Nike to the Rescue?

Nicholas Kristof has been beating the pro-sweatshop drum for quite a while. Shortly after the East Asian financial crisis of the late 1990s, Kristof, the Pulitzer Prize-winning journalist and now columnist for the New York Times, reported the story of an Indonesian recycler who, picking through the metal scraps of a garbage dump, dreamed that her son would grow up to be a sweatshop worker. Then, in 2000, Kristof and his wife, Times reporter Sheryl WuDunn, published “Two Cheers for Sweatshops” in the Times Magazine. In 2002, Kristof’s column advised G-8 leaders to “start an international campaign to promote imports from sweatshops, perhaps with bold labels depicting an unrecognizable flag and the words ‘Proudly Made in a Third World Sweatshop.’”


Now Kristof laments that too few poor, young African men have the opportunity to enter the satanic mill of sweatshop employment. [See his article reprinted below.] Like his earlier efforts, Kristof’s latest pro-sweatshop ditty synthesizes plenty of half-truths. Let’s take a closer look and see why there is still no reason to give it up for sweatshops.


A Better Alternative?


It is hardly surprising that young men on the streets of Namibia’s capital might find sweatshop jobs more appealing than irregular work as day laborers on construction sites.


The alternative jobs available to sweatshop workers are often worse and, as Kristof loves to point out, usually involve more sweating than those in world export factories. Most poor people in the developing world eke out their livelihoods from subsistence agriculture or by plying petty trades. Others on the edge of urban centers work as street-hawkers or hold other jobs in the informal sector. As economist Arthur MacEwan wrote a few years back in Dollars & Sense, in a poor country like Indonesia, where women working in manufacturing earn five times as much as those in agriculture, sweatshops have no trouble finding workers.


But let’s be clear about a few things. First, export factory jobs, especially in labor-intensive industries, often are just “a ticket to slightly less impoverishment,” as even economist and sweatshop defender Jagdish Bhagwati allows.


Beyond that, these jobs seldom go to those without work or to the poorest of the poor. One study by sociologist Kurt Ver Beek showed that 60% of first-time Honduran maquila workers were previously employed. Typically they were not destitute, and they were better educated than most Hondurans.


Sweatshops don’t just fail to rescue people from poverty. Setting up export factories where workers have few job alternatives has actually been a recipe for serious worker abuse. In Beyond Sweatshops, a book arguing for the benefits of direct foreign investment in the developing world, Brookings Institution economist Theodore Moran recounts the disastrous decision of the Philippine government to build the Bataan Export Processing Zone in an isolated mountainous area to lure foreign investors with the prospect of cheap labor. With few alternatives, Filipinos took jobs in the garment factories that sprung up in the zone. The manufacturers typically paid less than the minimum wage and forced employees to work overtime in factories filled with dust and fumes. Fed up, the workers eventually mounted a series of crippling strikes. Many factories shut down and occupancy rates in the zone plummeted, as did the value of exports, which declined by more than half between 1980 and 1986.


Kristof’s argument is no excuse for sweatshop abuse: that conditions are worse elsewhere does nothing to alleviate the suffering of workers in export factories. They are often denied the right to organize, subjected to unsafe working conditions and to verbal, physical, and sexual abuse, forced to work overtime, coerced into pregnancy tests and even abortions, and paid less than a living wage. It remains useful and important to combat these conditions even if alternative jobs are worse yet.


The fact that young men in Namibia find sweatshop jobs appealing testifies to how harsh conditions are for workers in Africa, not the desirability of export factory employment.


Oddly, Kristof’s desire to introduce new sweatshops to sub-Saharan Africa finds no support in the African Growth and Opportunity Act (AGOA) that he praises. The Act grants sub-Saharan apparel manufacturers preferential access to U.S. markets. But shortly after its passage, U.S. Trade Representative Robert Zoellick assured the press that the AGOA would not create sweatshops in Africa because it requires protective standards for workers consistent with those set by the International Labor Organization.


