weekly assignment 4

[On page 603-604, Maitland argues against the critics’ claim that international sweatshops widen the gap between the rich and the poor in the countries that host sweatshops. With your own words, explain Maitland’s argument; then briefly explain whether or not you agree with him, and why.]
ethics
ATTACHED FILE(S)
Ethical Issues in International Business 597
SWEATSHOPS AND BRIBERY
T h e G r e a t Non-Debate
over International Sweatshops
I n r e c e n t y e a r s , t h e r e h a s b e e n a d r a m a t i c
g r o w t h in t h e c o n t r a c t i n g o u t of p r o d u c t i o n
by c o m p a n i e s in t h e i n d u s t r i a l i z e d c o u n t r i e s
to suppliers i n developing countries. This glob-
alization of p r o d u c t i o n has l e d to a n e m e r g –
i n g i n t e r n a t i o n a l division of l a b o r in footwear
a n d a p p a r e l in which c o m p a n i e s like Nike a n d
R e e b o k c o n c e n t r a t e o n p r o d u c t d e s i g n a n d
m a r k e t i n g b u t rely o n a n e t w o r k of contractors
in I n d o n e s i a , China, Central America, a n d t h e
like, to b u i l d shoes o r sew shirts a c c o r d i n g to
exact specifications a n d deliver a high-quality
g o o d a c c o r d i n g to p r e c i s e delivery s c h e d u l e s .
As Nike’s vice p r e s i d e n t for Asia has p u t it, “We
d o n ‘ t k n o w t h e first t h i n g a b o u t m a n u f a c t u r –
i n g . We a r e m a r k e t e r s a n d designers.”
T h e c o n t r a c t i n g a r r a n g e m e n t s have d r a w n
i n t e n s e fire f r o m c r i t i c s — u s u a l l y l a b o r a n d
h u m a n rights activists. T h e s e “critics” (as I will
r e f e r t o t h e m ) h a v e c h a r g e d t h a t t h e c o m p a –
nies a r e (by p r o x y ) e x p l o i t i n g w o r k e r s i n t h e
p l a n t s (which I will call ” i n t e r n a t i o n a l sweat-
s h o p s ” ) of t h e i r s u p p l i e r s . Specifically t h e
c o m p a n i e s s t a n d a c c u s e d of c h a s i n g c h e a p
l a b o r a r o u n d t h e g l o b e , failing to p a y t h e i r
w o r k e r s living wages, u s i n g c h i l d labor, t u r n –
i n g a b l i n d eye t o a b u s e s of h u m a n r i g h t s ,
b e i n g c o m p l i c i t w i t h r e p r e s s i v e r e g i m e s i n
d e n y i n g w o r k e r s t h e r i g h t t o j o i n u n i o n s a n d
failing to enforce m i n i m u m l a b o r s t a n d a r d s in
t h e w o r k p l a c e , a n d so o n .
T h e c a m p a i g n against i n t e r n a t i o n a l sweat-
s h o p s has largely u n f o l d e d o n television a n d ,
Ian Maitland
t o a lesser e x t e n t , i n t h e p r i n t m e d i a . W h a t
seems like n o m o r e t h a n a h a n d f u l of critics
has m o u n t e d a n aggressive, media-sawy cam-
p a i g n w h i c h h a s p u t t h e publicity-shy r e t a i l
giants o n t h e defensive. T h e critics h a v e or-
c h e s t r a t e d a s e r i e s of s e n s a t i o n a l ” d i s c l o –
s u r e s ” o n p r i m e t i m e television e x p o s i n g t h e
terrible pay a n d working conditions in factories
m a k i n g j e a n s for Levi’s o r sneakers for Nike or
Pocahontas shirts for Disney. O n e of t h e princi-
pal scourges of the companies has b e e n Charles
K e r n a g h a n who r u n s t h e National L a b o r Coali-
t i o n ( N L C ) , a l a b o r h u m a n r i g h t s g r o u p in-
volving 25 u n i o n s . It was K e r n a g h a n w h o , in
1996, b r o k e t h e news before a C o n g r e s s i o n a l
c o m m i t t e e t h a t Kathie L e e Gifford’s c l o t h i n g
l i n e was b e i n g m a d e by 13- a n d 14-year-olds
working 20-hour days in factories in H o n d u r a s .
K e r n a g h a n also a r r a n g e d for t e e n a g e workers
from sweatshops in C e n t r a l A m e r i c a to testify
b e f o r e c o n g r e s s i o n a l c o m m i t t e e s a b o u t abu-
sive l a b o r practices. At o n e of these h e a r i n g s ,
o n e of t h e workers h e l d u p a Liz Claiborne cot-
ton sweater identical to ones she h a d sewn since
s h e was a 13-year-old w o r k i n g 1 2 – h o u r days.
A c c o r d i n g to a news r e p o r t , ” [ t ] h i s i m a g e , ac-
cusations of oppressive c o n d i t i o n s at t h e fac-
tory a n d the Claiborne logo played well o n that
evening’s n e t w o r k news.” T h e result has b e e n
a circus-like a t m o s p h e r e — a s in R o m a n circus
w h e r e Christians were t h r o w n to lions.
K e r n a g h a n has shrewdly t a r g e t e d t h e c o m –
p a n i e s ‘ carefully cultivated p u b l i c imag es. H e
From Ian Maitland, “The Great Non-Debate Over International Sweatshops,” British Academy of Management Annual
Conference Proceedings, September, pp. 240-65, 1997. Reprinted with permission of the author.
598 Ethical Issues in International Business
has explained: “Their image is everything.
They live and die by their image. That gives
you a certain power over them.” As a result,
he says, “these companies are sitting ducks.
They have no leg to stand on. That’s why it’s
possible for a tiny group like us to take on a
giant like Wal-Mart. You can’t defend paying
someone 31 cents an hour in Honduras.. . .”1
Apparently most of the companies agree with
Kernaghan. Not a single company has tried to
m o u n t a serious defense of its contracting
practices. They have judged that they cannot
win a war of soundbites with the critics. In-
stead of making a fight of it, the companies
have sued for peace in order to protect their
principal asset—their image.
Major U.S. retailers have responded by
adopting codes of conduct on h u m a n and
labor rights in their international operations.
Levi-Strauss, Nike, Sears, J.C. Penney, Wal-
Mart, Home Depot, and Philips Van-Heusen
now have such codes. As Lance Compa notes,
such codes are the result of a blend of hu-
manitarian and pragmatic impulses: “Often
the altruistic motive coincides with ‘bottom
line’ considerations related to b r a n d name,
company image, and other intangibles that
make for core value to the firm.”‘ Peter Jacobi,
President of Global Sourcing for Levi-Strauss
has advised: “If your company owns a popular
brand, protect this priceless asset at all costs.
Highly visible companies have any number of
reasons to conduct their business not just re-
sponsibly but also in ways that cannot be por-
trayed as unfair, illegal, or unethical. This sets
an extremely high standard since it must be
applied to b o t h company-owned businesses
and contractors. . . .” And according to an-
olher Levi-Strauss spokesman, “In many re-
spects, we’re protecting our single largest asset:
our brand image and corporate reputation.”
Nike recently published the results of a gen-
erally favorable review of its international op-
erations conducted by former American U.N.
Ambassador Andrew Young.
Recendy a truce of sorts between the critics
and the companies was a n n o u n c e d on the
White House lawn with President Clinton and
Kathie Lee Gifford in attendance. A presi-
dential task force, including representatives
of labor unions, human rights groups and ap-
parel companies like L.L.Bean and Nike, has
come u p with a set of voluntary standards
which, it hopes, will be embraced by the entire
industry. Companies that comply with the code
will be entitled to use a “No Sweat” label.
