Three Reasons Why Slavery Thrives in the Global Economy
Think slavery is a thing of the past? Think again.
Today’s interconnected global economy makes it easier for multinational corporations to turn a blind eye to those working for little or no pay, under the threat of violence at the hands of employers, or with restrictions on their freedom of movement.
University of Aukland researchers Christina Stringer and Snejina Michailova refer to such treatment as “modern slavery” — an umbrella term to describe exploitative situations ranging from forced and bonded labour to human trafficking.
“Those involved in modern slavery develop a keen understanding of what it is possible for them to get away with and what’s not possible,” says Stringer. The researcher discussed their work on slavery and global value chains (GVCs) at Smith School of Business as part of a conference held by the Canadian chapter of the Academy of International Business.
Who is Affected
A global value chain is an international system of production, trade, and investment whereby different stages of the manufacturing and production process are located in different countries in a bid to reduce costs.
“Multinational organizations are embedded in multiple international environments,” says Stringer. “Those environments are fragmented and constantly changing, and a range of actors are able to exploit the cracks in the institutional environment.” In 2016, more than 40.3 million people worldwide were enslaved due to forced marriage or forced labour.
Stringer says there is an estimated US$150 billion profit obtained annually from slave labour; one third is a result of forced labour in the private economy.
“Those who generate the most profit from victims are in developed countries. Most victims are in the Asia-Pacific region,” she stresses. “It crosses borders. It is not just constrained to developing countries.”
Stringer and Michailova offer three reasons why modern slavery is able to thrive in an economy that relies on a network of global value chains:
1. The complexity and governance of global value chains
Global value chains are complicated, interconnected networks spanning multiple territories that are orchestrated and controlled by multinational firms. GVCs enable them to produce goods as inexpensively as possible. Each node on the value chain is located in a different geographic location, with different institutional agreements and different standards for workers.
“The ways in which the lead firms drive their value chains have implications for labour,” says Stringer. “Firms want flexibility, and they put pressure on their supplier firms in terms of wages and conditions. Labour conditions akin to slavery can – and are – then realized.”
2. The capitalist business model
Stringer points to four business models that facilitate modern slavery: two are focused on minimizing costs, while the other two are revenue maximization models.
“At either stage – the employment stage or the production stage— if wage rates can be forced lower than market rates through coercion, there is a business case for slavery to exist.”
Employers and intermediaries can offer services – such as shuttling workers between countries, food providers, and accommodation – which also play a role. Workers are frequently charged excessive rates for basic necessities.
Stringer says workers operating in modern slavery conditions often see their wages stolen or withheld and may be penalized for little reason. They are conditions that can lead to debt bondage, which is seen as “one of the most common forms of slavery in the world.”
3. Conditions that enable slavery
The nature of the global value chain system means that multinationals can download their low value or risky activities to contractors, many of whom then pass them down to a further set of subcontractors. The fragmented production process makes it hard to enforce labour standards, particularly when many different jurisdictions are involved.
“It sets the conditions for exploitative practices,” says Stringer. “It’s hard to ensure transparency when there’s a multi-tiered subcontracting network. Shadow facilities can easily operate, especially when there is a tight delivery schedule and prices have to stay competitive.”
Consider the experience of undocumented workers from Bangladesh packing strawberries in Greece. “They had worked for six months without pay,” Stronger says. “When they asked for it, their supervisors began shooting at them. The conditions enabling slavery often occur in the most labour-intensive stages.”
She says even those who sign contracts with employers can find themselves trapped in slave-like conditions because they don’t have the agency to exit the relationship, are held in debt bondage, or fear physical violence deportation.
Stringer and Michailova have issued a call for the international business community to break its silence on the subject of modern slavery.
“The fragmented nature of GVCs can go some way to hiding slavery,” Stringer says, “but that doesn’t mean that multinationals are unaware that it exists. It’s not unknown or unknowable.”
While the issue frequently goes without public acknowledgement, Stringer says that is starting to change thanks to initiatives such as the UK’s Modern Slavery Act (2015) and The California Transparency in Supply Chains Act.
She believes government legislation and consumer pressure could go some distance to have companies identify and then eradicate the slavery in their supply chains. In California, for example, legislators have proposed that trucking companies be responsible for the labour conditions for the production of the goods they are tasked with hauling.
“Multinationals need to consider what is happening in their global value chains, and they are increasingly going to be confronted with these issues,” she says. “They need to be investigated.”