Antisweatshop Activism and Jobs


Kristof is convinced that the antisweatshop movement hurts the very workers it intends to help. His position has a certain seductive logic to it. As anyone who has suffered through introductory economics will tell you, holding everything else the same, a labor standard that forces multinational corporations and their subcontractors to boost wages should result in their hiring fewer workers.


But in practice does it? The only evidence Kristof produces is an imaginary conversation in which a boss incredulously refuses a Nike vice president’s proposal to open a factory in Ethiopia paying wages of 25 cents a hour: “You’re crazy! We’d be boycotted on every campus in the country.”


While Kristof has an active imagination, there are some things wrong with this conversation.


First off, the antisweatshop movement seldom initiates boycotts. An organizer with United Students Against Sweatshops (USAS) responded on Kristof’s blog: “We never call for apparel boycotts unless we are explicitly asked to by workers at a particular factory. This is, of course, exceedingly rare, because, as you so persuasively argued, people generally want to be employed.” The National Labor Committee, the largest antisweatshop organization in the United States, takes the same position.


Moreover, when economists Ann Harrison and Jason Scorse conducted a systematic study of the effects of the antisweatshop movement on factory employment, they found no negative employment effect. Harrison and Scorse looked at Indonesia, where Nike was one of the targets of an energetic campaign calling for better wages and working conditions among the country’s subcontractors. Their statistical analysis found that the antisweatshop campaign was responsible for 20% of the increase in the real wages of unskilled workers in factories exporting textiles, footwear, and apparel from 1991 to 1996. Harrison and Scorse also found that “antisweatshop activism did not have significant adverse effects on employment” in these sectors.


Campaigns for higher wages are unlikely to destroy jobs because, for multinationals and their subcontractors, wages make up a small portion of their overall costs. Even Kristof accepts this point, well documented by economists opposed to sweatshop labor. In Mexico’s apparel industry, for instance, economists Robert Pollin, James Heintz, and Justine Burns from the Political Economy Research Institute found that doubling the pay of nonsupervisory workers would add just $1.80 to the production cost of a $100 men’s sports jacket. A recent survey by the National Bureau of Economic Research found that U.S. consumers would be willing to pay $115 for the same jacket if they knew that it had not been made under sweatshop conditions.


Globalization in Sub-Saharan Africa


Kristof is right that Africa, especially sub-Saharan Africa, has lost out in the globalization process. Sub-Saharan Africa suffers from slower growth, less direct foreign investment, lower education levels, and higher poverty rates than most every other part of the world. A stunning 37 of the region’s 47 countries are classified as “low-income” by the World Bank, each with a gross national income less than $825 per person. Many countries in the region bear the burdens of high external debt and a crippling HIV crisis that Kristof has made heroic efforts to bring to the world’s attention.


But have multinational corporations avoided investing in sub-Saharan Africa because labor costs are too high? While labor costs in South Africa and Mauritius are high, those in the other countries of the region are modest by international standards, and quite low in some cases. Take Lesotho, the largest exporter of apparel from sub-Saharan Africa to the United States. In the country’s factories that subcontract with Wal-Mart, the predominantly female workforce earns an average of just $54 a month. That’s below the United Nations poverty line of $2 per day, and it includes regular forced overtime. In Madagascar, the region’s third largest exporter of clothes to the United States, wages in the apparel industry are just 33 cents per hour, lower than those in China and among the lowest in the world. And at Ramatex Textile, the large Malaysian-owned textile factory in Namibia, workers only earn about $100 per month according to the Labour Resource and Research Institute in Windhoek. Most workers share their limited incomes with extended families and children, and they walk long distances to work because they can’t afford better transportation.


On the other hand, recent experience shows that sub-Saharan countries with decent labor standards can develop strong manufacturing export sectors. In the late 1990s, Francis Teal of Oxford’s Centre for the Study of African Economies compared Mauritius’s successful export industries with Ghana’s unsuccessful ones. Teal found that workers in Mauritius earned ten times as much as those in Ghana — $384 a month in Mauritius as opposed to $36 in Ghana. Mauritius’s textile and garment industry remained competitive because its workforce was better educated and far more productive than Ghana’s. Despite paying poverty wages, the Ghanaian factories floundered.


