See
Nike, Trade, and the Left’s “Race to the Bottom” Canard by y Daniel J. Ikenson of Cato.
"To capitalism’s detractors, Nike symbolizes the Dickensian
horrors of trade and globalization – a world ripened for mass
exploitation of workers and the environment for the impious purpose of
padding the bottom line. They are offended by President Obama’s
selection of Nike headquarters as the setting for his speech, last week,
in which he touted the benefits of the emerging Trans-Pacific
Partnership agreement. But Nike exemplifies the redeeming virtues of
globalization and illustrates how self-interested capitalism satisfies
popular demands – including, even, the demands of its detractors.
Fealty to the reviled bottom line incentivizes companies like Nike to
deliver, in a sustainable manner, what those genuinely concerned about
development claim to want. U.S. and other Western investments in
developing-country manufacturing and assembly operations tend to raise
local labor, environmental, and product safety standards. Western
companies usually offer higher wages than the local average to attract
the best workers, which can reduce the total cost of labor through
higher productivity and lower employee turnover. Western companies often
use production technologies and techniques that meet higher standards
and bring best practices that are emulated by local firms, leading to
improvements in working conditions, environmental outcomes, and product
safety.
Perhaps most significantly, companies like Nike are understandably
protective of their brands, which are usually their most valuable
assets. In an age when people increasingly demand social accountability
as an attribute of the products and services they consume, mere
allegations – let alone confirmed instances – of labor abuses, safety
violations, tainted products, environmental degradation, and other
objectionable practices can quickly degrade or destroy a brand. Western
brands have every incentive to find scrupulous supply chain partners and
even to submit to third party verifications of the veracity of all
sorts of practices in developing countries because the verdict of the
marketplace can be swift and unambiguous.
Nike remembers the boycotts and the profit losses it endured on
account of global reactions to its association with “sweatshop” working
conditions in the past. Mattel’s bottom line took a beating when some of
its toys manufactured in certain Chinese factories were found to
contain dangerous levels of lead paint. There have been numerous
examples of lax oversight and wanting conditions, but increasingly they
are becoming the exception and not the rule.
Obviously, most Americans would find developing country factory
conditions and practices to be, on average, inferior to those in the
United States. But the proper comparison is not between wages and
conditions in a factory in Ho Chi Minh City and Akron, Ohio or between
Akron in 2015 and Akron in 1915. Trade and globalization scolds who
would hamper investment flows to developing countries by demanding that
poor countries price themselves out of global supply chain networks by
adopting rich-country standards should stop and ponder the conditions
that would prevail in those locations without Western investment because
that’s where their demands ultimately lead.
Even New York Times columnist Nicholas Kristof – an icon of
the Left – has argued that factory work offers a step up the ladder for
billions of impoverished people around the world. His stories about the
limited options for subsisting among Cambodian women before the arrival
of apparel factories, which included picking through garbage dumps,
backbreaking agricultural work, and prostitution, remind us that
development is a process and not one that is prone to use of magic
wands. What employment options would
exist in the absence of Western investment? How much accountability
would there be if locally-owned factories were the only choices? Without
Western investment, there would be much less opportunity and much less
scrutiny of labor and environmental practices.
Globalization has brought greater accountability by assigning
globally recognizable brand names to otherwise anonymous, small-scale,
production and assembly operations. Brands have the most to lose from
the discovery of any unscrupulous practices, so the incentives are
aligned with the goals of development. An important lesson of capitalism
and markets is that even corporate behavior that meets the disapproval
of consumers gets punished and corrected.
Unfortunately, a lesson that too many on the Left fail to heed is
that capitalism and trade are making life much better for people around
the world. Calling globalization a “race to the bottom” may make for a
hip bumper sticker, but it has no bearing in reality."
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