UNIVERSITY OF SIEGEN• FACULTY I •

CHAIR OF POLITICAL SCIENCE, M.A. IN ROADS TO DEMOCRACY(IES)INTERNATIONAL PROGRAM

PROF. DR. CHRISTOPH STRÜNCK

Varieties of Capitalism

Seminar Thesis

“Sweatshops and Capitalism: Does ClothingBrands Equate Modern Slavery?”

Supervisor : Univ.-Prof. Dr. ChristophStrünck

Submitted by: Kaewkarat Kirchner, B.A.

Matriculation Number: 891798

Kölner Straße 50, 57072 Siegen

Tel.: +49 (0) 176 627 71797

E-Mail: kaew.kirchner@gmail.com

kaew.suwannakul@gmail.com

Submission Date:September 1st, 2012

Semester: Summer Semester 2012

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Introduction

Fundamentally, capitalism is an economic system based on

three elements: wage labor, private ownership of the means

of production as well as production for exchange and

profit. Capitalism is based on a simple process in which

money is invested to generate more money or in other words

a sufficient return on investment. Money serves as a

capital used to spur growth and as the capital increases

it is called capital accumulation, which is the driving

force of a capitalistic economy. With respect to this,

those accumulating capital perform better when they can

shift costs onto others. If for instance companies can cut

costs by not protecting the environment or by paying

sweatshop wages, in purely economic terms they will do so

in order to improve net profits and overall performance in

numerical terms.

People tend to think that much of the merchandise produced

by U.S. companies and sold in U.S. marketplaces are

actually made in the USA, but in fact, they are

manufactured by workers in so-called Third World Countries

who earn as little as $12 cents per hour drudging in harsh

and even dangerous work environments. Morally, operating a

sweatshop is wrong and we often view the poor workers as

modern slaves of capitalism that need to be released.

Still, many profitable companies are willing to hire poor

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people in Third World Countries to produce best quality

products at the lowest costs to win the highly competitive

price war in their home country and to attract as many

customers as possible. Ultimately, this leads to a high

profit margin for the company, a best price for the

consumers who presumably increase their consumption, which

in the end of the day drives the economy as well.

Can the economy and consumers actually survive without

sweatshops? What happens to the poor workers if we ban all

the sweatshops? Is it a necessary evil?

Hence, this paper focuses on the analysis of sweatshops

and capitalism, applying a main focus of analysis on the

famous Swedish clothing brand H&M manufacturing in

Bangladesh. To open up the issue, it is necessary to

explore the definition of the term “sweatshop” to get

sufficient background knowledge. Afterwards we will

analyze the issue of sweatshops from different angles of

the arguments. Next, it is important to investigate the

H&M’s policy as well as the standpoint of the Swedish

government, especially if both, company and national

government are saying and acting the same in terms of

sweatshops and the respective labor policy.

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Table of Contents

Introduction .........................................1

3

Table of Contents ..............................................3

1 Defining the Sweatshops..........................4

2 Beneficent Exploitation? Different Sides of the Coin5

3 The Case of H&M: A Swedish Clothing Brand........9

4 (Sweatshops + Capitalism) = Modern Slavery?......15

5 Conclusion......................................16

Bibliography ........................................18

Internet References .................................20

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1. Defining the Sweatshops

To begin with, a sweatshop is a production facility

characterized by poor working conditions, violation of

labor law, long working hours and low wages. Originally,

the term was coined in the late 1800s when concerned

individuals began to describe the harsh discipline and

inhumane treatment employed by the factory managers, often

in subcontract facilities, to sweat as much profit from

their worker’s labor as was humanly possible.1 Nowadays,

sweatshops can be found all over the world, but they are

especially a big issue in the developing and

underdeveloped countries such as China, India, Vietnam,

and Bangladesh to mention just a few. The poorer the

country, the easier people have become a target of

exploitation.

There are several conditions that promote the

proliferation of sweatshops. On the one hand, the tendency

for First World Countries to contract their workers out of

nations with much less demanding labor laws. On the other

hand, at the same time many developing or underdeveloped

countries have loosened up their labor laws to attract and

engage in foreign trade, in hopes of stimulating their

economies and improve the general standard of living.

