If I said ‘what’s a sweatshop country’ and we were talking in 1960, it’s gonna be Hong Kong, Taiwan, Singapore, South Korea… These were the places that garment production shifted in the post World War Two years to, and that had pre-industrial standards of living (under $3,000 per capita for the year). And they had these same poor working conditions that we had had in Britain and the U.S. and that exist in Bangladesh and India today. But in about a generation and a half they went from pre-industrial to post-sweatshop, first-world living standards, to today, in some of their cases (Hong Kong), being wealthier than the United States. And it’s because the world has so much more capital and technology now, that when you get your institutions right, these things can flow in and drive the process of development much quicker.
Some people mistakenly characterize this as a ‘race to the bottom’. Those sweatshops, that as soon as a country gets richer they leave and go find poor labor somewhere else. Well, yeah but it’s not like Hong Kong was left in shambles when the sweatshops left. The problem was labor got too productive in Hong Kong, so it was too valuable to use in making garments, and garment factories could not bid enough to get those workers there, compared to the other industries they were competing with. So they left and went to another place. Sweatshops are like the second to bottom rung on the ladder of economic development, and as they leave you country it’s a sign that you’ve graduated to a higher standard of living and someone else is about to get on that chain.