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Globalization, Sweatshops, and Economics (participation)

March 7, 2012

Volume 11, No. 2—March 2001
Table of contents for this issue

COVER STORY

Clothes Encounters
Activists and economists clash over sweatshops
by Liza Featherstone and Doug Henwood

“ARE YOU A ZAPATISTA?” ASKED JAGDISH BHAGWATI, ONE OF THE WORLD’S preeminent trade economists, of a young protester wearing a mask. The sixty-six-year-old Columbia professor and free-trade advocate laughs as he recounts his adventures amid the steelworkers, topless lesbians, and papier-mâché puppets at the protests against the World Trade Organization (WTO) in Seattle. Recalling the demonstrator’s response, he is still a bit puzzled. “She said, ‘No, I’m just an anarchist.'” He giggles. “I didn’t know if she’d read Bakunin!”

“I wanted to see where they were coming from,” Bhagwati says of his foray into the November 1999 street protest. “I talked to a lot of kids, and some of the turtles as well, and asked, ‘What’s agitating you?'” (Some protesters were dressed as turtles to dramatize a WTO ruling that failed to protect turtles from commercial fishnets.) To his dismay, “They just assumed that the WTO was anti-turtle.”

Whether or not the WTO is anti-turtle, the argument between Bhagwati and the protesters is really about a larger question: Does global trade policy place corporate profit before human and environmental welfare? Most of the demonstrators in Seattle would claim that it does, whereas most economists would claim with equal fervor that it doesn’t.

“I came back from Seattle thinking that the voice of economists was not very audible in the public space,” Bhagwati says. “Economists had opted out, partly out of indifference and partly out of contempt for [anticorporate] voices.” Despite his enthusiasm for free trade, Bhagwati does not share this contempt. “Some of them rant and rave,” he laughs, “but I have a slightly indulgent attitude, because they tend to raise questions from a very different perspective. So then I called up a lot of [economists] and said, ‘Why don’t we engage?'”

As a first step, Bhagwati and his allies decided to take on student anti-sweatshop activists. Their movement undoubtedly comprises the most vigorous strain of the youthful dissent that Bhagwati encountered in Seattle; indeed, it has produced the strongest surge of student activism since the anti-apartheid campaign of the 1980s. But surprisingly, though the campus debate over sweatshops is concerned with economic issues, economic analysis has barely played any part in the drama, which has been more about morality and public relations. All that may be about to change.

THE APPEAL for better labor practices in the garment industry did not begin as a campus movement. Throughout the 1990s, labor, left-wing, and religious groups deplored the low wages and harsh conditions prevalent in garment factories throughout the world. Workers in Indonesia and Vietnam, these activists pointed out, often toiled for thirteen hours at a stretch for around twenty cents an hour and in facilities that reeked of toxic fumes. The most prominent anti-sweatshop advocates belonged to the National Labor Committee, whose fiery director, Charles Kernaghan, famously made talk-show personality Kathie Lee Gifford cry on television by revealing that Honduran children worked fifteen hours a day sewing the clothes that bore her label.

Though activists tend to direct their energies at the best-known brands—like Nike, Kathie Lee, Gap, and Reebok— such conditions pervade the apparel industry. (Activists use the word “sweatshops”; companies and most economists reject it as inaccurate and inflammatory.) Garment workers have always been vulnerable to exploitation, partly because the softness of fabric and the complexity of patterns don’t allow for easy mechanization. With the decline of international transportation and communication costs since the 1960s, garment manufacturers have increasingly elected to avoid the relatively high wages of U.S. labor by moving most of their factories overseas, often to countries that offer workers little protection. The industry has also become more ruthlessly competitive as increasingly volatile consumer tastes dictate quicker production cycles. In an attempt to keep clothing prices low enough to seduce American teenagers, manufacturers pay the Chinese and Haitian teenagers who make the clothes less than thirty cents an hour.

