Sweatshops for the Muslim world

Chip Goodyear, the head of Australia’s BHP Billton, the world’s largest mining company, has said that that Muslim world will be the next big emerging market after India and China.

The head of the world’s largest mining company says the Muslim population stretching from North Africa to Pakistan and Kazakhstan is large, young and underemployed – characteristics that it shares with China and other rapidly developing economies.

There’s no argument about the demographics: much of the Muslim world is young, unemployed and poor. Not every Muslim land has oil and natural resources to exploit: for some of them, their only comparative advantage seems to be cheap labour. So as wages rise in India and as they will surely rise in China, why wouldn’t multinationals look then to the relatively poor corners of the Muslim world for cheap labour to run their factories and call centers?

Of course, this means they will establish what some in the West call “sweatshops”: places where people don’t get paid Western standards of pay; don’t work in environments that would meet Western occupational health and safety expectations; and don’t work forty hour weeks with leave loading and one month of paternity leave. They are, of course, pretty horrible places and we should all thank God that we were not born into such conditions.

However, the sad reality is that if people — without physical coercion — enter into a contract to work in a sweatshop then that means that they are deriving some benefit from that transaction; ergo, working in a sweatshop is preferable to not working in a sweatshop (being unemployed, starving, or turning to crime to earn a living).

And it is obvious why a poor person in the third world would see a Western-owned sweatshop as a pretty good deal: conditions in Western-owned sweatshops are generally better than in the local alternatives; and foreign companies tend to pay more than their local counterparts. And although the unskilled unemployed may provide cheap labour initially, the influx of foreign capital brings with it an influx of foreign ‘know how’, and the foreign-owned factories soon find themselves competing with local factories for labour. Eventually, conditions will improve, wages will rise, and skills will increase.

So, if we want to improve the economic conditions of the Third World — including, of course, much of the Muslim world — then should we tolerate the initial proliferation of sweatshops as a distasteful but necessary step towards economic development?