1 Benjamin P., David S.: Are Sweatshops Bad for Third Workers?. The EconomicEducation Bulletin, Vol. IV (April, 2005). The American Institute forEconomic Research. Massachuetts, pp. 1-3.

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The clothing products are one of the primary exports of

sweatshops, but there are also other consumer goods such

as rugs, shoes and children toy’s being produced in

sweatshops as well. Usually, to keep labor costs low, the

apparel shop owners would pay workers a ‘piece rate’,

which means that workers don’t get paid by the hour.

Rather, their wage is based on the number of items such as

shirts, shoes, socks that they complete in a shift.2 If

workers hope to earn a decent income then they have to

work hard, and they have to work long. Basically, they

have to sweat for each piece, which translates into the

income they can take home in the end of the day to feed

themselves and their families.

To look at this issue fairly, of course, the term suggests

that the responsibility for these situations falls squarely on

the shoulders of the average consumer. By a simple act of

buying a dress for oneself, one is providing economic

support to a system which leads to this form of

oppression. The only difference between the consumer who

buys sweatshop-made products and the supervisor who runs

the sweatshop is the range of physical proximity to the

offense. But on the other hand, sweatshops are surely a

symptom of poverty, but the poverty in the developing or

underdeveloped world existed long before the presence of

2 See above.

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multinational companies and sweatshops.3 In fact, when the

Western multinational companies located their production

base in those countries, they also brought in advanced

production technologies, certainly being responsible for

technology spills in those places, too. In fact, it goes

without saying that these sweatshops generate more jobs

with better payment to the poor people, providing them a

better opportunity to make money compared to rural

agricultural jobs.

2. Beneficent Exploitation? Different Sides of the

Coin

Whenever a debate about corporate globalization and

sweatshops arises, defenders of the status quo will always

point out that without a doubt sweatshops are bad, but at

least it provides people with jobs they wouldn’t have

otherwise. The response to this shortsighted argument is:

but what kind of jobs? Yes, poor people want jobs and so

does everybody else. But they also want to be treated with

dignity and respect. It’s always worthwhile to give people

new opportunities. The problem is that sweatshops don’t

provide real opportunities to people, because the

corporations are so determined to keep wages low and feed

their own greed.

3 Benjamin P., David S.: Are Sweatshops Bad for Third Workers?. The EconomicEducation Bulletin, Vol. IV (April, 2005). The American Institute forEconomic Research. Massachuetts, pp. 1-3.

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Ian Maitland, in defending the low wages of inter-national

sweatshops, states that he will “proceed by examining the specific

charges of exploitation from the standpoints of both (a) their factual and (b)

their ethical sufficiency.”4 Specifically, he argues that

sweatshop workers welcome these jobs and they are much

better off with them than without. While it is true that

the workers may be benefited by the jobs, and that they

would be worse off without them; but nevertheless, they

are being wrongfully exploited. At the same time, Richard

DeGeorge, in arguing against sweatshop labor and other cases

of exploitation of poor countries, appeals to human rights

and to obligations not to physically harm workers. Take,

for example, his treatment of extracting industries such

as oil drilling, mining, and forestry. The extracting

multinational corporations “are vulnerable to the charge of

exploitation unless they can show two things: that they do more good than

harm to the host country, and that the work they do benefits the people of the

country.”5 With regards to sweatshop labor, DeGeorge

appeals to human rights, specifically to one of his

general principles ‘G4’ which states that “multinationals

should respect the human rights of their employees.”6 Although the

violation of rights is an important part of the complaint

4 Ian Maitland, "The Great Non-Debate Over International Sweatshops," reprinted in Tom L. Beauchamp and Norman E. Bowie, Ethical Theory and Business, 6thed. (Englewood Cliffs: Prentice Hall, 2001), 595. First published in British Academy of Management Conference Proceedings, September 1997, pp. 240-265.5 Richard D.: Competing with Integrity in International Business. (NY: Oxford, 1993), p. 74.6 See above.

