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The statements are true, and they have a powerful influence on the use of sweatshops and outsourcing. For starters, consumers expect low-cost manufactured goods, so businesses must discover ways to cut production costs. One technique for lowering production costs is to lower salaries, which is not viable in established economies unless the corporation relocates its production operations to small developing countries with plentiful cheap labor. Workers in wealthy countries will lose their employment since their wages are greater and the company cannot sustain them while remaining competitive in the market. Secondly, companies are in business to make profits, and that is only possible if they can operate in environments which favor business. That drives them away to developing countries like China where hourly wages can be ten times lower. For instance to produce one shirt a company needs to pay $ 0.5 per hour in Bangladesh while the same firm needs $5 hourly to manufacture the same shirt. The situation is similar in China, India, other Asian countries and even Africa. Therefore, evils emanating from sweatshops and outsourcing have been made possible by the demands of the consumers and fierce competition in the business environment.
Laissez-faire is a concept which advocates for a free market, that is allowing the forces of demand and supply guide and control how the market works. On the other, globalization is when countries allow trade to take place across their borders with limited barriers. Laissez-faire and globalization are closely related because they advocate for free trade. It is true that outsourcing and sweatshops are extensions of laissez-faire on the following three perspectives: the communitarian, free-market, and populist.
First, the free market perspective advances the ideologies of globalization and postulates that it has brought more development and economic strength to less developed countries. This happens because small countries benefit from the flow of financial resources and technology from more advanced nations. According to this approach, the idea of globalization allows even distribution of wealth and economic growth and development across the world. Secondly, the populist perspective highlights that the economic, social and political afflictions affecting the developed countries are as result of globalization. The claim is valid because globalization leads to poor and exploitation of the working class because of poor wages and unconducive working conditions. Besides, employment of underage children which negatively affects their health and intellectual development. These characteristics are synonymous to what used to happen during the capitalistic period when slaves used to work in factories and plantations under poor conditions. Thirdly, the communitarians fear the imposition of the tyrannical exploitations by few dominating multinationals globally. The claim is valid because the international companies take advantage of abundant free labor in establishing business empires and then export the manufactured products to developed countries where they sell them at very high prices. It is not easy to solve the problem in one country without changing the global economic arrangement because all these companies are scrambling for profits by using all possible means of reducing the costs of production. For instance, it is hard for one factory to pay high salaries while the competitors pay poor wages. It can quickly be forced out of the market.
Besides, the claims of sweatshops and outsourcing as being extensions is supported by the results of the economic policy institute in 2000 that the income of the wealthy increased by 15 percent while that of the working class and the poorest population grew by 2 percent a trademark characteristic of the capitalist economic.
The anti-sweatshop and outsourcing skepticism has far reaching effects on developed economies, emerging economies, and the companies themselves using the two philosophies in running their business. First, if a company is compelled not to outsource and forced to manufacture its products within a developed economy, it may not be able to comply with higher wage requirements hence forced out of the market. Or its productivity may be hampered hence compelled to downsize to operations cost by reducing the number of employees. The classic example is Levi Strauss which tried to maintain its production plants in the U.S while paying competitive wages for employees in developing countries. Because of unbearable costs of production, it was forced to close its 58 branches across the U.S and sack more than 10,000 employees to stay in the market. The second issue is massive loss of jobs particularly in the developed economies since manufacturers will entirely shift to low-wage countries or relatively manageable wages to stay in the market. The result will be a weak U.S and other developed countries. The third effect of anti-sweatshops campaigns and outsourcing criticisms will have two dimensions in developing economies; the developing economies will suffer from massive unemployment in case multinationals close down and retreat to mother countries. If they remain in business, they will reduce the number of employees considerably who will earn competitive wages. Besides, economic growth of developing countries will reduce because of reduced economic activities. The alternative for improving living conditions for workers in developing countries will be offering training to many unskilled workers and paying average wages. This will increase the supply of paid labor at affordable prices. Besides, the trained worker will take the position of underage children working in factories thus help in keeping children healthy and intellectually developing.
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