Financial Times - May 2, 2000
Nike wrongfoots the student critics Jagdish Bhagwati argues that 'anti-sweatshop' protesters' strong-arm tactics will undermine their own cause
Phil Knight, founder and chief executive of Nike, grabbed the headlines from Elián González last week by withdrawing a promised $30m from the university of Oregon, his alma mater.
The university's president, like many counterparts at other colleges, had succumbed, supine, to an "anti-sweatshop" coalition.
Students are demanding that the newly founded and union-dominated Workers' Rights Consortium be the exclusive licensing and monitoring agency for companies seeking to supply university-badged apparel made in developing countries.
Those who have read Ralph Nader's celebrated attack on corporate morality Unsafe At Any Speed and witnessed actress Julia Roberts' transition from a Pretty Woman to the socially purposive Erin Brockovitch may conclude that Nike, the world's biggest sportsware manufacturer, is an "evil" corporation. In other words, that it is using its financial clout to stifle attempts to stop the exploitation of workers in developing countries.
They could not be more wrong. In fact, Mr Knight has drawn attention to two facts that seem to have escaped the public view. First, a tiny minority of students who are captive to unions have acted in the name of social responsibility to advance an agenda, both illegitimate and narrow, that will harm the countries and workers they claim to assist.
Second, their tactics, which have consisted of intimidation and outright militancy, are reminiscent of the protests against the World Trade Organisation in Seattle last year. There have been no real policy debates on campuses, nor have there been any voting procedures that are truly democratic.
Consider the students' demand for a "living wage" to be paid in developing countries. It sounds great, until you go beneath the surface. Typically, wages paid to workers in the developing world are considered "too low" because they are measured against developed-world standards. But these countries do have low wages - they are poor countries.
The key point is that economic studies of multinational corporations show that they typically pay a "wage premium" estimated by researchers, such as Ann Harrison of Columbia Business School, at about 10 per cent compared with local wages.
Unions such as Unite, which represents workers in the apparel industry, are misleading a few gullible undergraduates who then chant on campuses against the "exploitation" of workers in developing countries. Are they demanding that the wage premium enjoyed by a lucky few who work for multinationals be increased still further?
Indeed, Unite and other unions have a clear agenda: by raising wages in labour-intensive industries abroad, such as apparel manufacturing, they hope to moderate competition against industries in the developed world that have lost their advantage. Hence the talk of "exploitation" and the seeming need to exercise "social responsibility", by insisting on a "living wage".
This is little more than a cynical manipulation of people's moral instincts and an obfuscation of reality. The unions are merely pursuing the economic interests of their members at home - being seen as wanting to free foreign workers from "exploitation" clearly helps their cause.
As someone with an interest in both free trade and social progress, I strongly disagree with this protectionist version of social responsibility. Instead, I would suggest that the catalogue of such responsibilities include the condemnation of such blatant protectionism.
I would also encourage "rich-world" companies to reach out to the "outsiders" who are part of the community in which they operate. Several universities and some companies do precisely that - through so-called "outreach programmes".
Espousing "progressive" social responsibilities hardly squares with the WRC's desired monopoly on licensing and monitoring of apparel manufactured in developing countries.
But the universities' surrender to what are really "anti-social" responsibilities is what bothers me even more. None of the "progressive" viewpoints presented above have been debated in public forums. Moreover, university senates have often voted on these issues, but without the aid of informed analysis. This is outrageous - no one elected the professors and the students on these bodies on the basis of their social and political views. Indeed, my own experience at Columbia university has been that members of the faculty on these bodies have strong preferences but no arguments.
The universities, presidents and "elected" faculty, are increasingly succumbing to the militant few. It is the easy thing to do. After all, it sounds wonderful to be exercising "social responsibility" whether one is genuinely doing so or not.
Mr Knight has taken a stand against these moral double standards. His action is a gamble for Nike; but our gain from it is certain.
The writer is professor of economics at Columbia University