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against sweatshops, it does not seem adequate for

addressing the problem of excessively low wages and

exploitation in the same instance. However, one problem

with appealing to rights with respect to fair wages is

that it seems to rely on a positive human right to

subsistence. Such positive rights are controversial

because they might not be feasible enough to provide

adequate subsistence, or a job with adequate compensation,

to every human being in this world.

Typically, sweatshop defenders hold neo-liberal views that

markets are self-regulating, in a way leading to optimal

results for everyone if left alone.7 Thus, only the

markets should determine wages and a fair wage is whatever

the employer is willing to pay and whatever the worker can

successfully bargain for. Artificially high wages, so the

story goes, result in less investment and consequently

lead to fewer people employed.8 With low wages, more

workers are employed. As these workers tend to spend their

paycheck on goods and services provided to them within

their respective community, the economy improves, their

consumer activities increase demand, which ultimately

increases employment since more production is needed to

meet the increased purchase rates by a growing numbers of

7 “Such market imperfections [as high unemployment and grossly unequal bargaining power] seem to call for more reliance on market forces rather than less.” Maitland, Ethical Theory and Business, p. 603.8 “Attempts to improve on market outcomes may have unforeseen tragic consequences.” Maitland, Ethical Theory and Business, p. 603.

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consumers with sufficient liquid capital reserves.

Hypothetically, when the employment situation increases

meaning more jobs are on the market, a certain degree of

competition arises for workers who can then demand for

higher wages.

However, it is questionable of whether in fact laissez-

fair open markets are the best way to the economic

prosperity for the developing nations.9 Free market

supporters usually appeal to anecdotal evidence while

Maitland and others will cite well-chosen examples of

economies such as in South Korea or Taiwan that have

improved after decades of sweatshop labor. However, such

growth as a result of sweatshops is not universal. Many

underdeveloped nations have had sweatshops for years with

no significant increase in the overall economy or in

working conditions and wages such as in Bangladesh, India

or in El Salvador. In Latin America, wages have only

increased by 6% in the last twenty years, and wages in

former Eastern Bloc countries have actually dropped after

having adopted a free market system.10 But on a brighter

side, working in the sweatshops may be better than any

alternative available to the poorest countries. The more

9 Jessica Collins and John Miller raise many questions about misleading data and dubious interpretations of statistics in their article “Know-Nothings and Know-It-Alls: What’s Wrong with the Hype About Globalization,”Dollars and Sense (September–October 2000), p. 55. 10 Pete Engardio, Elizabeth Malkin, et al.: “Global Capitalism: Can It Be Made to Work Better?” Business Week, 6 November 2000, p. 20.

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sophisticated arguments in favors of sweatshops are

usually based on the grounds that such jobs benefit the

workers11 and are entered into freely and even

enthusiastically by the workers. In fact, the workers in

sweatshops are very happy to have the work and strongly

prefer working in the sweatshop compared to any of their

other alternatives.12 In supporting this view, Hilton and

Gibbon (2002) have suggested that some sweatshop jobs are

highly paid compared to rural agriculture jobs, which

exist in many developing countries.13

In many accounts, working in sweatshops is truly the only

alternative the poor people have and when talking to

families living in the dump, working in sweatshops is a

cherished dream and an ambitious future plan parents could

have for their children in the midst of an extreme

poverty. “I’d love to get a job in a factory,”14 said Pim Srey Rath,

a 19-year-old woman scavenging for plastic wastes. “At least

that work is in the shade. Here is where it’s hot.”15 Another woman, Vath11 “In 1996, young women working in the plant of a Nike supplier in Serang, Indonesia were earning the Indonesian minimum wage of . . . about $2.28 each day . . . [J]ust earning the minimum wage put these workers among higher-paid Indonesians.” Maitland, Ethical Theory and Business, p. 599.12 Maitland cites the long lines for sweatshop jobs outside of factories in Guatemala and Honduras. Ethical Theory and Business, p. 599.13 Hilton S.,Gibbons G.: Good Business. 2nd ed. London: Thompson. 2004, p.33. 14 Kristof, N. Where Sweatshops Are a Dream. The New York Times. Date 15/01/2009. <http://www.nytimes.com/2009/01/15/opinion/15kristof.html?_r=2&ref=opinion&Op-Ed Columnist-where-sweatshops-are-a- dream.> Data Accessed: 16/07/2012. 15 See above.

