Winners and Losers – Trends and Forces of Global Poverty, Resource Curse & Sweatshops (Week 1) > 2. Global Poverty Reduction > Dean Joel Hellman on the Trends in Global Poverty
- We are very pleased to have today our new Dean of the School of Foreign Service, Joel Hellman, who comes here from the World Bank with a great deal of work on poverty reduction and the forces of globalization.
- Turning first to poverty reduction, many of us think that poverty has just been getting worse and worse.
- How would you characterize what has been happening in recent decades with regard to poverty reduction? I’m glad you asked the question, Ted, because there are real misperceptions about what’s happening in terms of trends on global poverty.
- Over the last 15 years, and certainly if you take even a larger perspective over the last 25 to 30 years, we are in an era of one of the sharpest reductions in extreme poverty in human recorded history.
- The extreme poverty rate is defined by the World Bank as a generally accepted definition of living on $1.25 a day.
- It’s an extraordinary low figure, but at least it provides a benchmark for looking at the most extreme poverty globally, and what we’ve seen is a sharp reduction, from about 40% of the world’s population living on less than $1.25 a day, that has gone down to around low 20, so almost a halving of the figure of the global poverty rate, which is an extraordinary achievement and something we haven’t seen in any decade, in any sense, in any period that we’ve been looking in recorded history.
- The dominant trend and the dominant driver of the trend in poverty reduction is very, very sharp reductions related to economic growth and rapid economic growth, in particular, in some of the largest developing world countries- In China, in India, in Indonesia, in Brazil, in Turkey, in Pakistan, Bangladesh.
- The bulk of the poverty reduction has gone on in those large populous nations.
- There’s tremendous vulnerability of people around the poverty line, so the ability and the likelihood and the chances of slipping back into extreme poverty, including in India and China are still high.
- I want to turn to that next, but some of our other speakers have talked about, not just the ones hovering around the poverty line, but actually the growth of big numbers in the middle class.
- So the middle is- in Kenya where I lived for several years, what constitutes the middle would look here in the United States or in Europe like poverty conditions elsewhere, but in comparison to especially the extremes of rural poverty, the hunger, health problems, and schooling problems associated with that, moving in just to another strata where you have access to health care, access to education, not facing severe hunger, malnutrition, other issues, can catapult someone into what would seem there to be the middle class.
- Our MOOC students are always asking, what are the gender implications of this growing out of poverty? And it’s an absolutely central question, and really the role of women and the shift of women out of poverty is really an essential aspect of the overall poverty reduction story.
- First, you do have more and more women participating in the workforce, especially in those countries where you see the sharpest reductions in poverty, in China, in India.
- You know, remittance is a really important story in poverty reduction globally.
- The integration in the global economy that we were talking a little bit about earlier, one of the ways that it has sort of shaped poverty reduction is through the transfer of funds from developed countries to developing countries, which we called remittances, from populations that have moved the temporary worker working or where families have worked.
Winners and Losers – Trends and Forces of Global Poverty, Resource Curse & Sweatshops (Week 1) > 2. Global Poverty Reduction > Dean Joel Hellman on the Challenges for Sustainable Development and Security: The Impact of Conflict
- You’ve already mentioned the remaining poverty, and you brought up war-torn or conflict states.
- I’ve presented data, which I hope you can present here, that if you look at the share of the population in extreme poverty, in fragile and conflict-affected states- those that have had persistent violence, either through civil war or domestic violence and crime- what you should see is the poverty rate is not going down in those countries.
- If we project out to the next 15, 20 years, what you’re going to see is a larger share, certainly of the global poverty story, will be concentrated in those countries that are impacted by violence and conflict.
- So there’s a big shift in the extreme poverty story from being in large, populous countries that are now growing fast to being in a smaller group, so smaller countries, with persistent poverty problems related to conflict.
- Could you give us some country examples? I know there have been several places where you have worked directly in war-torn states.
- We generally define about 30 to 40 countries would be in this special group of countries that are affected by conflict, or that have long-term fragility of basic state institutions.
- So you have countries in active conflict, like Afghanistan.
