Wednesday, March 29, 2006

Hello Dr. X

This is the second time this semester that someone has stood at the front of a classroom and said there is nothing wrong with sweatshops.  Here was my response…

Hello Dr. X,
 Today in class you made the statement that Nike sweatshops actually increase the standard of living for those who work in them.  I am a development studies student and haven’t come across this information in my research on sweatshops.  What I have heard about the Nike factories in Indonesia is that even though the wage is triple the minimum it is still below subsistence levels.  The low minimum wage is an indicator of the International Monetary Fund’s Structural Adjustment Programs (SAPs) which are designed to manage foreign debt.  The SAPs cut public spending and decrease trade and labour protection.  The goal of the SAPs is to increase GDP and by attracting Foreign Direct Investment (FDI).  The problem with FDI is that it chases the lowest wages.  A case study I did of Mauritius showed that when the country was starting to develop and the average wage in an Export Processing Zone (EPZ) reached one dollar the companies started to pull out and move to China because they could pay thirty cents an hour.  The result was that unemployment rose.  I have attached my paper if it interests you.
 I also share your scepticism of Ethical Mutual Funds.  Whose Ethics are applied?  I might have a different ethical standard than the fund manager, etc.  But I still think that ethical investing is the way to go.  In economics a standing principle is educate the populous and they can use their economic vote (I know it is a bad paraphrase).  If people were given the opportunity to convey their values through their investment I think the world would be a better place.(image placeholder) 
As a development studies student I have seen the underside of the corporate world.  The corporation is legally obliged to place shareholders above any ethical concerns (except where regulated).  I am convinced that the best way to fight poverty is from the inside of a corporation, but I am also under the impression that the higher position I attain in a corporation the less freedom and ability I will have to change things because of my obligation to the shareholders because everyone is out to make the quick buck.  If I pay wages higher than I have to I will be fired and someone will be next in line to replace me.  But what if shareholders got political and demanded that certain policies be put in place?  Things could change.  For example, about a week ago the second largest oil spill since Exxon Valdez happened off the Alaskan coast.  A Shell oil pipe burst.  The union said that the maintenance was a month behind and the maintenance inspection crew was being cut from 8 to 6. (here is a link to the article: It is these kinds of calculated risks that corporations take that just aren’t worth it if we start thinking outside of the economic models.  One of the things that prompted me to write this email was that you told the class that investing with anything other than good economics is a bad decision.  It might not be the best thing for my portfolio, but if everyone shuts off their conscience to conduct business what happens to the world?  We are facing the 6th major geological extinction.   
(image placeholder)Sorry if any of this came across as emotional, I just want to discuss as two decent people with different opinions.  
 Thank you for your time, I know the life of a professor is very busy.  

So what are your thoughts?  Anything to add, or that you disagree with? Post your comments and let the discourse begin.

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