Month: August 2018

In “Exploitation Part IV (a), Exploiting Exploitation−The Cause” I described how the torment and higher costs that modern anti-sweatshop activists (“Sweatshop Activists”) visited on rich country sweatshop owners (“Sweatshop Owners”) inflicted net harm on the people they thought they were helping, i.e., desperately poor people in poor countries. The Sweatshop Activists picked on rich country companies (as if those companies were causing the depicted people to be poor). To avoid being counterproductive, activists must understand why Indonesians were so poor. Lacking that understanding, it would have been happenstance had their campaign actually helped the poor. It should come as no surprise that the Sweatshop Activists advocated policies that were counterproductive.

To sort out what was counterproductive about the activists’ policies, one must understand what enables poor countries to become sustainably richer countries. Perhaps the easiest way to forge a path from poverty to prosperity is to identify what prosperous countries have that poor countries do not and then figure out what would enable a country to have those things. To cram into one sentence a summary of hundreds of books on this topic^[i], to be rich, a country must have a culture with a relatively high reverence for and quantum of the rule of law, equal protection under the law, property rights, literacy, free markets, mutual trust among members of society, reasonable levels of taxation, and, perhaps above all, an ethic that confers dignity on people engaged in business (e.g., inventors, developers, manufacturers, service providers, traders, and entrepreneurs—even to those who honestly try but fail^[ii]), as well as institutions that enable and preserve those things. In such cultures, humans can create wealth and thrive—which bot improves their own lives by producing things needed or wanted by others.

Note that having wealth (“capital”) is not on the list of prerequisites. With the above list of essential ingredients in place, humans can and do create wealth. History is replete with examples of poor countries with little or essentially no natural resources or much wealth becoming astoundingly wealthy. Hong Kong and Japan are great examples of this phenomenon. Conversely, history is even more replete with countries with great natural resources or wealth either failing to exploit their natural resources or squandering their wealth due to a lack of prerequisites for a sustainable prosperous culture/economy. Middle Easterners and the natives in the Western Hemisphere before the 17^th century are examples of people making very little of their vast resources. Spain after the plunder of South America and Venezuela today are prime examples of countries squandering vast resources. Rome had an exceptional (for its time) amount the prerequisites as it rose to power, and returned to the norm when it abandoned too many of the prerequisites. [This blog is my small contribution to the effort to prevent America from suffering the same fate.]

Note also that benevolence by entrepreneurs is not a prerequisite.  As Adam Smith taught us so long ago, “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.” This is relevant because demanding that an employer spend more on employees than is necessary to entice people to sign up for the work is a demand that the employers pay more for labor than the labor is worth. A plan that relies on the benevolence of others is unnecessary and suboptimal for poor people in poor countries. Fewer employers will want to set up shop or expand operations in places that requirement is imposed. Of course, the result of that is fewer jobs for desperately poor people — the exact opposite of what is needed for the country to become more prosperous.

Had rich countries given Indonesians muti-billions of dollars in “aid” before Indonesia developed the culture and institutions to put the money to productive uses, before long all of that wealth that was not grabbed and stored in foreign bank accounts of politicians and other grifters, would have wound up in a sewer system or latrine, i.e., it would have created nothing but a short-lived bubble of prosperity followed by the devastating loss of both wealth and hope.

To his great credit, Jeffrey Sachs has devoted his life to trying to figure out how to enable poor peoples to become rich. “He is known as one of the world’s leading experts on economic development and the fight against poverty.”^[iii] I doubt anyone has conducted more experiments to find how to prime the pump of prosperity for poor people. He literally wrote the book on “The End of Poverty.” He has improved the lives of people in many ways. Most of those improvements, however, were short-lived, and many of them left the object of his benevolence in much worse shape than when he showed up. Neither he nor anyone else has figured out how to use foreign aid to kick-start a sustainable prosperous economy in places that do not have the prerequisites for prosperity.^[iv] Without the prerequisites for prosperity described above (which must be developed from within), casting money or idealistic “development” projects on a country is like casting seeds on rock soil.

