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The human cost of a two-dollar T-shirt

Running alongside the Mekong and Tonle Sap rivers, the Sisowath Quay is the main drag for tourists, expatriates, and international aid workers in the Cambodian capital of Phnom Penh. By day they flock to the grounds of the Royal Palace, with its famous Silver Pagoda and dollhouse-like Napoleon III Pavilion, and to Wat Botum, a golden spire–topped Buddhist monastery that in the 1930s fostered a young novice monk named Saloth Sar, better known later in life as Pol Pot. At night, Westerners push their way to the quay’s open-air bars and restaurants through a circus of street vendors: book and video sellers, opium dealers, tuk-tuk drivers, and the unavoidable young prostitutes. “I’m too tired these days to even think about sex,” I overheard a Briton complain to his friend one night last July at a faux pub called Huxley’s Brave New World, which featured a soundtrack heavy on the Rolling Stones and the Doors. A waitress holding a small baby under her arm served them mugs of beer and the signature “Huxley’s Tower” of Cajun-breaded shrimp, pork ribs, and chicken wings.

Other than the nightclubs and “hostess bars” whose neon lights illuminate a few dim side streets, the rest of Phnom Penh shuts down early. By ten o’clock the streets are free of traffic, and a motorcycle can quickly cover the city center. Along Mao Zedong Boulevard sit foreign embassies and the garish blue-and-white tower of the anti-poverty group CARE, a perfect symbol of the excesses of the international charity complex. Norodom Boulevard, named for the country’s former king, is home to the most powerful political institutions: Prime Minister Hun Sen’s ruling People’s Party, whose logo is a goddess sprinkling gold dust, fitting for a regime whose bosses have grown rich through corruption; the ministry of the interior, which oversees the police and otherwise maintains order; and the local offices of the World Bank, a major donor to the country.

One end of Norodom Boulevard connects to Road No. 2, which winds east through a procession of shantytowns to the border with Vietnam, roughly eighty miles away. If Norodom houses the political power, Road No. 2, which is lined with dozens of factories, embodies the engine of Cambodia’s economy. These plants, and hundreds more around the capital’s periphery, have sprung up since the mid-Nineties to make apparel for Western corporations.

In 1999, Cambodia signed a bilateral trade agreement that allowed it to export a quota of textile products to the United States under highly favorable terms. In exchange, Cambodia agreed to improve labor conditions and submit to factory inspections by the International Labor Organization (ILO); if better conditions were documented, the country’s quota would be raised. American unions lobbied heavily for the deal. For the first time, the United States would predicate trade on labor rights, not merely as a talking point but as part of an enforceable agreement. It set the stage for Cambodia to become a major garment exporter and allowed it to build a reputation as a “sweat-free” country.

Even after 2005, when global textile quotas were phased out and the U.S.–Cambodian trade agreement lapsed as a result, the garment industry continued to grow. It is currently the country’s largest sector, employing 350,000 workers, most of them young women. Apparel accounts for three quarters of export earnings, with about 60 percent of that output going to the United States. Many of the biggest apparel brands and buyers source from Cambodia, among them Walmart, Nike, Adidas, Target, Gap, Sears, Eddie Bauer, and Puma. Although there is no longer an enforcement mechanism in place, the ILO continues to monitor factories, and Cambodia has maintained its status as a model apparel producer. Two years ago, USA Today published an article about how the country had “position[ed] itself as the sweatshop-free producer in a fiercely competitive global clothing market”; Cambodia, a Levi’s executive told the newspaper, “is a special country.” In his book Giving: How Each of Us Can Change the World, former President Bill Clinton wrote that Cambodia offered a model to be emulated by other developing countries in turning fair labor practices into a “marketing asset to discerning U.S. and European consumers.”

And yet despite Cambodia’s friendly reputation, its workers have not seriously benefited from the trade deal, in terms of either wages or labor standards. There is a simple reason for this: apparel buyers, while quite happy to win accolades for doing business in Cambodia, have remained unwilling to pay much for the privilege. Scott Nova, head of the Washington-based Worker Rights Consortium, describes sourcing departments as the “beating heart” of apparel firms. “They are compensated on the basis of how cheap they can get prices,” he told me. “The factories can take some modest steps on labor conditions, but one thing they cannot do is raise wages, because that causes the whole model to collapse. Any government that imposed a living wage as a legal minimum and tolerated genuine collective bargaining would see its local industry vanish in a matter of months.”

