weekly assignment 4

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.

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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 .

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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

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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.