Sweatshops Aren’t Going to Last Forever

Ashok Kumar

Brands like Gap and H&M have long been able to shop around for outsourced suppliers, driving sweatshop conditions in newly industrializing countries. But their rising dependence on large, centralized suppliers is undermining the bases of the sweatshop model — and increasing workers’ power to fight for improvements.

The Rana Plaza building collapse in Dhaka, Bangladesh, on April 24, 2013. Wikimedia Commons

Interview by
George Souvlis

When the anti-globalization movement flowered at the turn of the 2000s, many campaigns took aim at the bad employment practices of big-name brands like Gap, Nike, and Adidas. As the garment sector was ever more outsourced to newly industrializing countries in Latin America and East Asia, the products sold in the West were increasingly made in low-paid sweatshops. For their workers, this typically meant long hours, poverty wages, violent and abusive bosses, and sometimes life-threatening conditions.

The problem was, even efforts to build worker resistance in the countries concerned often met with a harsh employer response. When workers in outsourced factories did organize unions, the brands on which their employers relied for orders preferred to “cut and run” — shifting production elsewhere in order to keep down costs. Fed by a dynamic where a tiny number of buyers governed the fate of a vast array of suppliers — a situation known as monopsony —the structure of the globalized garment trade put up severe barriers to worker organizing.

This is the subject of Ashok Kumar’s new book, Monopsony Capitalism: Power and Production in the Twilight of the Sweatshop Age. It combines an analysis of these developments with an anti-capitalist prescription. Kumar traces the developments in capitalist industrialization over the past century, at different sites across the world, in order to identify points of vulnerability for capital and — therefore — points of potential strength for labor.

In so doing, Kumar proposes a unified theory of both global supply chains and of workers’ bargaining power. George Souvlis spoke to him to find out what exactly “monopsony capitalism” is, what evidence there is that garment workers can organize effectively, and whether we are in the “twilight of the sweatshop age.”

George Souvlis

Why did you choose to write this book? And why monopsony?

Ashok Kumar

Like many US university students in the mid-2000s, I was part of campaigns around both local union organizing and international labor solidarity struggles. Much of these latter were focused on the global garment sector. Yet almost every solidarity campaign would result in the end of orders by transnational brands such as Gap and Nike, and often the closure of the outsourced factory.

Building unionization and workers’ power in garment sweatshops thus proved to be a Sisyphean task. Dispossessed and dispensable workers did organize, but this also brought great difficulties. For when they demanded recognition for their unions or took strike action, the factory owners would retaliate — often viciously. And even if the workers succeeded in besting their bosses in their own workplaces, the now-unionized factories would come under threat from buyers — ever liable to “cut and run” to the next factory, where labor was still unorganized and thus cheaper.

Here’s where the unequal power dynamic of many sellers and only a few buyers — a situation known as monopsony — becomes central. The garment and footwear sectors rely on this dynamic to guarantee power and profits for transnational buyers (the brands and retailers), even as the supplier firms — the outsourced factories themselves — get by on low margins. Supplier firms unable to reach these transnational buyers’ price demands risk losing orders — or having to close entirely.

This dependence leaves manufacturers in a state of perpetual instability — unable to muster the capital necessary to escape the orbit of brand power and pursue their own development. The possibility that they will lose a purchasing contract thus remains an inexorable and existential threat. This ensures chronically low profits, little investment in fixed capital (such as machinery), and almost no margins for workers to make demands from their direct employers. The result is a “race to the bottom” in which garment and footwear workers have the lowest bargaining power of any industrial sector.

But why is this true of garments rather than other sectors? Imagine you’re an Indonesian or Indian capitalist. You can establish an export-oriented garment factory with 3,000 workers with no more than £1 million, whereas an auto factory would be no less than £100 million, and an airplane factory would easily run you £1 billion. Garment and footwear thus have a low barrier to entry for emerging capitalists. This makes for a large number of factories. Naturally, this number keeps growing with trade liberalization, as more domestic capitalists join the global market.

A supply chain with a high degree of monopsony functions through bottlenecks. Here, tens of thousands of suppliers will fight for purchases from a small number of buyers — ensuring high profits for buyers and low profits for suppliers. A high degree of monopsony power thus flows from a low-investment, low-technology sector — allowing tens of thousands of factories to be created with a relatively small amount of capital.