Because of this, pay for apparel workers in Cambodia has stagnated, according to a 2008 survey, at 33 cents an hour, lower than anywhere but Bangladesh.Directly above Cambodia were Pakistan (37 cents an hour), Vietnam (38 cents), and Sri Lanka (43 cents). China, with wages between 55 and 80 cents per hour in inland areas, was the ninth cheapest.Labor unions are abundant, but most are funded and controlled by employers or by the government, and independent activists have been fired, suspended, sued, and otherwise targeted for repression. In 2004, even before the trade deal with the United States expired, a well-known apparel union leader and founder of the main opposition party was shot and killed in central Phnom Penh. Two other independent unionists were murdered after that, in 2004 and 2007. Of the three cases, one was closed because police said there was insufficient evidence; in the two others, convictions were obtained in trials that were harshly criticized by international human-rights groups observing the proceedings. And so even as factories poured into Cambodia and exports boomed, apparel workers got poorer. The monthly minimum wage at apparel plants (which, like many Cambodian businesses, typically pay workers in U.S. dollars) was $45 in 2000, and nine years later it was $56; during that same period, inflation has cut the buying power of a dollar by 37 percent.

Of course, the current state of the U.S. economy has only worsened the picture for overseas labor, not just in Cambodia but in every country that depends on manufacturing exports to the United States. Tens of thousands of factory employees in Singapore had their wages cut and their hours reduced when consumer demand plunged in North American and European markets. In Taiwan, 200,000 electronics workers were put on long-term unpaid leave. Apparel exporters have been especially hard hit, with millions of workers at Third World textile, clothing, and footwear plants laid off. Only a handful of countries have been able to increase their exports to the United States and the European Union: Vietnam, Bangladesh, Haiti, and China, and not even these nations have escaped plant closings and mass layoffs. One reason for China’s continuing success, the New York Times explained in a recent article, is the ability of its manufacturers “to quickly slash prices by reducing wages and other costs in production zones that often rely on migrant workers.” An official at a Chinese jeans exporter told the newspaper that American buyers were “getting more and more tough in bargaining for lower prices.”

The crisis has made it more difficult for workers to pressure companies and governments for better wages and conditions. In Vietnam, strikes have been relatively common, even though they are generally considered illegal and are opposed by government-controlled unions. In 2008, a series of wildcat stoppages over the soaring inflation rate led to a small improvement in an otherwise bleak situation; but after the downturn, the number of strikes plunged as apparel workers grew anxious over job security. In Bangladesh, where the average wage is 22 cents an hour, the lowest rate in the world, union activities were temporarily banned under a state of emergency declared in 2007. Despite the arrest of several union and labor-rights activists, workers have continued to protest low salaries. In October, after a garment factory closed, thousands of its workers rioted to demand three months’ back pay; two workers were killed during the protests, which police put down with rubber bullets and tear gas.

The Cambodian government is preparing a new labor law that amounts to a huge handout to apparel makers; its central provision would allow garment factories to keep workers on short-term renewable contracts for as long as they like. Companies in Cambodia have begun hiring almost exclusively on short-term contracts—which pay out far less in benefits than companies using permanent employees and discourage short-term workers from complaining about pay (or anything else) because they have no job security.Currently these engagements are limited to two years, at which point the employee has to be put on the regular payroll. Even in China, where a similar provision is routinely exploited, “short-term” employees must be made permanent after ten years.In October 2008, a Phnom Penh newspaper reported that foraging for food was “an increasingly popular weekend pursuit for garment workers feeling the pinch due to the spiraling cost of goods.” To survive, workers scavaged the fields near their factories for wild vegetables, snails, and crabs.

Yet the conventional wisdom in the United States is still that wages in the Third World are as high as they need to be. “Before Barack Obama and his team act on their talk about ‘labor standards,’ I’d like to offer them a tour of the vast garbage dump here in Phnom Penh,” the New York Times columnist Nicholas Kristof wrote last January, in his trademark tone of a den mother addressing a troop of Brownies. “The miasma of toxic stink leaves you gasping, breezes batter you with filth, and even the rats look forlorn. . . . Many families actually live in shacks on this smoking garbage.” For families living in the dump, “a job in a sweatshop is a cherished dream, an escalator out of poverty,” and attempts by Obama to push “living wages” for apparel workers in the Third World would merely ratchet up production costs and lead to factory shutdowns and layoffs. “The central challenge in the poorest countries,” he wrote, “is not that sweatshops exploit too many people, but that they don’t exploit enough.”Incidentally, Kristof’s speakers’ bureau, American Program Bureau, says his typical fee is approximately $30,000 for an hour, during which he offers “a compassionate glimpse” into global poverty and gives a “voice to the voiceless.”