OBJECTIVE OF THIS PAPER
In this confrontation between the companies
and their critics, neither side seems to have
judged it to be in its interest to seriously engage
the issue at the heart of this controversy, namely:
What are appropriate wages and labor standards
in international sweatshops? As we have seen,
the companies have treated the charges about
sweatshops as a public relations problem to be
managed so as to minimize harm to their pub-
lic images. The critics have apparently judged
that the best way to keep public indignation at
boiling point is to oversimplify the issue and
treat it as a morality play featuring heartless ex-
ploiters and victimized Third World workers.
The result has been a great nondebate over in-
ternational sweatshops. Paradoxically, if peace
breaks out between the two sides, the chances
that the debate will be seriouslyjoined may re-
cede still further. Indeed, there exists a real risk
(I will argue) that any such truce may be a col-
lusive one that will come at the expense of the
very Third World workers it is supposed to help.
This paper takes u p the issue of what are
appropriate wages and labor standards in in-
ternational sweatshops. Critics charge that the
p r e s e n t a r r a n g e m e n t s are exploitative. I
proceed by examining the specific charges of
exploitation from the standpoints of b o t h
(a) their factual and (b) their ethical sufficiency.
However, in the absence of any well-established
Ethical Issues in International Business 599
c o n s e n s u s a m o n g business ethicists ( o r o t h e r
t h o u g h t f u l o b s e r v e r s ) , I s i m u l t a n e o u s l y u s e
t h e investigation of sweatshops as a s ettin g for
trying to adjudicate b e t w e e n c o m p e t i n g views
a b o u t w h a t t h o s e s t a n d a r d s s h o u l d b e . My ex-
a m i n a t i o n will pay p a r t i c u l a r a t t e n t i o n to ( b u t
will n o t b e l i m i t e d to) l a b o r c o n d i t i o n s a t t h e
p l a n t s of Nike’s s u p p l i e r s in I n d o n e s i a . I have
n o t p e r s o n a l l y visited any i n t e r n a t i o n a l sweat-
s h o p s , a n d so m y c o n c l u s i o n s a r e b a s e d e n –
tirely o n s e c o n d a r y analysis of t h e v o l u m i n o u s
p u b l i s h e d r e c o r d o n t h e t o p i c .
WHAT ARE ETHICALLY
APPROPRIATE LABOR STANDARDS
IN INTERNATIONAL SWEATSHOPS?
W h a t a r e ethically a c c e p t a b l e o r a p p r o p r i a t e
levels of wages a n d l a b o r s t a n d a r d s i n i n t e r –
n a t i o n a l sweatshops? T h e following t h r e e pos-
sibilities j u s t a b o u t r u n t h e g a m u t of s t a n d a r d s
o r p r i n c i p l e s t h a t h a v e b e e n s e r i o u s l y p r o –
p o s e d to r e g u l a t e s u c h policies.
1. Home-country standards: It m i g h t b e ar-
g u e d ( a n d in r a r e cases has b e e n ) t h a t inter-
n a t i o n a l c o r p o r a t i o n s have a n ethical duty to
pay the same wages a n d provide t h e same labor
s t a n d a r d s r e g a r d l e s s of w h e r e t h e y o p e r a t e .
However, the view t h a t h o m e – c o u n t r y standards
s h o u l d apply in h o s t c o u n t r i e s is r e j e c t e d by
most business ethicists a n d (officially at least) by
t h e critics of i n t e r n a t i o n a l sweatshops. T h u s
T h o m a s D o n a l d s o n argues t h a t “[b]y arbitrar-
ily establishing U.S. wage levels as t h e b e n c h –
m a r k for fairness o n e eliminates t h e role of t h e
i n t e r n a t i o n a l m a r k e t in establishing salary lev-
els, a n d this in t u r n e l i m i n a t e s t h e i n c e n t i v e
U.S. c o r p o r a t i o n s h a v e to h i r e f o r e i g n work-
ers.”3 Richard D e G e o r g e makes m u c h t h e same
a r g u m e n t : If t h e r e w e r e a r u l e t h a t said t h a t
“that A m e r i c a n MNCs [multinational corpora-
tions] t h a t wish to b e ethical m u s t pay t h e same
wages a b r o a d as they d o at h o m e , . . . [ t h e n ]
MNCs would have little incentive to move their
m a n u f a c t u r i n g a b r o a d ; a n d if they d i d m o v e
a b r o a d they w o u l d d i s r u p t t h e local l a b o r mar-
ket with artificially h i g h wages t h a t b o r e n o re-
lation to t h e local s t a n d a r d o r cost of living.”6
2. “Living wage” standard: It has b e e n p r o –
p o s e d that an international corporation should,
at a m i n i m u m , pay a “living wage.” T h u s De-
G e o r g e says t h a t c o r p o r a t i o n s s h o u l d pay a liv-
i n g wage “even w h e n this is n o t p a i d by local
firms.” However, it is h a r d to pin down what this
m e a n s operationally. A c c o r d i n g to D e G e o r g e ,
a living wage sh o u ld “allow t h e worker to live in
dignity as a h u m a n being.” I n o r d e r to r e s p e c t
t h e h u m a n rights of its workers, h e says, a cor-
p o r a t i o n m u s t pay “at least subsistence wages
a n d as m u c h above t h a t as workers a n d t h e i r
d e p e n d e n t s n e e d to live with r e a s o n a b l e dig-
nity, given t h e g e n e r a l state of d e v e l o p m e n t of
t h e society.”8 As we shall see, t h e living wage
s t a n d a r d has b e c o m e a rallying cry of t h e crit-
ics of i n t e r n a t i o n a l s w e a t s h o p s . A p p a r e n t l y ,
D e G e o r g e believes t h a t it is p r e f e r a b l e for a
corporation to provide n o j o b at all t h a n to offer
o n e t h a t pays less t h a t a living wage. . . .
3. Classical liberal standard: Finally, t h e r e is
what I will call t h e classical liberal s t a n d a r d . Ac-
c o r d i n g t o this s t a n d a r d a p r a c t i c e (wage o r
l a b o r p r a c t i c e ) is ethically a c c e p t a b l e if it is
freely c h o s e n by i n f o r m e d workers. F o r exam-
ple, in a r e c e n t r e p o r t t h e World B a n k invoked
this s t a n d a r d i n c o n n e c t i o n with w o r k p l a c e
safety. It said: “The appropriate level is therefore
t h a t at which t h e costs are c o m m e n s u r a t e with
the value t h a t i n f o r m e d workers place o n im-
p r o v e d working conditions a n d r e d u c e d risk.”9
Most business ethicists reject this s t a n d a r d o n
t h e g r o u n d s t h a t t h e r e is s o m e sort of m a r k e t
failure o r the “background conditions” are lack-
i n g for m a r k e t s t o w o r k effectively. T h u s for
D o n a l d s o n full (or near-full) e m p l o y m e n t is a
p r e r e q u i s i t e if w o r k e r s a r e t o m a k e s o u n d
choices r e g a r d i n g workplace safety: ” T h e aver-
age level of u n e m p l o y m e n t in t h e d e v e l o p i n g
c o u n t r i e s today e x c e e d s 40 p e r c e n t , a figure
600 Ethical Issues in International Business
that has frustrated the application of neoclas-
sical economic principles to the international
economy on a score of issues. With full em-
ployment, and all other things being equal, mar-
ket forces will encourage workers to make
trade-offs between job opportunities using safety
as a variable. But with massive unemployment,
market forces in developing countries drive the
unemployed to the jobs they are lucky enough
to land, regardless of the safety.”10 Apparently
there are other forces, like Islamic funda-
mentalism and the global debt “bomb,” that
rule out reliance on market solutions, but
Donaldson does not explain their relevance.11
DeGeorge, too, believes that the necessary con-
ditions are lacking for market forces to oper-
ate benignly. Without what he calls “background
institutions” to protect the workers and the re-
sources of the developing country (e.g., en-
forceable minimum wages) a n d / o r greater
equality of bargaining power exploitation is the
most likely result.12 “If American MNCs pay
workers very low w a g e s . . . they clearly have the
opportunity to make significant profits.”