Kristof knows full well the real reason garment factories in the region are shutting down: the expiration of the Multifiber Agreement last January. The agreement, which set national export quotas for clothing and textiles, protected the garment industries in smaller countries around the world from direct competition with China. Now China and, to a lesser degree, India, are increasingly displacing other garment producers. In this new context, lower wages alone are unlikely to sustain the sub-Saharan garment industry. Industry sources report that sub-Saharan Africa suffers from several other drawbacks as an apparel producer, including relatively high utility and transportation costs and long shipping times to the United States. The region also has lower productivity and less skilled labor than Asia, and it has fewer sources of cotton yarn and higher-priced fabrics than China and India.


If Kristof is hell-bent on expanding the sub-Saharan apparel industry, he would do better to call for sub-Saharan economies to gain unrestricted access to the Quad markets — the United States, Canada, Japan, and Europe. Economists Stephen N. Karingi, Romain Perez, and Hakim Ben Hammouda estimate that the welfare gains associated with unrestricted market access could amount to $1.2 billion in sub-Saharan Africa, favoring primarily unskilled workers.


But why insist on apparel production in the first place? Namibia has sources of wealth besides a cheap labor pool for Nike’s sewing machines. The Economist reports that Namibia is a world-class producer of two mineral products: diamonds (the country ranks seventh by value) and uranium (it ranks fifth by volume). The mining industry is the heart of Namibia’s export economy and accounts for about 20% of the country’s GDP. But turning the mining sector into a vehicle for national economic development would mean confronting the foreign corporations that control the diamond industry, such as the South African De Beers Corporation. That is a tougher assignment than scapegoating antisweatshop activists.


More and Better African Jobs


So why have multinational corporations avoided investing in sub-Saharan Africa? The answer, according to international trade economist Dani Rodrik, is “entirely due to the slow growth” of the sub-Saharan economies. Rodrik estimates that the region participates in international trade as much as can be expected given its economies’ income levels, country size, and geography.


Rodrik’s analysis suggests that the best thing to do for poor workers in Africa would be to lift the debt burdens on their governments and support their efforts to build functional economies. That means investing in human resources and physical infrastructure, and implementing credible macroeconomic policies that put job creation first. But these investments, as Rodrik points out, take time.


In the meantime, international policies establishing a floor for wages and safeguards for workers across the globe would do more for the young men on Windhoek’s street corners than subjecting them to sweatshop abuse, because grinding poverty leaves people willing to enter into any number of desperate exchanges. And if Namibia is closing its garment factories because Chinese imports are cheaper, isn’t that an argument for trying to improve labor standards in China, not lower them in sub-Saharan Africa? Abusive labor practices are rife in China’s export factories, as the National Labor Committee and Business Week have documented. Workers put in 13- to 16-hour days, seven days a week. They enjoy little to no health and safety enforcement, and their take-home pay falls below the minimum wage after the fines and deductions their employers sometimes withhold.


Spreading these abuses in sub-Saharan Africa will not empower workers there. Instead it will take advantage of the fact that they are among the most marginalized workers in the world. Debt relief, international labor standards, and public investments in education and infrastructure are surely better ways to fight African poverty than Kristof’s sweatshop proposal.


In Praise of the Maligned Sweatshop

Op-ed by Nicholas Kristof, New York Times, June 6, 2006


WINDHOEK, Namibia — Africa desperately needs Western help in the form of schools, clinics and sweatshops.


On a street here in the capital of Namibia, in the southwestern corner of Africa, I spoke to a group of young men who were trying to get hired as day laborers on construction sites.


“I come here every day,” said Naftal Shaanika, a 20-year-old. “I actually find work only about once a week.”


Mr. Shaanika and the other young men noted that the construction jobs were dangerous and arduous, and that they would vastly prefer steady jobs in, yes, sweatshops. Sure, sweatshop work is tedious, grueling and sometimes dangerous. But over all, sewing clothes is considerably less dangerous or arduous — or sweaty — than most alternatives in poor countries.


