Tuesday, February 23, 2010

Cooperative Sweatshops for Haiti!

Many commentators on Haiti, from Bill Clinton to Paul Collier to Ban Ki-Moon, have been forcefully advocating the proliferation of garment factories as a key to Haiti's economic development. Even the US government, in an attempt to aid the people of Haiti, has decreed itself tariff-free for garments made in Haiti for the next 10 years. To many people this garment factory model of economic development makes intuitive sense—if the Haitian economy is poor and largely based on a backwards agricultural sector, then creating a bunch of new factories is just the ticket. However, there are a few logical flaws in this line of thinking.

The most important flaw inherent in the Clinton model of sweatshop-led development is that it is founded on low wages, so it can never end poverty in Haiti. Boosters of this model claim that the low wages of Haitian workers represent an absolute advantage that favors profitability of garment factories. This shows the tunnel-vision nature of the proposal. It's true that Haitians receive low wages, and it's true that factory owners can profit greatly from this. However, it would be impossible for the country of Haiti to enjoy a generalized economic prosperity from such a model. If attracting and maintaining investment were based on keeping wages low, then there is no way that the proliferation of these factories could ever benefit workers. If, on the other hand, workers were to organize and demand higher wages, factory owners would either have to repress these demands, or move their investments elsewhere, because the low-wage attractiveness of Haiti would be no longer. So whether the garment factories prospered (due to maintaining Haitian misery) or floundered (due to Haitians' demanding better pay), the model is inviable in the long-run. Those who draw comparisons to the US's 19th and 20th century economic development, driven in part by garment sweatshops, are misled at best and willingly misleading at worst. They should know that the benefits that accrued to garment workers during this historical process came about thanks to labor organizing, and this organizing was only effective because the industries operating in the US couldn't simply relocate their factories to other countries at the first sign of labor unrest, as is possible and common today.

Another, seemingly more agrarian proposal from Bill Clinton and his friends is promoting export agriculture based on things like mangos or coffee. Again, this is erroneous thinking, like the promotion of sweatshops. Exported crops have numerous ecological and economic arguments against them.

Most obvious in the ecological sphere is that when you take away large amounts of fruits or grains from the land it was grown on, you're also taking away the nutrients the plant drew from the soil to produce them. If the product goes to a nearby town or is consumed on the farm, it's possible that part of those nutrients will return to the local soil in the form of discarded peelings, raw human shit, or processed sewage sludge. If, however, the product of the earth is shipped to a distant country, those nutrients are gone for good. To replace them you've got to add synthetic fertilizers. Another ecological strike against export crops is that they are usually grown as monocultures, meaning that a field is dedicated only to that crop. This makes that field a breeding grounds for any insects or diseases that attack that particular crop, which means that farmers must use large amounts of pesticides to control these problems.

The issues of synthetic fertilizer use and pesticide use brings us to the economic drawbacks of export crops. An export-driven farm must rely heavily on purchased inputs to maintain soil fertility and prevent pest problems. These inputs represent a cost that cuts into profitability. Aside from this and more importantly, dedicating a field to one crop gives far less net production and profit than planting it to a mix of crops. For instance, if instead of planting a field only to corn I plant it to a mix of corn and beans, I won't get as much corn or as many beans as if I'd dedicated the field exclusively to one or the other. But I will get a good deal more than if I'd planted half the field only to beans, and half only to corn. This is because multiple crops complement one another. If this is the case with our simple example of only two crops, imagine the productivity of a typical Haitian garden plot with 5 or more crops planted together. All this is to say that an acre planted by a typical Haitian peasant, using few purchased inputs, has a higher net productivity, both in terms of food produced and in terms of net profit, than an acre of monocrop plantation, be it mangos, coffee, coconuts, or oil palm. In fact, plantation farming anywhere in the world has always had such a dismal productivity per acre compared to normal, smallholder farms, that it has only been viable where owners save money by paying meager wages to workers or by being irresponsible with natural resources.

This brings us back to a problem shared by proposals for both sweatshop-driven development and export agriculture-driven development. It only makes sense to those of us who think of farming as backwards and a poor creator of wealth. We have seen in the prior paragraph that peasant agriculture is in fact a better creator of wealth per acre than is plantation agriculture. It is also a better creator of wealth per person, though it may not seem so at first. Plantation agriculture, with many acres controlled by one owner (or a consortium of shareholders) can ostensibly create much wealth for the owners. But its profitability, like that of sweatshops, is predicated on low wages for the people that work in the enterprise. A plantation produces a cash income for owners, but this is at the expense of workers (who consequently have little incentive to pursue maximum productivity, either of land or of work). This means that in the end, plantations are actually poor creators of wealth, but very good upward redistributors of the little wealth created. On the other hand, peasant agriculture, where farmers are owners and workers on their own land, leads to a maximum production by each farmer, of which he gets to keep the entirety. To put it in concrete terms, a 100-acre plantation with a few employees can provide starvation wages for those employees and luxurious wealth for one person, while those 100 acres divided between 100 people could provide a decent livelihood for each one, and certainly a much higher total production than the plantation.

Why then is Haitian agriculture so consistently disparaged if, as I claim, the value represented in Haiti's agricultural sector is immense? Almost all the food produced is either consumed by farmers and their neighbors, or sold to residents of Port-au-Prince with few middlemen. In both cases, it's very possible that the wealth created by growing food is not well-accounted for in official balance sheets representing the gross domestic product of Haiti, because auto-consumption involves no monetary transaction, and informal market channels are often not seen by economists and statisticians. But even though auto-consumption or short-path marketing does not involve large flows of cash, it represents a lot of value. When you consume your own produce, the value of that produce to you is essentially the retail price, because that is what you are saving by producing your own food instead of buying it at the market. Even if a farmer sells his produce to a market woman to sell in the village or in Port-au-Prince, the fact that this market woman is likely the only middleman means that the price the farmer receives is relatively high. Compare this to US farmers (or tropical farmers growing export crops), who are paid mere cents for every dollar the consumer spends.