DeGeorge goes on to make the interesting ob-
servation that “competition has developed
among multinationals themselves, so that the
profit margin has been driven down” and de-
veloping countries “can play one company
against another.”14 But apparently that is not
enough to rehabilitate market forces in his eyes.
THE CASE AGAINST
INTERNATIONAL SWEATSHOPS
To many of their critics, international sweat-
shops exemplify the way in which the greater
openness of the world economy is hurting
workers.. . . Globalization means a transition
from (more or less) regulated domestic
economies to an unregulated world economy.
The superior mobility of capital, and the es-
sentially fixed, immobile nature of world labor,
means a fundamental shift in bargaining
power in favor of large international corpora-
tions. Their global reach permits them to shift
production almost costlessly from one loca-
tion to another. As a consequence, instead of
being able to exercise some degree of control
over companies operating within their bor-
ders, governments are now locked in a bid-
ding war with one another to attract and retain
the business of large multinational companies.
The critics allege that international com-
panies are using the threat of withdrawal or
withholding of investment to pressure gov-
ernments and workers to grant concessions.
“Today [multinational companies] choose be-
tween workers in developing countries that
compete against each other to depress wages
to attract foreign investment.” The result is a
race for the bottom—a “destructive downward
bidding spiral of the labor conditions and
wages of workers throughout the world… ,”15
Thus, critics charge that in Indonesia wages
are deliberately held below the poverty level
or subsistence in order to make the country a
desirable location. T h e results of this com-
petitive dismantling of worker protections,
living standards and worker rights are pre-
dictable: deteriorating work conditions, de-
clining real incomes for workers, and a widening
gap between rich and poor in developing
countries. I turn next to the specific charges
made by the critics of international sweatshops.
Unconscionable Wages
Critics charge that the companies, by their
proxies, are paying “starvation wages” and
“slave wages.” They are far from clear about
what wage level they consider to be appropri-
ate. But they generally demand that compa-
nies pay a “living wage.” Kernaghan has said
that workers should be paid enough to sup-
port their families and they should get a “living
wage” and “be treated like human beings.”16
. . . According to Tim Smith, wage levels
should be “fair, decent or a living wage for an
Ethical Issues in International Business 601
e m p l o y e e a n d his o r h e r family.” H e has said
t h a t wages in t h e m a q u i l a d o r a s of Mexico av-
e r a g e d $35 to $55 a w e e k (in o r n e a r 1993)
which h e calls a “shockingly substandard wage,”
a p p a r e n t l y o n t h e g r o u n d s t h a t it “clearly does
n o t allow a n e m p l o y e e to feed a n d c a r e for a
family adequately.” 1 7 I n 1992, Nike c a m e in for
h a r s h criticism w h e n a magazine p u b l i s h e d t h e
pay s t u b of a w o r k e r at o n e of its I n d o n e s i a n
suppliers. It s h o w e d t h a t t h e w o r k e r was p a i d
at t h e r a t e of $1.03 p e r day which was r e p o r t –
edly less t h a n the I n d o n e s i a n g o v e r n m e n t ‘ s fig-
u r e for ” m i n i m u m physical n e e d . ” 1 8
I m m i s e r i z a t i o n T h e s i s
F o r m e r L a b o r Secretary R o b e r t Reich has p r o –
p o s e d as a test of t h e fairness of d e v e l o p m e n t
p o l i c i e s t h a t “Low-wage w o r k e r s s h o u l d b e –
c o m e b e t t e r off, n o t worse off, as t r a d e a n d in-
v e s t m e n t b o o s t n a t i o n a l i n c o m e . ” H e h a s
w r i t t e n t h a t “[i]f a c o u n t r y p u r s u e s p o l i c i e s
t h a t . . . limit to a n a r r o w elite t h e benefits of
t r a d e , t h e p r o m i s e of o p e n c o m m e r c e is per-
v e r t e d a n d d r a i n e d of its r a t i o n a l e . ” A key
claim of t h e activists is t h a t c o m p a n i e s actu-
ally i m p o v e r i s h o r i m m i s e r i z e d e v e l o p i n g
c o u n t r y workers. T h e y e x p e r i e n c e a n absolute
d e c l i n e in living s t a n d a r d s . T h i s thesis follows
f r o m t h e claim t h a t t h e b i d d i n g war a m o n g
d e v e l o p i n g c o u n t r i e s is d e p r e s s i n g wages. . . .
W i d e n i n g G a p B e t w e e n R i c h a n d P o o r
A r e l a t e d c h a r g e is t h a t i n t e r n a t i o n a l sweat-
s h o p s a r e c o n t r i b u t i n g to t h e i n c r e a s i n g g a p
between rich a n d poor. N o t only are t h e p o o r
b e i n g absolutely impoverished, b u t trade is gen-
e r a t i n g g r e a t e r i n e q u a l i t y w i t h i n d e v e l o p i n g
countries. A n o t h e r test that Reich has p r o p o s e d
to establish t h e fairness of i n t e r n a t i o n a l t r a d e is
t h a t ” t h e g a p b e t w e e n rich a n d p o o r s h o u l d
t e n d to narrow with development, n o t widen.”
Critics c h a r g e t h a t i n t e r n a t i o n a l s w e a t s h o p s
f l u n k t h a t test. T h e y say t h a t t h e i n c r e a s i n g
GNPs of s o m e d e v e l o p i n g c o u n t r i e s simply
mask a w i d e n i n g g a p b e t w e e n rich a n d poor.
“Across t h e world, b o t h local a n d foreign elites
are g e t t i n g richer from t h e exploitation of t h e
m o s t v u l n e r a b l e . ” A n d , ” T h e major adverse
c o n s e q u e n c e of q u i c k e n i n g global e c o n o m i c
i n t e g r a t i o n has b e e n w i d e n i n g i n c o m e dispar-
ity within almost all n a t i o n s . . . ,”22 T h e r e ap-
p e a r s to b e a tacit alliance b e t w e e n t h e elites of
b o t h first a n d t h i r d worlds to exploit t h e m o s t
v u l n e r a b l e , to r e g i m e n t a n d c o n t r o l a n d con-
script t h e m so t h a t they can create t h e material
c o n d i t i o n s for t h e elites’ extravagant lifestyles.
C o l l u s i o n with R e p r e s s i v e R e g i m e s
Critics c h a r g e that, in t h e i r zeal to m a k e t h e i r
c o u n t r i e s safe for f o r e i g n i n v e s t m e n t , T h i r d
World r e g i m e s , n o tab ly C h i n a a n d I n d o n e s i a ,
h a v e s t e p p e d u p t h e i r r e p r e s s i o n . N o t o n l y
have these countries failed to enforce even t h e
m i n i m a l l a b o r r u l e s o n t h e b o o k s , b u t t h e y
h a v e also u s e d t h e i r m i l i t a r y a n d p o l i c e t o
b r e a k strikes a n d repress i n d e p e n d e n t u n i o n s .
