[Marxism] Bhagwati and Sweatshops

Mine Doyran mine.doyran at verizon.net
Mon Feb 16 10:28:36 MST 2004


 http://www.columbia.edu/~jb38/liv_wage.pdf

A Letter from Professor Bhagwati to a Columbia University Committee engaged
in decision on the question of a Living Wage etc. in judging whether apparel
firms supplying

Columbia T-shirts etc. should be asked to sign on to A Social Responsibility
Code

Ref: Defining Social Responsibility in the Apparel Industry, for Our Firms
Abroad, for Our Firms at Home And for Our Labor Unions in regard to Their
Protectionist Demands

Dear Professor xxxx :

I was happy to see you all today and to be able to share some of my thoughts
on the subject of Social Responsibility in general and on the
appropriateness of linking that to the concept of a Living Wage in
particular.

I thank you for offering me the opportunity to share with you my thoughts on
how to think about these questions in an appropriate way, reflecting my long
association with developmental economics, international trade issues, and my
close association through membership of Boards and/or Advisory Committees
with SA8000, Human Rights Watch (Asia), CUTS (the leading Indian NGO on
consumer and trade issues) etc.

I might add that, as I said to you all, no one in the Columbia
administration has ever discussed my views with me. But, based on the
occasional reports of your committee and the campus activities by a group of
students as reported in The Spectator, I have discussed the issues in my
very large SIPA class this term so that the students learn how to think
about these issues for themselves and to reach conclusions based on an
informed analysis of facts, assumptions, and public policy alternatives. In
fact, I have taught these issues to date to nearly 500 SIPA and other
students, many with NGO backgrounds and many wanting to rejoin NGOs; many
have often come with pro-living-wage ideas and then changed their minds (and
told me so AFTER the grades were assigned!).

I: Why a Living Wage is the wrong way to Go for Defining Social
Responsibility by Employers/Multinationals going abroad:

Just to recap for your record, I argued that it was not a good idea for the
University, in its search for Social Responsibility among its suppliers of
apparel with our logo, to embrace the Living Wage concept

Noting that the student movement has been mainly concerned with the question
in relation to wages paid by multinational making apparel etc. abroad, and
that also is what Professor Litwak's letter to me explicitly states --- 
"developing a Columbia Code specifying work conditions in third-world
countries (italics inserted) --- I would make the following arguments about
the multinationals and their wage payments and their economic impact on the
poor countries abroad as being relevant to how we wish to think about the
demands being made.

I believe that the evidence shows that multinationals generally pay a wage
premium of about 10% to the host-country workers they hire (see the work of
Ann Harrison of the Business School). These wages are , of course, lower
than what you get here; after all, these are poor countries. Also, the
multinationals, by increasing the demand for local labour, cannot but help
the laboring class in these poor countries: reaching a contrary conclusion
requires models that have no plausibility in my view. There is also much
evidence that multinationals diffuse technology to the host countries:
again, there is much evidence of this in the scholarly literature (see the
work of Magnus Blomstrom of Stockholm School and of Richard Caves at
Harvard).

The notion that multinationals exploit workers or the working class in the
poor countries and/or hurt the poor countries' development is simply hard to
sustain in the teeth of this analysis. In fact, in my view, the notion that
trade and investment are the source of poverty in the poor or the rich
countries is widespread among the unions that fear international competition
and drive some of the campaigns for the living wage (though, of course,
there are other morallydriven groups doing so also). But there are, in fact,
many empirical studies that argue just the opposite. I have dealt with this
problem in recent articles that I will be happy to share with th  Committee.
[I raise this aspect because, as far as I could understand him, Professor
Litwak invoked "globalization" and the resulting "interdependence" as the
reason why a Living Wage was necessary in some sense.]

So, the notion that we "need" a living wage to be imposed on multinationals
cannot be supported on the grounds that otherwise investment abroad is
harmful to, and "exploits", workers there. No; investors who typically pay
the going wage plus a wage premium typically do the opposite. The notion of
a "living wage" cannot therefore be meaningfully grounded in a persuasive
definition of "exploitation, at least not one that appeals to me and indeed
most economists who work on the subject.

This is why many (including altruistic NGOs) in the poor countries see the
drive towards raising the local cost of production of apparel in particular
(because that is where the export advantage of the poor countries has always
raised demands for protection by our textile unions such as UNITE and
corporate interests in the industry) by paying yet higher wages (exceeding
even the wage premium) as essentially "masked protectionism" which is aimed
essentially at reducing the force of international competition.

In consequence, the drive to enforce a Living Wage on firms investing or
buying abroad is seen by many there, and some here, as morally obtuse,
instead of being the ethically appropriate policy that it is often claimed
to be.

II. What we ought to Focus on Instead:

Instead of the Living Wage as part of the Social Responsibility definition,
I therefore prefer that one focuses instead on matters such as the
following:

· minimum safety standards;

· dignified treatment of workers;

· reasonable restrictions on working hours and rights of women workers
regarding treatment of pregnancy et.al.; and

· stakeholder performance for the community, i.e. for the "outsiders", not
the "insiders" who already enjoy the superior (to local alternative)
opportunity of being employed by a multinational.

I should reiterate also that the condemnation in such Standards of Child
Labour, for reasons explained by me at the meeting, can in fact be morally
obtuse and counterproductive, a point widely recognized by NGOs who work on
the problem in the poor countries but which unions such as UNITE do not wish
to admit. Unless there are programs in place to do the heavy lifting which
ensures that children who are displaced from jobs are sent to school, that
they are not instead bumped down into yet worse jobs including into
prostitution (as has been observed in Bangladesh following on the threat of
trade sanctions and market closures), that impoverished parents are not
reduced to starvation as children's incomes disappear, the use of Social
responsibility requirements that exclude the use of child labour per se is
not just unhelpful; it is also thoughtless and harmful.