Taking this exhortation to heart, and hoping to get an inside glimpse at how clothes are made in Asia’s “sweatshop-free” nation, I decided to pose as the representative of an American firm looking to bring new business to Cambodia. Until now, “Dexter Designs,” which designed and sold high-end T-shirts to boutique stores, had been sourcing in China, but the company now hoped to get a better deal for itself somewhere else in the region. My intention was not to pull off some sort of sting but rather to see the inside of the apparel plants—where journalists and other interlopers are rarely granted access—and to meet with industry representatives in a business setting, where they might talk more openly about the Cambodian “model.”

My first stop was at the Garment Manufacturers Association in Cambodia (GMAC), which, as the trade group representing the country’s biggest employer and exporter, works closely with the government and wields huge political influence. Perhaps a dozen motorcycles were parked in front of its building downtown, and a corresponding number of helmets sat lined up neatly at the front counter. I passed the receptionist my simple black-and-white business card, which identified me as Dexter’s purchasing agent, and explained that I was in town for only a few days but hoped to have at least a brief meeting with the GMAC. After consulting with a colleague, the receptionist led me upstairs. We walked through the Fashion Observatory Centre—which featured a well-curated collection of books and magazines about the industry, as well as a fabric library and racks of clothing samples from local factories—and into the conference room. She turned on a wall-mounted air conditioner, which brought a bit of relief from the stifling heat, and ducked out for a minute, returning with a glass of water and some GMAC literature, which I flipped through while I waited.

GMAC’s most recent annual report describes its chief priority as seeking “to influence policy and legal environment, making sure it is conducive for the growth and development of the garment industry in Cambodia.” But it was equally concerned about “taking care of the Cambodian people,” which it pursued through its charitable activities. In one photo, a smiling GMAC official handed out Nike shoulder bags to a group of orphans. The report featured a section on two related GMAC projects—Precious Girl magazine, which offers apparel workers advice about “working life, hygiene, make-up, cooking, savings and relationship issues,” and the I Am Precious beauty pageant, which promotes the “self-esteem of garment workers.”

Before long, Kaing Monika, GMAC’s business-development manager, walked into the conference room. A thin man with neatly cropped dark hair, Kaing pumped my hand in vigorous greeting. “We work with international brands, so there is no question of quality,” he said. “We are very happy to help you.”

Prior to the bilateral trade agreement, Kaing told me, Cambodia exported almost nothing to the United States, to which it is now the ninth largest supplier of apparel. “The global economy has really hit Cambodia,” he replied when I asked about the current business climate. “We export a lot to the U.S., so when all these companies go bankrupt, in Chapter 11, we have a very hard time.”

Cambodia, I knew, was extremely generous to foreign investors. An article published by a website called Business in Asia identifies the country as “at the top of the chart among world’s [poor countries] in market-friendliness,” and touts the Cambodian government’s “positive policies in terms of the level of fiscal burden, labor market restriction, regulatory barriers and trade policy.” Could Dexter benefit from any incentives for foreign investors? I asked Kaing.

“Well, there are not [incentives] specifically to the buyer,” he said with an air of regret, but added that the government offered a number of subsidies to the factories; Dexter would benefit indirectly from these subsidies, which included a tax holiday of up to eight years, and, after that, a low corporate tax rate (9 percent) as well as the duty-free import of machinery and raw materials. Further concessions had been offered in the aftermath of the global meltdown, Kaing said: the government had suspended an “Advance Profits Tax” and was subsidizing company contributions to the national pension fund.

This was all good news, but what about the labor situation? I asked. The last thing Dexter wanted was to transfer business to Cambodia and then have production interrupted by strikes or other disruptions. He described labor unions as being numerous but mostly docile, and said there were few strikes. “Strikes can happen anywhere,” Kaing allowed, “but there’s a very good environment here.”

In order to attract factory interest, Dexter would have to place a minimum order of 5,000 T-shirts, Kaing told me. I asked if he could recommend any local factories, so on my way out he had the full list of the association’s 277 member companies printed for me. A GMAC employee used a yellow highlighter to indicate firms that could produce the boutique-quality T-shirts I was looking for. The list included the firms’ addresses and phone numbers, the number of employees, and the owners’ nationalities.Taiwan had the largest number of plants, with seventy, followed by China with fifty-six, Hong Kong with fifty, and South Korea with thirty-two. Kaing wished me luck as I left and said to be back in touch if I needed further assistance.