T h e y h a v e stifled political dissent, b o t h to r e –
tain t h e i r h o l d o n political p o w e r a n d to avoid
any instability t h a t m i g h t scare off f o r e i g n in-
vestors. Consequently, critics c h a r g e , c o m p a –
n i e s like N i k e a r e p r o f i t i n g f r o m p o l i t i c a l
r e p r e s s i o n . “As u n i o n s s p r e a d in [Korea a n d
T a i w a n ] , Nike shifted its s u p p l i e r s p r i m a r i l y
to I n d o n e s i a , C h i n a a n d T h a i l a n d , w h e r e they
c o u l d d e p e n d o n g o v e r n m e n t s to s u p p r e s s in-
d e p e n d e n t u n i o n – o r g a n i z i n g efforts.”
EVALUATION OF THE CHARGES
AGAINST INTERNATIONAL
SWEATSHOPS
T h e critics’ c h a r g e s a r e u n d o u b t e d l y a c c u r a t e
o n a n u m b e r of p o i n t s : (1) T h e r e is n o d o u b t
t h a t i n t e r n a t i o n a l c o m p a n i e s a r e c h a s i n g
602 Ethical Issues in International Business
c h e a p labor. (2) T h e wages p a i d by t h e inter-
n a t i o n a l s w e a t s h o p s a r e — b y A m e r i c a n stan-
d a r d s — s h o c k i n g l y low. (3) S o m e d e v e l o p i n g
c o u n t r y g o v e r n m e n t s have tightly c o n t r o l l e d
o r r e p r e s s e d o r g a n i z e d l a b o r i n o r d e r t o p r e –
v e n t it from d i s t u r b i n g t h e flow of f o r e i g n in-
v e s t m e n t . T h u s , i n I n d o n e s i a , i n d e p e n d e n t
u n i o n s h a v e b e e n s u p p r e s s e d . (4) It is n o t u n –
u s u a l i n d e v e l o p i n g c o u n t r i e s for m i n i m u m
wage levels to b e lower t h a n t h e official poverty
level. (5) D e v e l o p i n g c o u n t r y g o v e r n m e n t s
h a v e w i n k e d a t violations of m i n i m u m wage
laws a n d l a b o r rules. However, m o s t j o b s are in
t h e i n f o r m a l s e c t o r a n d so largely o u t s i d e t h e
s c o p e of g o v e r n m e n t s u p e r v i s i o n . (6) S o m e
suppliers have e m p l o y e d c h i l d r e n o r have sub-
c o n t r a c t e d w o r k to o t h e r p r o d u c e r s w h o have
d o n e so. (7) S o m e d e v e l o p i n g c o u n t r y gov-
e r n m e n t s d e n y t h e i r p e o p l e b a s i c p o l i t i c a l
rights. C h i n a is t h e obvious e x a m p l e ; I n d o n e –
sia’s r e c o r d is p r e t t y h o r r i b l e b u t h a d s h o w n
steady i m p r o v e m e n t u n t i l t h e last two years.
B u t o n m a n y of t h e o t h e r c o u n t s , t h e critics’
charges a p p e a r to b e seriously inaccurate. And,
e v e n w h e r e t h e c h a r g e s a r e a c c u r a t e , it is n o t
self-evident t h a t t h e practices in q u e s t i o n a r e
i m p r o p e r or u n e t h i c a l , as we see n e x t .
W a g e s a n d C o n d i t i o n s
Even t h e critics of i n t e r n a t i o n a l sweatshops d o
n o t dispute that the wages they pay are generally
h i g h e r t h a n — o r a t least e q u a l t o — c o m p a r a b l e
wages in t h e l a b o r markets w h e r e they o p e r a t e .
A c c o r d i n g to t h e I n t e r n a t i o n a l L a b o r Organi-
zation ( I L O ) , m u l t i n a t i o n a l c o m p a n i e s often
apply standards relating to wages, benefits, con-
d i t i o n s of work, a n d o c c u p a t i o n a l safety a n d
h e a l t h , w h i c h b o t h e x c e e d s t a t u t o r y r e q u i r e –
m e n t s a n d those practiced by local firms.” T h e
ILO also says that wages a n d working conditions
in so-called E x p o r t Processing Zones (EPZs) are
often equal to o r h i g h e r t h a n j o b s outside. T h e
World Bank says t h a t t h e p o o r e s t workers in de-
veloping c o u n t r i e s work i n t h e informal sector
w h e r e they often e a r n less t h a n half what a for-
m a l sector e m p l o y e e e a r n s . Moreover, “infor-
m a l a n d rural workers often m u s t work u n d e r
m o r e h a z a r d o u s a n d insecure conditions t h a n
t h e i r formal sector c o u n t e r p a r t s . 2 5
T h e s a m e a p p e a r s to h o l d t r u e for t h e in-
t e r n a t i o n a l sweatshops. I n 1996, y o u n g w o m e n
w o r k i n g i n t h e p l a n t of a N i k e s u p p l i e r i n
Serang, I n d o n e s i a , were e a r n i n g t h e I n d o n e –
sian legal m i n i m u m wage of 5,200 r u p i a h s , o r
a b o u t $ 2 . 2 8 e a c h day. As a r e p o r t i n t h e
Washington Post p o i n t e d o u t , j u s t e a r n i n g t h e
m i n i m u m wage p u t t h e s e w o r k e r s a m o n g
h i g h e r – p a i d I n d o n e s i a n s : “In I n d o n e s i a , less
t h a n half the working population earns the min-
i m u m wage, since a b o u t half of all adults h e r e
a r e i n farming, a n d t h e typical f a r m e r w o u l d
m a k e only a b o u t 2,000 rupiahs each day.”26 T h e
workers in t h e S e r a n g p l a n t r e p o r t e d t h a t they
save a b o u t three-quarters of their pay. A 17-year-
o l d w o m a n said: “I c a m e h e r e o n e y e a r a g o
f r o m c e n t r a l Java. I ‘ m m a k i n g m o r e m o n e y
t h a n my father makes.” This w o m a n also said
t h a t t h e she s e n t a b o u t 75 p e r c e n t of h e r earn-
ings b a c k t o h e r family o n t h e farm. Also i n
1996, a Nike s p o k e s w o m a n estimated t h a t a n
entry-level factory worker in t h e p l a n t of a Nike
supplier m a d e five times what a farmer makes.