The garment and footwear industries are one of the leading edges in the advance of globalization and the spread of outsourced supply chains — and they epitomize the tension between labor and capital under globalization. These industries are “starter” sectors — training wheels in the course of a country’s economic development. Starter sectors offer clues to the direction of capitalist development by paving the road — sometimes literally — for more advanced industries. Within these sectors, there are products that are ephemeral by nature, sensitive to seasonality and fashion, and those that are not, and are therefore subject to standardization and mechanization.

In the book, I examine a number of workers’ struggles in the most “valorizable” sections of these starter sectors (i.e., those most able to capture value or, in this context, most able to develop technologically). In so doing, we can understand what shapes and circumscribes industrial capitalism and workers’ structural power within it.

George Souvlis

But how is this expressed in workers’ structural power?

Ashok Kumar

Contrary to what neoclassical economists might have you believe, workers at the level of the firm do not get what they deserve — they get what they demand, from within what is available. Indeed, the primary explanation for the persistence of the sweatshop, and its reemergence under globalization, is workers’ effective inability to make demands at the point of production.

In my book, I trace the history of these labor-intensive manufacturing sectors to show that, time and again, attempts by workers to organize have been crushed in much the same manner, by a hypermobile capital. This has followed from New York to “right-to-work” states in the Southern United States, to the maquilas, then to Central America, and finally to the labor-rich countries of Asia. In each case, I show that the bargaining power of workers is contingent on the degree of monopsony power. When this power is high and buyers (brands, retailers) can choose to shop around, workers can demand less; when it is low, workers demand more.

In order to illustrate sweatshop workers’ position, the book begins on April 23, 2013, with the collapse of the Rana Plaza — a commercial building in Dhaka, Bangladesh, that was home to numerous garment factories. Of the 3,100 (mostly women) workers employed at the site that day, 1,129 died, and many more were injured. This was the deadliest structural failure in modern human history.

This was not an isolated case. The previous November, a fire raged through Dhaka’s Tazreen Fashion Factory, killing 112 and injuring 200. Tazreen had been producing clothes for Walmart, Sears, and Disney. Indeed, the last four months of 2012 were particularly deadly. The Tazreen disaster, together with three other factory fires in three other countries, took a total of almost 500 lives — concluding what was then the deadliest year in history for sweatshop workers. Just four months later, Rana Plaza broke all records.

The Rana tragedy is often compared to the 1911 Triangle Shirtwaist Factory fire, which killed 146 in New York City. Indeed, the same dynamics that created the Triangle Shirtwaist disaster — now a solemn milestone discussed in American history textbooks — still hold sway, but on a global scale.

Like Rana, the Triangle Shirtwaist Factory was located in the top floor of a complex well known for its dangers. The factory was run by strongmen in a city rife with corruption, employing almost exclusively young women. In the decades leading up to the Triangle Shirtwaist disaster, New York City’s garment district had become a locus for domestic apparel production. As tales of shop-floor crowding and long hours in the district’s Lower East Side factories gradually made their way into the press, the term “sweatshop” entered the public imagination.

Just like today, brand companies at the turn of the twentieth century maximized profits by creating bidding wars between factory owners. In order to stay competitive and thus survive, the owners would increase downward pressure on workers. Workers at the factory-floor end of this chain were left with poverty wages, deteriorating workplace standards, and rising incidences of factory fires and building collapses.

My motivation for writing this book was this landscape of unending tragedies. But more than that, I wanted to answer the question of why labor organizing always comes up against a brick wall. It turned out to be a book about much more — for these sectors have so much to say about work under global capitalism.

George Souvlis

You’ve identified some of the key theories that explain why the sweatshop has lasted for so long. But can you unpack the theory you put forward in the book? And if we know about conditions in such workplaces, are we now in the “twilight of the sweatshop age,” as your subtitle puts it?

Ashok Kumar

The proposed theory comes in two parts: the supply chain and workers’ bargaining power.

One way to think about the supply chain is that if capitalism is a frame, then supply chains are the nuts and bolts that keep it together. But it’s also important to note that, just as with capitalism, the supply chain isn’t static. Analysis of supply chains tends to avoid theory in favor of more fixed typologies.

