Capital, Free Trade and U.S. Hypocrisy

Image from Kheel Center, Cornell University

Nearly 100 years after the infamous Triangle fire, on December 14, 2010, workers producing apparel for the Gap in the Hameen factory outside the capital of Bangladesh, became trapped by a 9^th floor fire (Hammadi & Taylor, 2010).  The fire quickly became a conflagration and raged between the workers and the exit.  The workers fled to the fire exits and found locked doors, because management sought to prevent theft.  Left with no recourse, workers either jumped from the top of the building to the ground below or perished from the smoke or flames (Hammadi & Taylor, 2010).  This modern-day Triangle tragedy killed 29 workers and injured more than 100 (Griggs, 2011).

Image from Reuters/Andrew Biraj

The tragedy in Bangladesh serves to highlight the continued exploitation of labor that occurs in the developing world in order to drive down the costs for U.S. corporations.  The problem of exploitation is a complicated one that includes many factors, including the capitalist motives of growth and profit, relaxed or free trade agreements, the appeal of cheap labor and lack of regulatory standards in the developing world, and the need of developing world countries for capital investment to create economic stimulation.  These factors combine to create a vicious cycle that leads to worker exploitation and needless tragedies like the Hameen factory fire and other equally abhorrent labor practices that often impact woman and children the most.

Structural Problem with Capitalism

Hodsen and Sullivan (2008) describe Marx’s view of the structural problem inherent under capitalism:

“The exploitation and misery of workers results directly from the laws of capitalism in which the market system demands that every capitalist buy labor as cheaply as possible in order to produce and sell goods as cheaply as possible and still turn a profit.  If capitalists do not exploit their employees, they will be undercut by other capitalists who do.”  (pg. 8)

Lower costs allow U.S. corporations to return profit to shareholders, compete more effectively, and fund new initiatives to grow their business; in essence, the capitalist incentive system is designed to maximize growth and profit, in direct conflict with workers’ needs for living wages and safe working environments.

The Appeal of Global Labor Differences

            Labor costs vary widely across the globe based on a variety of factors, including the country economy, inflation rate, worker wages, overtime, benefits, and regulatory standards.  Economies without regulatory standards to protect workers, prevent worker exploitation, or protect the environment can be very attractive to corporations that can pass savings on to shareholders in the form of profits or to fuel new growth initiatives.

Free Trade Agreements

            Free trade agreements eliminate trade barriers like tariffs and quotas that historically prevented companies from moving work to countries with lower cost structures.  Advocates of free trade policies, like the WTO and the World Bank argue that free trade promotes economic growth for open economies and a resulting reduction in poverty and inequality.  In the World Bank report on globalization Collier and Dollar (2002) indicate that:

Globalization generally reduces poverty because more integrated economies tend to grow faster and this growth is usually widely diffused. As low-income countries break into global markets for manufactures and services, poor people can move from the vulnerability of grinding rural poverty to better jobs, often in towns or cities.  (p. 1)

Others argue the free trade creates a race to the bottom where industries are more likely to move across borders to countries that have different cost structures and regulatory standards (Hassoun, 2008).  While free trade agreements have opened markets and promoted trade, “these global institutions, however, have been much more reluctant to implement policies that provide protections for workers or for the environment” (Hodson & Sullivan, 2008, p. 203).  By way of example, the Hameen factory fire is indicative of lax safety standards and either poor or poorly enforced labor policies.

A Vicious Cycle

The availability of lower cost labor pools made assessable by free trade agreements have driven the trend by corporations to move work overseas to countries whose economies are in dire need of capital investments and who consequently have created a business-friendly environment.  The government of these countries, like Bangladesh, El Salvador, or Honduras, keep labor costs low to attract needed capital.  For example, El Salvador, a member nation of the International Labor Organization (ILO), one of 5 nations that participate in the Central American Free Trade Agreement (CAFTA),

Image from laurizza

has particularly egregious violations of international labor standards including discrimination against women, the worst forms of child labor and the “violation of the fundamental rights of freedom of association and collective bargaining” (Monterrosa, 2004, p. 46).  Countries with poor economies, high unemployment and free trade agreements make attractive targets for manufacturing investment, particularly when coupled with a pro-business environment that discourages labor unions and lacks effective enforcement of labor laws; the low labor costs are simply too attractive to pass up.  Large infusions of capital for new manufacturing investments can perpetuate pervasive labor problems like exploitation of women and children, low wages and occupational safety issues.

An Example: From a Sweatshop in El Salvador to CSU

            Two years after CAFTA was signed into law, Hanes Brands, a U.S. based maker of apparel across numerous brands, including the Champion Brand, announced the acquisition of the textile manufacturing operations of Industrias Duraflex, El Salvador, in order to continue to lower global supply chain costs (HanesBrands, 2007).  Hanes Brands, has been implicated in child labor violations in Bangladesh (Kernaghan, 2006), while in the Dominican Republic, Hanes used “a range of illegal means to thwart workers’ efforts to exercise their associational rights” (Worker Rights Consortium, 2007, p. 3).  A May 2009 report from the Washington Office on Latin America (WOLA) found continued institutional weakness and pervasive impunity in the enforcement of labor rights post-CAFTA in countries like El Salvador and cited numerous labor violations by Hanes Brands (2009).  Companies like Hanes Brands are able to operate largely with impunity in free trade zones, ignoring ILO labor standards and local labor laws while being applauded by the investors for their superior business management.  Meanwhile, Colorado State University, is selling CSU-branded Hanes merchandise to students and helping to support El Salvador’s sweatshop economy.

