s good to define this reference if it’s going to be used (a point that we tabled in a previous discussion, so this is a welcome contibution from Nob). But I’m still curious whether we think it’s an important referent, or just a particular thing that has a name. (My sense is that the term itself is more metaphor than descriptor, so that would suggest it is, but I’m not sure that people who use the term have really considered whether they consider “sweatshop” conditions to be the upper bound on whatever conditions they consider ones that should be regarded as unacceptable, subject to policy remediation, or etc.)

        So, not really asking to be advised what I should think about whether “sweatshop” conditions are an important cutoff point for what we should regard as acceptable working conditions and wages in the developing world given the realities involved, but more just to find out what others think about it.Report

        • Avatar Michael Drew in reply to Michael Drew
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          says:

          …Granted, I asked about what people think “we should” think about that. But at this time I’m asking more to find about about the state of opinion on that (or on just what people themselves regard as unacceptable conditions, if they don’t view those opinions of theirs as given by normative reasons that they think should be more or less broadly compelling) than to inform my own opinion.

          So again, soliciting views. Sweatshops: do working conditions need to be at least that (be the definition given in the OP) before they provoke acute concern on behalf of the workers facing them that they are in a situation that ought to be remediated by a policy response of some kind or other, or are there sets of conditions short if this definition that provoke a similar concern (which you may or may not have associated with the term “sweatshop” before the clarification given here)? (And I’ll check in comments to James K’s post to see if there are any responses on point to this question there…)Report

    • Nob Akimoto Nob Akimoto in reply to Michael Drew
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      I guess for me my definition of sweatshop is there to make this discussion useful. Just like how the debate on terrorism went on for years without much progress because everything and their mother was branded a terrorist group, so this sweatshop label puts us at an impasse when it comes to debate.

      I would argue that this thread has actually been substantially more productive in moving some debate and giving points of agreement between potentially antagonistic ideological sides than previous ones because we’re trying to narrow down what things are NOT acceptable, rather than work with a hazily defined definition of “bad practices”.Report

      • Avatar Michael Drew in reply to Nob Akimoto
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        says:

        Thanks, Nob.

        I guess I don’t think that “terrorism” and “sweatshop” are analogous terms here, though. Terrorism is rather clearly a thing we’re inherently concerned about no matter what term you use to describe it, and I’d say the analogue to working conditions would be something more like, “arguably inhumane working conditions,” or “unacceptable working conditions.” It doesn’t seem to me that “terrorism” refers to some particular level of political violence that we either think is morally significant or not, the way “sweatshop conditions” refers to a particular place along the slope of possible sets of working conditions. It seems to me that, however we end up defining terrorism precisely, ultimately we know from the start that the thing we care about there is pretty clear to us, while, even once we define precisely what sweatshop conditions are, we then still have to decide whether that’s a threshold we actually care about in particular.

        Perhaps the kinds of political violence which we term “terrorism” that we’re concerned with isn’t actually as clear as I’m making out, but it still seems more clear than we actually are right now about what kinds of working conditions in poor countries we should be particularly concerned with, and which are just an unavoidable and acceptable result of the economic state that the place where they obtain happens to be in.Report

        • Nob Akimoto Nob Akimoto in reply to Michael Drew
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          says:

          Can a state be a terrorist?
          What about if the target is a state actor?
          Is a simple shooting spree an act of terrorism?

          There’s a lot of permutations on what counted as terrorism until most experts began focusing on the non-state actors attacking civilian targets thing. In fact there’s probably still disagreement on this which leads to different outcomes and solution sets. For example, a Counter Insurgency based model which involved lots of boots on the ground etc. vs. the counter-terrorism/counter-force model where you just kill specific threats as you find them.

          Then there’s definitions bases on whether you use military or law enforcement means, etc, and how you talk about the definition changes how you deal with it.

          Hence why I think it’s important to be clear what we mean for “sweatshops” because it does meaningfully alter our tool kit in dealing with it.

