Maquiladora Sweatshops in Latin America: An Academic Perspective Using Economic Theories

Sweatshops are factories or work environments that are subject to extreme exploitation, including the absence of a living wage, long work hours, poor working conditions such as health and safety hazards, arbitrary discipline such as verbal or physical abuse, and fear and intimidation when workers speak out or attempt to unionize.[i] To the average American consumer, these circumstances have been compellingly described in the media. In 1995, the country was aghast when third-world type slave labor was discovered in El Mission Viejo, California, and in 1996, attention focused on sweatshops operated under the names of stars such as Kathie Lee Gifford.[ii] Human rights organizations and unions have waged media campaigns against companies that they believe unjustly exploit factory workers in the interest of excessive profits. Consumers are becoming increasingly aware of the debate and are demanding changes to account for better working practices as defined by the International Labor Organization and other regulating bodies. Despite common intuition that a workplace with such horrible working conditions should be deemed unethical and therefore prevented, sweatshops still continue to grow across the world, particularly in developing countries. Economists in particular, contend that not only do sweatshops bolster economic development, they also benefit the world’s poor.[iii] This paper will first analyze why sweatshops exist, particularly the maquiladoras in Latin America, and then proceed to evaluate its ethics using the moral theories of utilitarianism and deontology, as well as CSR theories by Dayton and Friedman, suggesting that sweatshops can be deemed ethical or unethical depending on its varying community impacts, moral judgments, and underlying assumptions.

Maquiladora sweatshops, foreign-owned assembly plants that produce export textiles and other products, exist because they work well in the socio-economic conditions found in developing countries. In places with few employment options, a lack of social services, and impoverished living conditions, sweatshops are viable places to work. For example, there had been an explosion in the number of Maquiladoras in Mexico and Guatemala. In late 1991, maquiladora exports had risen 100-fold over a six year period in these two countries. As of 2006, maquiladoras still account for 45 percent of Mexico’s exports.[iv] In today’s fact passed industry, sweatshops provide companies such as Guess, Wal-Mart, Van Heusen, K-Mart, Disney, and other companies the strategic advantage of cutting costs to generate higher profits. These economic gains are not only valued by corporations and their shareholders, but by governments as well.

On the macrocosm, governments and other political associations allow and encourage the promulgation of sweatshops because they generate tax revenues and other sources of income. These workplaces may also be seen as forces that facilitate economic development because they bolster a nation’s domestic market and export activity. The output of sweatshops at the macro-level brings about increased consumer spending, investment, and savings, thereby increasing GNP. Between 1990 and 2002, real value added by the Mexican maquiladora industry grew at an astounding annual average rate of 10%.[v] Since 1984, employment in maquiladoras has risen from 180,000 workers to 1.1 million workers, or to over one-quarter of Mexico’s total manufacturing labor force. By 2000, the maquiladora sector generated 48% of Mexico’s exports and 35% of the country’s imports.[vi] These plants remain concentrated in Mexican states along the Mexico-U.S. border, which in 2002 accounted for over 80% of total maquiladora employment.[vii] On the microcosm (i.e. individual level), sweatshops can help illiterate people lacking marketable skills to enter the global industrial marketplace. A job in a sweatshop is often preferred to no job at all. Sweatshop jobs are also preferred to even lower paying or illegal jobs such as farming, prostitution, or trash collection. In summary, sweatshops exist because they are a viewed as a “necessary evil.[viii] While sweatshops can be justified along economic lines, they can be condemned based on law and acting unethically.