- You have countries in the Middle East that have had persistent conflict, like Iraq or Yemen.
- Of course, you have a whole host of Sub-Saharan countries, which make up the larger share of these conflict-affected countries.
- You also have some very high-crime and violence-affected countries in Latin America and Central America- Guatemala, El Salvador.
- Then you have a number of countries in the Pacific, small island states with extreme fragility that are impacted.
- So you have a very, very wide range of countries in all parts of the world that are affected by this.
- The world was divided into humanitarian assistance, what we did when countries were facing disaster, natural disasters, or right in the immediate aftermath of conflict, where you have refugees and the necessity of feeding populations that are extremely vulnerable.
- You tended to do those in peaceful countries where there wasn’t conflict, and where you can have a long-term engagement and presence.
- We need to do that not just with the experience and the lens of the most developed countries- European countries, the United States- but we really need to be learning the lessons from other countries that have themselves come out of conflict and begun the task of poverty reduction.
- So we have a lot to learn from those countries and many countries like that.
GeorgetownX: NFX523-03x Globalization’s Winners and Losers
- So we lead off with one of the most controversial issues in the spread of trade investment and technology across borders and that is foreign direct investment in natural resources, like oil and gas, copper, diamonds, gold, coal, and the problem of the resource curse.
- Now, if you were to open a textbook from years ago, you would have found that natural resources in abundance are a source of growth and wealth for developing countries, or so it was supposed.
- Why not? If you have oil, if you have diamonds, if you have gold and copper, can’t these be used to help develop the country? But if you turn to contemporary textbooks, the first chapter is liable to be about the resource curse, meaning that the revenues from foreign investment in oil and gas and coal and copper get siphoned off in corruption.
- The readings that I have assigned show some studies that suggest countries that are richer in resources grow more slowly, not more rapidly, but more slowly because of the burden of having the resource curse.
- So the question is, how can resources be used to benefit broad economic and social development and avoid the corruption and authoritarian rule? The key issue is always going to be the local population, the local leadership, the local press, and NGOs, non-governmental authorities that try to promote openness and transparency.
- Before we leave the resource curse, you will see from the readings there is a phenomenon called “Dutch Disease.
- ” This is also part of the resource curse, which means that the exchange rate for the currency of resource-rich countries becomes overvalued, and this hurts the exports of other industries.
Winners and Losers – Trends and Forces of Global Poverty, Resource Curse & Sweatshops (Week 1) > 3. The Resource Curse > EITI Lecture
- The most prominent external source of support for transparency and accountability is the EITI, the Extractive Industry Transparency Initiative.
- What you will find is there are 34 countries signed up to be members of the EITI, there are 70 corporations, international oil companies and mining companies that take part in this.
- In order for a country to be considered compliant with the EITI monitoring system, first, the companies that invest in that country publicly report any payments they have made to the government.
- Third, the EITI Monitor compares the payments with the receipts to assess if there are any discrepancies.
- Well, EITI is a voluntary international organization.
- Whether or not EITI works depends upon the citizens, the leaders, the press, the legislature.
- For your information, both Ghana and Mongolia are members of EITI.
- I have asked you all to look at the website of the Extractive Industry Transparency Initiative, EITI.
- The EITI stands for the Extractive Industry Transparency Initiative, and it’s a collaboration of government entities, companies, and civil society to increase transparency of companies within the resource extraction.
- How does it work? I believe the governments disclose the receipt of the payments, and corporations and companies disclose their payments to the EITI, and the EITI reconciles both sides to see if there’s any discrepancies.
- So you have an intermediary in the country that takes the reports of tax payments and other payments by the companies, takes the report from the Treasury, from the Internal Revenue about what payments they received, and see if they mesh, or if there’s $5 million missing, or $10 million missing? Is that kind of the way it works? Exactly.
- I have asked that all of you look at EITI on the website.
- Ghana and Mongolia are both EITI members.
Winners and Losers – Trends and Forces of Global Poverty, Resource Curse & Sweatshops (Week 1) > 3. The Resource Curse > Guest Lecturer: Scott Taylor on the Resource Curse
- I’ve worked throughout the continent, starting in southern Africa, but have also worked in West Africa and East Africa, particularly recently.