At 9:00 a.m. on a weekday morning, I was picked up by a driver and translator at my hotel near the Quay, and we headed for Kie & Kie World Co., one of the companies GMAC had recommended. Employing 1,027 workers, Kie & Kie manufactures T-shirts, pants, jackets, shirts, and skirts. The company’s address placed it on a major road not far from the Phnom Penh airport, but the driver couldn’t find the plant, and we had to pull over every few minutes to ask directions. It was a brutally hot, dry day, and each time he rolled down the window to talk to a street vendor or pedestrian, a small cloud of dust suffused the car. We finally reached the factory, which sat behind a six-foot yellow stucco wall and was topped with a red tile roof. The translator explained the purpose of our visit to a security guard at the front gate, emphasizing that GMAC had recommended the firm. The guard sent a colleague inside with the details, and a few minutes later we were given visitor’s badges and ushered in.

Cartons of clothing packed for export were piled up near the entrance. We walked past the factory floor, where long rows of seamstresses and cutters sat making clothing with the Aeropostale logo. The work area was cut off from the administrative section by a huge floor-to-ceiling plastic sheet. Kie & Kie president Park Joeng Keun greeted me in his office, which was decorated with a chintzy painting of a rice paddy scene. A golf club sat in a corner of the room next to a rolled-up strip of Astroturf that Park apparently used as a practice putting green.

Whether because he was suspicious of my story or just didn’t think Dexter Designs was a serious enough buyer to waste much time on—I had tossed out an initial order of only 30,000 T-shirts—Park was extremely tight-lipped. He did say that Kie & Kie could do the job for Dexter at a competitive rate, but he was not prepared to offer pricing information because he was unfamiliar with my company. I later emailed him and offered to send more information about Dexter, but I never heard back.

On the way out, however, Park did give me a copy of Kie & Kie’s “company profile,” which revealed that the company exported almost exclusively to the United States and that its biggest customer was Aeropostale, which buys 60 percent of its output. Walmart, JCPenney, and Target buy the rest. The prospectus said the company produced 7.8 million pieces annually and had about 1,000 employees—excluding office, maintenance, and other support staff—which would work out to 7,800 pieces per employee. At $25 per piece retail (a rough but reasonable guess based on its buyers), Kie & Kie’s average employee generates approximately $195,000 in retail sales annually, for which she receives about $750 in pay (factoring in an estimate of about 25 percent in overtime). The profile included an “international inspection report” that reported no labor problems at the plant other than minor violations: insufficient soap in a restroom for workers, and three fire extinguishers not fully charged.

I was more warmly received at Sae Han, a Korean-owned firm located in a large industrial park lined by ninety identical yellow stucco buildings, each one numbered. Sae Han, which employs roughly five hundred workers, operates out of 38 through 40. Security guards were posted at the blue-gated entrance and at booths in front of each building, but once again I was quickly granted an audience with management after mentioning GMAC.

A guard escorted me into an upstairs office overlooking the factory floor, where hundreds of women sorted fabric, cut it into pieces, and sewed the pieces into shirts and pants. Kim Jae Dong, Sae Han’s youthful, chubby factory director, greeted me effusively and motioned for me to take a chair. A few pieces of clothing hung from a rack next to his wood desk, which was stacked with manila folders labeled attendance, payroll, and daily output.

Since Park of Kie & Kie had been unenthusiastic, I decided to up the ante with Kim. I explained that we planned to place an initial order of about 80,000 units, but if business went as well as expected, there would be far larger orders down the road. Could he give me even a broad per-piece estimate? I asked. Kim picked up a yellow plastic calculator and began punching in numbers. He said he couldn’t offer a firm price until he had more information: fabric quality (content and gram per square inch), size range, shipping and handling instructions. Did I want the T-shirts folded or hanging? How many pieces per bag and bags per carton? I didn’t have ready answers to those questions, but I said that Dexter’s owner would be able to send him the information by email shortly.

Meanwhile, I had a few additional questions. I asked whether the global downturn had affected the plant much, and Kim said it had. “We almost had to suspend operations earlier this year,” he said. “But now we have orders for August. So far we don’t for September, but I think things will pick up.” And what about the labor situation in the country? Dexter Designs was concerned about labor agitation and strikes, especially if they led to upward pressure on wages; in fact, I added, the firm had previously been looking hard at Vietnam but had been discouraged when the government there had raised wages following a wave of wildcat strikes in 2008.

In this regard, Kim offered, the recent impoverishment of millions of Cambodians had proved something of a silver lining. “Two years ago the unions were very strong,” he said with a thin smile. “But after the economic crisis they became weaker and more cooperative. Because the economy is so bad, workers are very happy to have jobs. So we don’t have problems.” Furthermore, he added, Prime Minister Hun Sen had been taking a tough line with labor leaders, “and the unions have become easier to deal with since.”

Soon after our meeting, Kim emailed a bid of $23.40 per dozen shirts, which included door-to-door shipping. At about $2 per unit, that was a bit high: figures from the Commerce Department show that the average cost of an imported T-shirt has fallen from $3.02 in 1996 (adjusted for inflation) to $1.87 in 2008. I suspect that if I’d really been in the market, I could likely have gotten a better offer. If not, Dexter would have had plenty of options to source its product elsewhere in Asia.