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Sam Oeun, hopes her 10-year-old boy, scavenging beside

her, grows up to get a factory job, partly because she has

seen other children run over by garbage trucks. Her son

has never been to a doctor or a dentist, and last bathed

when he was 2 years old so a sweatshop job by comparison

would be far more pleasant and less dangerous than

anything she has ever known.16 While 13-year-old Neuo

Chanthou, who earns a bit less than $1 a day scavenging in

the dump, she’s wearing a t-shirt and hat that she found

amid the filth, and she worries about her sister who lost

part of her hand when a garbage truck ran over her. “It’s

dirty, hot and smelly here,”17 she said wistfully. “A

factory is better.”18 Every coin has two sides and in this

respect, the main question arises of what happens to these

poor workers if we abolish their cherished sweatshops? Are

we willing to accept the fact that sweatshops have a good

side too? Regarding the low wages issue in the sweatshops,

the Bangladeshi factory owner’s perspective states, “All

female workers are from the rural area. The work is new for them. They can

neither read nor write and have no skill, therefore, their productivity is very

low. We are getting criticized by Western countries but they just do not

understand that the salaries correspond to the work these women perform.

And you have to control them much more in other places because they are not

16 See above. 17 See above.18 See above.

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used to work. Without control, they would sit around and chatting all day.”19

This argument from the factory owner coincides with the

earlier statement concerning the fair wages issue, that it

in fact seems to rely way too much on positive human right

subsistence and it may not be adequate to define a

universal standard wages to every person in this world.

3. The Case of H&M: A Swedish Clothing Brand

H&M prides itself on the commitment to selling stylish

affordable fashion that has been produced under fair labor

conditions. To be known as fashion and quality at the best

price, buyer driven corporations rising from global

capitalism invest huge resources in their corporate

identity such as logotype, image and culture. Their

promise to deliver current fashion and quality at the best

price, forces them to rely on the sewing hands rather than

garment making machines. The recent inquiry into Gokaldas

Export, revealed that H&M has paid its factory workers

$4.41 for a 9-hour shift.20

The low wage clearly violates minimum international labor

standards set up by the Ethical Trading Initiation (ETI).

Surprisingly it seems, H&M is also a member of ETI, which19 Garment Factory Owner, Bangladesh (quoted in Fair Wear Foundationbackground study, 2006)20 McVeigh, K. ‚The Sweatshops High Street- More Brands Under Fire’. TheGuardian. Date 3.07.2010.<http://www.guardian.co.uk/business/2007/sep/03/retail.supermarkets>. DataAcessed: 06.20.2012

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nowadays creates a PR crisis to the clothing company

giant. H&M’s clothing and accessories are manufactured in

sweatshops in a various number of countries, from Cambodia

over Bangladesh to Turkey. In 2010, 21 workers were killed

in a fire at a Bangladeshi factory that produces jumpers

and cardigans.21 The deaths were preventable, had the

emergency exits not been locked and the fire safety

standards been up to code. This tragedy is clearly a

tremendous violation of human rights committed by

sweatshops that supply H&M. One tailor who manufactured

clothes for H&M reported that when she could not achieve

her production quotas, the clothes were thrown in her

face. She revealed that up to 15 workers a day collapsed

and had to be given medical attention.22 At the same time,

H&M argued that the harassment and alleged forced overtime

was unacceptable and it would forward the complaints to

its suppliers. It said it required suppliers to pay a

legal minimum wage.23

21 H&M Factory Fire in Bangladesh Kills 21. Huffington Post. Date 05/02/2010. <http://www.huffingtonpost.com/2010/03/02/hm-factory-fire-in-bangla_n_482170.html>. Data Accessed: 09/07/2012.22 Shopping guide to High Street Clothes Shops. Ethical Consumer. <http://www.ethicalconsumer.org/buyersguides/clothing/clothesshops.aspx>. Data Accessed: 16/07/2012.23 McVeigh, K. The Sweatshops High Street – More Brands Under Fire. TheGuardian. Date 03.07.2010.<http://www.guardian.co.uk/business/2007/sep/03/retail.supermarkets>. DataAccessed: 20.07.2012

