January 10, 2008

Highlight #2

After finishing up The Undercover Economist I found the highlight of the last five chapters to be about sweatshops in poor countries, as many of us did. I think the reason I found this particular point so fascinating (although there were others that came close) was because this issue is so controversial and yet so under researched. Who are these protesters against sweatshops and why are they trying to get rid of all these jobs in underdeveloped countries? First off, this is not the first time I have heard the argument for sweatshops, but it compels me nonetheless. I feel the need to write on this subject to inform people the positive impact that outsourcing has on poor countries, even though my audience clearly already knows the benefits.

I’ll start by saying it is undeniable that the conditions in these sweatshops, to us Americans, seems cruel and unbearable. Minimal pay, poor conditions, long hours with few breaks and strict management. I wouldn’t want to work there. Well, I wouldn’t want to work there if this sweatshop was in America anyway. This however should be acknowledged as a step up from the other working environments. First of all the wages are better than most other companies in these countries can offer and so are the conditions. I think Harford mentioned that many other people we out prostituting themselves or digging in landfills and avoiding landslides. I would choose the sweatshop in this case.

Next, the sweatshop provides jobs that were not once available. Now this country has not only more jobs, but better jobs. After a while this makes the other local competing companies raise their wages and improve their conditions to get workers. Net result: all around better working environments and more jobs with higher pay.

Now, what about the Americans? Many people view outsourcing as negative because it takes away from American job opportunities. If Nike only hired American workers to make their shoes we would probably pay $400 for a pair of Air Jordans. Very few people would pay that for a pair of tennis shoes from Nike when they could buy a similar pair from New Balance, or Rebok or anyone else that produces shoes. So, Nike would go out of business and all the jobs that Americans had with Nike would now be lost. Not only that, but when companies like Nike and Gap move to other countries it provides an alternative for these people as well. Not only are they making our clothes they are now buying these products as well which saves money but also makes more money by selling products to their workers and families and the rest of the country.

I think having read Harford’s book we can all agree that we have different views on the world and may reconsider some of our beliefs and decisions. But that is the point of the class, now isn’t it?

Also, I few years ago I read, The World is Flat by Thomas Friedman which also offers some great insight to globalization if anyone is interested.

5 comments:

Roman Kozhevnikov said...

I would rather pay more for certain services NOT to be outsourced. For example, if you have problems with AOL, T-mobile, or almost any other computer or telephone provider, then your call is answered by someone half-way across the world who might not speak English very well. I have an accent, so they REALLY don't understand me. I would rather pay more for services that require English-speakers.

Also, doesn't it take only a few dollars to make Nike, Adidas, or Reebok tennis shoes? If those companies used American workers, those companies could still make money, just not all of the extra $98. They could also advertise that their products are made in America, not hecho en Mexico or 中國製造. I'm sure this would bring in new customers who want to support American labor.

And finally, if companies REALLY wanted to improve working conditions in poorer countries, then they could provide a much-higher standard than sweatshops! If companies thought they wre improving working conditions in other countries, then why aren't they advertising and showcasing their advancements in order to attract more American customers? Answer: because they don't give a rat's behind about helping the people who have already agreed to work 18 hours a day for pennies.

Jessica Wade said...
This comment has been removed by the author.
Larry Eubanks said...

"I’ll start by saying it is undeniable that the conditions in these sweatshops, to us Americans, seems cruel and unbearable. Minimal pay, poor conditions, long hours with few breaks and strict management. I wouldn’t want to work there. Well, I wouldn’t want to work there if this sweatshop was in America anyway. This however should be acknowledged as a step up from the other working environments. First of all the wages are better than most other companies in these countries can offer and so are the conditions."

I suppose "sweatshops" is an interesting term, and I suppose it may be a term that is effective in politics. But, for an economist, I think the normative reasons for using the word "sweatshops" should be considered. Most often economists do normative economics by being interested in an efficient allocation of resources. There are specific value judgements used to define efficiency. Most of the time economists are very explicit about these value judgements and most of the time they are very careful not to try to hide what those value judgements are. In contrast, it seems to me that those who use "sweatshops" also make value judgements, but they are value judgements that are usually not made explicit, and often when asked to make them explicit that task is avoided.

For the economist interested either in efficiency or individual liberty as value judgements, Harford does a fine job explaining the economics of so-called sweatshops. And, in some respects, that economics is also reflected in the observation that one would not want to work in such production facilities if they were in the United States.

But, I want to suggest that even that observation, may be too narrow, perhaps because of normative value judgements (I'm not sure). Consider, though, that such working conditions were, at one time, historically typical in the United States. Consider what the implications of this assertion might be, especially if we take a dynamic view of economic activity, which isn't really done very well in neoclassical economics, or the economics that is most often taught to undergraduate students.

Perhaps our very prosperity can be only properly and accurately appreciated if we recognize that you and I were born at a stage of this countries prosperity for which "sweatshops" were no longer the norm. Perhaps the sweatshops in developing countries today are necessary steps to what may later be the kind of prosperity we live with for the children or grandchildren of those making their livings in "sweatshops" today?

Jessica Wade said...

I think it is obvious that companies don't set out with the motto "Let's improve the standard of living in this country", however that is in fact the outcome a lot of the time. I'm not saying the conditions are something to be proud of and that is why in fact they are not advertised. However, I think it's naïve to think that outsourcing is negatively impacting our economy. It make cost just a few dollars in materials to make tennis shoes but if you factor in American wages I'm sure that number would go up.

Maybe your right that some things should stay local. I agree that I am very frustrated when I call to get help with something and I am rerouted half way across the world and they can't seem to understand me. I think the fact of the matter is that companies are out to maximize profits and they're doing just that regardless if I want them to or if you want them to. In the end trade makes everyone better off, whether it be imports and exports or outsourcing labor.

Jessica Wade said...

I am going to continue by saying that maybe I didn't clearify myself. No, I would not want to work in these conditions, but that is because I have worked in the workforce that has higher standards and that is what I am used to. However, I do agree with what Prof Eubanks is saying. I know that my grandparents and great grandparents worked in very hard in conditions I would not want to work in but that was the standard then and that as how they made their money. I think that it was an interesting point that Harford made about how South Korea used to be where companies outsourced but their economy has expanded and conditions have improved and now the country's wage is high enough to where corperations have moved on. I think that outsourcing opens up an opportunity for countries to grow and become "rich" instead of "poor". So maybe we should refer to these "sweatshops" as outsourced assembly lines or just outsourced manufacturing plants. Like Harford said, "sweatshops" may just be a step on the ladder for underdeveloped countries on their way to becoming wealthier.