In my book, I identify a universal logic that governs the supply chain, by measuring the degree of monopsony power. Second, I show that workers’ bargaining power within global supply chains is itself reflected in the degree of monopsony power. These logics are based on the forces of competition, in which supply chains everywhere are subject to similar laws of motion, and workers everywhere are driven by a common set of interests and aspirations, albeit with diverse strategies.

This process follows a logical chain. Liberalization produces high degrees of monopsony power (many suppliers, few buyers), which increases the profits accumulated by buyers (since they can exploit the increased competition among many suppliers). The drive to maximize profits by buyers further intensifies competition between suppliers, resulting in greater downward pressure on the supply chain. This takes the form of lower source price offering. In other words, in order to increase profits, brands like Gap or Nike will demand that a supplier produce a shirt or a shoe for a lower price. This narrows the number of suppliers that are able to compete.

The result is of this is supplier-end consolidation — that is, it increases the surviving suppliers’ share of value, which expands their access to finance, facilitates their self-investment, and increases investment in fixed capital (machinery). All of this raises entry barriers to aspiring capitalists. The vanishing of many small suppliers and the growth of a few large suppliers reduces the degree of monopsony power of the supply chain. This, in turn, increases the profits captured by large suppliers. And, ultimately, the growth of the bargaining power of suppliers is reflected in the bargaining power of workers.

In identifying these changes in both capital and labor, I explore a number of workers’ struggles across the world. As György Lukács wrote in History and Class Consciousness, a crisis can bring into view the outlines of capitalism as a system. With this in mind, I analyze labor disruption and its effects on the composition of labor-intensive global supply chains and workers’ bargaining power. On this basis, I show how international solidarity, illegal strikes, workplace disruptions, and so on reflect changes in the balance of power.

My research looks at workers’ collective actions in a number of countries, primarily China, India, Honduras, and the United States, and secondarily in Vietnam, Cambodia, Bangladesh, and Indonesia. By analyzing the most developed sections of underdeveloped sectors, we can see where capital is going and how it gets there. And the two questions on which the supply chain turns are how capital affects the shop floor and how the shop floor affects capital.

I advance a theory of workers’ structural bargaining power that centers around the degree of spatial inflexibility. This term refers to the scope of geographic possibility within which production can take place. In other words, it has to do with the constraints on how far global buyers can move production around in order to maximize their profit. So a high degree of spatial inflexibility results in greater structural bargaining power for workers, and a low degree of inflexibility means less structural power for workers.

Within this, there are two forms of spatial constraints on capital: regulatory and market limits. Regulatory spatial inflexibility is the set of geographical constraints imposed on capital, typically by states. Many of these regulations were dismantled under neoliberalism, or effectively dismantled through offshoring.

I define market spatial inflexibility, on the other hand, as the set of de facto geographical limitations that are baked into a given stage of capitalist development. During early capitalist development, for instance, crude technology, insufficient surpluses, and a tiny bourgeoisie constrained market growth, producing a high market spatial inflexibility. During advanced capitalism, however, the drives to centralize, redistribute wealth upward, and erect high entry barriers effectively locked in the relationship between garment buyers and a few mega-suppliers.

Simply put, buyers’ inability to cut and run to another factory — which is the basis for their power in the sector — ends up increasing the structural bargaining power of factory owners and workers. This has improved the terms and conditions of workers at the most advanced sections (footwear, underwear, denim) in the historically underdeveloped sector most associated with sweatshops.

As for the question regarding the book’s subtitle — first, it’s important to note that the “sweatshop” is mostly an affective definition. It evokes a scene of intense labor in cramped quarters – of exploited labor and passive misery. However, I think it’s most accurate and useful to describe the sweatshop as a workplace with very little workers’ bargaining power. The changing composition of capitalism outlined here — coupled with workers’ subjective agency to make demands and take action — means changes are beginning to occur in parts of these sectors.

Whether this is the twilight of the sweatshop age or a new race to the bottom may ultimately depend on the self-organization and demands of those who work on the factory floor. But for now, at least, workers have growing possibilities to make demands with their more value-laden, geographically anchored, direct employer.

George Souvlis

What effects has this value-chain production had in terms of changing the nature of work itself? And how would you characterize the key changes in the capitalist system over the last forty years, as compared to the previous realities of welfare capitalism?