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Moreover, according to Tree Hugger, H&M was listed as one

of the most ‘unethical fashion brands hiding in your

closet’. The article cited H&M social and environmental

scandals such as cutting up and disposing of unsold

merchandise during a winter, committing an organic cotton

fraud and buying from sweatshops in Bangladesh that

commits human rights violations.24

In response to all the scandals, H&M is going through an

image makeover and they want to reposition themselves as

an ethical retailer for the customers, as Helena

Helmersson, head of the sustainability at H&M promised

that the company is attempting to improve and be a

responsible and reliable producer. In 2011, H&M created

‘good working conditions’ contracts and increased the

usage of recycled and organic materials and by 2020, they

are set to have almost 100% sustainably sourced cotton in

their fashion products. Supporting humanitarian issues,

the Head of the H&M reported that they would use their

influence to exert pressure on its suppliers in Bangladesh

to improve the working conditions. Helena Helmersson

further added that H&M wants suppliers to set up

democratic labor committees that can negotiate wages and

working conditions with factory owners.25 Concerning the

mass fainting in Cambodian-based factories of H&M, where

24 Tree Hugger, Date 06.01.2010.<http://www.treehugger.com/files/2010//06/are-these-unethical-fashion-brands-hiding-in-your-closet.php>. Date Accessed: 15.07.2012.

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hundreds of employees mysteriously passed out in August

2011, H&M’s head of sustainability stated that “we work

actively to strengthen the rights of textile workers.”26 And “our code of

conduct requires that we pay at least the legal minimum wage. But the same

factory that H&M purchases products from also sew for other large chains.

There are often misunderstandings about how much control we have over

wages.”27 H&M’s press release dating back to January 24th,

2012 commemorated the victims of the 2010 “Garib Garib”

fire and promised a continued dedication to the children

of the victims and to educating the textile workers of

Bangladesh as well.28

Regarding the low wages issue, the official H&M website

states “we demand and check that everyone receives the pay and overtime

remuneration to which they are legally entitled. Our Code of Conduct states

that the statutory minimum wage is the lowest acceptable pay level for our

supplier’s employees, but not the recommended level. We prefer to see pay

levels based on negotiations between employers and employees, and for the

25 Haroon, J. H&M To Buy More RMG Products From Bangladesh. The Financial Express. Date 29/05/2012. <http://www.thefinancialexpress-bd.com/more.php?news_id=131146&date=2012-05-29> Data Accessed: 16/06/2012.26 H&M Under Fire Over Cambodia Mass Faintings. The Local. Date 09/02/2012. <http://www.thelocal.se/39006/20120209>. Data Accessed: 13/07/2012.27 See above.28 Aisling O’Conor: The Sweatshop Allegations that Have Shocked the New YorkRag Trade. The Independent. Date 16/06/2012.<http://www.independent.ie.com/opinion/aisling-oconor-the-sweatshop-allegations-that-have-shocked-the-new-york-trade-3058911.html> DataAccessed: 03/22/2012.

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law to lay down a reasonable minimum wage.”29 While concerning the

child labor issue, H&M states “H&M’s auditors carry out regular

checks to ensure that there are no underage workers in the factories. Should

this nonetheless happen, H&M requires the suppliers to take responsibility

and, together with H&M and the family to find a solution in the best interest of

the child. If H&M discovers repeated breaches of its ban on child labor at a

supplier, or one of its subcontractors- the cooperation will be ended for

good.”30

In fact, the wages paid to workers in any countries are

determined by what the majority earns, but none of these

countries such as China, Bangladesh, Indonesia and India

to mention just a few, which are known as the most

exploitative, have a majority of the workforce engaged in

the manufacture of goods for export. Most workers in these

countries are employed in the domestic sector. Hence, the

domestic sector sets the standard. For a customer in a

developed country, may it be favorite and well-known

fashion brand, trying to apply high pressure on his

supplier to increase the wages of the workers, without

offering to pay more for the goods produced at that

particular factory, has no chance at all to succeed,

especially without the cooperation of the country’s

government. For example, a garment company had 2,000

employees and made an average profit of $340,000 per year.29 H&M FAQ. <www.hm.com/ca/customer-service/faq/our-responsibility>. DataAccessed: 17/06/2012. 30 See Above.