Sweatshops are a global issue, but for student activists an obvious target lies close at hand: the hats, sweatshirts, and other items emblazoned with university logos. After a summer internship with the United Needle and Textile Workers Union (UNITE) in 1997, Tico Almeida, then an undergraduate at Duke University, pressed Duke to pass a code of conduct that would require manufacturers of its apparel to maintain safe, independently monitored workplaces in which workers were free to organize. Fellow Duke students were enthusiastic and began lobbying administrators aggressively. They succeeded in getting Duke to enact their code, and the victory inspired students on other campuses to begin similar campaigns.

The next year, Duke students occupied their president’s office, demanding that the university go a step further by requiring full disclosure of licensees’ factory locations. After a sit-in that lasted thirty-one hours, Duke’s president, Nan Keohane, gave in. Similar occupations won students full disclosure at Georgetown, Wisconsin, Michigan, and Chapel Hill. In the spring of 1998, students founded the United Students Against Sweatshops (USAS), a network of campus anti-sweatshop groups, which now has an office in Washington, D.C., and two full-time staff members.

With these successes behind it, the student movement turned to other questions. Codes of conduct were just pieces of paper, the activists realized, unless they were enforced by a credible body. Administrators pointed to the Fair Labor Association (FLA), an industry-backed monitoring group founded by the Clinton administration in 1996, but students scorned it as favoring corporate interests. In fact, several unions and a religious group had resigned from the FLA in 1998, protesting that it relied on voluntary enforcement and set no standard for a living wage. Last year, when administrators at many universities, under pressure from garment contractors, insisted on staying with the FLA, students occupied buildings on more than a dozen campuses, including the Universities of Michigan, Wisconsin, Oregon, Pennsylvania, Iowa, and Kentucky, as well as SUNY Albany, Tulane, Purdue, and Macalester. After the tumult subsided, more than fifty institutions had switched to a new monitoring organization founded by students—the Worker Rights Consortium (WRC), which has close ties to local and international labor and human rights organizations. The WRC’s membership roster still lags well behind the FLA’s 148. (Neither organization has monitored any factories yet.)

The founding of the WRC, which focuses on investigating worker complaints rather than certifying specific companies or factories as “sweat-free,” reflects the student movement’s increasing emphasis on direct contact with garment workers. Students have visited factories and established relationships with workers throughout Central America and Asia. Critics ranging from the Bangladeshi-born feminist sociologist Naila Kabeer to mainstream pundits like Thomas Friedman have derided First World anti-sweatshop crusades as protectionist, and it’s true that a few (though by no means all) of the unions that back the student anti-sweatshop movement can be exactly that. But USAS, which receives funding from the AFL-CIO, has been careful to emphasize that it does not favor banning imports, nor does it call for boycotts. Most apparel workers, USAS activists realize, need their jobs. The goal of the movement is to improve workers’ pay and working conditions at offshore factories, not to force universities to take their business elsewhere.

USAS now has chapters on at least 175 campuses, from large state universities to elite East Coast schools to small religious colleges. And although most activists are white and affluent, they are politically diverse. Some, like Bhagwati’s masked friend in Seattle, embrace anarchism; many passionately resist any form of hierarchy within their organizations. One Penn freshman who participated in a February 2000 sit-in earnestly described himself as a “capitalist”; others, who range from Marxists to Students for a Democratic Society-style radical democrats, denounce capitalism with equal earnestness; still others are liberals with no particular visionary blueprint for the world. Such differences have generally been tolerated, but tensions among these factions broke out at USAS’s August 2000 conference in Eugene, Oregon, as activists fought bitterly, even tearfully, over whether the group should create a more centralized, formalized structure or retain its decentralized, loose character.