Sweatshops often violate laws and limit the bargaining power of the workers to the point that the workers can easily be exploited. 80% of the maquiladora workers are women as research has shown that they are generally more patient and not as aggressive and difficult to deal with as men.[ix] Maquiladoras construct their female workforce under the notion that female workers are temporary workers, therefore justifying lower wages and creating a high turnover rate of laborers.[x] They are generally paid between $1 to $2 dollars a day for working 16 hour days.[xi] In the Guatemalan economy, an income of $6 provides for the minimum standard of living. Workers are routinely forced to work until midnight and then are locked inside the factory so they can begin work early the next morning. The buildings have almost no windows, fans, exits, or heat, and employees do not get health or safety training. Further, workers are exposed to chemicals and dust when working with dyed cloth, and there are frequent reports of sexual or physical abuse, and discrimination. Human Rights Watch reports that in Mexican maquiladoras, US companies such as Johnson Controls and Carlisle Plastics require female job applicants to submit to pregnancy screening and those who test positive are not employed. The case is the same for Guatemala and this form of pregnancy discrimination is a violation of both Mexican and Guatemalan Law.[xii] Additionally, there have been cases where sweatshops have suppressed, often with the assistance of the host country government, efforts to unionize the labor force.

Union-busting is a common feature of sweatshops as it helps cut operating costs. A 2000 report by the El Salvadoran Ministry of Labor found that of the 229 maquiladora factories operating at the time (employing approximately 85,000 workers), not a single union existed with a collective contract. Any attempt to unionize was met with mass firings and subsequent blacklisting. These anti-unionization efforts were, in fact, a violation of El Salvador national law. But this was insufficient to prevent their widespread violation as many sweatshop-hosting countries lack even this formal legal protection.[xiii] In Mexico, some maquiladoras lack proper waste management facilities and the ability to clean up disposal sites, which is why some of the hazardous waste are illegally disposed of. Environmental hazards associated with some maquiladoras include polluted rivers and contaminated drinking water. According to the Southwest Consortium for Environmental Research and Policy (SCERP), all streams and rivers in the border region have been ecologically devastated as a consequence of the maquiladora industry.[xiv] Yet sweatshops continue to exist partly because there is no definitive theory that can justify their continued use and the emphasis on profits.

Dayton argues that it is the Corporate Social Responsibility (CSR) of a business to serve society. CSR may be considered as the manner in which businesses engage their stakeholders including shareholders, employees, customers, suppliers, governments, NGOs, international organizations, as well as the natural environment through policies, processes, and procedures. Dayton states that one of an organization’s primary goals is its obligation to operate in a socially responsible manner. Social responsibility however, can be arbitrary, based highly on different cultures, ways of thinking, and ethical justifications. For example, companies such as BP may be notorious for damaging the environment through oil spills but the company also gives employees good compensation packages. While Dayton argues that CSR helps the community by actively reaching out and perhaps even venturing out of the business’ core competency, the economist Friedman, from a lineage of thinkers traced to Adam Smith, argues that CSR is to maximize profits. While it may be true that sweatshops have an ethical obligation to make a profit for the owners of the enterprise, this obligation does not automatically trump other ethical obligations. Indeed, one of the primary tasks of a company manager is to balance various competing ethical obligations to stakeholders. Keeping these arguments in mind, the social responsibility of maquiladora sweatshops can be analyzed in relation to ethical frameworks in the following paragraphs.

Because utilitarianism is highly subjective and relative, proponents of this theory can both justify and condemn ethics based on different judgments of how to maximize utility. The economist Jeremy Bentham and Stuart Mill first proposed utilitarianism as a theory that determines right and wrong according to what maximizes aggregate utility. The economists use a cost-benefit analysis by pointing out that workers — primarily women in maquiladoras — do not appear to perceive themselves as harmed by working there, based on their alternatives which are worse.[xv] While utilitarianism may be used to argue against sweatshops, it can also be used to justify sweatshops along the lines of how the pleasure or happiness to the majority outweighs the pain or harm to the minority.[xvi] For example, the suffering of maquiladora workers may be offset by even greater happiness of consumers around the world from purchasing the end products, and by company executives and stockholders who benefit from higher pay, dividends, and capital appreciation. Increased business activity and export growth may also harm workers in the short run but in the long run, the public sector will most likely try to retain high levels of business activity by building and expanding on essential infrastructure such as power plants, sewage and water treatment facilities, phone and internet workers, public transportations and more services.[xvii] Individuals who work in sweatshops choose to do so; they might not like working in them and might strongly desire that their circumstances were such that they did not have to do so. Nevertheless, the fact that they choose to work in sweatshops is morally significant. Workers’ labor consent should lead us to abandon certain moral objections to sweatshops, and perhaps even to view them as, on net, a good thing.[xviii] On the macrocosm, by lowering costs of production, the practice of sweatshops has brought about more affordable goods not just for first world countries, but also third world countries like Guatemala.