          If we simply define it as “low wage industrial labor” we’re gonna have a much harder time agreeing on a means of fixing it, than if we identify particularly egregious practices.Report

          • Avatar Michael Drew in reply to Nob Akimoto
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            says:

            Yes. So I guess my point is, whatever terms we use to describe these various problems – and it’s true that whether we called them terrorism became very politically significant for a time over the last decade – apart from terminological issues, it’s always, as far as I can tell, been rather clear what kinds of things we’re concerned about in the first instance, whether we ultimately call them terrorism or not. Whether we call them terrorism might affect how we approach the problem, but as a first-order matter, we know these are problems we need to attack with policy.

            In the case of working conditions, before we get to the question of whether some set of conditions constitute sweatshop conditions, it’s not clear to me that we have any kind of handle on what kinds of sets of of conditions we’re (acutely) concerned about in the first instance, whether they amount to sweatshop conditions or not. The “sweatshop” terms has, from where I’m sitting, seemed to sort of stand in for the whole set of vaguely or not-at-all defined states of affairs that we think we might be concerned about w/r/t working conditions in poor countries. That being the case, it’s not clear to me that we make the kind of analytic advance by defining the term sweatshop that we do by defining the term terrorism. Yes, we become more clear about what we’re referring to when we use that term, but now we’ve potentially left some part of what we previously thought we were referring to by sweatshop – but still actually are (or may be concerned with despite that term not applying to it – without a name that we instinctively use for it. By defining “sweatshop,” we haven’t actually defined what the thing is we’re concerned with, though we’ve removed a terminological obstacle that had previously been in the way of our making that conceptual clarification.

            Again, from my perspective, even while we’ve continued to clarify the terminological issue around what is and isn’t “terrorism,” in fact we’ve always had a better handle on what actual things we were concerned about that we had associated with that term than we do about what sets of working conditions actually concern us. Which is not to say that that handle on the terrorism-y things we’ve been concerned with was ever, or is, perfect or quite good. But I do think it’s mostly better than is our handle (by which I mean the left’s, more or less; Roger, for example, is admirably clear about his view on this question) – on what sets of working conditions in the developing world we’re acutely concerned with.

            So you’re right that in both cases, the term needs to be diligently clarified in order not to be an obstacle to good analysis of the concept, but that doesn’t mean that the state of our analytical clarity about the concept – the thing or things we’re concerned about, whatever we call them – is the same in each case. I think we have more clarity about what kinds of things we’re concerned about in the general ‘terrorism realm,’ whether we call those things terrorism or not, than we do about what sets of working conditions we’re concerned about in the general ‘factories in the third world’ realm, whether we call them sweatshops or not.Report

            • Avatar Roger in reply to Michael Drew
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              says:

              Michael,

              Good comment. My briefest response is sweatshop is a catch all for “unacceptable working conditions.” The libertarian default position is that unacceptable should be defined by the worker facing the alternatives. It is their definition which most matters. Nob’s three exceptions to this rule of thumb make sense to me.Report

  13. Avatar James K
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    says:

    This is the most useful post on working conditions in poor countries that I’ve read in quite some time Nob.Report

  14. Avatar Plinko
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    says:

    I realize I neglected to praise your post, Nob (as well as thank you for the callout). I’m glad to see how much more productive this discussion’s been than many we’ve had on the subject – though Jonathan’s at the 49th was a huge step, I think.

    One thing that’s really rolling around in my head is some offhand comments there made about the Asian Tigers. I’m reading Korea: The Impossible Country right now and so far, it’s really validated my opinion that the lessons of the Tigers is anything but that free markets are the necessary precursor to emerging from poverty. I’m thinking I need to study up on that subject a bit more, about Korea as well as Singapore, Thailand and Malaysia.

    I highly recommended the book, by the way. Most Americans really know far less about the Korea and the ROK than we ought.Report

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