N i k e ‘ s c h a i r m a n , P h i l K n i g h t , likes to teas-
ingly r e m i n d critics t h a t t h e average w o r k e r in
o n e of N i k e ‘ s C h i n e s e factories is p a i d m o r e
t h a n a professor at Beijing University. T h e r e
is also plentiful a n e c d o t a l evidence from n o n –
Nike sources. A worker at the Taiwanese-owned
King Star G a r m e n t Assembly plant in H o n d u r a s
t o l d a r e p o r t e r t h a t h e was e a r n i n g s e v e n
t i m e s what h e e a r n e d in t h e countryside. I n
B a n g l a d e s h , t h e c o u n t r y ‘ s fledgling g a r m e n t
i n d u s t r y was p a y i n g w o m e n w h o h a d n e v e r
w o r k e d before b e t w e e n $40 a n d $55 a m o n t h
i n 1 9 9 1 . T h a t c o m p a r e d with a n a t i o n a l p e r
capita i n c o m e of a b o u t $200 a n d t h e a p p r o x i –
m a t e l y $1 a day e a r n e d by m a n y of t h e s e
w o m e n ‘ s h u s b a n d s as day lab o rers o r rickshaw
drivers. 3 1
Ethical Issues in International Business 603
T h e same news r e p o r t s also s h e d s o m e light
o n t h e w o r k i n g c o n d i t i o n s in sweatshops. Ac-
c o r d i n g to t h e Washington Post, in 1994 t h e In-
donesian office of t h e international a c c o u n t i n g
firm Ernst & Young surveyed Nike workers con-
c e r n i n g w o r k e r pay, safety c o n d i t i o n s , a n d at-
t i t u d e s t o w a r d t h e j o b . T h e a u d i t o r s p u l l e d
workers off t h e assembly line at r a n d o m a n d
a s k e d t h e m q u e s t i o n s t h a t t h e w o r k e r s
answered anonymously. T h e survey of 25 work-
e r s a t N i k e ‘ s S e r a n g p l a n t f o u n d t h a t
23 t h o u g h t t h e h o u r s a n d o v e r t i m e h o u r s t o o
h i g h . N o n e of t h e workers r e p o r t e d t h a t they
h a d b e e n d i s c r i m i n a t e d against. T h i r t e e n said
t h e w o r k i n g e n v i r o n m e n t was t h e key r e a s o n
they w o r k e d at t h e S e r a n g p l a n t while e i g h t
cited salary a n d benefits.’ T h e Post r e p o r t also
n o t e d t h a t t h e S e r a n g p l a n t closes for a b o u t
10 days e a c h y e a r f o r M u s l i m h o l i d a y s . I t
q u o t e d Nike officials a n d t h e plant’s Taiwanese
owners as saying t h a t 94 p e r c e n t of t h e workers
h a d r e t u r n e d to t h e p l a n t following t h e m o s t
r e c e n t b r e a k . . . .
T h e r e is also t h e m u t e testimony of t h e lines
of j o b a p p l i c a n t s o u t s i d e t h e s w e a t s h o p s i n
G u a t e m a l a a n d H o n d u r a s . A c c o r d i n g to Lucy
M a r t i n e z – M o n t , i n G u a t e m a l a t h e sweatshops
a r e c o n s p i c u o u s for t h e l o n g lines of y o u n g
p e o p l e waiting t o b e i n t e r v i e w e d for a j o b .
O u t s i d e t h e g a t e s of t h e i n d u s t r i a l p a r k i n
H o n d u r a s t h a t R o h t e r visited ” a n x i o u s
o n l o o k e r s a r e always w a i t i n g , h o p i n g f o r a
c h a n c e at least to fill o u t a j o b application [for
e m p l o y m e n t at o n e of t h e a p p a r e l p l a n t s ] . ”
T h e critics of sweatshops a c k n o w l e d g e t h a t
workers have voluntarily t a k e n t h e i r j o b s , con-
sider themselves lucky to have t h e m , a n d w a n t
t o k e e p t h e m . . . . B u t t h e y g o o n t o d i s c o u n t
t h e w o r k e r s ‘ views as t h e p r o d u c t of confusion
o r i g n o r a n c e , a n d / o r t h e y j u s t a r g u e t h a t t h e
w o r k e r s ‘ views a r e b e s i d e t h e p o i n t . T h u s ,
while “it is u n d o u b t e d l y t r u e ” t h a t N i k e h a s
given j o b s t o t h o u s a n d s of p e o p l e w h o
w o u l d n ‘ t b e w o r k i n g otherwise, they say t h a t
“neatly skirts t h e f u n d a m e n t a l h u m a n – r i g h t s
issue raised by these p r o d u c t i o n a r r a n g e m e n t s
t h a t a r e n o w s p r e a d i n g all across t h e world.” 3 5
Similarly t h e N L C ‘ s K e r n a g h a n says t h a t
” [w] h e t h e r workers t h i n k they a r e b e t t e r off in
t h e assembly p l a n t s t h a n e l s e w h e r e is n o t t h e
real issue.” 3 6 K e r n a g h a n , a n d Jeff Ballinger of
t h e AFL-CIO, c o n c e d e t h a t t h e w o r k e r s des-
p e r a t e l y n e e d t h e s e j o b s . B u t ” [ t ] h e y say
t h e y ‘ r e n o t a s k i n g t h a t U . S . c o m p a n i e s s t o p
o p e r a t i n g in t h e s e c o u n t r i e s . T h e y ‘ r e asking
t h a t workers b e p a i d a living wage a n d t r e a t e d
like h u m a n beings.”‘ A p p a r e n t l y t h e s e work-
ers a r e victims of w h a t M a r x called false con-
sciousness, o r else they w o u l d g r a s p t h a t they
a r e b e i n g e x p l o i t e d . A c c o r d i n g to B a r n e t a n d
Cavanagh, “For m a n y workers . . . e x p l o i t a t i o n
is n o t a c o n c e p t easily c o m p r e h e n d e d b e c a u s e
t h e alternative p r o s p e c t s for e a r n i n g a living
a r e so b l e a k . ” 3 8
I m m i s e r i z a t i o n a n d Inequality
T h e critics’ claim t h a t t h e c o u n t r i e s t h a t h o s t
i n t e r n a t i o n a l sweatshops a r e m a r k e d by grow-
ing poverty a n d inequality is flady c o n t r a d i c t e d
by t h e r e c o r d . I n fact, m a n y of t h o s e c o u n t r i e s
have e x p e r i e n c e d sharp increases in living stan-
d a r d s — f o r all strata of society. In trying to at-
t r a c t i n v e s t m e n t i n s i m p l e m a n u f a c t u r i n g ,
Malaysia a n d I n d o n e s i a a n d , now, V i e t n a m a n d
C h i n a , are r e t r a c i n g t h e industrialization p a t h
already successfully t a k e n by East Asian c o u n –
tries like Taiwan, Korea, S i n g a p o r e a n d H o n g
Kong. T h e s e f o u r c o u n t r i e s got t h e i r start by
p r o d u c i n g labor-intensive m a n u f a c t u r e d goods
(often electrical a n d e l e c t r o n i c c o m p o n e n t s ,
shoes, a n d g a r m e n t s ) for e x p o r t m a r k e t s . Over
t i m e t h e y g r a d u a t e d to t h e e x p o r t of h i g h e r –
value-added items that are skill-intensive a n d re-
q u i r e a relatively d e v e l o p e d industrial b a s e . 3 9
As is well known, these East Asian c o u n t r i e s
achieved growth rates e x c e e d i n g 8 p e r c e n t for
a q u a r t e r c e n t u r y . . . . T h e w o r k e r s in t h e s e
e c o n o m i e s were n o t i m p o v e r i s h e d by g r o w t h .
604 Ethical Issues in International Business
T h e benefits of g r o w t h were widely diffused:
T h e s e e c o n o m i e s achieved essentially full e m –
p l o y m e n t in t h e 1960s. Real wages r o s e by as
m u c h as a factor of four. A b s o l u t e poverty fell.
A n d i n c o m e i n e q u a l i t y r e m a i n e d a t low to
m o d e r a t e levels. It is t r u e t h a t i n t h e initial
stages t h e r a p i d g r o w t h g e n e r a t e d only m o d –
e r a t e increases in wages. B u t o n c e essentially
full e m p l o y m e n t was r e a c h e d , a n d w h a t e c o n –
o m i s t s call t h e Fei-Ranis t u r n i n g p o i n t was
r e a c h e d , t h e i n c r e a s e d d e m a n d for l a b o r re-
sulted in t h e b i d d i n g u p of wages as firms com-
p e t e d for a scarce l a b o r supply.
