Sweatshops the “Best Available Alternative”? But Who Decides What Alternatives are Available?

Of all the self-styled libertarian commentaries attempting to put the Bangladesh garment factory tragedy in “perspective,” Benjamin Powell’s is probably the worst (“Sweatshops In Bangladesh Improve The Lives Of Their Workers, And Boost Growth,” Forbes, May 2). In Bangladesh, Powell writes,

“some 4,500 garment factories employ approximately 4 million workers. In the grand scheme of things, they are better off with the factories than they would be without them; the benefits outweigh the risks. In fact, compared to other opportunities in Bangladesh, the garment industry pays reasonably well.”

If U.S. companies like Nike reduce their footprint in Bangladesh and abandon factories there out of fear of bad publicity, “hundreds of thousands of garment workers could lose their jobs and be thrust into worse alternatives.”

Well, yeah — true as far as it goes. When a mugger says “your money or your life,” I’m better off handing over the money and staying alive — but it’s the guy with the gun who artificially set the range of alternatives. The question you should be asking yourself, and people like Powell and the people in the C-suite at Nike don’t want you asking, is who decides what other alternatives are available in Bangladesh?

It isn’t some faceless, inevitable fact of nature that is forced on the sweatshops — or on Nike — by an anonymous market. Thanks to international trademark and patent law, Nike and a few other companies are the only game in town when it comes to hiring people to make shoes. They can take Nike’s price or leave it. But there’s lots of competing sweatshops, and Nike can easily take its business elsewhere. Nike’s oligopsony pricing power means they can set the price they pay a sweatshop for a pair of sneakers as low as they like. And the same “intellectual property” gives them oligopoly pricing power in the United States to sell the sneakers at a retail price thousands of percent above the actual cost of production. The margin between what they pay sweatshops for the shoes and how much they gouge Western customers isn’t set by “the market.” It’s set by Nike. They can set that margin as high or as low as they want.

And the operative phrase here is “as high.” Nike would rather maximize the margin it makes on its sneakers, even at the cost of people living in barracks working hundreds of hours a week for a few dollars a day — and sometimes dying slow, horrible deaths by the hundreds in the rubble of their factories.

So-called “intellectual property” is not legitimate property at all, but a state-enforced monopoly every bit as protectionist as the industrial tariffs of a century ago. Like the tariff, “intellectual property” creates artificial scarcity in goods that are not scarce by nature, enabling privileged corporations to extract rents from that scarcity. The global corporations of the 21st century are as dependent on “intellectual property” for their profits as the old national industrial corporations of the early 20th century were on tariffs. Tariffs ceased to be useful to big business, and “intellectual property” became useful, because corporations became global. Because “international trade” actually consists mostly of internal transfer of goods between local subsidiaries of global corporations, tariffs no longer serve the interests of giant corporations. Like the tariff, “intellectual property” is a government restriction on who may sell a given type of good in a given market, enabling the beneficiary to charge whatever consumers can pay. But unlike the tariff, which was a form of protectionism that regulated the transfer of goods across national boundaries, “intellectual property” regulates the transfer of goods across corporate boundaries.

Unlike the industrial corporations of a hundred years ago, companies like Nike don’t actually make things. They use artificial property rights like “intellectual property” to control the conditions under which other people can make things, and to set up toll gates between the people who make things and the people who consume things. The really, really big money isn’t the ability to produce, but the ability to collect tribute for allowing production to take place.

Without “intellectual property,” those factories in Bangladesh could ignore Nike’s trademark and market identical shoes to the local population at a tiny fraction of the price. And without Nike to impose uniform pricing across the industry, they’d have to compete for local workers. It wouldn’t matter if Nike decided to “reduce its footprint” and pull out of Bangladesh. The workers’ livelihoods would no longer be held hostage to what Nike did or didn’t do.

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