- In terms of political economy, I’m particularly interested in state- society relations, issues of governance and corruption, and with a special focus on business- state relations and the relationship between the private sector and the public sector.
- Nigeria, 90% dependent on oil for its exports, for example.
- So in terms of the particular challenges from the resource curse in terms of the link between resources and the abuse of the revenues from those resources, i.e. corruption, the worst offenders are the petro-states of Africa, the major oil producers.
- Historically, that’s been Nigeria which is the leading oil producer on the continent, followed by Angola, and much of the West African coastal oil producing countries- Gabon, Equatorial Guinea, Congo, and so forth.
- Increasingly, other economies around the continent are discovering oil.
- The fear, of course, is that since oil has been such an elixir, such a corrupt resource historically in Africa, that these new oil economies are also going to be plagued by some of these resource curse issues.
- Nigeria, Angola, Gabon, Equatorial Guinea have been some of the worst offenders in terms of corruption.
- Dollars that have been earned from oil exports, instead of being channeled into the national economies of these countries, have, again historically at least, been channelled into the pockets of elites.
- So what you have is a tremendous divide between the political class, those with access to these oil revenues or rents, and the mass of the populous.
- Scott, you’ve mentioned Nigeria as a particular case.
- It had some promising examples in it of more civilian control over oil revenues, and better distribution mechanisms, and so on.
- On the other hand, corruption is still a deeply entrenched problem in Nigerian politics, not just in the oil sector.
- The Transparency International doesn’t rank Nigeria among the 10 most corrupt in Africa in its most recent survey.
- At the same time, we need to think about the deeply entrenched interests around oil, around petroleum, both at the international level and the Nigerian level of how difficult it is to eradicate some of these problems.
- Just by way of history, in the early 1990s under the military dictatorship of Ibrahim Babangida an estimated $12 billion went missing in oil revenues.
- Under the subsequent military regime of Sani Abacha, arguably the most brutal in Nigeria’s history, $3.5, $4 billion, estimates vary, went missing again.
- This was largely derived from oil revenues, again, that was accumulated by state elites.
- Largely it illustrates that tremendous amounts of wealth have been wasted in Nigeria and have been siphoned off, exported out of the country instead of used domestically.
- So with the transition to civilian rule in 1999, there was a lot of hope that Nigeria had turned the corner.
- Again, a new set of rules and regimes would provide oil revenues to be invested more locally.
- There was a revenue sharing agreement that came in in 1999 that was supposed to direct more resources, particularly to the south of the country which is the major oil producing region.
- There are still tremendous examples of corruption, both at the state level, and the federal government is still the leading collector of international oil revenues.
- So corruption remains a entrenched problem in Nigeria, particularly in its oil sector.
- There’s a new oil bill, Petroleum Industry Bill, the PIB that’s being debated in the Nigerian legislature, that hopefully will introduce some new measures of transparency in revenue sharing and so on.
- Some of these things bode well for Nigeria, but there’s still very deeply entrenched problems.
- As Africa’s largest oil producer, a lot as I mentioned, 150,000 barrels or so just simply goes missing.
- The EITI- Nigeria’s a signatory, and it’s been deemed compliant with at least some of the initial phases of EITI compliance.
- These are small steps though, and it’s going to take a generation or more to really get to the bottom of eradicating corruption in the petroleum sector in Nigeria.
Winners and Losers – Trends and Forces of Global Poverty, Resource Curse & Sweatshops (Week 1) > 3. The Resource Curse > Guest Lecturer: Scott Taylor on the Case of Botswana
- Scott, some of the readings in this course have suggested that Botswana is an exception, that Botswana has actually done quite well.
- What is your appraisal of Botswana? Well, Botswana has done well.
- Again, if we look at the various international metrics, whether it’s Transparency International, on control of corruption issues, democracy and governance, Botswana is at the top of the charts in Africa.
- One of the reasons why Botswana has not been enmeshed in the resource curse is, in part, because of the kind of resources that Botswana has.
