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Sabel, O'Rourke, and Fung offer a disarmingly simple strategy for strengthening labor standards. Accurately inform consumers, via transparent monitor's reports, about corporate behavior and as firms compete for customer loyalty the magic of the market will "generate improvements that then 'ratchet' standards upward." No laws need to be passed. No need for brutal fights about worker rights in the global economy.
Despite much that is good—for example, they are right to stress the importance of transparency1—their proposal is deeply flawed, and filled with wishful thinking. Their analysis of consumer concern about sweatshops is simplistic. This leads to a misunderstanding of how firms respond to publicity about abusive conditions. They have an overly optimistic view of how monitoring works in practice and, finally, they ignore the crucial question of rights and power.
Let's start with the limits of ethical consumerism. The authors do not understand that consumer demand for good and bad conditions is asymmetric. Firms do have a lot to lose if they are seen as sweatshop producers. The demand for goods produced under sweatshop conditions is inelastic. Thus, firms will go to great lengths—join the Fair Labor Associations (FLA) or Social Accountability International (SA8000), adopt codes of conduct, pay monitors to check their factories, increase their public relations efforts—to avoid being perceived as a sweatshop producer.
What firms will not do is grant workers basic rights to organize or change the sweatshop structure of the industry. This is because firms have limited ability to raise prices for products made under good conditions. Consumer demand for worker-friendly products, in contrast to sweatshop-made products, is elastic: price increases generate sharp drops in demand. The loss of revenue from consumers unwilling to pay more for a garment produced under good conditions is not offset by those willing to pay more.2
The authors present an optimistic view of the relationship between monitors and companies. "Firms confident of their outstanding social performance would seek out the most credible monitoring organizations to verify their accomplishments." Replace the word "credible" with "friendly" and one understands how this works in practice.3 The companies, the monitors, and the monitoring organization all have an interest in the system being "reasonable" or company friendly: the companies because they are looking for protection against being labeled a sweatshop producer; the monitoring organization because they want to attract companies; the monitors because they want the companies will hire them.
Another example of wishful thinking is the account of how RLS could come into existence. One of the existing monitoring organizations, according to Fung, O'Rourke, and Sabel, could:
… differentiate itself from the others through a focus on transparency and disclosure that breaks with now dominant policies of confidentiality and proprietary knowledge. This innovation, while scaring off some corporations fearful of revealing current practices, would make this organization the most credible, encompassing, and capable social-certification entity. This credibility would allow it to impose significant disclosure requirements on its associated firms and monitors, to rank each of them on their social performance, and to set the terms of open comparison for other firms and monitors.
The problem is that corporations don't want to disclose. Whatever minimal disclosure has been achieved is due to Herculean efforts by student anti-sweatshop activists. We will not get further disclosure because a monitoring organization thinks they can "differentiate" themselves by calling for disclosure. No companies will take part. We could pass a law requiring disclosure—I'm all for it—and the authors hint that it would be necessary. But then we are getting dangerously close to top-down regulation, to which RLS was supposed to be an alternative.
The authors do not address the limits of monitoring schemes in the context of authoritarian countries where workers have no right to organize. It is not an accident that most apparel production takes place in such countries. Without a right to organize, the best code in the world means little. At best, codes do not challenge the laws that deny workers their rights. At worst, they provide cover for corporations operating in such settings.4
Fung, O'Rourke, and Sabel might respond by saying that RLS aims "not at establishing a minimum fixed set of core workplace rights, but rather at creating a process that makes workplaces as good as they can be, and better over time, as companies become more capable and nations more developed." "How else," they ask, "can we hope to find effective solutions to the new misery of the global economy?"
One way is to empower workers. That means creating rules for the global economy that protect worker's rights. The importance of this is described by Amartya Sen:
The governmental response to acute suffering often depends on the pressure that is put on it, and this is where the exercise of political rights (voting, criticizing, protesting, and so on) can make a real difference…. While this connection is clearest in the case of famine prevention, the positive role of political and civil rights applies to the prevention of economic and social disasters generally…. To concentrate only on economic incentives (which the market system provides) while ignoring political incentives (which democratic systems provide) is to opt for a deeply unbalanced set of ground rules.5
The institutions and agreements that govern the global economy (the WTO, NAFTA, World Bank, IMF) operate according to a deeply unbalanced set of ground rules that protect property rights but not human rights. RLS does not challenge those ground rules. That is its fatal weakness. Human rights, as Sen argues, are not a reward of development. Rather they are critical to achieving it.
1 One of the greatest weaknesses of the current monitoring programs such as Fair Labor Association and Social Accountability International is the lack of transparency. In contrast, the Workers' Rights Consortium (WRC), is based on transparency. Of all the organizations to arise out of concern about sweatshops, the WRC is the most promising. For an explanation of its "verification model" and an example of transparent reporting, see http://www.workersrights.org.
2 For an analysis of consumer demand for labor standards see Kimberly Elliott and Richard Freeman, "White Hats or Don Quixotes? Human Rights' Vigilantes in the Global Economy," paper presented to NBER Conference on Emerging Labor Market Institutions (August, 2000). Elliott and Freeman argue that, "If consumers responded more to information about good conditions than about bad conditions, activists and firms would have some common ground on which to work."
3 See the devastating critique of SA8000 monitoring in China, "No Illusions: Against the Global Cosmetic SA8000," Labor Rights in China (1999).
4 One reason to be skeptical about existing codes: of 61 factories "certified" by SA8000, 34 of them are in China. In the SA8000 code there is very strong language about freedom of association. If any workers in those 34 factories were to try and exercise the rights spelled out in the code they would find themselves in jail or an insane asylum.
5 Amartya Sen, "Human Rights and Asian Values," New Republic, 14 July 1997.
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