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This equates to only $170 per worker, so an increase of

$3.50 per week per worker would wipe all the company’s

profits out and would ultimately lead to the company going

out of business!

Contemporaneously, the Swedish government as well as other

governments in the developed world has not been able to

provide a proper solution to the sweatshop problems.

Disappointingly for many involved, it has not come up with

a proper generally admitted solution in local, regional,

national or supra-national governmental regulatory

policymaking. The reason is the absence of an adequate

governmental venue, due to the strong forces of corporate

globalization and weak ones of political globalization.31

The early use of consumer boycotts and present practice of

new market based regulatory tools such as labeling,

schemes, codes of conduct and monitoring institutions in

many multinational companies, including H&M’s revelation

of how the capitalist market mechanisms are used to create

rule making,32 which is not at all linked to the national

government. On a national level, the Swedish labor law is

relatively thin. This is due to many of the issues and

areas that in other nations are regulated through state or

federal law such as minimum wage, working hours and

31 Micheletti. M.: The Moral Force of Consumption and Capitalism: Anti-Slavery and Anti-Sweatshops in Citizenship and Consumption. Edited by K.Soper and F. Trentmann. London: Palgrave Macmillan, 2007, p. 125.32 See Above.

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overtime compensation. Instead, in Sweden, they are

regulated through collective agreements between trade

unions and employer organization representatives because

of the desire of the social partners to avoid any form of

government intervention.33 As a result, the Swedish

national government doesn’t have much to say concerning

the sweatshops regulations. More so, the Swedish labor

laws such as minimum wage, working hours, overtime

compensation, healthcare, sick or parental leave cannot be

enforced for instance in Bangladesh. According to the

Swedish labor law, any employees in Sweden who cannot work

due to sickness or injury are entitled to sick leave,

while the sweatshop workers in H&M’s Bangladesh factory do

not have this right, any health insurance or compensation

at all, as they’re based outside of Swedish sovereignty.

In Sweden, a person receiving parental benefit is always

entitled to parental leave during the child’s first 18

months and up to one-quarter leave until the child is

eight years old. It goes without saying of how much damage

to H&M’s valuable profit if they would allow the

Bangladeshi workers to have equal parental or sick leave

as the Swedish national workers do.

33 Swedish Institute. Working in Sweden – How and Why: Labor Law 2009. <http://www.sweden.se/eng/ Home/Work/Labor-market/Employee-rights/Labor-law/> Data Accessed: 20/06/2012.

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Consequently, with respect to the H&M sweatshops in

Bangladesh, the Swedish national labor law and the H&M

regulations are not in line with each other at all. They

cannot be compared with each other. The Swedish government

is responsible only for national labor and workers based

in Sweden, while H&M is a multinational entity with a

tremendous profit to look after partly generated outside

of Swedish soil. Therefore, any disputes occurring between

the workers and suppliers must be negotiated among

themselves without the intervention from the Swedish or

the Bangladeshi government. If so, only the Bangladeshi

government would have a chance to improve work conditions

within its factories, but is hesitant of stepping in

because it fears the corporations would simply move to

another country. As a matter of fact, there are no clear

governmental regulations protecting the rights of foreign

workers supplying the Swedish companies yet. In addition,

the government of Bangladesh as well as many governments

of developing nations is reluctant to enforce strong

worker-protection laws, partly due the reasons stated

above. Certainly, they view cheap labor as one of the

major assets they can offer to attract investment by

multinational companies, which generates jobs and provides

capital flows for development serving their neoliberal

agenda.