A similar mistake was made with the1965 War On Poverty. The U.S. federal government has spent $22 Trillion on welfare programs that were part of that war. While the War On Poverty did significantly reduce hunger in America, that $22 Trillion of beneficence has not caused America’s poor to thrive or become less aggrieved — despite the fact that wealth of America’s poor is greater than the world average (the sum of every human’s wealth divided by the number of people on Earth), i.e., if wealth was distributed equally across the world, most Americans in the bottom 20^th percentile would have to contribute some of their wealth into the world pot. In short, benevolence is a band-aid at best, it does not create prosperous people. ^[v] What poor countries need most is more prosperity. Beneficence cannot deliver that.

Though Jeffery Sachs has not found the magic bullet, he has learned something very important about the role of sweatshops in getting a country on the path to prosperity. He puts it thus: “[S]weatshops are the first rung on the ladder out of extreme poverty.”^[vi]

In fact, all rich countries went through a sweatshop phase in the process of becoming rich. As bad as the working and living conditions of poor workers in poor countries appeared to be in the videos made by Sweatshop Activists, those living and working conditions are comparable to the preindustrial working and living conditions of poor people in every countries that is rich today. For example, the absence of indoor plumbing and air conditioning and the presence of horse dung in the paths to the public outdoor latrines were a common feature of New York City factories in 1900^[vii]—which was well into the industrial revolution, i.e., well along the path to prosperity. Much worse working conditions and child labor in factories were commonplace at the beginning of the industrial revolution of the 1700s.^[viii] There is no magic wand to be waved over impoverished countries to create enough productivity and wealth to support rich-county working conditions. They must go through the processes of creating a productive and sustainable economy first. (As will be explained in future posts, trying to jump-start the process with benevolence actually slows the process.)

For example, as I explained in “Wealth” about America:

“Factory labor was dehumanizing, sometimes led to child labor, and caused many to leave their “idyllic” farm lives. Despite these negative results, people took factory jobs because they could live better lives than would have been possible with their alternatives. One should realize that having young children working on farms was already necessary for survival. At first, there was nothing unnatural about children working as they had always done. Child labor only became dispensable after the factory machines (made possible and available by capitalism) improved the productivity of ordinary workers so they could produce enough to provide for their families. Even then, there was not enough productivity to dispense with all child labor. The first child labor laws restricted the employment of children younger than 9 years old, and the next wave of laws only required employers to provide a certain amount of education to young workers. It took more than 100 years for capitalism to produce sufficient productivity per worker so the legal age of an adult could be set at 18.”

For a country to dispense with child labor, it must be rich enough to do so. Quixotic do-gooding, such as Keady and Kretzu’s, hinders a country’s ability to become rich enough to dispense with child labor.

A common reason impoverished countries are impoverished is that economic conditions in those countries are not conducive to wealth creation, i.e., the odds that a new business would make enough profit to be worth the necessary effort, money and time are too low to induce enough people to attempt new businesses. Consequently, poor business environments generate neither the financial or human capital necessary to have a self-sustaining prosperous society. To create the necessary economic conditions for sustained prosperity, the odds of profitability of doing business in a poor country needs to increase. The greater the prospects for profit, the more and faster a country will move along the path to prosperity. Requiring employers to pay (either in payroll or working conditions) more than is necessary to attract and keep workers destroys wealth, i.e., it slows the process of wealth creation.

Economic conditions that inhibit profitability can exist for a wide variety of reasons. Regardless of the reasons, however, no foreign company can substantially alter the economic conditions of another country. Under the right conditions, however, they can help countries get started on the right path. In particular, if (1) the foreign company is large and wealthy enough to take on distant, complicated, problematic,^[ix] and risky operations in a foreign land and (2) opening a factory in a foreign land is profitable enough to deal with all issues of building and running a factory there, then the job opportunities its factory makes available to poor people in that country will increase the workers’ financial and human capital (wellbeing) — all of which increase their productivity—and will put the country in a better position to improve its economy. As more people get jobs, the supply of labor shrinks. A shrinking supply of labor increases the value of labor, and pay. The faster this virtuous cycle works it magic, the faster working conditions and pay will be increase. Sadly, the opposite is true when Sweatshop Activists slow the process by imposing uneconomic requirements.