Interestingly, given its historic mission as a
watchdog for international labor standards, the
I L O has e m b r a c e d this d e v e l o p m e n t m o d e l . It
recently n o t e d t h a t t h e m o s t successful devel-
o p i n g e c o n o m i e s , in t e r m s of o u t p u t a n d em-
p l o y m e n t growth, have b e e n “those w h o best
exploited e m e r g i n g opportunities in the global
economy.” 4 A n ” e x p o r t o r i e n t e d policy is vital
in c o u n t r i e s t h a t a r e starting o n t h e industri-
alization p a t h a n d have large surpluses of c h e a p
labour.” C o u n t r i e s which have s u c c e e d e d in at-
t r a c t i n g foreign d i r e c t i n v e s t m e n t (FDI) have
e x p e r i e n c e d r a p i d g r o w t h in m a n u f a c t u r i n g
o u t p u t a n d e x p o r t s . T h e successful a t t r a c t i o n
of foreign i n v e s t m e n t in p l a n t a n d e q u i p m e n t
“can b e a powerful s p u r to r a p i d industrializa-
t i o n a n d e m p l o y m e n t c r e a t i o n . ” “At low levels
of industrialization, FDI in g a r m e n t s a n d shoes
a n d s o m e types of c o n s u m e r e l e c t r o n i c s c a n
b e very useful for c r e a t i n g e m p l o y m e n t a n d
o p e n i n g t h e e c o n o m y t o i n t e r n a t i o n a l m a r –
kets; t h e r e may b e s o m e e n t r e p r e n e u r i a l skills
c r e a t e d i n s i m p l e activities like g a r m e n t s (as
h a s h a p p e n e d in B a n g l a d e s h ) . M o r e o v e r , in
s o m e cases, s u c h as Malaysia, t h e investors may
strike d e e p e r r o o t s a n d invest in m o r e capital-
intensive t e c h n o l o g i e s as wages rise.”
A c c o r d i n g to t h e W o r l d Bank, t h e rapidly
g r o w i n g Asian e c o n o m i e s ( i n c l u d i n g I n d o n e –
sia) “have also b e e n u n u s u a l l y successful a t
s h a r i n g t h e fruits of t h e i r g r o w t h . ” I n fact,
while inequality in t h e West has b e e n growing,
it has b e e n s h r i n k i n g i n t h e Asian e c o n o m i e s .
T h e y a r e t h e only e c o n o m i e s in t h e w o r l d to
have e x p e r i e n c e d h i g h g r o w t h and d e c l i n i n g
inequality, a n d they also show s h r i n k i n g gen-
d e r g a p s in e d u c a t i o n . . . .
P r o f i t i n g f r o m R e p r e s s i o n ?
W h a t a b o u t t h e c h a r g e t h a t i n t e r n a t i o n a l
sweatshops a r e p r o f i t i n g f r o m r e p r e s s i o n ? It
is u n d e n i a b l e t h a t t h e r e is r e p r e s s i o n in m a n y
of t h e c o u n t r i e s w h e r e sweatshops are located.
B u t e c o n o m i c d e v e l o p m e n t a p p e a r s to b e r e –
l a x i n g t h a t r e p r e s s i o n r a t h e r t h a n s t r e n g t h –
e n i n g its g r i p . T h e c o m p a n i e s a r e s u p p o s e d
to b e n e f i t from g o v e r n m e n t policies (e.g., r e –
pression of unions) that h o l d down labor costs.
However, as we have s e e n , t h e wages p a i d by
t h e i n t e r n a t i o n a l sweatshops already m a t c h o r
e x c e e d t h e p r e v a i l i n g local wages. N o t o n l y
that, b u t i n c o m e s in t h e East Asian e c o n o m i e s ,
a n d in I n d o n e s i a , have risen rapidly. . . .
T h e critics, however, are r i g h t in saying t h a t
t h e I n d o n e s i a n g o v e r n m e n t has o p p o s e d in-
d e p e n d e n t u n i o n s in t h e s w e a t s h o p s o u t of
fear they would lead to h i g h e r wages a n d l a b o r
u n r e s t . B u t t h e g o v e r n m e n t ‘ s f e a r clearly is
t h a t u n i o n s m i g h t drive wages in t h e m o d e r n
industrial sector above market-clearing levels—
or, m o r e exactly, f u r t h e r a b o v e m a r k e t . It is
i r o n i c t h a t critics like B a r n e t a n d C a v a n a g h
w o u l d use t h e M a r x i a n t e r m “reserve a r m y of
t h e u n e m p l o y e d . ” A c c o r d i n g to M a r x , capi-
talists d e l i b e r a t e l y m a i n t a i n h i g h levels of u n –
e m p l o y m e n t in o r d e r t o c o n t r o l t h e w o r k i n g
class. B u t t h e I n d o n e s i a n g o v e r n m e n t ‘ s poli-
cies (e.g., s u p p r e s s i o n of u n i o n s , resistance t o
a h i g h e r m i n i m u m wage, a n d lax e n f o r c e m e n t
of l a b o r rules) have b e e n d i r e c t e d a t achieving
e x a c d y t h e o p p o s i t e result. T h e g o v e r n m e n t
a p p e a r s t o h a v e c a l c u l a t e d t h a t h i g h u n e m –
p l o y m e n t is a g r e a t e r t h r e a t t o its h o l d o n
power. I t h i n k we c a n safely t a k e a t face value
its c l a i m s t h a t its p o l i c i e s a r e g e n u i n e l y
Ethical Issues in International Business 605
intended to help the economy create jobs to
absorb the massive numbers of unemployed
and underemployed.
LABOR STANDARDS
IN INTERNATIONAL SWEATSHOPS:
PAINFUL TRADE-OFFS
Who b u t the grinch could grudge paying a
few additional pennies to some of the world’s
poorest workers? There is no doubt that the
rhetorical force of the critics’ case against in-
ternational sweatshops rests on this apparently
self-evident proposition. However, higher
wages and improved labor standards are not
free. After all, the critics themselves attack
companies for chasing cheap labor. It follows
that if labor in developing countries is made
more expensive (say, as the result of pressures
by the critics), then those countries will re-
ceive less foreign investment, and fewer jobs
will be created there. Imposing higher wages
may deprive these countries of the one com-
parative advantage they enjoy, namely low-cost
labor.
We have seen that workers in most “inter-
national sweatshops” are already relatively well
paid. Workers in the urban, formal sectors of
developing countries commonly earn more
than twice what informal and rural workers
get. Simply earning the minimum wage put
the young women making Nike shoes in
Serang in the top half of the income distribu-
tion in Indonesia. Accordingly, the critics are
in effect calling for a widening of (he economic
disparity that already greatly favors sweatshop
workers.
By itself that may or may not be ethically
objectionable. But these higher wages come
at the expense of the incomes and the j o b op-
portunities of much poorer workers. As econ-
omists explain, higher wages in the formal
sector reduce employment there and (by in-
creasing the supply of labor) depress incomes
in the informal sector. The case against re-
quiring above-market wages for international
sweatshop workers is essentially the same as
the case against other measures that artificially
raise labor costs, like the minimum wage. In
Jagdish Bhagwati’s words: “Requiring a mini-
mum wage in an overpopulated, developing
country, as is done in a developed country,
may actually be morally wicked. A minimum
wage might help the unionized, industtial pro-
letariat, while limiting the ability to save and in-
vest rapidly which is necessary to draw more of
the unemployed and nonunionized rural poor
into gainful employment and income.”4 3 The
World Bank makes the same point: “Minimum
wages may help the most poverty-stricken work-
ers in industrial countries, but they clearly do
not in developing nations. . . . The workers
whom m i n i m u m wage legislation tries to
protect—urban formal workers—already earn
much more than the less favored majority. . . .