- Diamonds, in Botswana’s case, are different than oil, which is- the nature of international oil markets makes it naturally conducive to corruption and leakages.
- Whereas with diamonds, it’s a much more tightly controlled commodity.
- 75% of Botswana’s export revenues are generated from diamonds.
- I should just say, parenthetically, that diamonds aren’t always different, because we’re familiar with conflict diamonds and the case of Zimbabwe, which now has a lot of diamond reserves.
- So Botswana is exceptional, not just because of diamonds, but also because it’s Botswana.
- What do I mean by that? Botswana has a history of democracy and transparency and good governance.
- It is also- the Botswana government is in partnership in the leading diamond producer with De Beers, the South African corporation, forming a company called Debswana.
- Debswana has been a monopoly but a positive influence on the Botswana political economy.
- So all these factors plus the fact that Botswana has a very small population, less than two million people, means that it is a more easily governed state than a place like, for example, Nigeria, with it’s 160 plus million very ethnically diverse.
- Botswana, in contrast, is very ethnically homogeneous.
- All of these factors help to explain Botswana’s better utilization of its natural resources and its better channeling of the revenues from those natural resources into productive ends, infrastructure development, education, health care, and so on.
Winners and Losers – Trends and Forces of Global Poverty, Resource Curse & Sweatshops (Week 1) > 3. The Resource Curse > Jean Francois Seznec on Saudi Arabia and Lessons on Managing the Resource Curse
- We are very pleased today to have professor Jean-Francois Seznec come on our MOOC.
- I went to work for some Saudi entities, started a couple banks in New York, and I’ve been a consultant to the Gulf companies, to the Gulf governments, about the Gulf and mostly industrial policy in the Gulf.
- What has happened in Saudi Arabia? And how has Saudi Arabia managed the resource curse issues? Of course, it’s a very difficult question to answer, because there’s so many possible answers, and it’s all theory, really.
- I think the big difference has been the fact that in the early ’70s, the Saudis really sat down and thought about how to avoid this problem.
- How has that been avoided in Saudi Arabia? Well it hasn’t been totally avoided, but at least they were helped by the fact that there was so much resources, so they could divvy up the resources.
- At Saudi Aramco, which is the largest oil producer in the world, Saudi Aramco does not have a single member of the royal family in the company, or even on the board of directors.
- SABIC, which is now the second largest chemical company in the world, only has one prince on the board of directors.
- Mind you, he’s the chairman, but still, the real power is with the rest of the civil servants who manage the company, et cetera, et cetera.
- Most of these managers have been trained in the United States, at the higher level, they always have PhDs from the United States, and a lot of them in engineering.
- The present oil minister, who is always a non-royal in Saudi Arabia, the present oil minister was trained in the United States, and he started in the company at Saudi Aramco as a tea boy, and then he rose up through the rank because he was so brilliant.
- They sent him to the States to do his BA and his masters and his Ph.D, he became head of Aramco, of Saudi Aramco, and now he’s minister of oil.
- The main company, Saudi Aramco in particular, is very proud of the fact that they hire women, that they train women as engineers and what not.
- Even though the present King Abdullah very much wants to encourage women to enter the workforce, it is still a very small number.
- This includes Saudi women or European and American women? No, I’m talking Saudis, here.
- Now the state companies will push to hire Saudis, they will train the Saudis.
- There is a rumor, whether it’s true or not, that Saudi Aramco, when they hire somebody, have a budget of $1 million to train that person.
- If you look out to Latin America, or to Africa, or to countries in Asia, what are the lessons? In China, we have state oil- we have state companies, chemical companies, big IT companies, phosphate companies.
- What are the lessons for these other companies that they might learn from Saudi Aramco and SABIC? Well, I think the main lesson is the companies should try to make sure that they have independence of management.
- Every time there’s a shipment of oil, a certain percentage of that money goes into the account of the company, who then manages its accounts as if it were Exxon Mobile.
- Is it transparent and accountable? I mean- Saudi Aramco I’m not sure.
- Saudi Aramco is still state owned and doesn’t publish statements, though.