Whereas in developed countries with a strong federal law

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like the United States of America, the courts are a

possible path to improve for instance working conditions

at sweatshops. In May 1999, a Los Angeles court issued

subpoenas to seventeen U.S. firms including, GAP, Wal-

Mart, Sears, Tommy Hilfiger and Jones Apparel Group over

one billion dollars in damages over apparel goods

reportedly manufactured in Siapan sweatshops. Moreover in

February 1999, U.S. garment firms announced support of

another one billion dollar suit against sweatshop

factories in the Mariana Islands.34 But even so, the

problem of sweatshops is likely to stay. The structural

adjustment programs that are oftentimes imposed on many

developing nations by the International Monetary Fund

(IMF) are among the hallmarks of the emerging global

economy. This program, which originated from liberal

capitalist economic theories, can act indirectly as a

barrier against labor laws and labor organizations, in a

way as a threat to free trade, while deregulating the flow

of foreign investment. The problem is far too complex for

a national government to take care of by itself and there

is no solution to sweatshops in the governmental

proclamations and regulatory tools, partly due to the

persistent political ideologies of non-intervention as

well.

34 Lawsuit Against US Corporations Using Sweatshops in Saipan. Institute forGlobal Labour and Human Rights. Date 01/01/1999. <http://www.globallabourrights.org/reports?id=0479>. Data Accessed: 10/06/2012.

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Additionally, the varieties of capitalism framework

encourages the expectation of differences in the way that

commodity chains operate particularly in institutional

settings and in the way that civil society actors try to

challenge and transform them. For example, Rachel Schurman

and William Munro (2008) demonstrate that even when

activists in different countries mobilize around the same

issue, national contexts shape the organizing strategies

that they use and the degree to which their efforts find

traction.35 Furthermore, comparative research on ethical

trading initiatives among retailers provides further

evidence of cross-national variation in the outcomes

resulting from the efforts to regulate the global

industries (Sasser et al. 2006; Hughes et al. 2007).36

Multinational companies such as IKEA and Wal-Mart have

adopted policies to improve labor standards in their

supply chains after being targeted by several anti-

sweatshop activist campaigns, but the degree to which

these policies actually changed working conditions varied,

reflecting differences in the way these global retailers

organize their subcontracting relationships and interact

35 Schurman, R., Munro W.: “Targeting Capital: A Cultural Economy Approach to Understanding the Efficacy of Two Anti-Genetic Engineering Movements.” American Journal of Sociology 2008. 115(1): 155-202.36 Sasser, E., Prakash, A., Cashore, B. and Auld, G.: “Direct targeting as an NGO political strategy: examining private authority regimes in the forestry sector.” Business and Politics. 2006. 8(3): 1-32. Hughes, A., Buttle, M., Wrigley N.:“Organisational geographies of corporateresponsibility: a UK-US comparison of retailers’ ethical trading initiatives.” Journal of Economic Geography. 2007. 7: 491-513.

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with suppliers. These differences, in turn, reflect each

company’s home-country institutions, such as the

prevailing system of industrial relations (Christopherson

& Lillie 2005).37

Consequently, this leads to the salience of country level

differences in the way firms within the same industry

operate, including the way in which they engage, or fail

to engage, anti-sweatshops activist challenges to company

practices, is resonant with a large body of literature on

the distinct varieties of capitalism (Hall and Soskice

2001; Hancké et al. 2007)38, or national business systems

(Whitley 1999)39 found in the global economy. The main

argument enhanced by the varieties of capitalism school is

that a multiplicity of domestic institutional forms can

co-exist within the global political economy due to

different institutions encouraging different

organizational capabilities, and these, in turn, provide

firms with particular competitive advantages in

international markets.40

37 Christoperson, S., Lillie N.:“Neither global nor standard: corporate strategies in the new era of labor standards.” Environment and Planning. 2005. A 37: 1919-1938, p. 39. 38 Hall, P., Soskice D.: Varieties of Capitalism: The Institutional Foundations of Comparative Advantage. New York: Cambridge University Press. 2001, p. 13. Bob, H., Rhodes M., Thatcher M., eds.: Beyond Varieties of Capitalism: conflict, contradiction, and complementarities in the European economy. New York: Oxford University Press. 2007, p. 30. 39 Richard, W.: Divergent capitalisms: The social structuring and change of business systems. New York: Oxford University Press. 1999, p. 25. 40 The view advocated by scholars subscribing to this approach, namely thatthe world economy accommodates multiple varieties of capitalism can becontrasted with the emphasis in the global commodity chains approach on the

23

4. (Sweatshops + Capitalism) = Modern Slavery?

