Why do TNCs use sweatshops?

Why do TNCs use sweatshops?

Most people have heard that some trans-national companies (TNCs) turn profits comparable to the GDP of a small country. They will also have heard about TNCs use of sweatshops.

The sensible question is – why? They have seen, or experienced, the negative publicity that it results in. They can afford not to, clearly. Glass Clothing is much smaller than a TNC, and we can afford to pay our tailors fair wages. So why do TNCs do it?

The economic argument for sweatshops

What do Ralph Lauren shirts and £2 leggings from Primark have in common? They may seem different, but a report from 2011 claimed that clothes from both stores were made in Asian sweatshops. And, despite their difference in market values, the reason for involving sweatshops in the supply chain is the same – profit.

The image of the heartless businessman is a tired stereotype. One person’s lack of empathy does not cause a company to start using factories that mistreat their workers. The problem is bigger. Business models which prioritise profit over people have, in the past, done better in an economic sense, therefore companies continue to use them.

In his 2004 book ‘The Corporation’, Joel Bakan claims that Nike factory workers Nike in Indonesia earned just 0.3% of the market value of the products they made. This exemplifies why it might seem financially viable to use sweatshops. Companies want to minimise manufacturing costs. If they feel they can get away with underpaying their workers, they will.

The same argument underlies why there have been scandals about over-long hours, lack of safety, and child labour. Minimising cost maximises profit. The way to change this is to show that there is a cost to sweatshops. This cost has to be economic – shoppers must ‘vote with their feet’ (or with their computer), by avoiding buying from TNCs known for breaking the rules.

TNCs might be able to afford to pay their workers more. But, ultimately, they’ll profit more if they don’t.

How the structure of TNCs encourages sweatshop use

Discussions on sweatshop usage quickly get caught up in accusations of immorality against CEOs of TNCs. However, the problem is not individual, it is structural. The way such a large corporation functions leads to a huge degree of separation between those who decide the direction of a corporation and those who actually make the product. Conversely, at Glass Clothing, we communicate directly with our tailors in Pakistan, to ensure that there is no such divide.

It’s possible that those in charge have no clue where exactly their products are manufactured. Therefore, it becomes a lot easier to disregard the needs of the people who make them.

Nobody actively wants to deprive poor children of education, or force workers to do up to 40 hours of overtime a week. Such practices are illegal in most countries. But, rigorous inspections are necessary to ensure that humane standards are being upheld. For this to happen, those who have the power to decide where the product is made need to know about how it is made. This is difficult to do in a multi-million dollar corporation.

TNCs also need to be motivated to make a change, which is hard for the same reason. Executives think about profit because it affects them directly. Working conditions for the people who enable it often do not. Therefore, it is easy to agree to ‘reduce manufacturing costs’ without considering what this might mean for the workers at the other end of the chain.

The ‘outsourcing‘ of manufacturing to other countries increases this separation. As well as being cheaper to use (due to less regulation), these faraway factories become less of a moral concern for bosses based in the UK or America.

The suffering of an unknown person feels less real – and therefore is easier to dismiss if doing so would prevent trouble close to home. The massive size of the apparatus of TNCs makes this easy to do.

Babar Mahsi, Tailor for Glass Clothing
One of our tailors, Babar Mahsi. We communicate closely with our factory, unlike many TNCs.

Don’t let them get away with it – how consumers can help

It is easy to unintentionally become complicit in the exploitation of sweatshop workers. Simply put, it’s easier to pop into Primark for a cheap t-shirt than to spend hours researching ethical companies like Glass Clothing online. This is part of the reason why we are committed to keeping our prices competitive with high street brands: you shouldn’t have to pay top dollar to avoid exploitation. Also, many people have developed habits of buying from certain brands. If you like their clothes or know them to be reliable, it can undeniably be difficult to make the switch.

The way to change how TNCs treat their workers is to show them that using sweatshops has a price and that ethical practice leads to more profit. Sweatshop usage has been a mainstream issue for nearly 2 decades. However, companies which are widely believed to use sweatshops continue to succeed.

Media coverage of sweatshop use has little impact without financial consequences for the companies exposed. Therefore, to change the way TNCs work, consumers need to show them that ethical fashion sells better.

Read about the political side of sweatshop use

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