The tragic building collapse in Bangladesh two weeks ago, killing over 900 people, has focused public attention on working conditions for garment workers around the world. The attention has intensified calls for Western clothing brands to insist on better working conditions in the factories around the developing world where their products are made. According to the New York Times, some companies are responding to consumer concerns by marketing their “fair labor” practices on product labels.
The development of a fair trade movement for clothing is in many ways encouraging. It demonstrates the power of consumers in a free market to impose their preferences on the supply chain. Businesses succeed or fail based on how well they meet consumer demand, and if consumers demand certain labor practices enough to cover the added costs, businesses will respond.
This voluntary mechanism does a much better job than government mandates. Even a requirement that companies merely put labels on their clothes does a poor job of informing consumers. Any mandated label is insulated from accuracy-enhancing, consumer-driven competition and vulnerable to capture by special interests.
On the other hand, refusing to buy clothes made in “sweatshops” is a terrible way to help the people of Bangladesh. The fact remains that despite the terrible working conditions, workers chose their sweatshop jobs over worse alternatives. Outlawing sweatshops or refusing to buy things made in Bangladesh removes those workers’ best option and forces them to settle for less. (LearnLiberty.org has an excellent video explaining the “Top 3 Ways Sweatshops Help the Poor Escape Poverty.”)
More foreign investment in industrial production would help the people of Bangladesh even more. It’s true that Bangladeshis’ poverty enables you to buy cheap t-shirts because they will work for next to nothing in dangerous factories. But the systemic effect of Western investment means more opportunity, and opportunity is the opposite of poverty.
That said, consumer demand for “fair trade clothing” may actually help factory workers, whereas a flat-out refusal to trade would not. This particular disaster seems to be largely the result of rampant cronyism, inept bureaucracy, and official corruption—problems that could be alleviated by reducing the discretion of local middlemen. If concerned consumers have more specific information about labor practices, they won’t have to rely on purely origin-based information. It would be a shame if someone decided not to buy a shirt just because it was “Made in Bangladesh.” Positive and voluntary inducements to improve working conditions are much, much better than refusing to do business with poor people.