Until the mid-1990s, Western apparel companies didn’t even acknowledge that labor rights or fair pay were legitimate issues for discussion. A barrage of bad publicity over sweatshop conditions at their foreign plants, and some ensuing consumer boycotts, prompted the companies to reassess their approach. “If you are an apparel importer, you have to accept that working in countries where police periodically machine-gun students or workers entails higher macro costs,” David Birnbaum, an industry consultant, warned in his Global Guide to Winning the Great Garment War, first published in 2000. “Similarly, as a garment buyer, you also have to accept the fact that working with some factories also carries higher indirect costs. If the factory looks like a cross between an orphanage and a prison camp, you have a potential problem.” Birnbaum described “ethical sourcing” as being fundamentally “a public relations exercise,” but stressed that it was important, from a business perspective, to join the bandwagon “because that is what our customers want.”

In 1999, Reebok, Nike, and three other brands founded the Fair Labor Association (FLA), which describes itself as “a nonprofit organization dedicated to ending sweatshop conditions in factories worldwide” and claims to have “helped improve the lives of thousands of workers around the globe.” FLA “affiliates” are required to establish rigorous codes of conduct, to submit their plants to inspection by “third-party monitors,” and to correct any abuses or shortcomings uncovered. Since then, an entire monitoring industry has emerged: a profusion of auditing firms, consulting companies, NGOs, and multilateral organizations that apparel makers pay handsomely to develop monitoring tools, offer expert advice, and write up countless glossy reports. For workers at apparel plants, though, the benefits have proved elusive. A recent academic study—whose lead author, Richard M. Locke, is the deputy dean of MIT’s business school—reviewed Nike’s own data and found that conditions had “stagnated or deteriorated” at 78 percent of the company’s supplier factories between 1998 and 2005.

Which is not to say that monitoring is inherently useless. When factory inspections are genuinely independent, unannounced, and thorough, they can uncover serious abuses. But one gets what one pays for, as the old saying goes; and since the apparel companies’ dues pay for the monitoring firms that inspect their plants, they tend to get the lax policing that they want.

Very quickly it became clear that the FLA’s main role was to offer image enhancement for its member firms, and so several labor unions and civil-society groups dropped out. Although a number of universities and NGOs do still sit on the board, the association’s main goal is clearly P.R. rather than social justice. Last year, Russell Athletic, a subsidiary of Fruit of the Loom and an FLA member, shut down the Jerzees de Honduras plant, which employed 1,200 workers in the Honduran town of Choloma. Russell claimed it took the step for financial reasons, though it appeared to be a flimsy cover story for illegal union busting; the prior year the company had been forced to reinstate droves of union supporters it had fired at a sister plant in Choloma. Under pressure from the Worker Rights Consortium, a Washington-based group whose own investigation challenged Russell’s explanation, the company turned for help to the FLA, asking that it send a monitor to assess the situation.

For that mission the FLA sent to Honduras an auditor from a company called ALGI, which had previously worked for Russell. After bringing company management to interviews with employees that were supposed to be confidential, the inspector issued a report concluding, predictably, that the plant closure was purely an economic decision, just as Russell claimed. The report was so obviously compromised that the FLA was forced to send a second auditor, who derided his predecessor’s report and concluded that Russell’s hostility to the union was a clear factor in its decision to close the plant. Following this unpleasant outcome for Russell, the FLA sent out a final mega-report that included the discredited audit alongside the other. The report added that the FLA itself found Russell’s explanation persuasive and accepted “that the decision to close [the factory] was principally a business matter.”In November, after student anti-sweatshop activists persuaded a number of U.S. universities to suspend their licensing agreements with Russell, the company agreed to rehire the workers from the closed plant, confirming a wise remark made in 1997 by Bud Konheim, CEO of Nicole Miller: “In this industry, the only reason to change is because someone has got a great cattle prod that keeps jabbing you in the rear end.”

U.S. apparel companies put in place codes of conduct that look good on paper. But at the same time, they squeeze their Third World suppliers mercilessly on price, thereby ensuring that factories can’t meet the codes. “The brands blame everything on factories and local governments, piously lamenting the locals’ failure to embrace their heartfelt moral standards,” Scott Nova of the Worker Rights Consortium told me. “Factories and local officials bear their share of the blame, but it is the big brands and retailers who are driving the train. The factories are responding to incentives created by the brands.” The three top North American T-shirt makers—Hanes, Fruit of the Loom, and Gildan—all own factories in Latin America. In recent years, Nova says, when their workers have tried to exercise the right to form unions and press for better conditions, “in every case their factories have responded with the same repression we see at contract facilities.” (When contacted, both Fruit of the Loom and Gildan pointed to their recent agreements with Nova’s group as an indication of their commitment to uphold labor rights.)

