A recent Banksy Film animation released on YouTube raised, once again, the specter of those things that may be being swept under the rug in supply chain outsourcing. However, as a businessman and consultant, I have been hearing questions raised about outsourcing for more than a quarter century. Some of the allegations are legitimate and some are not.
I am a believer in free markets. By that, I mean that I do not believe there should be either fraud or coercion in the agreements between participants in the market. That rule should obtain from lowest level of production and the hiring of workers to the nations and governments that set the rules under which international trade transpires. Beyond that, matters should be left to buyers and sellers to work out details.
When I lived more than twelve years in El Paso, Texas, I had friends on both sides of the U.S.-Mexican border. So, what I have to say is not born of hearsay, but from first-hand experience. Frequently, people who-for whatever reason-felt some moral ambiguity over the "twin plant" operations (where a U.S. company generally owned and operated a plant in Ciudad Juarez, Mexico) would ask me about how these Mexican workers were being "exploited."
It's been a long time, so I many not recall the numbers precisely, but here were the facts back in the 1980s in approximate figures:
1. For every job opening in a "twin plant" operation, there was (typically) more than 300 applicants
2. The typical hourly wage in the plant was about $2.00 per hour
3. The workers typically worked 40 to 50 hours per week
4. Frequently, the firm provided--at no charge or a very nominal charge--an on-site hot-lunch program
5. Some firms also provided daycare facilities
Now, let's talk about what Mexican firms were paying these same unskilled or semi-skilled workers. The same workers who would qualify to apply for a job in a "twin plant" operation would be comparing the option of being "exploited" by a U.S. company to working for some Mexican firm. The Mexican firm might require the workers to work as much as 80 hours per week for as little as $16 (U.S.). That amounts to 20 cents per hour. There was no hot-lunch program and no daycare offered. In addition, the workers in Mexican-owned operations did not work in air-conditioned comfort or, most likely, even have access to clean restrooms.
What is my point?
My point is that one can hardly, if rational, call giving an employee a ten-fold increase in wages along with shorter working hours and fringe benefits "exploitation." If these jobs offered in by U.S. manufacturers were not the "cream of the crop," there would not have been more than 300 Mexicans standing in line for every opening.
It makes no difference if a U.S. worker would get $19.80 per hour plus fringe benefits for the same work. That is not a valid measure. If it were-if $19.80 per hour reflected what the work was worth in real economic terms-then the U.S. worker would never have lost his job producing the products that were moved to the Mexican operations.
There was no fraud and no coercion involved in the agreements made between the U.S. companies and their Mexican employees. Most of them had no hope of finding any similar pay scale anywhere in their indigenous economy and their fondest hope was that they would never have to work anywhere else.
On not being blind
Now, that doesn't make everything "okay," necessarily.
U.S. firms have frequently discovered that, while they themselves are unwilling to engage in deceit or coercion, there are unscrupulous native citizens in almost every company that are willing to make huge profits by virtually enslaving their own people. Such folks are no different than the native Africans who sold their own people-or other nearby tribes-into slavery in the 18th and 19th centuries.
Coercive slavery led to huge profits for both the slave traders (today's unscrupulous indigenous businessman) and those who profited from the products produced by enslaved workers (traders in sugar cane, tobacco, cotton and more). The world will never-in this age-be free of men full of the moral depravity that drives them to accept profits built on the backs of coercive labor methods (slave labor).
Contrary to popular opinion, it is not solely up to governments to put an end to such practices. It is up to you and me--the buyers and sellers who keep such operations in business by turning a "blind eye" and remaining willfully ignorant of conditions under which our profits (or our products) are produced. Until consumers ranging from end-users to corporate buyers and negotiators are willing to stand up and do what is morally right on behalf of those who are being defrauded or coerced in the supply chain, we will not see this problem diminished.
Like drugs, the answer is not in more and better government enforcement. The real answer is to be found in drying up the "demand" for goods through consumer education at all levels. Companies should be willing to investigate with an open eye how and where the products they buy are being produced. In fact, given the spate of dangerous products arriving from China and elsewhere, U.S. corporations should be willing to do this in their own interest and in the interest of their customers.
Instead of seeking a "cheaper" source when a competitor is offering products produced in coercive "sweatshops," why not expose the competitor's supply chain to the light of day and dry up the competitor's markets through such publicity. This gives firms in the supply chain the opportunity to do well--be profitable--while doing good--the right thing--at the same time.
This problem will never be totally eliminated. But a caring approach to the human side of the supply chain could allow firms to take actions that can be both profit-producing and profitable for all mankind.
©2010 Richard D. Cushing