THE MEMBERS of USAS take their cues more from the labor movement than from the academic left, but the students do have faculty allies, most notably in sociology and cultural studies. The sociologists Edna Bonacich of UC-Riverside and Richard Appelbaum of UC-Santa Barbara, co-authors of Behind the Label: Inequality in the Los Angeles Apparel Industry (California, 2000), currently serve on the WRC’s advisory council, which assists the students with fund-raising and problem solving. Another sociologist, Peter Dreier, director of Occidental College’s Urban & Environmental Policy Program, advises student activists and has taught a seminar on the sweatshop issue. With Occidental activists, Dreier pressed administrators to commission an Occidental T-shirt made by UNITE members in Pennsylvania. Though some activists have criticized this strategy as protectionist, Dreier believes that the union label provides the best available insurance that apparel is “sweat-free.”

For all their practical support, many of the professors who advise the students say it’s difficult to offer activists much theoretical guidance. One can decry the fact that corporations freely exploit workers and the environment, but these days even intellectuals are hard-pressed to come up with alternative ways to run the world. Some blame the waning of Marxism, whereas others, including Dreier, point to the intellectual dominance of high theory. Postmodernism has corrupted his younger colleagues, Dreier complains: “Politics is an entirely theoretical concern for them.”

Though it’s easy to caricature cultural studies scholars as hopelessly removed from the blood and, yes, sweat of everyday life, some have been quite active in the student movement—not least Andrew Ross, the director of American studies at New York University. Ross edited No Sweat: Fashion, Free-Trade, and the Rights of Garment Workers (Verso, 1997), a collection of essays on the garment industry based on a conference he’d organized called “Fashion Victims.” Both book and conference brought together labor activists and cult studs to talk about the rag trade.

Creative and varied as their approaches have been, however, these professors have not been able to help the students sharpen their economic arguments. There’s an obvious reason for this: As Dreier points out, none are economists.

THAT VACUUM looked inviting to Bhagwati. Noting that student voices were dominating the sweatshop debate, he saw an opportunity for defenders of free trade to intervene. He drafted a letter criticizing administrators for caving in to activist pressure, worked his Rolodex, and the Academic Consortium on International Trade (ACIT) was born. Bhagwati’s draft was worked over by a steering committee that also included Robert Baldwin of Wisconsin, Alan Deardorff and Robert Stern of Michigan, Arvind Panagariya of Maryland, and T.N. Srinivasan of Yale. Of the six, Bhagwati is the most widely known to the general public, because he is a prolific writer of Op-Eds and letters to the editor in newspapers, including The New York Times and The Financial Times. But all six economists are widely published specialists in international trade, and all have consulted for governments around the world and for international institutions like the World Bank. In addition to its drafters, 246 signatories endorsed the ACIT letter, including the Nobel laureate Robert Lucas of Chicago and Harvard’s Jeffrey Sachs. Campuses with active anti-sweatshop campaigns, such as Michigan and Wisconsin, were heavily represented among the signers.

“[W]e often encounter news reports,” the professors wrote, “of sit-ins by groups of students in the offices of university/college administrators, after which decisions are often made without seeking the views of scholars in the social sciences, law, and humanities who have long discussed and researched the issues involved.” The economists go on to argue that monitoring groups “seem to ignore the well-established fact that multinational corporations (MNCs) commonly pay their workers more on average in comparison to the prevailing market wage for similar workers employed elsewhere in the economy. In cases where subcontracting is involved, workers are generally paid no less than the prevailing market wage.” In an interview, Bhagwati told us that the MNC wage premium makes it difficult to argue that Third World apparel workers are “exploited.” On the contrary, he says, workers in poor countries feel “lucky” to get jobs with the likes of Nike.They see the work as a “ticket to slightly less impoverishment,” he explains with characteristic ambivalence.

The ACIT letter further contends that if activists succeed in driving up wages, “the net result would be shifts in employment that will worsen the collective welfare of the very workers in poor countries who are supposed to be helped.” In other words, increasing the cost of labor will reduce the demand for it, so although a few workers might win raises, enough will lose their jobs to make the population as a whole worse off.