Deontologists who follow the Kantian categorical imperative would argue that there are universal principles that govern moral behavior, thus sweatshops are unethical because they violate certain human rights. If the rules that govern sweatshops were replicated on a universal level, there would be widespread misery and ubiquitous worker abuse. For Kant, an object that has dignity is beyond price. Employees have a dignity that machines and capital do not have. They have dignity because they are capable of moral activity. As a matter of consistency, a person who recognizes that he or she is a moral being should ascribe dignity to anyone who, like him or herself, is a moral being.[xix] Deontologists unlike utilitarians believe that intentions matter so there may be a slight difference between companies setting up maquiladoras with the goal of genuinely bettering the community and those with the goal of exploiting workforces and abusing poorly developed laws that do not sufficiently protect workers. Overall, deontologists may object by arguing that sweatshop workers’ consent to labor conditions is not fully voluntary, that sweatshops’ offer of additional labor options is part of an overall package that actually harms workers, that even if sweatshops labor benefits workers it is still wrongfully exploitative. Deontologists may also try to undermine the voluntariness of sweatshop workers’ consent by pointing to their ignorance, or lack or rationality in making this decision. Workers might lack knowledge about relevant alternatives such as better employment or chances to receive valuable education or training or may not know various facts about employment conditions at the sweatshop including its danger, what their managers will be like, and whether they will be able to unionize. Even if workers have all the relevant knowledge, they might still fail to act rationally if they do not give this knowledge the proper weight in their deliberation. A worker might unreasonably devalue the risks associated with working in the proximity of toxic chemicals, or might over-value the benefit of increased income.

While moral theories are helpful in building arguments against sweatshops, all of them appear vulnerable to manipulation and can be used almost as easily to defend sweatshops or to condemn them. The question of ethics is further complicated as different countries, cultures, and people have different views of morality and ethics. While it may be ethical for young workers to help their parents plow the land in developing countries, developed countries may see it as child abuse. As a result, part of the reason why sweatshops persist is that moral philosophy does not offer a robust and uniform argument against them. However, sweatshops represent a race to the bottom and as a result, there has been a tendency for companies to relocate to countries with cheaper socio-economic and political environments. Since globalization and physical restructuring have contributed to the competition and advent of low-cost offshore assembly in places such as China and countries in Central America, maquiladoras in Mexico have been on the decline since 2000. According to federal sources, approximately 529 maquiladoras have shut down and investments in assembly plants have decreased by 8.2% in 2002. Despite the decline, there still exist over 3,000 maquiladoras along the 2,000 mile-long United States–Mexico border, providing employment for approximately one million workers, and importing more than $51 billion in supplies into Mexico.[xx] Firms clearly hold the power to influence the living conditions of the lives of their workers.[xxi] A likely key to the long term eradication of sweatshop labor practices lies in recognizing the webs of stakeholder relationships and leveraging those relationships to motivate change.

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Endnotes

[i] Radin, Tara. “The Struggle against Sweatshops: Moving toward Responsible Global Business.”Journal of Business Ethic 66.2 (2006): 265. Springer. Web. 20 Oct. 2013.

[ii] Rasner, Jack. “Using the “Ethical Environment” Paradigm to Teach Business Ethics: The Case of the Maquiladoras.” Journal of Business Ethics 16.12 (1997): 1340. Web. 25 Oct. 2013.