Winners and Losers – Trends and Forces of Global Poverty, Resource Curse & Sweatshops (Week 1) > 4. Sweatshop Issues > Sweatshops Lecture
- Sweatshops occur when foreign companies invest in low-wage factories that produce garments, footwear, toys, and the like.
- What kind of standards are relative? That is to say, the treatment of workers can vary from country to country.
- As well as very low wages, in some countries it’s only a few dollars.
- Tom, what do you think of? Yeah, in addition to that, just poor working conditions, in that the standard set at each factory, or even using child labor as a means of production.
- There have been some notorious factory fires in situations where the exits were locked shut or there was only one exit.
- What kinds of labor standards and labor treatment do you think should be universal? That is to say, every person, independent of where they are, should be able to enjoy these standards.
- What kind of standards do you think are relative? That is to say, they can vary depending upon how developed the country is.
- I think child labor, as Tom mentioned, and forced labor, should be standards that every country abide by internationally, in addition to the freedoms for the workers to be part of collective bargaining.
- What do you think? Yeah, I think to add on to the, maybe objective universal standards, I think eliminating discrimination in hiring processes and employment is an important one as well.
- Living wage might vary depending on each country you go to.
- Now I ask you to go online and look at the website of the ILO, the International Labor Organization.
- Having to do with nondiscrimination, having to do with forced labor, and having to do with the tricky issue of child labor, and consider how to fit these in with the treatment of workers in low-wage factories.
- Many of the abuses that we are going to consider are gender-related because in garment and apparel factories, hundreds, and sometimes thousands, of young women are employed.
- I discovered, as I have researched the issue of sweatshops, that there is actually a gender literature that is very favorable to employment of women in low-wage factories like apparel, and footwear, and toys, because the statistics show that young women in these factories are better educated, have more knowledge about health, have specifically better knowledge about reproductive health.
- That’s in comparison, again, with women in the village where the alternatives are primarily working on farms, in the fields, or in domestic labor.
- There is nothing more opaque or more subject to potential abuse than unmonitored domestic labor in rural households.
- So you will find that there is a tension here between those who want to prevent sweatshop abuses, but those who want to encourage hundreds and thousands and tens of thousands of jobs without abuse for young women and also young men in developing countries.
- The Workers Rights Coalition and the Fair Labor Association are the two biggest organizations in the United States.
- So much like in the resource curse, in the sweatshop area, there are external sources of help to assist with the monitoring of good labor standards.
Winners and Losers – Trends and Forces of Global Poverty, Resource Curse & Sweatshops (Week 1) > 5. Wages > Minimum Wages and Living Wages Lecture
- One of the most sensitive issues in the sweat shop debate is how much should low skill workers in plants producing garments and footwear be paid? And how should their wages be determined? Well, wages are determined by the number of workers with a given set of skills and a given productivity level in relation to the number of jobs that need a particular set of skills and productivity level.
- You would expect in El Salvador that a person sewing in a garment plant would earn less than an office worker in El Salvador who knows Microsoft Excel, can do spreadsheets, can do budgets.
- So the higher productivity worker in El Salvador would be expected to earn a higher wage than the garment worker, just as in the United States, just as in Europe.
- Is this good for workers or not good for workers? Well, in a theme that’s going to be repeated several times in this course, it’s good for the workers who enjoy the higher minimum wage, but the question is are there fewer jobs because the minimum wage is too high to justify hiring people that have lower productivity? Let me give an example that I’m working on in South Africa.
- That’s because high school graduates who don’t have any skills, who have low skills, can’t get into the workforce because the rate that they would have to be paid is very, very high.
- I’m willing to work for less than what it takes to support a family of 4.1 people in El Salvador, but if the law says you have to pay that, then the factory owner will look for somebody who is more productive than the high school graduate.
- So are living wages good or bad for workers? We come back to the same theme.
Winners and Losers – Trends and Forces of Global Poverty, Resource Curse & Sweatshops (Week 1) > 5. Wages > Guest Lecturer: Scott Taylor on Youth Unemployment
- South Africa is a country that has benefited fairly, I think, from international attention in the post-1994 period- the rainbow nation, the economic miracle, the fact that the country didn’t fall apart when majority rule came in 1994, the leadership of Nelson Mandela.