During the drafting of the ACIT letter, Bhagwati demurred at the certainty of this last formulation; higher wages could result in layoffs, he says, but “economists are divided” on the likelihood of that happening. The minimum-wage controversy in the United States bears out his caution: For years, economists were certain that minimum-wage increases destroyed jobs, but an empirical study by economists David Card and Alan Krueger, of UC-Berkeley and Princeton respectively, concluded that they didn’t, and uncertainty replaced consensus within the profession. But Bhagwati’s objection was overruled by the other ACIT drafters, who kept the stronger language in the letter.

Perhaps ACIT’s most significant assertion is that MNCs pay better than local firms. The economists are two business school scholars, Ann Harrison of Columbia and Linda Lim of Michigan. Harrison wrote a 1996 paper with Brian Aitken of the International Monetary Fund and Robert Lipsey of the National Bureau of Economic Research that examined wages in the United States, Mexico, and Venezuela. The study concluded that foreign-owned firms pay about 30 percent better than domestic ones, though a significant part of that premium can be explained by the size and nature of MNC plants in countries where few local businesses are comparable. As for Lim, she visited two Nike factories last summer, one in Vietnam and one in Indonesia. In a memo she wrote on her return, Lim noted: “According to the World Bank, the average annual minimum wage for 1995-99 in Vietnam was $134 and the workers at Nike’s supplier factory earned $670; in Indonesia the minimum wage was $241 and the workers at the Nike supplier factory earned $720.” She cited other studies of Vietnam and Indonesia showing similar results.

Whether or not administrators will be swayed by ACIT’s letter remains to be seen. This fall, as students poured their energy into launching the WRC, their battles with administrators temporarily died down. Now they are heating up again, thanks to a strike in a Nike plant in Mexico; ACIT, with its prestigious list of signatories, could become a major player. Administrators at many institutions have reviewed the economists’ letter and acknowledged its concerns. At the University of Michigan, president Lee Bollinger has since appointed founding ACIT member Alan Deardorff to the committee that advises administrators on the sweatshop issue.

THE SIGNERS of the ACIT letter, like almost all economists, are passionately devoted to free trade. They believe that globalization promises the greatest good for the greatest number. And though they concede that there will be losers—firms in previously protected industries, for example, and less-skilled workers in the richer countries—the economists insist that most people on balance will gain. The opportunity to export to rich countries without tariffs or other fetters offers poorer countries a chance for upward mobility, the economists contend, and consumers everywhere are better served with a wider selection of products at lower prices. Deardorff and Stern have posted a paper to this effect on the ACIT Web site (www.spp.umich.edu/rsie/acit). In it, they profess to be well aware that trade liberalization can hurt people. They write, “Trade theory does not in any way dismiss these costs as unimportant or even as smaller than other gains. Economists therefore usually argue that movements toward freer trade should be somewhat gradual, so that these adjustment costs can at least to some extent be accommodated within the normal ups and downs of markets.”

These views are so typical among economists that the ACIT letter aroused hardly a peep of dissension among the signers’ colleagues. As a field, economics has become increasingly hostile to unorthodox opinion in recent years, and virtually no seriously left-of-center economist has been hired by a major department in more than two decades. Bhagwati deplores this narrowing of the discipline. He worries that economists are “corrupted” by consulting contracts, seats on corporate boards, and joint appointments with business schools—all of which require professors to be “acceptable to business.” The more economists depend on corporate connections, “the more you will tend to be prudent…. You can’t really take far-out positions the way we used to as professors.”

Because of his reputation and his eager promotion of free trade, Bhagwati acknowledges that he can pass as orthodox. However, he says, if he were still working on inequality, as he did in the 1960s, well, “forget it.” Still, the Columbia economist has enough latitude to express a few unorthodox views—for instance, that Ralph Nader has been “very influential” on his understanding of how corporate power constrains politics. Bhagwati cites the case of the expert group set up under the WTO to judge whether food-safety regulations are scientifically valid or mere protectionist ruses. Nader and his allies pointed out that almost all the experts were once in the employ of agribusiness—the kind of thing, Bhagwati notes, that “we economists don’t think about.” For a few moments last fall, he even toyed with sending Nader’s presidential campaign a thousand dollars.