And inasmuch as minimum wage and other
regulations discourage formal employment by
increasing wage and nonwage costs, they hurt
the poor who aspire to formal employment.”44
The story is no different when it comes to
labor standards o t h e r than wages. If stan-
dards are set too high, they will h u r t invest-
ment and employment. The World Bank report
points out that “[r] educing hazards in the
workplace is costly, and typically the greater
the reduction the more it costs. Moreover,
the costs of compliance often fall largely on
employees through lower wages or reduced
employment. As a result, setting standards too
high can actually lower workers’ welfare… .”45
Perversely, if the higher standards advocated
by critics retard the growth of formal sector
jobs, then that will trap more informal and
rural workers in jobs which are far more haz-
ardous and insecure than those of their formal
sector counterparts.
The critics consistently advocate policies that
will benefit better-off workers at the expense
606 Ethical Issues in International Business
of worse-off ones. If it were within their power,
it appears that they would reinvent the labor
markets of much of Latin America. Alejandro
Portes’ description seems to be on the mark:
“In Mexico, Brazil, Peru, and other Third
World countries, [unlike East Asia], there are
powerful independent unions representing the
protected sector of the working class. Although
their rhetoric is populist and even radical, the
fact is that they tend to represent the better-
paid and more stable fraction of the working
class. Alongside, there toils avast, unprotected
proletariat, employed by informal enterprises
and linked, in ways hidden from public view,
with modern sector firms.” . . .
Of course, it might be objected that trad-
ing off workers’ rights for more jobs is uneth-
ical. But, so far as I can determine, the critics
have not made this argument. Although they
sometimes implicitly accept the existence of
the trade-off (we saw that they attack Nike for
chasing cheap labor), their public statements
are silent on the lost or forgone jobs from
higher wages and better labor standards. At
other times, they imply or claim that im-
provements in workers’ wages and conditions
are essentially free. . . .
In summary, the result of the ostensibly hu-
manitarian changes urged by critics are likely
to be (1) reduced employment in the formal
or modern sector of the economy, (2) lower
incomes in the informal sector, (3) less
investment and so slower economic growth,
(4) reduced exports, (5) greater inequality
and poverty.
CONCLUSION: THE CASE FOR NOT
EXCEEDING MARKET STANDARDS
It is part of the job description of business ethi-
cists to exhort companies to treat their workers
better (otherwise what purpose do they serve?).
So it will have come as no surprise that both
the business ethicists whose views I summarized
at the b e g i n n i n g of this p a p e r — T h o m a s
Donaldson and Richard DeGeorge—objected
to letting the market alone determine wages
and labor standards in multinational compa-
nies. Both of them proposed criteria for set-
ting wages that might occasionally “improve”
on the outcomes of the market.
Their reasons for rejecting market deter-
mination of wages were similar. They both
cited conditions that allegedly prevent inter-
national markets from generating ethically ac-
ceptable results. Donaldson argued that
neoclassical economic principles are not ap-
plicable to international business because of
high unemployment rates in developing coun-
tries. And DeGeorge argued that, in an un-
regulated international market, the gross
inequality of bargaining power between work-
ers and companies would lead to exploitation.
But this paper has shown that attempts to
improve on market outcomes may have un-
foreseen tragic consequences. We saw how rais-
ing the wages of workers in international
sweatshops might wind up penalizing the most
vulnerable workers (those in the informal sec-
tors of developing countries) by depressing
their wages and reducing their j o b opportu-
nities in the formal sector. Donaldson and
DeGeorge cited high unemployment and un-
equal bargaining power as conditions that made
it necessary to bypass or override the market
determination of wages. However, in both
cases, bypassing the market in order to prevent
exploitation may aggravate these conditions.
As we have seen, above-market wages paid to
sweatshop workers may discourage further in-
vestment and so perpetuate high unemploy-
ment. In turn, the higher unemployment may
weaken the bargaining power of workers vis-a-
vis employers. Thus such market imperfections
seem to call for more reliance on market forces
rather than less. Likewise, the experience of
the newly industrialized East Asian economies
suggests that the best cure for the ills of sweat-
shops is more sweatshops. But most of the
Ethical Issues in International Business 607
well-intentioned policies t h a t i m p r o v e o n mar-
k e t o u t c o m e s a r e likely to have t h e o p p o s i t e
effect.
W h e r e d o e s this leave t h e i n t e r n a t i o n a l
m a n a g e r ? If t h e p r e c e d i n g analysis is c o r r e c t ,
t h e n it follows t h a t it is ethically a c c e p t a b l e to
pay m a r k e t wage rates in d e v e l o p i n g c o u n t r i e s
( a n d to p r o v i d e e m p l o y m e n t c o n d i t i o n s a p –
p r o p r i a t e for t h e level of d e v e l o p m e n t ) . T h a t
h o l d s t r u e even if t h e wages pay less t h a n so-
called living wages o r subsistence or even (con-
ceivably) t h e l o c a l m i n i m u m w a g e . T h e
a p p r o p r i a t e test is n o t w h e t h e r t h e w a g e
r e a c h e s s o m e p r e d e t e r m i n e d s t a n d a r d b u t
w h e t h e r it is freely a c c e p t e d by (reasonably) in-
f o r m e d w o r k e r s . T h e workers themselves a r e
in t h e best position to j u d g e w h e t h e r t h e wages
o f f e r e d a r e s u p e r i o r t o t h e i r n e x t – b e s t al-
t e r n a t i v e s . ( T h e s a m e l o g i c a p p l i e s mutatis
mutandis to w o r k p l a c e l a b o r s t a n d a r d s ) .
I n d e e d , n o t only is it ethically a c c e p t a b l e
for a c o m p a n y to pay m a r k e t wages, b u t it may
b e ethically u n a c c e p t a b l e for it to pay wages
t h a t e x c e e d m a r k e t levels. T h a t will b e t h e case
if t h e company’s above-market wages set prece-
d e n t s for o t h e r i n t e r n a t i o n a l c o m p a n i e s which
raise l a b o r costs to t h e p o i n t of d i s c o u r a g i n g
foreign investment. F u r t h e r m o r e , c o m p a n i e s
m a y have a social responsibility to t r a n s c e n d
t h e i r own n a r r o w p r e o c c u p a t i o n with p r o t e c t –
i n g t h e i r b r a n d i m a g e a n d to publicly d e f e n d
a system which has greatly i m p r o v e d t h e lot of
m i l l i o n s of w o r k e r s i n d e v e l o p i n g c o u n t r i e s .
NOTES
1. Steven Greenhouse, “A Crusader Makes
Celebrities Tremble.” New York Times (June 18,
1996), p. B4.
2. Lance A. Compa and Tashia Hinchliffe
Darricarrere, “Enforcement Through Corpo-
rate Codes of Conduct,” in Human Rights, Labor
Rights, and International Trade ed. Compa and
Stephen F. Diamond (Philadelphia: University
of Pennsylvania Press, 1996), 193.
3. Peter Jacobi in Martha Nichols, “Third-World
Families at Work: Child Labor or Child Care.”
Harvard Business Review (January-February 1993).
4. David Sampson in Robin G. Givhan, “A Stain
on Fashion; The Garment Industry Profits from
Cheap Labor.” Washington Post (September 12,
1995), p. B l .
5. Thomas Donaldson, Ethics of International Business
(New York: Oxford University Press, 1989), 98.
6. Richard DcGcorge, Competing with Integrity in
International Business (New York: Oxford Uni-
versity Press, 1993), 79.
7. Ibid., 356-57.
8. Ibid., 78.
9. World Bank, World Development Report 1995,
“Workers in an Integrating World Economy”
(Oxford University Press, 1995), 77.
10. Donaldson, Ethics of International Business,
p. 115.
