Friday, December 25, 2009

Are "Sweatshops" Bad? Maybe It Depends on Where You Are Living

I remember well the afternoon, during my Fulbright in Armenia, that one of my MBA students from the American University of Armenia came into my office upset and puzzled by something he'd been reading for my class.

He'd read two passages taken from a book called The New Protectionism by Tim Lang and Colin Hines. Opponents of free trade, Lang and Hines believe that global trade should be restricted in order to encourage greater regional self-sufficiency. Here are the passages:

"Trade liberalization hopes to bring more trade, yet more international trade brings more of the problems the world needs less of: threats to the environment, uneven spread of unemployment, and widening gaps between rich and poor, both within societies and between societies" (p. 3).

"Thus, the basic thesis of free trade is that instead of being self-sufficient, each one should specialize and produce what it is best at and can produce most cheaply, i.e., the things in which one has a 'comparative advantage' . . . This theory runs into difficulty where one country can produce products more cheaply than others, and has no incentive to trade, or where a country has little or no comparative advantage in anything" (p. 21).

While Armenia is an emerging former-Soviet republic, its relative poverty does not come close to the levels of extreme poverty one will find in places like sub-Saharan Africa. Yet this bright young man in my office simply could not believe what he was reading! In his eyes, the only hope for poor countries like his was greater openness, greater trade, and better access to markets. And as he had seen for himself already, some of the very best jobs in his growing nation were jobs created by foreign direct investment. He simply could not believe that there were comfortable Western "compassionate" writers out there like Lang and Hines who thought they knew better than he--a hardworking shopkeeper--what would be best for him and others in his emerging economy. How could they possibly know, he thought.

I was reminded of my conversation with my student Arthur as I watched this segment about sweatshop labor from 20/20. All of us comfortable Westerners need to remember that, no matter how noble our intentions, sometimes our hearts tell us to do something that may actually harm those we yearn most to help.


  1. Dear Dr. Claar! This is Arthur H. Hovhannisyan, your former AUA Microeconomics class student (year 2007) mentioned in the post. I clearly remember our conversation. Again, I want to reconfirm my opinion about free trade. I have nothing to add because what you said in your post came from my heart and my mind!!!

    Best regards,

    Arthur Hovhannisyan, MBA
    Project Manager, Competitiveness Foundation of Armenia (

  2. Arthur! So nice to hear from you!

    Thanks for your kind comments. And keep using both your heart *and* your mind. *That's* the best way to help others.