The Role of Sweatshops

Here is a great short paper from Ben Powell on the importance of so called "sweatshops" and how they benefit the third world. From the conclusion:

Not only are sweatshops better than current worker alternatives, but they are also part of the process of development that ultimately raises living standards. That process took about 150 years in Britain and the United States but closer to 30 years in the Japan, South Korea, Hong Kong, and Taiwan.

When companies open sweatshops they bring technology and physical capital with them. Better technology and more capital raise worker productivity. Over time this raises their wages. As more sweatshops open, more alternatives are available to workers raising the amount a firm must bid to hire them.

The good news for sweatshop workers today is that the world has better technology and more capital than ever before. Development in these countries can happen even faster than it did in the East Asian tigers. If activists in the United States do not undermine the process of development by eliminating these countries' ability to attract sweatshops, then third world countries that adopt market friendly institutions will grow rapidly and sweatshop pay and working conditions will improve even faster than they did in the United States or East Asia. Meanwhile, what the third world so badly needs is more "sweatshop jobs," not fewer.