A hallmark of poor people in poor countries is that they have few, if any skills when hired, know nothing about how to become a more productive (valuable) employee, and have no way to gain that human capital. Working in a sweatshop starts the process of building those skills. Building and operating factories in poor countries necessarily provides to poor people (1) brick and mortar capital, (2) employment income that will (a) improve the standard of living of the employee, and (b) be traded with local businesses, thereby improving the lives of the owners and employees of those other businesses, and (3) education (human capital) to workers (a) who learn skills and/or what causes workers to be rewarded or punished for various behaviors, and (b) for some, how to run a business.

As I hope is now obvious, “Sweatshops themselves are part of the very process of development that will lead to their own elimination.”^[x]

To those who are more interested in actually helping poor people than enhancing their own self-esteem, the more poor countries can receive the benefits of sweatshops, the better for the poor.

Edited 3/18/2021

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^[i]       The seminal book was Adam Smith’s “The Wealth of Nations.” My favorite book on the subject is Diedre McCloskey’s “Bourgeois Dignity.”

^[ii]       See “The EU Is Not Entrepreneur Heaven — But It Could Be:”

“The “fail fast, fail often” mentality is at the center of the entrepreneurial approach in the U.S., and investors regard a track record of failures as a sign of boldness, intelligence, and ambition.

Not so much in the EU: While in Germany, for example, a failed entrepreneur, manager or professional is at best regarded with contempt, there are countries like Italy where a personal bankruptcy essentially means that you will not be able to build any other business for the rest of your whole life — and in some cases not even own anything at all, like a car, a house or an armchair.”

^[iii]     See Jeffery Sachs Wikipedia page.

^[iv]     See William Easterly’s “The Elusive Quest for Growth” and “Jeffrey Sachs on the Millennium Villages Project.”

^[v]      See “The War on Poverty After 50 Years.”

^[vi]      See “Meet the Old Sweatshops, Same as the New.”

^[vii]     See “Life in New York City before indoor toilets.”

^[viii]    See “The conditions in these early sweatshops were worse than those in many Third World sweatshops today. In some factories, workers toiled for sixteen hours a day, six days per week. Attendance at traditional festival days was curtailed because factories would fine workers for absences. The working conditions were unhealthy and dangerous. Dust from textile fibers was inhaled in poorly ventilated rooms, and workers were maimed by fast-moving machinery (Stearns 2007, 35). Child labor was common.2 Factories employed orphan children from London and other major cities in exchange for providing them room and board.”  Also see, “Meet the Old Sweatshops, Same as the New,” Page 110, VOLUME 19, NUMBER 1, SUMMER 2014.

^[ix]    See “CHALLENGES OF DOING BUSINESS IN INDONESIA.”

^[x]    See “Meet the Old Sweatshops, Same as the New,” Page 120, VOLUME 19, NUMBER 1, SUMMER 2014.

“Exploitation Part IV (a), Exploiting Exploitation−The Cause” described how do-gooder activists exposed the abominable working and living conditions of low-skilled workers in poor country “sweatshops” (starting with “Behind the Swoosh” about Nike’s sweatshop in Indonesia) and the derision, boycotts, and bad press they heaped on Western sweatshop owners. The activists’ tactics described in “The Cause” presented what the activists apparently believed were logical arguments as to what to do about the supposed evil that Nike and others were committing. Sadly, those “arguments” not only convinced the activists of their own righteousness (the dopamine hits from which induced them to do more of it), the “arguments” resonated with a large portion of the American public. What was illogical about those “arguments” needs to be sorted out. Let’s do that now.

Let’s review the activists’ tactics/“arguments” (described in “Exploitation Part IV (a), Exploiting Exploitation−The Cause”).

(1) Publish videos of working conditions in the rich companies’ sweatshops. As viewed through Western lenses, the conditions living and working conditions presented in “Behind the Swoosh” were invidious. The video was quite useful in raising awareness of the importance of improving the lives of desperately poor people around the world. Note, however, that the working conditions of a sweatshop are poor is a fact. The closest it comes to being an argument would be that it implies that something should be done by someone. However, showing that fact makes no case about what should be done or by whom.