At its core, capitalism grants power to the people by

allowing individuals and organizations to have control of

their financial prosperity rather than relying on the

system. It is because of that ‘power of the people’

dynamic that especially, many Americans have come to

equate the term ‘capitalism’ to ‘democracy’. After all,

democracy relies on the idea that people can come together

and vote to determine who has the power. In the same

picture, people can come together and buy certain

corporations into dominance such as Apple Inc. While

people may have different interpretations of what

constitutes ‘capitalism’, in the end of the day, it is the

idea of privatization, meaning private ownership of the

means of production and the creation of services and goods

for profit.

Because people have power over their finances as opposed

to the states, there is more room for exploitation with

the purpose of maximizing the profits. On a global scale,

neoliberalism takes the place of capitalism in which itemergence of industry-specific organizational logics that are internationalin scope (Gereffi 1996). This debate, about whether globalization promotesconvergence or is compatible with persistent diversity, is paralleled inthe social movement literature by the distinctorientations taken in two lines of work, respectively emphasizing eitherthe broad defining features of the global context and the organizationalforms such as transnational advocacy networks that emerge in response to it(Keck and Sikkink 1997), or the local concerns and conditions out of whichactivism emerges, even as “rooted cosmopolitans” attempt to identify andseize the political opportunities created by globalization as amacrostructural process (Tarrow 2006).

24

attempts to maximize profits but also allow for equal

opportunities through its ability to be stopped by the

people. When companies seek to skyrocket its profit

potentials, it hunts down the cheapest source of labor. At

any instance in which laws cannot come to the aid of a

labor source, it will result in exploitation. Especially

when it comes to the complexities of corporate affairs and

international law, there are enough grey areas to allow

for ethical considerations to go unnoticed, which

heightened the tendency for multinational companies to

outsource and search for a more cost-efficient or cheap

workforce overseas.

Finally, any foreign countries that permit sweatshops to

exist and ultimately contribute and serve to the Western

economies tend to be less focused on staying in the

boundaries of ethical standards. For one thing, democracy,

global capitalization and the neoliberal economics will

always have in common that they rely on choosing the

lesser of two evils. Never will there be a situation in

which a presidential candidate boasts all of the qualities

people truly look for in a leader. Similarly, there will

seldom be scenarios in which neoliberalism produces

entirely agreeable circumstances for all as well.

5. Conclusion

25

Although it is considered to be a moral relief for many

consumers, but simply by refusing to purchase products

manufactured in sweatshops is very unlikely to solve the

real problem, because the sweatshop issue isn’t just about

the suppliers and the workers, but it involves the entire

political economic system that we live in. Like mentioned

earlier, what happens to all the sweatshop workers if the

multinational corporations decided to close down the only

mean of their survival? Professor Benjamin Powell pointed

out that in order to help Third World Countries get rid of

sweatshops, we ought to buy more products made in the

sweatshops instead of boycotting them, because then people

will get more money to reinvent their own economy, thus,

creating more jobs, higher wages, better working

conditions and increased growth.41 Powell goes so far

saying that if there are more sweatshops in a nation, it

means that a nation is doing well because it will lead to

more economic development. He further claimed that

movements to close down all sweatshops by the

international community actually do more harm than good.42

Interestingly enough, different countries including

multinational corporations are pursuing different types of

capitalism models whereas the United States are pursuing

41 Benjamin, P., David, S.: Sweatshop Wages and Third World LivingStandards: Are the Jobs Worth the Sweat? Journal of Labor Research. Vol. 27, No.2. Spring 2006. 42 See above, p. 25

26

the liberal market economy, or in other terms the free

market economy, where the system provides an environment

in which competition is encouraged, but the distribution

of income is highly unequal. Most developing nations are

pursuing a neoliberal economic strategy to attract foreign

investments, and Sweden which is considered to be one of

the best examples of a true welfare state is implying a

more social form of capitalism where economic freedom

fosters the development and individual responsibility. But

above all this, whether a country is pursuing the liberal

market economy or the coordinated market economy as in the

United States or any Western European countries, they are

still harboring the sweatshops into poorer nations, as it

is highly profitable for the company’s operating within

these respective economies.

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32