In Cambodia, the International Labor Organization supplies an extra coat of whitewash through its Better Factories Cambodia monitoring program. I stopped by its offices in the Chamkarmon district, a pleasant area of upscale bars and restaurants. The reception room was abundantly stocked with thick reports that had clearly sat there for years untouched by human hands; among these was a pristine copy of the World Bank’s sixteen-page 2004 study, “Cambodia: Corporate Social Responsibility & the Apparel Sector.”

It’s quickly evident to any visitor that the ILO is an advocate for the apparel companies that fund its work and pay for its reports, which are kept strictly confidential. “We are trying to build confidence among our stakeholders, because the industry is so important to Cambodia and the lives of its people,” a group spokesman, Ny You, told me when I asked about the Better Factories program. “We want people to feel more comfortable and confident, and showcase good working conditions here, especially with the economic crisis.” The ILO calls its staffers monitors, not inspectors, “because they have no power,” Ny said categorically, giving no indication that the impotence of the ILO’s personnel might be seen as a handicap and not a virtue. That philosophy was expanded on in a brochure he gave me about the Better Factories program. The ILO’s monitoring, it said, “is not intended to punish a factory, condone strikes, or compromise business.”

I interviewed several dozen apparel workers—none were comfortable having their names published—from three factories, in their neighborhoods or at their homes. All were young women who had come to Phnom Penh from the provinces in order to support their families, and all worked at plants producing for major Western brands, including Levi’s, Adidas, and Puma. None had ever received a pay increase, notwithstanding hikes in the national minimum wage. They all worked overtime, if they could get it, often an extra twenty hours a week, because otherwise they didn’t make enough money to live on. There had been some small improvements in working conditions. Factories tended to be better cooled or ventilated. It was no longer common for pregnancy to lead to firing. At one plant, bathroom passes had recently been abolished. But there were still problems, especially in the aftermath of the global crisis. Besides the widespread layoffs, employees were being told they needed to work faster to keep output up.

Among those I spoke with were ten workers from Chu Hsing, a Taiwanese plant that makes Levi’s jeans. They all lived in a neighboring shanty, which clings to the banks of the Mekong River. We sat in a courtyard, surrounded by a jumble of shacks with corrugated tin roofs and walls of either palm fronds and wood or rough concrete. Large clay pots of water sat outside each home, and charcoal burned in a large metal grill that served as a communal kitchen.

One woman, twenty-three, showed me the tiny shack she shared with two other employees. The mats they slept on were rolled up in the corner of the white-tiled room, which was otherwise furnished with an electric griddle, a TV on a wood desk, and a metal rack on which they hung their clothing. The woman, who worked in the plant’s measurement section, had never been to the heart of Phnom Penh in the four years since she’d moved to the city, even though it was just thirty minutes away by bus. “My rent is $20 a month, I pay $3 a month for utilities, and $1 a day for food,” she said. “If I spent a day in the city all my money would be gone.” She’d seen labor monitors come to Chu Hsing—she wasn’t sure if they were from the ILO or a private company hired by the plant—but to her knowledge they’d never spoken with workers in their homes. Management had prepped employees on talking to monitors. “My boss told me if I wanted a higher salary I should convince the buyers that it was a good factory and they should buy more products,” she said.

At a second shantytown in the Dangkor neighborhood, I spoke with a group of women who worked for Grand Twins International, another Taiwanese-owned firm, which produces clothing for H&M. One worker said that management had instituted a production-quota system a year earlier. “If you don’t meet the quota you get warned, and if you get several warnings you can be fired,” she said. Two employees she knew had been dismissed for failing to meet production goals. She’d come to Phnom Penh nine years earlier; returning to her province was not an option, she said, as “only rich people can afford to tell their daughters to stay at home.” But her living conditions were worse, and she was sending less money home, than when she first moved to the city.

On the way back to town, I stopped on Norodom Boulevard at the Adidas Summer Sales store, where signs in the windows announced steep discounts. It looked like a store in an American strip mall and had prices to match. A pair of sneakers cost $40; a girl’s T-shirt was $32, and a pair of shorts was going for $30. The combined cost came to about two months’ pay on an apparel worker’s salary.