Yet, the activists seem to think that they have made an argument that because Nike owns the sweatshop and the working conditions are, by Western standards, unacceptably low, that Nike should improve working conditions. Because achieving that result would be in the best interest of Jim Keady, Leslie Kretzu, and other activists—because that result was their goal (another unstated goal appears to have been achieving the joy of defaming big companies)—they likely found the “argument” to be compelling (as did lots of people who were just as uninformed as the activists). Sadly, however, their “argument” omitted all the fact necessary to an understanding of what would help the poor people of the world (the goal that they claimed to be pursuing). An “argument” founded on a tiny fraction of the relevant facts, however, is not an argument.

When it comes to helping those desperately poor people, what was shown made matters worse and had action been taken in response to what the video did not show would have actually helped the desperately poor people of the world.

Most important, while succumbing to the activists’ tactics resulted in improvements in the working conditions and pay (lives) of the relatively few poor Indonesians who won the job lottery of being employed by Nike, the “success” for those few Indonesians resulted in the unnecessary continuation of misery for millions of other desperately poor people in Indonesia—and hundreds of millions elsewhere. Moreover, the least skilled of the Nike employees at the time of the video (perhaps even some shown in the videos) would have lost their jobs to higher skilled Indonesians enticed away from their former job to enjoy the higher pay and better working conditions at Nike.

The videos did not reveal those negative consequences. The fact that the activists filmed and published their videos while oblivious to the consequences of their actions should have brought them infamy. Sadly (especially for the poor of the world), due to the equal obliviousness of the general public in America, they were esteemed instead.

Another instance of Keady or Kretzu serving their own interests at the expense of the poor was that they advocated for things that Keady and Kretzu thought would be best for the Nike workers rather than what Nike workers thought would have been best for the Nike workers. Had Keady and Kretzu asked sweatshop workers whether they would have preferred better working conditions or more pay with the same (or even somewhat worse working conditions), the vast majority would have said “more pay.” Why? As the videos showed, the poor Indonesians were continually malnourished and hungry. The reason poor Indonesians would choose more pay over better working conditions is simple: No one can nourish her starving family with better working conditions. So, even had the activists’ “arguments” actually been arguments, those arguments would not have been tilted in favor of the activists’ interests rather than the best interests of the poor they sought to help.

(2) Show how little the workers were paid. Showing a factoid out of context can cause emotional, knee-jerk reactions, but it is often of little help in understanding a problem—which is essential to effectively addressing the problem. For example, showing a clueless mother the advantages to herself and her children if they were to successfully rob a bank might induce her to give that plan a go. Obviously, the fact that the factoid is true, does not mean that there were no other facts that should be considered before executing the plan. Such is the nature of the “logic” underlying the activists’ plan to improve working conditions and pay.

A very important fact omitted from the video is the fact that every one of the depicted workers was much better off than they would have been absent the Nike job—despite the poor working conditions and pay. Everyone who accepted Nike’s job offer was fully aware of the pay and working conditions being offered and, not only did workers voluntarily agree to the deal, they felt lucky that they were near enough to the front of the long line^[i] of job applicants that they, unlike the woeful applicants remaining in the line when the window closed, got a job before all the positions were filled. Such pertinent information could not be included in the videos because it would have been too much of a buzzkill to their demonization of Nike.

Another important factor misleadingly omitted from the video is the reason workers were paid so little in Indonesia at the time. The primary reason workers in poor countries are paid so little is that the number of low-skilled workers greatly exceeded the number of low-skilled jobs (i.e., the supply of low-skilled workers greatly exceeded the demand for low-skilled workers). As I explained in “Tax Cuts and Employee Compensation,” the best approach to increase wages at any pay level is to increase the number of jobs at that level of pay. In short, workers’ pay at any pay level rises when qualified workers for a job are scarce and such jobs are plentiful.^[ii] The ripple effect of more people having jobs, more money, and prosperity helps everyone, not just the Nike workers. Slowing the pace of job growth has precisely the opposite effects, which are bad for everyone.

Keady or Kretzu were obviously oblivious to the fact that as the cost of labor increases, the demand for labor decreases. Consequently, Keady or Kretzu were illogically advocating policies that would reduce the number of jobs, thereby putting downward pressure on pay for low-skilled workers in Indonesia (with the possible exception of those lucky few who landed a job at a sweatshop owned by a rich country company).