I have just made the case for promoting peasant agriculture in Haiti as opposed to plantation agriculture. In other essays I have argued in favor of further favoring productivity of peasant agriculture in Haiti by providing small farmers with better access to land, credit, tools, and inputs. But what would be the equivalent of a “peasant sweatshop”? Is it possible to harness the garment factories' admitted potential for wealth creation, in such a way that that wealth reaches workers and thus favors a general, widespread economic advancement in Haiti?

I believe so, and this argument is the ultimate reason that I am writing this post. I believe that sweatshops can potentially play a valuable role in Haiti's development, if and only if they are cooperative sweatshops. That is to say that they would not in fact be sweatshops, but garment factories owned by their very workers, and hence preserving for them a level of dignity impossible to attain in a factory owned by a profiteer foreigner. But beyond working conditions, which would surely be better in such employee-owned factories, the main difference would be that the wealth generated by such an enterprise would accrue directly to the workers, instead of leaving the country or flowing to Haitian elites. Profits would be invested in other productive or socially responsible projects, and the higher wages workers would pay themselves would go to buy goods and services from other working Haitians.

I have read that a Haitian sweatshop laborer earning $3US a day produces suits that can sell in the US for $550. Now I imagine that no one worker actually makes an entire suit in a day, but rather hundreds of sleeves, or lapels, or sews on hundreds of buttons, all in an integrated assembly line. But even if we suppose that a garment factory turns out the modest average of one of these suits per worker per day, it is easy to see the profit potential that so attracts Bill Clinton and the investors he courts for Haiti. A few dollars in labor, plus a few dollars in materials, and a few dollars in shipping, and you've got a product that must sell for at least a hundred dollars wholesale. I've heard of return on capital of 22%! If workers were in charge of a factory, this math wouldn't change much, except maybe instead of $3 a day they'd earn $10US. The factory would take a little hit on the profit margin, but they'd be their own shareholders, so it wouldn't matter! If times got tough, or prices went down, the workers could decide how to weather it, and would in fact be more able to resist adverse economic circumstances than outside investors looking to maintain a certain return on their investment.

So what are the practical steps to make such a dream a reality? I should think the first would be to obtain some seed money, from interested investors or a grant in some change the world contest. This money could then be leveraged with credit from Haitian banks, the Inter-American Development Bank, or other such large, institutional investors. One would then buy a factory, gather together a group of workers (preferably working in collaboration with an existing grassroots group, like a peasant association or worker union), and set to work running the factory. This would include creating the workflow plan of the factory, lining up suppliers, and most importantly courting buyers, preferably high-end fashion retailers whose tariff savings would be more significant if their luxury clothing were coming to them from Haiti as opposed to another country without special tariff treatment in the US. Over the course of a few years the factory would pay off any loans from banks or private investors, and then the operation would truly belong to the workers. In time they could expand vertically, producing first the fabric they assemble into clothes, then spinning the thread used to weave this fabric, and finally buying and ginning cotton directly from Haitian producers. It would be an engine of integrated local development.

This idea should attract support from all political sectors. It is libertarian and pro-market in its contention that free enterprise can benefit people and that credit and opportunities for risk-taking should be available to everyone, not just to economic and political elites with inordinate amounts of influence. It is progressive and pro-worker in promoting a more even distribution of wealth and generalized economic development for a poor country. It follows the lines of Clinton's proposals for Haiti to a letter, taking their spirit even further. The only people who would object to such an idea would be current sweatshop owners who might see their profit margin threatened by emboldened workers demanding a more just wage. But even these could be won over. Many sweatshop owners are Haitians themselves, and recognize (more now than ever) that their personal well-being is impacted by the generalized poverty of their country. While profit is surely important to such Haitian elites, also important is the development of their country and the dignity of their countrymen (as well as the purchasing power of these countrymen!). Surely they would be willing to raise wages slightly if it meant sustainable profits for them and a better life for their country. As for foreign sweatshop owners, I don't see any silver lining to my proposal. It would cut into their all-important profit margin if it incited their workers to demand better wages. But given the time frame that would be necessary to make my idea a reality and eventually a major social force, and the mere 10-year window of special US tariff treatment of Haitian garments, many foreign investors will likely be gone from Haiti before a worker cooperative garment factory would have time to affect them significantly.

I want to close by stressing once again the impossibility of any model for economic development based on low wages, outside capital, and concentration of wealth. I know that Bill Clinton's sweatshop chorus will remain an important voice in the discussions of Haiti's future development, and I accept that foreign- and elite-owned sweatshops will be part of Haiti's future, as they are part of its present. In fact, I have no grand moral problem with these sweatshops. Presumably their owners are unpleasant, exploitative people, but I agree with their basic argument that people accept what they pay because there are no better options. In the face of a total lack of government and donor support for peasant agriculture and small businesses, some desperate people will of course take low-wage jobs at sweatshops, and presumably these people take the jobs because they have no better alternatives and welcome the $3US a day they can get there. But if we can change the paradigm such that not only Haitian agriculture (see my posts on Haitian agrarian reform) but also Haitian industry is more capable of providing a dignified livelihood to people, people will no longer have to make this horrid choice between pauperdom or working in sweatshops. As with the much-vaunted public health care option in the US that would ostensibly force private insurers to play fair, providing a better, more just form of worker-owned garment factory in Haiti will force even private sweatshop investors to give their workers a better deal.

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