The third and final factory I visited was GW Enterprise Limited, which opened in 2004 and is likewise Taiwanese-owned. Many of its workers live in a slum outside the plant gates, where vendors were selling dozens of different fruits, many of which I’d never seen: bright pink dragonfruit, which has a white, soft pulp; mangosteen, which resembles a plum capped by an artichoke stem; and the especially odd-looking rambutan, with its small round reddish-white body and long stalks. A statue of a Chinese warrior god sat guard at the entrance to the plant, and five sticks of burning incense and three cups of tea had been left before it as offerings.

Phosphorous lights hung above the factory floor, where workers bustled and the sewing machinery clattered mildly. In an upstairs room—whose main decorative feature was a large photograph of Prime Minister Hun Sen wearing a golden shirt and surrounded by smiling flunkies—I was directed to a chair at a coffee table upon which sat a pot filled with plastic orange flowers. Moments later Philip Chang, GW’s cheerful and gracious marketing director, joined me at the table. GW made casual clothing for companies in the United States and Europe, Chang said, with its major buyers including Gap, Target, Costco, and Abercrombie & Fitch. Chang asked a female employee to bring over samples of clothing the firm had made for Southpole. Some items included price tags; a thin white T-shirt with a Southpole logo on it was marked to move at $28.

GW has fallen on hard times with the downturn—the company had shuttered one plant entirely, and its total employment in Cambodia had fallen from 2,000 to 800—and Chang was eager to do business with Dexter. “China is really cheap, it’s ridiculous,” he said derisively when I mentioned that Dexter had until then been sourcing in that country. “But you only think you’re getting a good price, because the quality is so bad that you can’t use 20 to 25 percent of what you buy. You can get a good price in Bangladesh too, but you’ll have the same problem. Here you can use 100 percent. Our quality control manager is from Singapore and our production manager is from Malaysia, and they are very experienced.” (Few Cambodians have supervisory roles in local plants. The Garment Industry Productivity Center, a U.S.-funded program in Phnom Penh run by two Beltway consulting firms that aims to improve the Cambodian garment industry’s “performance, productivity, and competitiveness,” reports that foreigners account for 84 percent of production planners, 56 percent of work-study engineers, and 54 percent of line supervisors at Cambodian factories.)

Chang walked to a wall cabinet and brought out a few plastic-wrapped shirts that he had recently received from a plant in China. “Look at this,” he said, shaking his head as he showed me a blue-and-white polo shirt with a Nautica label, which was badly sewn from cheap fabric. “If you want to place an order and sleep well at night, don’t order in China. Order here at GW.” He said Dexter would enjoy other advantages by buying from Cambodia, including the government’s lenient rules on foreign ownership and control. “I worked in Bangladesh for six years, and there they have a rule that there needs to be at least 51 percent local ownership,” he said. “In Cambodia, foreigners can own 100 percent. In Bangladesh, I can’t do anything, because the locals have the majority. But here we have 100 percent control.”

Once Dexter gave the go-ahead, GW could move swiftly. Chang had a variety of fabric suppliers, in South Korea, China, and Indonesia, so we would not need to nominate one. After we had agreed on fabric color and quality, and other lingering details, it would take as little as three weeks for GW to produce our T-shirts and have them shipped. What about the price? I asked. Like Kim at Kie & Kie, Chang needed additional information, but he said that GW could offer a rate of about $2 per piece, which would include shipping. Not bad for a T-shirt that would probably retail at trendy stores for around $30 or $40.

Before I left, Chang took me to a separate room and proudly showed me racks of plaid jumpers and white tops made for Parker, the Texas-based company that provides uniforms for private-school kids. since 1931, said the label. But it turns out that Parker shifted production to Cambodia more than a year ago.Parker’s website doesn’t mention that it makes its uniforms in Cambodia. “We design and manufacture in-house,” it says.

In the past decade, clothing is the only major category of the Consumer Price Index that has declined. “As far as bottom costs go, we’re there,” Nicole Miller CEO Bud Konheim told the New York Times in a 2008 article about the falling cost of retail clothing. “I think we’ve exploited all the countries on earth for people who really want to work for nothing.”

Nicholas Kristof’s neoliberal koan—that “the central challenge in the poorest countries is not that sweatshops exploit too many people, but that they don’t exploit enough”—uncannily echoes the opinion of the novelist Julia Magruder, who, in 1907, felt moved to defend the use of child labor in American cotton mills. “If the children employed in these mills would, otherwise, be living in decent homes, going to school, eating sufficient and wholesome food, getting some sort of moral, mental and manual training, then, without question, mill-work for children deserves to be decried as a flagrant social evil,” she wrote. “As a matter of fact, however, the alternative presented to these particular children is to live in dilapidated houses, wear wretched clothing and eat food which is inadequate in quantity and abominable in quality.”