This shirt is made in El Salvador

How are we to begin to solve the labor problems associated with globalization when we reward the worst abusers with profit?

Fair Trade versus Free Trade

Free trade agreements have done much to advance the cause of trade and little to advance the cause of workers rights.  A move towards fair trade, with a linkage between international trade and basic labor standards, would do much to level the competitive labor field while improving justice (Barry & Reddy, 2005).  Linkage may also have the effect of improving wages and decreasing poverty (Barry & Reddy, 2005).  Upcoming trade agreements with Columbia and Peru are including more provisions for improved labor standards, although still may fall short in funding for enforcement projects (Washington Office on Latin America, 2009).

Improve Educated Consumer Choice

Information on ethical choices for purchased goods should be readily available to U.S. consumers whose current purchasing decisions reward corporations that exploit workers.  While there is information available for those who choose to do the research, it appears to be fragmented and lacks an appropriate framework to make it easy for a consumer to make an ethical decision.  Perhaps, were products labeled as “ethically manufactured” in the same way organic food is labeled “organic”, consumers could make an informed decision.  That knowledge would certainly have prevented my purchase of the CSU-Global apparel.

Conclusion

            The U.S. government, corporations, and consumers are equally culpable in the continued exploitation of workers and specifically the most vulnerable workers, women and children.  There are many factors contributing to the ongoing exploitation of women and children in the developing world.  Major factors include capitalist motives of growth and profit, free trade agreements that do not include provisions to enforce basic labor standards, the appeal of cheap labor and lack of regulatory standards in the developing world, and the need of developing world countries for capital investment to create economic stimulation.  These factors help create a vicious cycle where U.S companies infuse large amounts of capital into developing economies to take advantage of the opportunity of free trade and cheap labor; while the governments of developing countries allow an environment hostile to labor to perpetuate continued exploitation to attract capital investment.  It is the height of hypocrisy that the U.S. government, corporations, and workers, that insist on basic labor standards inside the U.S., have systematically help deny workers in the developing world the same basic rights.

References

Barry, C., & Reddy, S. G. (2005). Just Linkage: International Trade and Labor Standards (pp. 122). New York: Columbia University.

Collier, P., Dollar, D., & World Bank. (2002). Globalization, growth, and poverty : building an inclusive world economy. Washington, DC New York, N.Y.: World Bank; Oxford University Press.

Griggs, A. (2011, March 24). Triangle’s Fire Still Burns. Labor Notes. Retrieved May 29, 2011, from labornotes.org/2011/03/triangle’s-fire-still-burns

Hammadi, S., & Taylor, M. (2010, December 14).  Workers jump to their deaths as fire engulfs factory making clothes for Gap | World news | guardian.co.uk .  Latest news, comment and reviews from the Guardian | guardian.co.uk . Retrieved May 29, 2011, from http://www.guardian.co.uk/world/2010/dec/14/bangladesh-clothes-factory-workers-jump-to-death

HanesBrands. (2007, September 6). Hanesbrands Inc : Hanesbrands Inc. Acquires Textile Plant in El Salvador Capping Successful First Year as an Independent Company. Stock Market Quotes and Financial News | 4-Traders. Retrieved May 30, 2011, from http://www.4-traders.com/HANESBRANDS-INC-31267/news/HANESBRANDS-INC-Hanesbrands-Inc-Acquires-Textile-Plant-in-El-Salvador-Capping-Successful-First-Year–411680/

Hassoun, N. (2008). Free trade, poverty and the environment. Public Affairs Quarterly, 22(4), 353 – 380.

Hodson, R., & Sullivan, T. A. (2008). The social organization of work (4th ed.). Belmont, CA: Wadsworth.

Kernaghan, C. (2006, October 24). Child Labor Is Back: Children Again Sewing Clothing for Wal-Mart, Hanes and Other U.S. Companies. Common Dreams. Retrieved May 29, 2011, from http://www.commondreams.org/news2006/1024-01.htm

Mcclear, S. (2005, March 1). ZCommunications | Race to Bottom for Garment Workers by Sheila Mcclear | ZMagazine Article. Z Communications. Retrieved May 29, 2011, from http://www.zcommunications.org/race-to-bottom-for-garment-workers-by-sheila-mcclear

Monterrosa, A. l. E. n. C. (2004). LEGAL, POLITICAL AND PRACTICAL OBSTACLES TO THE ENFORCEMENT OF LABOR LAWS IN EL SALVADOR Fundamental Labor Rights in Central America, Latin America and the Caribbean (pp. 51). Washington DC: International Labor Rights Fund.

Washington Office on Latin America. (2009). DR-CAFTA and Worker’s Rights: Moving from Paper to Practice (pp. 28). Washington DC: WOLA.

Worker Rights Consortium. (2007). WRC ASSESSMENT re TOS DOMINICANA (DOMINICAN REPUBLIC)

FINDINGS AND RECOMMENDATIONS. Washington DC: Workers Rights Consortium.