- South Africa gets plauded as the most developed economy on the continent, as it certainly is.
- I think that’s largely deserved, but if you peel back the onion a little bit and you look in South Africa itself, you see so many entrenched problems that are quite worrying in terms of looking forward about what South Africa’s future looks like.
- If you look at the official unemployment in South Africa, it’s somewhere around 25%, which is an enormous number.
- So how do you put these people to work, particularly the youth, particularly since youth are the potentially most incendiary element of a society- arguably since the youth were principally responsible for much of the transition in South Africa in the first place, what are they going to do if they can’t work, if they’re idle, if they can’t find jobs? Frankly, I’m not sure what the solution is in South Africa, because over the last 20 years of independence, at least, the economy’s been largely unsuccessful at absorbing this population in terms of employment.
- We’ve got the problem of youth unemployment that is not improved by the influx, quite frankly, of skilled and unskilled labor from other African countries, particularly from Zimbabwe, which has had as many as 3 and 1/2 million of its residents residing in South Africa because of problems in Zimbabwe.
- So you’ve got a whole confluence of factors that’s complicated South Africa’s capacity to employ its citizens, and particularly its youth.
- Many of the private sector companies complain that the education system is insufficient, and that South Africans coming, even with high school graduates and those graduating from South Africa’s technical universities, technikons, and even some university graduates are insufficiently qualified for some of the positions that these companies are seeking.
- The strains in South Africa’s mining sector, which has historically been the engine of much of the economy, they’ve had some contraction in various sub-sectors of the mining industry.
- Some of the companies in South Africa have been quite proactive about youth training, about public-private partnerships around employment and job creation.
- It’s a very long-term effort to try to provide training, entrepreneurial skills, and new opportunities for South Africa’s youth.
Winners and Losers – Trends and Forces of Global Poverty, Resource Curse & Sweatshops (Week 1) > 5. Wages > Prescriptions Lecture
- I don’t want to leave this section on wages with the impression that there is nothing to be done to help workers with low skills.
- So in Central America, in Southeast Asia, or in Washington, the best thing is to support programs that can help workers to gain new skills and to improve the skills that they have.
- Another initiative is here on the Georgetown campus, students, and faculty, and alumni, and administrators who want the workers who produce the sweatshirts and ball caps with the Hoya logo on it to earn decent wages, maybe a wage premium- let us say, 125% of the going wage in Central America or in Southeast Asia.
- The same can be true of Levi Strauss or of other kinds of premium brands because they essentially have oligopoly rents- that’s to say, extra profits that can be taken from the consumer and dedicated to higher wages for the workforce.
- The employer can hire as many workers at the wages that their skill merit.
- The society as a whole decides that it wants to devote some of the tax income of the state to helping working families or working individuals who earn very low wages.
Winners and Losers – Trends and Forces of Global Poverty, Resource Curse & Sweatshops (Week 1) > 5. Wages > Guest Lecture: John Kline on Facing Sweatshop Issues
- This week, we have been paying attention to sweatshop abuses and already made reference to the fact that here on the Georgetown campus, there is great concern that sweatshirts and t-shirts that have the Hoya logo be produced in plants and in supply chains that avoid sweatshop abuses.
- So we are particularly pleased to have Professor John Kline, who plays a central role here at Georgetown in trying to manage the supply chains to avoid sweatshop abuses.
- Can you describe a little bit how universities tried to deal with the whole sweatshop phenomenon, John? Yes, Ted.
- I have been privileged to serve on the licensing oversight committee at Georgetown, whose job it is to monitor the apparel factories that produce Georgetown products to make certain that they are abiding by a code and that they are not produced in sweatshops.
- So from the point of view of your own experience, what kinds of measures can universities take to prevent against sweatshop abuses? Well, Ted, the university concern about sweatshops really arose in the late 1990s when there were student protests against the fact that many of the t-shirts, the sweatshirts that bore a university emblem were being made in sweatshops.