As the author and economic analyst Richard Rothstein has noted, the contemporary arguments made by Kristof and other fans of cheap Third World labor are recycled versions of those made a century ago in the United States by business leaders and economists who fought regulation of America’s own sweatshops. In 1906, Senator Knute Nelson of Minnesota opposed a bill to regulate child labor on the grounds that “families are often partially dependent upon the efforts of the young children for support. A widowed mother with a large family requires that her boys would sell papers on the street, or in some other manner to earn money.” Manufacturers argued that child labor was a requisite stage of industrialization and would ensure future prosperity for all. Nowadays, cheap-labor advocates point to countries like Japan, South Korea, and Taiwan, which each went through a sweatshop phase of their own, as evidence that other Asian countries can follow the same textile-paved road to prosperity.

Between the current and historical advocates for cheap labor, there is also a striking parallel in their sanctimony, their smothering tone of noblesse oblige. Magruder, an aristocratic Southerner who traveled widely in Europe, denounced opponents of child labor as “ignorant sentimentalists, who plunge into the subject on the impulse of emotional feeling, rather than on a basis of knowledge”; she added that “the elevating and civilizing influence of the cotton-mills, among the poor white people of the South, from whom the mill-hands are drawn, is not to be questioned by any fair minded and intelligent man or woman.” Kristof, in a similar vein, derides Western campaigners for better wages for Third World apparel workers as “child labor hawks” out of touch with the reality of poor peoples’ lives.

None of the arguments extolling cheap overseas labor today hold up any better than did the earlier ones in favor of American sweatshops. Asian apparel workers are obviously not going to get paid First World salaries, but labor costs in the developing world are so low that the industry could still provide Americans with very cheap clothing while paying its workers significantly more, raising millions of people out of poverty. It’s true that the United States and other industrialized nations went through their own sweatshop phases, but they also underwent reform phases that led to rising wages and indispensable safety regulations. And although a few Asian countries, notably Japan and Singapore, used apparel manufacturing as a route to prosperity, they did so only through the sort of massive interference with the free market—tariffs on imports, subsidies for local firms, tough capital controls, restrictions on foreign ownership—that our cheap-labor advocates vigorously oppose.

Few Third World apparel workers gain the skills or training that lead to better jobs and more income. The entire model depends on weak unions, few labor rights, and persistent autocracy. In the 1980s, dictatorships crumbled in South Korea and Taiwan, two of the Asian countries that the garment industry and its supporters like to cite as evidence of the long-term benefits of cheap labor. After wages soared there—rising fourfold in South Korea—the apparel industry instantly pulled out and moved to China and Indonesia. “The companies like to say that things have gotten better and there is no slave labor or child labor, but there was never much of that,” said Jeff Ballinger, a longtime labor-rights activist who spent more than a decade in Asia, when I asked him how conditions today compare with the situation in the mid-1990s, when the industry was under assault for sweatshop practices. “The big problems then were low wages and forced overtime, and those are still the big problems today, whether you go to Cambodia or Vietnam or Honduras or anywhere else. There is no fundamental difference in the way factories are run, because you still have the same predatory model of outsourcing. People are desperate for jobs. Working in an apparel factory is not a terrible job, but they work too long and get paid too little.”

The current crisis has caused even a few mainstream analysts to question the conventional wisdom about global trade. “What we call ‘free trade’ should be called ‘debt-financed trade,’” says Richard Duncan, chief economist at Blackhorse Asset Management in Singapore. “The whole world expanded industrial capacity in order to satisfy American demand for their products, which the United States bought on credit. We ended up with huge American trade deficits and the accumulation, during the past four years, of more dollars held overseas than had been built up in all prior history. That the bubble had to pop was obvious.” Duncan said that only the ability of the United States to run a $10 trillion deficit over the next five years will prevent a global depression. But in the long term, trade imbalances have to be corrected by increasing consumption in the Third World.

Duncan’s suggestion is simple: a “trickle-up” strategy, whereby wages rise—in Asia, beginning at a $5-per-day minimum, slightly above starting pay in southern China and more than twice the current rate in Bangladesh. Then, Duncan says, the wage could be raised by $1 each year for ten years. Imposing such a scheme would be quite simple to implement, he points out. The United States and the European Union could slap steep tariffs on imports manufactured by workers earning less than the minimum.

“If you sell a pair of tennis shoes for $101 instead of $100, no consumer in Chicago will notice the difference, but it will totally transform villages in Vietnam,” he said. “This is not a moral argument. We are currently on government life-support, but that’s not sustainable. We are going to have an international depression if we don’t figure out a way to create new sources of global demand—in which case, all those apparel companies are going to go out of business anyway.”

is the Washington Editor of Harper’s Magazine.

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