Exploitation—Part IV (a), Exploiting Exploitation−The Cause

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.

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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.”