The Tommy Hilfiger clothing manufacturing building in Bangladesh owned by Van Heusen that caught fire was a horrible tragedy. Many workers were badly injured and there were many fatalities. Van Heusen outsourced its manufacturing to Bangladesh in order to keep overhead costs lower. The network news jumped on this story first to show the building burning, with people suffering injuries, and then to interrogate the American owner of the company with questions like; “Why don’t you keep the manufacturing jobs in America since we need jobs here?” and; “Why don’t you increase the wages of these Bangladesh workers?” and; “These sweatshop workers shouldn’t be suffering in these poor working conditions, you should close this place down for good.” They showed about 5 seconds of an edited “non-answer” given by the owner which of course is what they wanted. I’m sure you have seen news stories like this before where the greedy, profit-driven American owner is exploiting workers in poor countries to make a product at a lower cost.
It sounds compassionate for a third-party like the network news organizations to try to change the way these business owners operate. When a third-party doesn’t have to deal with the effects of their cause or the consequences of their coercions it makes it easier to tell others how to live their lives.
If the business owner kept his manufacturing in America rather than Bangladesh, the retail cost would end up being more to the customer. If all business owners kept jobs in America it would lower the unemployment rate here but products and services would end up costing more which reduces purchasing power. Reduced purchasing power creates a need to work more or get a second or third job which would result back to increased unemployment. The other option for consumers is to consume less which slows the economy which also leads to higher unemployment. Keeping jobs in America comes with a price.
If this business owner would have focused on making profits in the long-term, he would have upgraded the structure to be a safe work environment before this fire happened. I’m sure other sweatshop owners have learned a lesson from this. If you don’t have a safe facility for the workers you will lose profit. We don’t need third parties deciding what should be done with profits when the competitive profit driven free market automatically gives the incentive to provide best results for a business and its employees. If the sweatshop workers in Bangladesh had a better alternative than the place they were employed at they would leave and go to the place with better wages or working conditions. Unfortunately in places like that there are no other alternatives. As long as they have corrupt dictatorships under “rule of man” rather than equal justice under rule of law, poor property rights, and minimal freedom and liberty, they will always be without better alternatives.
Some might say that if the profit-driven companies with sweatshops had minimum wage control laws and were forced to provide better working conditions for the employees that they would be better off. It’s true, they would be better off in the short-term, but the extra cost of higher wages and a more comfortable working environment may not be profitable, and if it’s not profitable then the company has no incentive to produce anything. The factory would then be shut down. Then you say; but Jeremy, isn’t that a good thing to shut down the sweatshop? Not when the alternative is a worse job, or no job at all, and left to digging through trash or begging to survive. If the sweatshop owner has a big enough profit margin to cover the cost of higher wages and better working conditions, that gives the owner the incentive to bring production back to America. That would be good for an American looking for a job, but not good for someone in Bangladesh looking for a Job. Ok so what about the business owner who outsourced production to a poor country and then goes and buys a huge yacht with the extra profits. Isn’t that bad for the sweatshop workers? Sure it is. If the workers think they will be better off working somewhere else that treats them better, they can. (If it’s forced slave labor, it should be dealt with on every level. Everyone has a natural right to freedom and liberty.) If the owner decides to not buy the yacht after all, that’s good news for the sweatshop worker but not for the company that builds the yacht and all its employees. Is the value of the sweatshop workers livelihood more valuable than the yacht builders’ livelihood, or vice-versa?
Just as I was writing this I was watching the Rachel Maddow show. She was saying how horrible it was that the Etch-a-Sketch company had outsourced its production to a cheap labor region of China. She however, didn’t mention that if the production plant had stayed in Ohio they wouldn’t be able to make the product with a low enough overhead cost in order to keep the retail price low enough for the demand in the marketplace. The only way they could keep their account with Toys R’Us was to manufacture in China for cheap labor (those laborers are not worse off than they were before). If they lost that account they would have gone out of business and then workers in Ohio and China would be out of a job. Some would say maybe the government should provide a subsidy for the extra cost of production in order to help those in Ohio keep their jobs. Of course the government would take that money away from people with jobs in order to save jobs, so there is still a zero sum result.
When busy-body third-party control freaks regulate businesses, even with good intentions there is never a net benefit. Do they think jobs, production, and the economy itself just always exist, somehow? These things only exist because they are created, and it happens best when entrepreneurs are free to create products and services without the burden of regulation. Profits are just a reflection of how much one has served his fellow man. The more you serve others the more you profit. Is that not enough?
SASSMEBACK.
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