Ashok Kumar

This paradigm of hyper-mobile capital is marked by a retreat of the state as the realm of workplace conflict resolution. Take the history of the garment sector, where state-level regulation began in the nineteenth century. Previously, any structural power labor had was owed to market spatial inflexibility, in other words, the geographically localized nature of both capital and work. By the 1850s, however, the legal gray area in which early labor activism operated gave way to more formal collaboration with employers and the state. Workers won, for example, the legal right to strike, to associate, and a set of unemployment benefits: i.e., a regulatory spatial inflexibility.

By the 1930s up until the 1970s, regulatory spatial inflexibility gave labor a longer lever with which to move the economy — a newfound power, manifest in the trade-union movement and collective bargaining agreements. Before the crisis of the early 1970s, Western garment workers, particularly in the United States and the UK, were shielded by protectionism. This capped the monopsonistic power of buyers and allowed trade unions to “chase the work.” Yet the early 1970s economic crisis inaugurated a new era of trade liberalization — that is, a lower degree of regulatory spatial inflexibility, as capital spilled over into the developing world.

When trade in the garment sector fully liberalized in 2005, global buyers steered production into a handful of labor-rich countries. Deregulation led simultaneously to a higher degree of monopsony power (and therefore greater value captured by buyers) and lower spatial inflexibility (and therefore less structural power for workers). As manufacturers began consolidating in response to the intense competition for contracts in those labor-rich countries, supply-chain monopsony power gradually contracted, giving rise to market spatial inflexibility. By this point, suppliers had become mature firms, guarding their market positions with high entry barriers (via integration, technology, and so on), and exercising increasing heft within global supply chains.

Before this latest stage set in, labor had been launching campaigns organized around a rights-based framework (codes, audits, and so on), but did not have enough footing to fight a globalized outsourced industry. The spatial dynamics of the sector harbored a tension that left workers and their direct employers geographically incapable of changing their conditions. This tension is located in the global distance between the space of value creation at the point of production (via the labor process) and its realization at the point of consumption (via its sale). It’s this that made a global anti-sweatshop movement become necessary. But its effects remained small and isolated.

George Souvlis

How do you see the prospects of workers’ organization developing today? Are you optimistic about the outcome of this process?

Ashok Kumar

I’m optimistic, yes. Under globalization, we witnessed a move from the welfare state and import-substitution investment to the market state as a vehicle for global capitalism. This inspired an industrial-scale production of academic pessimism — namely in the form of postmodernism and postcolonial theory. But with the sharpening of the contradictions of capitalism, we see the academy catching up, no longer able to obfuscate the tensions that exist beneath the surface.

This book attempts to return to the fundamentals. Capitalism creates two enemy forces: the forces of labor and the interests of capitalists. Under the most recent phase within globalization, this conflict has reached fever pitch, throwing the stakes into sharp relief.

Marx’s “workers of the world unite; you have nothing to lose but your chains!” is both a call to arms and a recognition of the common aspirations that bind us all together. In the book, I emphasize this universal experience of capital in an attempt to refocus our understanding of the economic world.

For this reason, in each chapter, I revisit the International Ladies’ Garment Workers’ Union (ILGWU), which rose to prominence in the first half of the twentieth century. It provides an example of regulatory spatial inflexibility, in which national boundaries allowed workers to “chase work” under a single, unified regime of wages, hours, and working conditions. The spatial limits on capital — that is, its geographical fixity — meant that workers could demand more of employers, despite the points of capture and creation being on opposite ends of a supply chain. Now, intense market pressure has led manufacturers to consolidate — leading to a different kind of spatial fixity.

Rising barriers to entry create new openings for workers. The growing dependence of buyers on large, centralized suppliers indicates that shop-floor labor, too, has become centralized and potentially more powerful. In the cases covered in the book, large firms both endured and capitulated to expensive strikes, workplace actions, and transnational boycotts. The results are mixed. But the ability for a factory owner to withstand or submit to workers’ demands, while not losing the business of large buyers, speaks to this changing composition. This has thrown a spanner into the race to the bottom, which remained an integral part of the sweatshop renaissance under globalization.

Ultimately, the book’s aim is to understand how capital evolves and how the internal logic governing competition reshapes supply chains. The point is to help improve workers’ understanding of the situation they are in — and how best they can leverage that position.