The Unbelievable Truth about Sweatshops

Benjamin Powell,

Release Date
June 6, 2011


Poverty & Inequality

Prof. Ben Powell discusses the importance of sweatshops in third world countries. Despite conventional views on the issue, sweatshops are actually the best alternative available to several third world workers. Further, sweatshops are part of an industrial development process that leads to higher wages and better working conditions. Heartfelt attempts to eliminate sweatshops actually reduce the choices, wages, and working conditions of workers in third world countries.

The Unbelievable Truth About Sweatshops
In 1993, Senator Tom Harkin proposed banning all products that were made with child labor from coming into the United States. The result, according to Oxfam, is that thousands, quote, “became prostitutes or starved.”
I’m Ben Powell, an economist at Suffolk University, and I’m going to talk to you about sweatshops. Defending sweatshops is not about defending corporate profits or economic efficiency. It’s about the welfare of the third world workers. And I think first we should say what we mean by a sweatshop.
It’s a place in the third world with very low pay by our Western standards and very poor working conditions, both health, safety, long hours of work, predictability of overtime, maybe lack of breaks or bathroom breaks, vacation time, many days a week, all of those things. With the appalling working conditions that they are, the workers still choose to work there, and that choice is important. Them choosing to work there demonstrates that they think that it’s better than the alternatives available to them.
And the other alternatives are often much worse. It could be scavenging, begging, or even prostitution. Let’s take Cambodia for example. There’s a trash dump there where workers earn—workers is actually an exaggeration—where people scavenging earn about 75 cents a day for their efforts in the broiling sun. But yet working in a sweatshop there can earn workers as much as $2 a day. This is a much better alternative to that.
Now of course that doesn’t mean that this is all we want these workers to aspire to. Of course we should want their lives to be better and them to be able to earn more. But it does mean that we have to be very careful what you agitate for, that you don’t eliminate the sweatshop job to throw them into some much worse alternative that’s out there. We need to give them more opportunities in sweatshops and fewer opportunities back in the informal scavenging subsistence agriculture sector.
The good news is the process of development is what cures the sweatshops. That brings increasing capital, labor, and technology into the countries. And this process can happen much quicker than it used to. Sweatshops used to be common in Great Britain, Germany, and the United States. For us, it was about a 150-year or so process of going from preindustrialization to postsweatshop. What’s happened is, when the U.S. and Germany and Great Britain were going through this, all the capital had to be created anew, all the technology had to be discovered. Now, it’s all out there.
So the potential for growth is explosive. But first, countries have to get their institutions right, things that protect private property, the rule of law, give economic freedom. These things can attract the capital and the technology to the country to make the growth explosive. It’s still a process. Sweatshops won’t disappear overnight. But that process can go much quicker now than it has in the past. But it depends crucially on institutions that promote economic freedom.