(3) Show how little the pay will buy. How little can be bought with sweatshop pay says nothing about the pay that would best serve the interest of all the poor people in a country. Consequently, showing how little can be purchased is not an argument as to what sweatshops should pay. They made no logical economic argument that paying the people they filmed more would be in the best interest of poor Indonesians as a whole. With what the activists chose to show, the only honest and logical argument the activists could have attempted would have been that arbitrarily paying Nike’s sweatshop workers above-market wages and working conditions created enough good to offset the extension of misery that would be inflicted on the millions of other poor people in the country as a result. An honest and logical argument, however, was likely impossible. Apparently more important to the activists, attempting an honest and logical argument would have undermined their efforts to gin up the emotional fever for their ill-founded cause.

(4) Show the workers’ destitution. Showing destitution provides no hint as to how best to alleviate destitution or who should pay the cost of such alleviation. Is anything more illogical than activists insisting that people or companies that are actually helping the poor should be condemned for not helping them even more?^[iii] To be logically consistent, shouldn’t activists be patrolling the streets of big cities screaming at people who put only $5 in a homeless person’s tin cup because the homeless person really needs $10K to get back on his feet?

(5) Reveal the high-profit Western sweatshop owners made each year. The wealth of an employer has nothing to do with either what employees should be paid or what pay is in the best interest of the poor people of the world. Neither does reporting the wealth of an employer reveal anything about whether the profit made from its poor country operations is inappropriately high, nor whether its operations are exploitative. It especially does not show how much less poor country workers would be paid by poorer domestic sweatshop owners (or how many fewer of such owners there would be if the income from foreign owners were not rippling through the economy) if rich companies were to abandon their operations in poor countries because of the derision and infamy that activists heap upon them. That activists routinely pick on companies that are making job opportunities available to people who would not otherwise have a job is illogical and exasperating.

As can be seen from the above, “Behind the Swoosh” and the other anti-sweatshop activists’ tactics approached 100% emotional appeal and 0% logical soundness.

As we shall see in the following post, if the anti-activists would have paid attention to sound economic reasoning instead of their emotions (or what was in their personal best interest), they would have gotten out of the way of rich businesses that were helping poor countries take a shorter and sustainable trip to prosperity. Instead, the activists have exploited the public’s economic illiteracy to make matters worse for the people they believed they were helping.

 

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^[i]     “Workers in Indonesia line up by the thousands to make Converse shoes for Nike. The wages paid make even the terribly poor— in the terribly poor’s judgment— better off than they would be with under the even more terrible alternatives, such as begging in the street.” McCloskey, Deirdre N. Bourgeois Equality: How Ideas, Not Capital or Institutions, Enriched the World (Kindle Locations 11154-11156). University of Chicago Press. Kindle Edition.

^[ii]     See “The world economy as we know it is about to be turned on its head.”

^[iii]    The companies listed in “The 20 Companies With The Most Low-Wage Workers” (which hire about 2 million minimum wage workers) are hounded the most.

AUTHOR’S NOTE: This and the next two posts are about well-intended people doing something that hurt the people they thought they were helping. To explain in one post the thing done, the illogic upon which the action was based, and the harm it caused must be explained would make for a very long post—something I try to avoid. (Seriously, I do!) For that reason, Part IV “Exploiting Exploitation” has been broken into three posts, (a) “The Cause,” (b) The Arguments, and (c) “The Effect.” This post about the cause describes only what those well-intended people did that caused the problems for the people they were trying to help.

🙛

A tragic example of the good intentions of self-assured do-gooders inflicting widespread harm on the world’s desperately poor (the very people they intended to help) is the 1998 campaign against Nike’s Indonesian “sweatshop.” That attack on Nike jump-started the modern “anti-sweatshop movement,” ^[i] which became a cause celebre.

Jim Keady and Leslie Kretzu, admirably compassionate, persistent, and persuasive (but economically illiterate) denizens of the wealthiest country in the world, traveled to Indonesia to film “Behind the Swoosh,”^[ii] an exposé on the plight of people, including children, who worked in Nike’s Indonesian shoe factory. They came, they saw what they thought to be heartless exploitation of poor people by the mighty and ridiculously rich Nike, Inc., and they conquered much of the enthusiasm of rich companies to make income opportunities available to people of the world who desperately needed income.