Well-meaning American university students regularly campaign against sweatshops. But instead, anyone who cares about fighting poverty should campaign in favor of sweatshops, demanding that companies set up factories in Africa.


The problem is that it’s still costly to manufacture in Africa. The headaches across much of the continent include red tape, corruption, political instability, unreliable electricity and ports, and an inexperienced labor force that leads to low productivity and quality. The anti-sweatshop movement isn’t a prime obstacle, but it’s one more reason not to manufacture in Africa.


Imagine that a Nike vice president proposed manufacturing cheap T-shirts in Ethiopia. The boss would reply: “You’re crazy! We’d be boycotted on every campus in the country.”


Some of those who campaign against sweatshops respond to my arguments by noting that they aren’t against factories in Africa, but only demand a “living wage” in them. After all, if labor costs amount to only $1 per shirt, then doubling wages would barely make a difference in the final cost.


One problem … is that it already isn’t profitable to pay respectable salaries, and so any pressure to raise them becomes one more reason to avoid Africa altogether.


One of the best U.S. initiatives in Africa has been the African Growth and Opportunity Act, which allows duty-free imports from Africa — and thus has stimulated manufacturing there.



Sources: Arthur MacEwan, “Ask Dr. Dollar,” Dollars & Sense, Sept–Oct 1998; John Miller, “Why Economists Are Wrong About Sweatshops and the Antisweatshop Movement,” Challenge, Jan–Feb 2003; R. Pollin, J. Burns, and J. Heintz, “Global Apparel Production and Sweatshop Labor: Can Raising Retail Prices Finance Living Wages?” Political Economy Research Institute, Working Paper 19, 2002; N. Kristof, “In Praise of the Maligned Sweatshop,”New York Times, June 6, 2006; N. Kristof, “Let Them Sweat,” NYT , June 25, 2002; N. Kristof, “Two Cheers for Sweatshops,” NYT , Sept 24, 2000; N. Kristof, “Asia’s Crisis Upsets Rising Effort to Confront Blight of Sweatshops,” NYT, June 15, 1998; A. Harrison and J. Scorse, “Improving the Conditions of Workers? Minimum Wage Legislation and Anti-Sweatshop Activism,” Calif. Management Review, Oct 2005; Herbert Jauch, “Africa’s Clothing and Textile Industry: The Case of Ramatex in Namibia,” in The Future of the Textile and Clothing Industry in Sub-Saharan Africa, ed. H. Jauch and R. Traub-Merz (Friedrich-Ebert-Stiftung, 2006); Kurt Alan Ver Beek, “Maquiladoras: Exploitation or Emancipation? An Overview of the Situation of Maquiladora Workers in Honduras,” World Development, 29(9), 2001; Theodore Moran, Beyond Sweatshops: Foreign Direct Investment and Globalization in Developing Countries (Brookings Institution Press, 2002); “Comparative Assessment of the Competitiveness of the Textile and Apparel Sector in Selected Countries,” in Textiles and Apparel: Assessment of the Competitiveness of Certain Foreign Suppliers to the United States Market, Vol. 1, U.S. International Trade Commission, Jan 2004; S. N. Karingi, R. Perez, and H. Ben Hammouda, “Could Extended Preferences Reward Sub-Saharan Africa’s Participation in the Doha Round Negotiations?,” World Economy, 2006; Francis Teal, “Why Can Mauritius Export Manufactures and Ghana Can Not?,” The World Economy, 22 (7), 1999; Dani Rodrik, “Trade Policy and Economic Performance in Sub-Saharan Africa,” Paper prepared for the Swedish Ministry for Foreign Affairs, Nov 1997.


John Miller teaches economics at Wheaton College and is a member of the Dollars & Sense collective. The syllabus for his course “Sweatshops in the World Economy” is available. This article is from the September/October 2006 issue of Dollars & Sense magazine.

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