The Neo-Colonial Context of Sweatshop Labor in Global Supply Chains

Introduction

This case study relates to the use of sweatshop labour from developing countries as a part of a complex supply chain that sees suppliers from developing countries using sweatshops to provide cheap and competitive labour costs to the multinational corporations of the developed countries, thereby maximising their profits. This case study considers the use and perpetuation of sweatshop phenomenon within the context of neo-colonialism, which is a theoretical approach to explaining how independent developing countries still continue to be controlled by developed countries, through economic instruments like corporations. This case study uses neo-colonial theoretical approach to explain how sweatshops provide cheap labour to corporations, who thus get richer and more influential as developing nations become more dependent on them for investment, and how such corporations use their influence to perpetuate sweatshops through law and policy. The focus was on answering the research question as to how neo-colonialism as a theoretical context may be interlinked with the perpetuation of sweatshops in developing countries.

Methodology

The methodology used in this case study is case study method. Case study is a method of qualitative research (Myers, 2013). The purpose of case study is to study in depth the characteristics of a single individual unit (Bryman & Bell, 2015). Case studies may be based on persons, or groups of persons, or even a specific phenomenon (Bryman & Bell, 2015). In this case study, case study was done on the phenomenon of sweatshops in developing countries. Case study is conducted in order to achieve in-depth information regarding the subject matter, or a specific aspect of the subject matter (Bryman & Bell, 2015). In this case, case study was done on sweatshops with reference to the interlink between neo-colonialism and perpetuation of the phenomenon. The focus was on answering the research question as to how neo-colonialism as a theoretical context may be interlinked with the perpetuation of sweatshops in developing countries. The mode of collection of data for the case study was based on desk-based research methods under qualitative research study. Articles in peer-reviewed journals, books and reports were studied for writing this case study.

Case study context

Sweatshop labour in the Third world has come to be recognised as one of the challenges of globalisation. Bad working conditions in sweatshops in countries like Bangladesh and Nepal, to name two, have led to public outcry on a number of occasions. This has led to companies making public declarations on denial of use of sweatshop labour, as seen in the example of Nike claiming that is did not use sweatshop labour (McGrath, 2006). This example goes to show the controversy that can be related to sweatshops and the ways in which major corporations may be called upon to answer for their use of sweatshop labour.

The context of this case study is provided by the power and influence that are wielded by major multinational corporations, which allow them to influence the structuring of work relations in the developing countries. Sweatshops have been criticised by activists in the western world (McGrath, 2006); however, there are also supporters of sweatshops who argue on the basis of principles of economic and free market (Zwolinski, 2007; Powell, 2008). There are supporters of sweatshops in corporations because from the point of view of their profitability, it makes more financial sense for them to get their supplies from third world countries that have abundant and cheap labour (Kegley, 2008). However, as the working conditions in the sweatshops are so appalling, there are those who argue that sweatshops must be banned. However, sweatshops provide a cheap labour alternative to the corporations, which may be one of the reasons why they choose to invest in labour rich developing countries, on the understanding that their rights and interests as investors shall be protected, including against trade unions. This creates the conditions for perpetuating sweatshops which earn more profits and influence for the corporations and bring developing countries more under dependence in a situation that is reminiscent of colonisation.

Theory

The theoretical context for understanding the sweatshop phenomenon can be provided by neo-colonialism. Neo-colonialism has been defined as a phenomenon in which the state that is subject to neo-colonialism may be directed in its economic system and political policy from outside despite being independent in theory and “having the outward trappings of national sovereignty” (Khanna, 2013, p. 338). As per neo-colonialism, otherwise independent states can be subjected to the control or influence of outside parties, such as, multinational companies. Indeed, one of the most effective ways for exercising control over independent states is through an economic instrument, for which reason MNCs have generally been considered to be the agents of neo-colonialism (Khanna, 2013). In a way, neo-colonialism extends colonialism in a novel way by controlling the economy of the developing countries (Khanna, 2013).

Developing countries need foreign investments from developed countries for which they are willing to compromise on their terms of engagement for opening their markets. For developed countries, there are definite economic incentives for investing in developing countries, including the availability of cheap and abundant labour (Chapman, 2004). Critics of neo-colonialism assert that multinational companies take advantage of the cheap labour in the developing nations, and therefore seek suppliers from developing countries who can provide them with more cost-effective supply (Chapman, 2004). The cost-effective and immensely profitable model which sees multinational companies from the developed world earn high revenues, leads to the multinationals creating more power for themselves therefore perpetuating influence over developing countries (Chapman, 2004).

Multinational companies have been found to use their power and influence over developing countries, who need foreign investments, by driving political and legal changes in developing countries that would allow them to exploit cheap labour and resources of such developing countries (Blanchard, 1996). As many multinational companies are richer than some of these developing countries, and have important networks within the global financial system, they are able to drive the desired changes in the developing countries’ legal and political frameworks, including laws relating to trade unions, minimum wages, and social security (Kegley, 2008). Critics of neo-colonialism argue that multinational companies are using their power, resources and influence to ensure the best business environment for themselves so that they are able to maximise their profits, including compromising the interests of the local populations, environments and businesses (Kegley, 2008). Therefore, for understanding and critically analysing the sweatshop phenomenon, neo-colonialism provides a sound theoretical approach.