The movement’s basic approach to was to (1) video the working conditions in the sweatshops, (2) describe how little (by Western standards) the workers were paid, (3) show how shockingly (to Western eyes) little could be purchased locally with that pay, (4) show the workers’ destitution (by anyone’s standards−save those billion people who live on $1/day instead of $3/day), (5) reveal the high profit Western sweatshop owners made (which were large by almost any standard), and (6) publicly defame and humiliate high profile people associated with sweatshops.

The anti-sweatshop movement’s basic approach (I would use the word “argument,” but they made no arguments, they made uncontextualized observations—apparently thinking they were making an argument) is illogical. Let’s sort out the elements of the approach:

(1) Publish videos of working conditions in the rich companies’ sweatshops. They presented to denizens of rich countries videos of the destitution of people in impoverished countries. Observing those sad scenes effectively tugged on the heartstrings of rich country people. Such tugging is helpful and noble for the purpose of raising awareness of a need to improve the lives of desperately poor people. Such tugging is worse than worthless as a means of identifying what actions might efficaciously and sustainably improve the lives of people in poor countries. It certainly presents no logical argument that paying Nike sweatshop workers more would make a dent in the lives of the billion poor people in poor countries that did not work for Nike. (As will be explained in a future post, paying the Nike employees more worsened the income prospects for the billion unemployed poor people in impoverished countries who did not work in Western company sweatshops—and for some of the Nike employees.)

(2) Show how little the workers were paid. This is another exercise in heartstring-tugging. It does not enlighten anyone as to why the depicted workers are paid so little or the negative consequences to the poor of the world of increasing pay or improving working conditions of sweatshop jobs. It makes no logical argument for anything.

(3) Show how little the pay will buy. That people in poor countries are destitute and desire sweatshop jobs^[iii] is sad and worthy of our attention, sympathy, and help. Regardless of how much sweatshop pay will buy, workers could afford to buy even less absent that pay. That is why they desire the jobs.^[iv] Moreover, regardless of how little can be bought with the pay says nothing about the pay amount that would maximize the rate at which their country can climb the ladder of prosperity (which is the only effective and sustainable way to help the world’s poor. What was shown in the video is not a logical argument that sweatshop workers should be paid more. It is an unthinking, emotional appeal to act—consequences be damned.

(4) Show the workers’ destitution. Showing destitution coveys nothing about how best to alleviate destitution.

(5) Reveal the high-profit Western sweatshop owners made each year. The high wealth of an employer is not a factor in determining the pay levels that will best serve the interests of the poor people of the world. For example, the median income of Americans is more than 130 times that of Liberians,^[v] i.e., the average American is ridiculously wealthier than the average Liberian. If an average American wanted to buy a car from a Liberian, should that American be shamed, defamed, and ridiculed if she is unwilling to pay more than fair market value for the car because she is ridiculously wealthier than the relatively poor Liberian? I can see no rationale for that. As an argument, the idea that Nike’s wealth has anything to do with how much a worker should be paid for the labor she is just as irrational. Rather than an argument, the activists’ tactic is an appeal not to logic but to the envy and exploits the economic illiteracy of the members of a mob.^[vi]

As you can see, the videos are great at pulling on heartstrings, but they present no logical argument as to how improving pay or working conditions for a handful of poor people (“lottery winners” would be an apt analogy) now will enable the bottom billion of poor people in the world to become sustainably richer sooner. In reality, all but the tiny fraction of poor people who win the lotto become poorer by having played. Most lottery winners, especially poor people who win, become poor again soon after a win, and the positive effects on “the poor” of lotto winners are negligible.

