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“Buy Ethical” Will Only Harm the World’s Poorest

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For the past four years, Baptist World Aid Australia have been releasing their annual Behind the Barcode report into the working conditions of the global fashion industry. In an attempt to combat the garment industries sweatshop phenomenon, the report grades companies on their efforts to provide a safe workplace, a living wage, and freedom from forced labour. These grades ultimately culminate into the Ethical Fashion Guide, a report designed to allow consumers to “buy clothes from the companies doing more to protect their workers.” But while the sentiment may be well intentioned, in reality, the Ethical Fashion Guide does little to empower those they seek to help.

While forced labour, or modern slavery, should be utterly condemned and prevented in every way possible, voluntary sweatshop labour is a different issue. To be perfectly clear, sweatshops absolutely involve lousy working conditions and terrible pay. However, purchasing garments that are ‘sweat-free’ does not magically improve the plight of the world’s poorest. As grim as they may be, sweatshops represent real progress to impoverished people who are rationally committed to improving their lives.

Wages and working conditions of the lowest skilled workers don’t just improve because we want them to. If we shift our preferences away from sweatshops, companies won’t suddenly respond by paying low-skilled workers more than their current productivity. Instead, they will respond by using more highly skilled workers or more machines. For example, ‘buying ethical’ would shift production away from lower skilled African and Asian companies and towards higher skilled Latin American or Eastern European ones. Or alternatively, toward industrialised countries with highly productive machines. In fact, this is already happening. Adidas, which received an A grade from Baptist, is already moving its shoe production to Germany. Facing rising costs in Asia, Adidas could have moved its production to lower skilled labour in cheaper Asian or African countries. Instead, under pressure to maintain ethical production, they have begun exiting the developing world altogether.

But this does nothing to improve the lives of those we’re looking to help. Supporting “empowered workers” doesn’t by itself empower the factory worker in Bangladesh. Rather, it shifts production toward wealthier workers in other countries with greater productivity. For example, in 1993, textile companies in Bangladesh stopped employing 50,000 children in response to pressure from the U.S. government. Rather than empowering the children, many of them ended up on the streets finding worse jobs in gruelling labour or prostitution. Meanwhile, companies continued to produce textiles –– they just moved elsewhere.

Such good intentions destroyed an alternative that poor, low-skilled workers had voluntarily chosen because they offered a better life, if only marginally. As Benjamin Powell, author of Out of Poverty: Sweatshops in the Global Economy has found, nearly 83 percent of Guatemalan sweatshop workers said they would not be willing to reduce the number of hours worked if it resulted in lower pay. Furthermore, 97 percent said they were unwilling to earn less for safer working conditions. ‘Buying ethical’ would mean these workers either earn less or lose their job altogether. If we genuinely care about the poor, we shouldn’t be looking to restrict their choices or their chances to improve their lives, even just a little, in this way.

It is also important to recognise that every industrialised country in the world has gone through a sweatshop phase. While the sweatshop phase for today’s industrialised nations was between 100-150 years long, recently developed economies have grown to First World standards in a generation. The Asian Tigers were all sweatshop countries in the 1950s. Yet they are some of the most prosperous nations in the world today. As Jeffrey Sachs, a lead advocate of the Millennium Development Goals, has said sweatshops, ”are precisely the jobs that were the stepping stone for Singapore and Hong Kong… and those are the jobs that have to come to Africa to get them out of their backbreaking rural poverty.” Sweatshops are a crucial stage in economic development that eventually leads to better wages and working conditions. They are not a race-to-the-bottom, but rather a ladder-to-the-top.

Baptist World Aid certainly has good intentions. But by shifting demand away from sweatshops, we take away the poor’s best bet out of a lot of bad alternatives. After all, as left-leaning economist Paul Krugman wrote back in 1997, “A policy of good jobs in principle, but no jobs in practice, might assuage our consciences but it is no favour to its alleged beneficiaries.” Ironically, following the Ethical Fashion Guide will only drive the world’s most vulnerable into deeper poverty.

Originally posted to The Spectator Australia