Case study focus

This case study focus is on the sweatshops in developing countries. Sweatshops are characterised by certain conditions of work that depict exploitation of labour. These characteristics include low pay, long working hours, and bad conditions of work that include harassment and exploitation. Such conditions of work are made more complex by the lack of formal structures as sweatshop labour is usually employed in a system of subcontracting, and in the absence of formal employment contracts that list the rights of the employees. Instead sweatshops typically do not provide for redressal of workers’ demands and needs, insecure working conditions, lack of proper payments, and lack of benefits. In general, sweatshop work conditions are such that there are legal insecurities and ambiguities for workers.

Sweatshops are common in the apparel and shoe industries and in toy industry (Meyers, 2004). Some of the objections to sweatshops are based on the grounds that sweatshop work conditions are harmful for the health and safety of the workers and are also contrary to basic human rights. (Meyers, 2004). Due to the work conditions in these sweatshops being so difficult and oppressive, there is a controversy attached to the use of the sweatshops by multinational companies for the purpose of getting cheap labour and maximising profits of the company (Meyers, 2004).

Using sweatshop labour is controversial because of the ethical concerns that are involved in the phenomenon (Twomey & Jennings, 2014). Due to the differences between perceptions of work conditions, standard of living and pay differences between the west and the developing world, the western companies and public may have certain perceptions about these aspects that may not match the perceptions of the developing country subsidiaries that may employ labour for pay scales that are acceptable in the west, and at working conditions that may be seen as amounting to slavery in the western world (Twomey & Jennings, 2014). For instance, suppliers of multinationals may have employees in sweatshops working for pennies per hour, which may seem unjust from a western perspective, but which may be argued as appropriate by the supplier (Twomey & Jennings, 2014).

Indeed, there has been some support for the sweatshops in developing countries in literature, which are based on the assessment that living and working conditions are indeed different in the third world and the appropriateness of these conditions cannot be ascertained on the basis of the first world standards (Powell, 2008). As Powell (2008) puts across: “All too often the fact that we have better alternatives leads first world activists to conclude that there must be better alternatives for third world workers too” (p.1). Powell (2008) argues that while working conditions in the sweatshops may be deplorable by the first world standards, these are often the only opportunities for employment available to the workers in the third world and it would be unfair for multinational companies to demand from their third world suppliers that they would not employ people in the sweatshops, as such demands compromise the only source of employment available to the labour in the third world. The alternatives to sweatshops may simply not be available for those employed in the sweatshops as noted in the example of Bangladesh laying of 50,000 children working in sweatshops on demands by American senators that they would block imports from countries that employed children in sweatshops; ultimately, British charity Oxfam reported that a large number of these laid off child workers became prostitutes (Powell, 2008).

Discussion

There is a clear link between neo-colonialism and sweatshops in developing countries. These sweatshops form an integral part of the world trade system, in which the major corporations of the world are in the developed countries, and their suppliers are located in the third world. The corporations are able to maximise their profits through the use of cheap labour in the third world, which increases their profit margins. Such increased profits also increase the influence that the corporations have as rich investors in developing countries that are looking for foreign investments to improve their economy. The corporations as well as developed countries to which they belong negotiate for better trade terms with developing countries, including provisions that will ensure that trade unions will not be set up in certain industries (Salacuse, 2017). This perpetuates the sweatshop industry, as workers have to work in the conditions offered to them due to extreme poverty and want. Meanwhile the increased profitability increases the resources and influence of the corporations and this perpetuates the dependence of the developing countries, who will continue to provide cheap labour so long as they can get investments.

It has even been argued that working in sweatshops is a moral choice that is made by the worker, and one in which third parties, such as governments or consumer boycott groups, ought not to interfere with (Zwolinski, 2007). This argument is based on the premise that sweatshops offer certain working terms and conditions that are accepted by the workers and as such, the workers exercise their moral right to be employed through their consent (Zwolinski, 2007). This argument would be particularly opposed to the labour-rights organisations that seek to change the law in countries which host sweatshops so as to establish higher minimum wages or better working conditions for the workers (Zwolinski, 2007). However, this argument fails to take into account the significant role played by developed countries in their bilateral trade treaties with developing countries, or terms of engagement that multinational companies seek to enforce, wherein emphasis is on getting the host countries to ensure trade unionism is not permitted in certain industries (Twomey & Jennings, 2014). In the absence of trade unions, workers in sweatshops may have no means of getting the employers to improve their work conditions. Therefore, this argument that there should be no interference with the sweatshop industry, only goes to strengthen neo-colonialism. Moreover, the argument also fails to take into account the possibility of people getting exploited even if they benefit from such exploitation or even if the exploited persons themselves choose the option over the other options (Meyers, 2004).

Conclusion

Sweatshops are an important part of the global supply chain and provides cheap labour to the corporations of the developed world. Neo-colonialism is engaged because it can help to explain how conditions akin to colonisation are perpetuated by corporations as they have the power to influence law and policy in developing countries who are dependent on them for investments and capital. Through influencing trade conditions that demand absence of trade unions and minimum wages in certain industries, the corporations are able to ensure that sweatshops are perpetuated as a phenomenon. This is because of the power that the corporations wield through their resources and capital. Thus, conditions are created in which sweatshops continue to function despite moral objections to the same amongst certain sections in the developed world.

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