III. What About Choice of Standard for Columbia?

If the arguments that I have made, albeit briefly, have any cogency, then
public legislation that requires or mandates that our multinationals pay
abroad a living wage or exclude the use of child labour altogether is to be
rejected. But that does not mean that, as private parties, we do not indulge
whatever ethical preferences, no matter how ill-grounded, to insist that
such restrictions be placed on what we voluntarily do.

So, if the Columbia community wishes to move in that direction for its
purchases of apparel, that seems to me to be fine, even if wrong. My only
skepticism is about procedure.

We are a cosmopolitan community which must show an extra concern for the
effects of our choices on the poor countries which we must seek to assist.
As a place for dispassionate inquiry, animated by passionate embrace of
higher objectives, we are also supposed to encourage informed arguments and
to arrive at choices based thereon.

That suggests more debates of the kind I raise here, in public fora on the
campus. It also means a conscious attempt at canvassing the opinion of our
huge community of foreign students so they speak for themselves rather than
have others claim to speak for them. In short, we need a serious debate on
the issues and the options; and a serious analysis of how we then reach a
decision which is supposed to reflect our collective preferences. I do not
know the answer to the latter problem; but I have no doubt that this is a
matter that universities including Columbia have given a lot of thought to.
I just want to register the question here.

IV. SA8000; et.al.

But, assuming that Columbia does reach the decision that a Social
Responsibility Standard which has a number of features such as a Living Wage
and adequate monitoring must be subscribed to for our purchases, the
argument in favour of WRC makes no sense to me.

For, such a social standard with adequate monitoring already exists. I draw
your attention to the wellknown SA8000 standard (of the CEPAA) on whose
Board I serve, having succeeded

Labor Secretary Ray Marshall.

It is truly a superb organization with adequate attention to monitoring
problems. There is no need to reinvent the wheel with WRC and SA8000 does
the job beautifully and is attracting worldwide attention from NGOs, firms
and intellectuals. For Columbia, the advantage is that Eileen Kauffman who
really runs it is a Columbia Ph.D. and her chief Aide Judy Gerhart is also
our SIPA graduate! And it contains a "living wage" which I of course do not
agree with; but then it meets many other things that I do like.

While embracing SA8000, Columbia could, in my view, also keep open the
possibility of making eligible for our purchase programs other standards
which do NOT have a living wage component, for example, as I argue above for
reasons I have set forth briefly. But that would depend on what kind of
outcome we have to the debate and decision process that I suggest above.

V. Columbia should also denounce Sweatshops and Protectionism HERE!

When adopting the Social Responsibility code(s), Columbia should
simultaneously dissociate itself from protectionism in its announcement and
in all following press releases of what Columbia is doing in regard to
apparel purchases and issues. The Code adoption and our attitudes on textile
protectionism are both important aspects of our moral concerns; one without
the other is incomplete and makes Columbia culpable to the charge of moral
hypocrisy.

Let me repeat that unions such as UNITE, and AFL-CIO, embrace protectionism
in textiles which hurts the poor workers abroad, making a mockery of their
claim that they stand for the poor workers abroad. Many of these workers
abroad are women. You may read about the incoherence (many call it
hypocrisy) of the unions and of our politicians in this regard in the xerox
I circulated at the Committee meeting, entitled "Hillary's Girls" which is
really about, not just Ms. Clinton's incoherence, but that of most
politicians in this regard. Columbia students and faculty should certainly
not go along with a Social responsibility Code on sweatshops in textiles
et.al. which ignores the untold harm that our protectionism does to workers
in the poor countries.

Columbia should also insist on an immediate examination of the sweatshop
conditions in the US itself, e.g. in the garment district downtown. Columbia
should denounce, even as it adopts a Social Responsibility Code, the
abysmally low enforcement expenditures on enforcement of our OSHA and
minimum wage laws in the American sweatshops.

Anything less is unworthy of a cosmopolitan university with values that
should transcend national borders. [ I might briefly comment here on the
computations of a "living wage" that came up.

Professor Shubham Chaudhuri's excellent work is as good as it can get, and I
commend it. But it has to do with defining a "living standard", which is an
aspiration of what we want poor countries' people to reach at a minimum. It
is a sophisticated version of what I did as my very first job in India, in
the context of India's Third Five-Year Plan in 1961 on returning to India
from my studies abroad: I was calculating the "minimum income" which every
Indian should get, reflecting "basic needs". But we were always clear that
this was not a minimum "wage" !

The public policy questions were: how was this minimum standard of living to
be attained? Through redistribution, through land reforms, through rapid
growth, etc.? Where Professor Chaudhuri would agree with me is that these
are two entirely different questions. So, if you consider his measurement as
simply measures of "Living Standards" that we as morally responsible people
feel must be attained in the poor countries, that is fine. But it is NOT a
measure that has any meaningful relationship to the question of what wage
should be paid.

The latter is an altogether separate question; and in answer to that
question, I propose, as I have already done above, that the demand that a
"living wage" be paid by multinationals going abroad is both unpersuasive
and arguably morally obtuse, even offensive.]

With my very warmest good wishes, and hoping that this statement of my views
on the issues at hand, is of some use in your continuing deliberations.

Yours sincerely,

PS. I did tell the students present that I would take them to lunch at my
expense to discuss these issues and perspectives so as to advance mutual
understanding. You may kindly remind Ginger (I do not have her last name) to
call me at 854-6297 or at jb38 on e-mail.

Copy to: President Rupp





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