The Plight of Racing to the Bottom

By Anyi Li

Racing to the bottom, which describes a socio-economic phenomenon that governments turn a blind eye to business activities to attract foreign companies, is common to the developing nations, especially in Asia and Africa. Accompanying this intentional negligence is that companies and factories take advantage of these developing nations’ workers in the forms of unfair pay, horrible working conditions, excessively long working hours each day, and even child labor to lower their business costs. People living in the developed and wealthy Global North, shocked by news uncovering the horrendous treatment received by these workers, always assume that governments in developing countries simply do not care about their citizens. Some parts of this assumption may hold true, but it is not the full picture of the story.

Western companies’ underlying reason to manufacture in developing countries is the cheap labor cost. When a certain developing country’s labor cost increases due to increasing living costs and improving living standards, many corporations from the Global North shift their manufacturing centers to countries with even cheaper labor. For instance, in the post-WWII years, Nike manufactured mainly in Japan, but it moved its manufacturing centers to South Korea and Taiwan as labor cost in Japan rose in the 1970s. And in the 1980s, when labor cost again rose in South Korea and Taiwan, Nike shifted to China. Recently, with the Chinese economy and society advancing into higher levels of development, we begin to see the Chinese factory workers’ rising wages drive western companies such as Nike and Apple away to Southeastern Asia. This shift often leaves little time for developing countries to adjust their economies and creates massive unemployment in developing countries. As a result, governments turn a blind eye to their export industries disobeying minimum wage laws and working condition requirements. 

At this point, you may ask: why do developing countries’ governments want to attract western companies in the first place? The simple answer is that these countries have to catch up to the wealthy Global North in development. However, plagued by decades, or even centuries of colonialism, wars, and poverty, they cannot miraculously transform their mostly agrarian society to a fully industrialized, developed one in a few decades when such it has taken the western countries more than a century. And in the current globalized economic environment, it is even harder for them to industrialize, modernize, and lift their people from poverty without opening doors to western companies. To remain competitive against other developing nations, governments in developing countries have little choice but to concede to racing to the bottom.