Fair trade is an interesting movement based on the premise that trade is not necessarily bad, but it needs to be done in a socially responsible manner to “help the poor.” Because the movement is not pushing for any government action, only private action by individual firms and consumers, I do not have a general problem with it. However, there is evidence that fair trade in some industries, like coffee, is actually hurting small growers or producers in poor countries. But that is a discussion for a different time.
One of the main premises pushed by fair trade supporters, and skeptics of globalization more generally, is that unrestrained free trade has led to sweatshops, which by their very nature are wrong. To combat this, we need to boycott the companies with unfair labor practices and push our governments to restrain outsourcing of labor.
This is a narrative that pulls at the heart strings. But deeper analysis shows that it privileges rich consumer conscience (and rich country labor unions) over poor worker welfare. Let me explain.
I sat in a class several years ago when a professor explained why he does not necessarily oppose sweatshops. Naturally, there was an uproar. Students stood up, voicing their moral outrage. But the professor continued on calmly. He made an interesting distinction between types of sweatshops:
- Prison Sweatshops: Places where low skilled workers are lured in and then not allowed to leave. These sweatshops have locked doors or other restraint mechanisms that make leaving impossible.
- Long Hour Sweatshops: Places where low skilled works may work for long, often obscene hours under less than ideal conditions for low pay. However, unlike the prison sweatshops, workers may leave the job at any time.
The professor went on to say that he is vehemently against the first type, because this is very obviously a human rights violation. However, he is not opposed to the second. I agree, and the reason is because of the counterfactual.
To consider the counterfactual we must consider what would happen if the firm employing the people did not exist. And it is the romanticized counterfactual that drives the knee jerk opposition to all sweatshops. We can presumably accept that if people are allowed to leave a low-skill manufacturing job at any time, (meaning they are employed in a type 2 sweatshop) then they are at the best paying job possible in their area. If this is true, it means that absent the sweatshop job, the person would be working at a lower paying, often locally owned job, or not working at all. If the person is not working, they are not sitting comfortably receiving an unemployment check like in the U.S. They are likely near starvation and suffering from diseases that they cannot afford vaccines for.
Many opponents of long hour sweatshops with conditions not on par with rich western countries forget how American industry started. They also paint a picture of rural poverty that is out of touch with reality. In general, sweatshop labor that does not involve coercion must make the people employed better off then the rural poverty experienced by the unemployed in that country. The absence of an “evil firm” that has sweatshops might make purchasing vaccines or food for children impossible.
With this new perspective on the counterfactual, the debate changes: sweatshops are not glorious. They are not comfortable. But trying to end them without some alternative replacement is dooming impoverished workers to even worse poverty. Poor countries rely on their comparative advantage in unskilled labor to produce certain manufactured goods at competitive world prices. Unless the morally outraged volunteer to invest their own capital in a foreign production plant, or unless they have some economically feasible alternative to multinationals, their outrage is nothing more than a drug to assuage their own conscience.