Bhagwati’s positions on labor are somewhat idiosyncratic as well: He favors, for example, stronger U.S. government regulation of the activities of its multinationals abroad; and though he does support keeping labor issues out of trade treaties, he also advocates that a strengthened International Labor Organization play a greater role in setting global labor standards. This is not typical Chicago-school free trade.

Still, Bhagwati’s quirks aside, there is a dearth of progressive economists. As a result, the student anti-sweatshop activists are so hungry for an intellectually substantial response to ACIT that some have taken matters into their own hands, writing undergraduate theses they hope will serve as ammunition. But other students, along with some sociologist allies, have looked further afield, casting about in search of a few good economists.

THEY FOUND one in Robert Pollin, a University of Massachusetts at Amherst economist and the co-author with Stephanie Luce of The Living Wage: Building a Fair Economy (New Press, 1998). Pollin is now working on a paper that examines the ACIT claims, and together with James K. Galbraith of the University of Texas, he has written a response to the ACIT letter that will be signed by progressive luminaries.

Pollin first encountered the anti-sweatshop activists in 1999, when students at the University of Wisconsin at Madison invited him to a meeting with the administration convened as part of a settlement package following their sit-in. Pollin’s work on living-wage ordinances, which require local governments to do business only with firms that pay their employees more than a specified hourly minimum, had caught the students’ attention. Such initiatives are generally opposed by business interests, who—like the ACIT economists—raise the specter of job loss as a bad consequence of the measures’ good intentions. Scrutinizing the numbers, Pollin found that both employers and municipal budgets could painlessly withstand a higher-wage bill.

Pollin has since conducted similar studies on sweatshops. Though he hasn’t found much good data to work with, his preliminary findings are very similar to his living-wage conclusions: There’s plenty of room for substantial wage increases for Third World apparel workers. The best numbers Pollin could find were for Mexico, where wages are higher than those in Asia. A man’s casual shirt retailing for $32 in the United States costs $4.74 to produce in Mexico. Of that amount, $0.52 goes to production workers and another $0.52 to supervisors. The retail price, then, is almost seven times the total cost of production and more than thirty times the labor cost alone. You could double the production workers’ wage, Pollin argues, and hardly anyone but the workers would be able to tell the difference.

What about the claim that MNCs pay more than local firms? There is plenty of academic ammunition the students might muster to refute the ACIT letter. The Aitken, Harrison, and Lipsey paper focused on Mexico, Venezuela, and the United States. But these are two moderately industrialized, middle-income countries and one highly industrialized, very rich country. Are they comparable with lightly industrialized, poor countries in Asia? As for the Lim study, it draws on anecdotal evidence from Nike plants in only two countries. Even taken together, the two studies form nothing like a systematic wage survey, without which it is dangerous to generalize, given the immense variations in relative pay around the world.

Jeffrey Ballinger, a prominent activist who has interviewed thousands of workers, points out the difficulty of gathering reliable wage data, given government and corporate obstruction of systematic wage surveys. He also questions Lim’s focus on annual wages because those figures can include wages for as many as ninety hours of overtime a month.

In any event, mainstream economists may not be asking the only relevant questions. Jeffrey Winters, a Northwestern University professor of political economy who specializes in Southeast Asia, demands, “Should American students be any less outraged just because Nike positions itself slightly higher than some of the exceptionally bad local Indonesian or Vietnamese producers?” Jobs with MNCs “only seem good because prevailing conditions are so horrible.” With unemployment and underemployment rates around 50 percent, “Indonesians would line up outside a slave plantation if they could be sure they got regular food and a roof over their heads,” says Winters.

