Sweatshop economics, the poverty of trade theory and the making of inequality across scales

This chapter argues that field-based research can provide key novel insights into the limitations of mainstream economic theories. The analysis provides a critique of comparative advantage and neoclassical trade models based on insights coming from years of field-based research on garment sweatshops in India. Field-based evidence deconstructs the assumptions and conclusions of classical and neoclassical theories of comparative advantage by touching upon issues of wage formation, productivity and convergence, and by illustrating the relevance of complex processes of social differentiation at work across labour markets embedded in multiple power relations. The chapter concludes that ‘sweatshop economics’ can powerfully contribute to debates on trade and inequality, particularly by re-centring the analysis of the implications of processes of exchange around labour. Notably, in building its case, the narrative draws from insights from economics, sociology, human geography and development studies and also shows how the study of production, exchange and inequality must transcend rigid divisions between the global, the national and the local.