11. Ibid., 150.
12. DeGeorge, Competing with Integrity, 48.
13. Ibid., 358.
14. Ibid.
15. Terry Collingsworth, J. William Goold, Pilaris
J. Harvey, “Time for a Global New Deal,” Foreign
Affairs (January-February 1994): 8.
16. William B. Falk, “Dirty Little Secrets,” Neivsday
(June 16, 1996).
17. Tim Smith, “The Power of Business for Human
Rights.” Business &f Society Review (January
1994): 36.
18. Jeffrey Ballinger, “The New Free Trade Heel.”
Harper’s Magazine (August 1992): 46-47. “As in
many developing countries, Indonesia’s mini-
mum w a g e , . . . , is less than poverty level.” Nina
Baker, “The Hidden Hands of Nike,” Oregonian
(August 9, 1992).
19. Robert B. Reich, “Escape from the Global
Sweatshop; Capitalism’s Stake in Uniting the
Workers of the World.” Washington Post (May 22,
1994). Reich’s test is intended to apply in de-
veloping countries “where democratic institu-
tions are weak or absent.”
20. Ibid.
21. Kenneth P. Hutchinson, “Third World Growth.”
Harvard Business Review (November-December
1994).
22. Robin Broad and J o h n Cavanagh, “Don’t Ne-
glect the Impoverished South.” Foreign Affairs
(December 22, 1995).
608 E t h i c a l Issues i n I n t e r n a t i o n a l Business
2 3 . J o h n Cavanagh & R o b i n B r o a d , “Global Reach;
W o r k e r s F i g h t t h e M u l t i n a t i o n a l s . ” Nation
( M a r c h 18, 1 9 9 6 ) : 2 1 . S e e also B o b H e r b e r t ,
” N i k e ‘ s B a d N e i g h b o r h o o d . ” New York Times
( J u n e 14, 1 9 9 6 ) .
24. I n t e r n a t i o n a l L a b o r O r g a n i z a t i o n , World Em-
ployment 1995 (Geneva: I L O , 1 9 9 5 ) , 7 3 .
2 5 . W o r l d B a n k , Workers in an Integrating World
Economy, p . 5.
2 6 . K e i t h B. R i c h b u r g , A n n e S w a r d s o n , “U.S. I n –
dustry Overseas: S w e a t s h o p o r J o b Source?: In-
d o n e s i a n s P r a i s e W o r k a t N i k e F a c t o r y . ”
Washington Post (July 2 8 , 1 9 9 6 ) .
2 7 . R i c h b u r g a n d S w a r d s o n , ” S w e a t s h o p o r J o b
S o u r c e ? ” T h e 17-year-old was i n t e r v i e w e d i n
t h e p r e s e n c e of m a n a g e r s . F o r o t h e r r e p o r t s
t h a t w o r k e r s r e m i t h o m e l a r g e p a r t s of t h e i r
e a r n i n g s s e e S e t h M y d a n s , ” T a n g e r a n g J o u r –
nal; F o r I n d o n e s i a n Workers at Nike Plant: J u s t
D o It.” New York Times ( A u g u s t 9, 1 9 9 6 ) , a n d
N i n a Baker, ” T h e H i d d e n H a n d s of N i k e . ”
2 8 . D o n n a G i b b s , N i k e s p o k e s w o m a n o n A B C ‘ s
World News Tonight, J u n e 6, 1996.
2 9 . M a r k Clifford, ” T r a d i n g i n Social Issues; L a b o r
Policy a n d I n t e r n a t i o n a l T r a d e R e g u l a t i o n , ”
World Press Review ( J u n e 1 9 9 4 ) : 3 6 .
30. L a r r y R o h t e r , “To U . S . Critics, a S w e a t s h o p ;
for H o n d u r a n s , a B e t t e r Life.” New York Times
Q u l y l 8 , 1 9 9 6 ) .
3 1 . M a r c u s B r a u c h l i , ” G a r m e n t I n d u s t r y B o o m s i n
Bangladesh.” Wall StreetJournal (August 6 , 1 9 9 1 ) .
32. R i c h b u r g a n d S w a r d s o n , ” S w e a t s h o p o r J o b
S o u r c e ? ”
3 3 . Lucy M a r t i n e z – M o n t , “Sweatshops A r e B e t t e r
T h a n N o S h o p s . ” Wall Street Journal ( J u n e 25,
1 9 9 6 ) .
34. R o h t e r , “To U . S . Critics a S w e a t s h o p . ”
3 5 . B a m e t & C a v a n a g h , Global Dreams, p . 326.
36. R o h t e r , “To U.S. Critics a S w e a t s h o p . ”
37. W i l l i a m B. Falk, “Dirty Little Secrets,” Newsday
( J u n e 16, 1 9 9 6 ) .
38. B a r n e t a n d C a v a n a g h , “Just U n d o It: N i k e ‘ s
Exploited Workers.” New York Times (February 13,
1 9 9 4 ) .
39. S a r o s h Kuruvilla, “Linkages b e t w e e n I n d u s t r i –
alization Strategies a n d I n d u s t r i a l R e l a t i o n s /
H u m a n Resources Policies: Singapore, Malaysia,
T h e Philippines, a n d I n d i a . ” Industrial & Labor
Relations Review (July 1996): 637.
40. T h e I L O ‘ s C o n s t i t u t i o n (of 1919) m e n t i o n s
that: ” . . . . t h e failure of any n a t i o n to a d o p t h u –
m a n e c o n d i t i o n s of l a b o u r is a n obstacle in t h e
way of o t h e r n a t i o n s w h i c h d e s i r e t o i m p r o v e
t h e c o n d i t i o n s i n t h e i r o w n c o u n t r i e s . ” I L O ,
World Employment 1995, p . 74.
4 1 . W o r l d B a n k , The East Asian Miracle (New York:
O x f o r d University Press, 1 9 9 3 ) , 2.
42. G i d e o n R a c h m a n , “Wealth in Its G r a s p , a Sur-
vey of I n d o n e s i a . ” Economist (April 17, 1 9 9 3 ) :
1 4 – 1 5 .
4 3 . J a g d i s h Bhagwati & R o b e r t E. H u d e c , e d s . Fair
Trade and Harmonization, vol. 1 ( C a m b r i d g e :
M I T Press, 1 9 9 6 ) : 2.
44. W o r l d B a n k , Workers in an Integrating World
Economy, p . 7 5 .
4 5 . Ibid., 77. As I h a v e n o t e d , t h e r e p o r t p r o p o s e s
t h a t t h e ” a p p r o p r i a t e level is t h e r e f o r e t h a t at
w h i c h t h e costs a r e c o m m e n s u r a t e with t h e
v a l u e t h a t i n f o r m e d w o r k e r s p l a c e o n
i m p r o v e d w o r k i n g c o n d i t i o n s a n d r e d u c e d
risk. . . . ”
Sweatshops a n d R e s p e c t for P e r s o n s
I n r e c e n t y e a r s l a b o r a n d h u m a n r i g h t s a c –
t i v i s t s h a v e b e e n s u c c e s s f u l a t r a i s i n g p u b l i c
a w a r e n e s s r e g a r d i n g l a b o r p r a c t i c e s i n b o t h
A m e r i c a n a n d o f f s h o r e m a n u f a c t u r i n g f a c i l i –
Denis G. Arnold and Norman E. Bowie
ties. Organizations such as H u m a n Rights
Watch, United Students Against Sweatshops,
the National Labor Coalition, Sweatshop
Watch, and the Interfaith Center on Corporate
From Denis G. Arnold and Norman E. Bowie “Sweatshops and Respect for Persons,” Business Ethics Quarterly 13 (2003).
Reprinted with permission of authors and Business Ethics Quarterly.

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