Making emotional pleas to institute changes while clueless as to the negative consequences is irresponsible. Worse, it is self-congratulatory folly to plea for things that will make things worse for the intended beneficiaries. Being superficial, trendy, and self-congratulatory is neither noble nor helpful.^[vii]

In an attempt to shame Nike’s chairman into paying sweatshop workers more, “Behind the Swoosh” made him out to be mean and heartless. Knowing that paying more than the local market rates would do harm to the world’s poor, Phil Knight resisted the demands of activists for many years. Eventually, however, the drumbeat of negative press induced by the movement and the economic illiteracy of the America public cause Nike to improve working conditions, increase pay, and reduce child labor in its sweatshops.^[viii] (Rather than reading the headlines and what economically illiterate journalists say, read between the lines of what Nike said and you will see that the primary thing that happened is that Nike lost the public relations war.) In other words, the movement increased Nike’s cost of doing business in impoverished countries. As The Independent reported, “… after a decade of denying any wrongdoing, companies such as Nike and Gap are now admitting that their workers have been exploited and abused^[ix] and have pledged to improve the conditions of the millions^[x] of people who are paid a few pence a day to make their top-selling goods.”^[xi] In short, Nike fought the mob and eventually the mob won—and the poor people in impoverished countries suffered the consequences.

Nike’s capitulation came after the movement’s first big scalp. Kathie Lee Gifford was brought to tears (see video above) by being called a “child exploiter!” because a clothing line with her name on it was made in a Honduran sweatshop. The humiliation and humbling of a high profile and popular public figure effectively warned other current and potential factory operators not to consider providing employment opportunities to people in poor countries unless they were willing to incur profit killing working conditions and pay. Even though Gifford’s company was making available desperately needed jobs and income to desperately poor people in Honduras, she could not fade the heat of the calumny that was being rained upon her. Rather than fight for what was in the best interest of the poor people of Honduras, she avoided being turned into a pariah by jumping on the advocate’s bandwagon. The activist visited similar tactics on others and achieved similar results on other high-profile people. “Pressure from college students and other opponents of sweatshops has led some factories that make goods for industry giants like Nike and the Gap to cut back on child labor, to use less dangerous chemicals and to require fewer employees to work 80-hour weeks, according to groups that monitor such factories.”^[xii]

The Independent article cited above also said, “And in the David and Goliath battle of the small activists against big business, even the companies themselves are admitting defeat.” They have also induced the U.S. government to cause poor countries to improve working conditions standards. In short, because the advocates’ successful villainization of sweatshop owners, the economic advantages of foreign sweatshops were and continue to be depressed.

The upshot of all of this is that the business advantages of opening factories in impoverished counties plummeted. The cause of that plummeting was the anti-sweatshop movement’s beliefs, illogic, and tactics. With those beliefs, illogic, and tactics, the activists exploited the word “exploitation” to boost their self-esteem, fame, and celebrity (and, perhaps, wealth) and to help a relative handful of sweatshop workers at the expense of the billions of desperately poor people who would have been dramatically helped had the activists tended to things they knew something about.

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^[i]       See “Anti-sweatshop movement.”

^[ii]       See “Nike Sweatshops – Behind the Swoosh.”

^[iii]      See “Two Cheers for Sweatshops.”

^[iv]     “Workers in Indonesia line up by the thousands to make Converse shoes for Nike. The wages paid make even the terribly poor— in the terribly poor’s judgment— better off than they would be with under the even more terrible alternatives, such as begging in the street.” McCloskey, Deirdre N. Bourgeois Equality: How Ideas, Not Capital or Institutions, Enriched the World (Kindle Locations 11154-11156). University of Chicago Press. Kindle Edition.

^[v]      See “Worldwide, Median Household Income About $10,000.”

[vi]      See “The Marginal Product of Labor.”

^[vii]     See “Jordan Peterson – I’ve Read Some Marx, Now I’m Gonna Change The World!”

^[viii]     See “‘We Blew It’: Nike Admits to Mistakes Over Child Labor,” and “How Nike shed its sweatshop image to dominate the shoe industry.”

^[ix]      This reads as if Nike had admitted that in general all sweatshop employees had been “exploited and abused.” I have found no support for that claim. Nike admitted it “blew it” with respect to child labor in Pakistan, not everywhere.

^[x]      I found no article that said how many people worked in Nike sweatshops, but the claim that “millions of people” work in Nike sweatshops is highly suspicious (seemingly incredible).

^[xi]      See “The ethical revolution sweeping through the world’s sweatshops.”

^[xii]      See “Anti-Sweatshop Movement Is Achieving Gains Overseas.”