[iii] Arnold, G and Laura P Hartman. “Workers Rights and Low Wage Industrialization: How to Avoid Sweatshops. Human Rights Quarterly. (Aug 2006) 677. Web. 20 Oct. 2013.

[iv] Gruben, William C. and Sherry L. Kiser. The Border Economy: NAFTA and Maquiladoras: Is the Growth Connected?

[v] Hanson, Gordon. “The Role of Maquiladoras in Mexico’s Export Boom. Retrieved 25, Oct 2013 from http://migration.ucdavis.edu/rs/more.php?id=8_0_2_0

[vi] Hanson, Gordon. “The Role of Maquiladoras in Mexico’s Export Boom. Retrieved 25, Oct 2013 from http://migration.ucdavis.edu/rs/more.php?id=8_0_2_0

[vii] Hanson, Gordon. “The Role of Maquiladoras in Mexico’s Export Boom. Retrieved 25, Oct 2013 from http://migration.ucdavis.edu/rs/more.php?id=8_0_2_0

[viii] Radin, Tara. “The Struggle against Sweatshops: Moving toward Responsible Global Business.”Journal of Business Ethic 66.2 (2006): 265. Springer. Web. 20 Oct. 2013.

[ix] Rasner, Jack. “Using the “Ethical Environment” Paradigm to Teach Business Ethics: The Case of the Maquiladoras.” Journal of Business Ethics 16.12 (1997): 1340. Web. 25 Oct. 2013.

[x] Pantaleo, Katherine (2010). “Gendered Violence: An Analysis of the Maquiladora Murders”. International Criminal Justice Review 20 (4): 349365. doi:10.1177/1057567710380914. Retrieved 14 March 2012.

[xi] Rasner, Jack. “Using the “Ethical Environment” Paradigm to Teach Business Ethics: The Case of the Maquiladoras.” Journal of Business Ethics 16.12 (1997): 1340. Web. 25 Oct. 2013.

[xii] Arnold, G and Laura P Hartman. “Workers Rights and Low Wage Industrialization: How to Avoid Sweatshops. Human Rights Quarterly. (Aug 2006) 687. Web. 20 Oct. 2013.

[xiii] Zwolinski, Matt. “Sweatshops, Choice, and Exploitation.” Business Ethics Quarterly, 17.4 (2007): 689–727. Philosophy Documentation Center. Web. 20 Oct. 2013.

[xiv] Sklair, Leslie. Assembling For Development: The Maquila Industry in Mexico and the United States. p. 94.

[xv] Rasner, Jack. “Using the “Ethical Environment” Paradigm to Teach Business Ethics: The Case of the Maquiladoras.” Journal of Business Ethics 16.12 (1997): 1343. Web. 25 Oct. 2013.

[xvi] Radin, Tara. “The Struggle against Sweatshops: Moving toward Responsible Global Business.”Journal of Business Ethic 66.2 (2006): 267. Springer. Web. 20 Oct. 2013.

[xvii] Radin, Tara. “The Struggle against Sweatshops: Moving toward Responsible Global Business.”Journal of Business Ethic 66.2 (2006): 265. Springer. Web. 20 Oct. 2013.

[xviii] Zwolinski, Matt. “Sweatshops, Choice, and Exploitation.” Business Ethics Quarterly, 17.4 (2007): 689. Philosophy Documentation Center. Web. 20 Oct. 2013.

[xix] Arnold, Dennis, and Norman Bowie. “Sweatshops and Respect.” Business Ethics Quarterly13.2 (2003): 222. Philosophy Documentation Center. Web. 20 Oct. 2013.

[xx] Villalobos, J Rene, et al. Inbound for Mexico. p. 38.

[xxi] Radin, Tara. “The Struggle against Sweatshops: Moving toward Responsible Global Business.”Journal of Business Ethic 66.2 (2006): 268. Springer. Web. 20 Oct. 2013.