- These protests occurred first at Duke, Georgetown, Penn, a number of the other campuses.
- They brought pressure to bear on university administrations to develop codes of conduct for licensees, that is, for companies that want to license the use of a university emblem for their clothing.
- These codes dealt with basic labor issues, with wages and compensation to workers, nondiscrimination provisions, the right to form a union and negotiate a collective bargaining agreement.
- The apparel companies were resisting abiding by the codes at first, primarily claiming that they could not impose them on overseas factories.
- It took a concerted effort by a large number of universities requiring this kind of code compliance for a license for the apparel companies to finally agree to it.
- There are literally thousands of these factories around the world that produce apparel.
- We couldn’t be sure that the codes were being complied with.
- If we fast forward now to the present time, the disturbing fact is that the code provisions of the universities and the monitoring devices that are being used are simply inadequate.
- We’ve all seen the recent headlines coming out of Bangladesh and Pakistan of the tragic events occurring in sweatshops there.
- What’s needed now is another round of university reforms.
- The first is to reduce the number of companies that are granted a license to produce Georgetown apparel.
- If other universities take similar steps to improve their code standards and their monitoring procedures, this could be the beginning of a new challenge to the sweatshop culture that is still all too prevalent in the global apparel industry.
Winners and Losers – Trends and Forces of Global Poverty, Resource Curse & Sweatshops (Week 1) > 5. Wages > Guest Lecture: John Kline on the Case of Alta Gracia
- Yes, Alta Gracia is an unique, very innovative factory that produces apparel in the Dominican Republic.
- The factory resulted from a series of conversations a few years ago between Scott Nova, who’s the head of the Workers Rights Consortium, which is a university-funded monitoring group, and Joe Bozich, who’s the CEO of Knights Apparel, which is the largest domestic producer of collegiate apparel in the country.
- The objective of this project is to challenge and test whether or not a widely accepted assumption is really true, that sweatshops exist because paying workers higher wages and having better labor conditions would cost so much that a factory would necessarily become uncompetitive.
- Since its opening in 2010, Alta Gracia has paid a living wage to its workers that is calculated on a market basket of goods and services locally that would meet the basic needs of a worker and two dependents.
- The first way is that the workers really value their jobs, and as a result, productivity and quality control are very high.
- In contrast, absenteeism and worker turnover is almost nonexistent.
- On the broadest level, it would be a challenge to the view of many economists that sweatshops are simply a development level that all countries have to suffer through, and that, as one economist put it, “an individual worker has to choose between working in a sweatshop or living on a garbage heap.
- ” If Alta Gracia succeeds, the economists are wrong, and the workers should have a better choice than that alternative.
- If Alta Gracia succeeds, then other companies are going to have to explain why they also cannot offer better compensation and better work conditions.
- That’s the impact on the workers, their families, and the community around Alta Gracia.
- The workers will be quick to tell you that Alta Gracia means more than simply more money in their paycheck.
- For the workers, it’s about how they’re treated and respected in the workplace, that they are listened to and responded to whether they’re coming with a complaint or an idea for improvement, that they have the right to form a union and can negotiate directly with management, that they’re respected as a person rather than a part of the production process.
- At a minimum, a success at Alta Gracia will mean that sweatshops are not economically inevitable, that workers deserve and should have a higher rate of compensation, whether it’s called a minimum wage, or a fair wage, or living wage, or “salario digno,” a level of compensation that allows them and their families to meet basic needs.
Winners and Losers – Trends and Forces of Global Poverty, Resource Curse & Sweatshops (Week 1) > 7. Conclusion & Looking Ahead > Conclusion: Summary
- This week we have dealt with two of the most controversial and difficult issues in globalization.
- Sweatshop issues- possible abuses in plants that produce garments and footwear.
- You should come away from this week very sensitized to the potential damages that can come from globalization.
- You should also understand that these damages need not take place.
- There are independent monitoring groups that can help.
- So this week represents the thesis of the course- that there are winners and losers.
Section 1: Winners and Losers – Trends and Forces of Global Poverty, Resource Curse & Sweatshops 