Winters suggests using metrics of the sort that most economists regard as other worldly: “How do wages compare with those of CEOs and celebrity endorsers? What do comparable workers in non authoritarian countries where unions are permitted get for comparable work, and under what conditions do they labor? These things matter, even if the Nikes of the world shun these places because they can go to more oppressive locations where nuisances like unions are suppressed.” The question MNCs should ask themselves is, he says, “‘Can the workers actually live on the wages they earn?’ not, ‘Is this job better than prostitution, slavery, or starvation?'” The bottom line, Winters concludes, is that “Nike does not pay a living wage and could easily afford to.” A company the size of Nike doesn’t have to do so on market grounds, but “that’s what unions and organizing and protests by students and consumers are all about—it’s about injecting very real nonmarket factors into the equation” to maintain “some semblance of humanity.”

Pollin concurs. Conceding that MNCs might pay higher wages than local firms, he argues that the real issue is “conditions for all workers.” He adds: “The aim should be to change wage norms. We would then be focusing on U.S. companies, since that’s where we have relatively greater leverage.” More broadly, he explains, “The point of neoliberalism is profit-led growth, with workers getting the shaft. The anti-sweatshop movement is one way of challenging that. But the Linda Lims are quite clever to shift the issue to something else—namely, are conditions at Nike plants worse than at local plants? They know that for the most part they probably are not worse, except maybe with subcontractors. So they can win that argument. But here’s another question: Is profit-led growth, where a high fraction if not a huge majority of workers are earning subpoverty wages in bad working conditions, the only way that poor countries can grow? Is it reasonable to give some thought to what might be good for workers, and then also think about how countries might grow in ways that also address those concerns?”

LIM, who was trained as a Marxist economist, dismisses Winters’s and Pollin’s remarks as “very naive about economics…more rhetorical than anything.” As for the anti-sweatshop movement, she describes it as “patronizing white-man’s-burden stuff.” She characterizes the activists’ attitudes as, “‘let’s help these poor Third World women of color who are so victimized by us and are helpless without us,’ et cetera—which is just not true and denies the benefit of these jobs to the women. These women aren’t dumb, and they do have choices. The ‘activists’ just don’t give enough credit to the women, and to their strength.”

Pollin sees an important role for academics like himself to play in this new battle between activists and mainstream economists. “It’s up to the Jeff Ballingers of the world to observe injustice and scream about it,” he remarks. “It’s then up to us economic sophisticates…to try to figure out whether their observations and conclusions make sense. In my view, the collapse of a serious analytic socialist left makes this job all the more difficult. The Bob Sterns and Linda Lims of the world don’t get challenged enough by people who can talk their lingo. They know they can win an argument against undergraduates, so they are therefore certain they are right. We need to match their intellectual firepower with some of our own.”

As the FLA and the WRC begin their work, there will no doubt be considerable debate about their methods and whether universities and apparel companies are responding properly to their findings. The students are positioning themselves both as a campus protest movement and as part of a new institution, the WRC. In both capacities, they will continue to face assaults from ACIT—and to respond in kind. Now that the progressive economists are getting involved, the fight promises to take on new intellectual dimensions.

Then again, the students could end up finding allies where they least expect them. Bhagwati himself confesses that, the ACIT letter notwithstanding, “I might change my mind about a living wage. And I might then go for WRC!”

When Bhagwati talks about the new generation of activists, he is strangely awestruck. “The kids really, when you see them, they are fierce,” he marvels. “They’re so fierce—they’re carrying these placards, and they’re all down with corporations! I’m putting the kids on the cover of my next book.”

Liza Featherstone writes for The Nation, The New York Times Book Review, Newsday, and The Washington Post Book World. She is working on a book about the student movement, which Verso will publish this year. Doug Henwood edits the Left Business Observer, and is the author of Wall Street (1997) and A New Economy? (forthcoming), both from Verso.

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One Comment
  1. Kyla Chappell permalink

    I thought this article was really interesting, a lot of vital information about sweatshops and the controversy of them. I found it very awesome that so many student organizations have formed to help end the conditions, and so far they have made a big difference, and I hope they will continue and attract more people to join in the movement to end sweatshop conditions.

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