[Kind of a rambling collection of thoughts that I tried to organize a bit. Hopefully it's interesting to read]

Introduction

I've recently had several conversations in which a member of the rationalist community made the case that exploiting people from less economically developed countries for profit is acceptable. In the first, the exploitation was for medical testing, in the second, factories (actually, sweatshops, but that seems extra-loaded, and I'm already using the word "exploitation") were used as the example. I'm not a very eloquent speaker and I tend to get myself tied in knots trying to explain what I'm thinking, then get frustrated that I can't verbalize. It's not a recipe for a productive conversation, so I thought I'd try to write my thoughts down rather than speak them.

Before I continue, I intend the word "exploitation" to mean: Using someone else for your own benefit in a way that harms them to some degree. This doesn't mean that they are harmed more than they benefit (assuming you could compare harms somehow), it just means that they are harmed in ways that they otherwise wouldn't be. The more harm, the more exploitation. There is something of a spectrum of exploitation here- I'm exploited by my employer for profit (not very), a soldier is exploited by their country for violence (a bit more), all the way to wildly imbalanced and unfair relationships like slavery.

The actual definition says something like "using someone for your own gain unfairly" but has a second definition for exploiting resources. Those feel like the same usage with varying levels of harm- if you exploit someone unfairly, then you are causing more harm than benefit. If you "exploit" some natural resource, then you're not harming anyone (directly). So I think my usage isn't entirely unreasonable. If you disagree, feel free to mentally substitute some other word.

Overview

The argument that I've heard twice now goes something like this- assume I have capital and I'm trying to make a profit, advance medical research, or accomplish some other goal. I could hire people in a richer country, pay them more, and be able to make less profit, or I could shop around and find a poor country where I could hire more people for less money and make a larger profit.

So I build my factory or medical research facility in the poor country and each dollar spent on wages will produce more widgets (or medical data).

I am a large employer, and by moving my operation to the poor country, I'm providing jobs which give locals more options for work (and presumably more bargaining power with other local employers) at the very least, but I may also be paying slightly more than other businesses in order to attract employees quickly and reduce down time in my business due to turnover. My business, on average, is more beneficial than harmful.

We may harm the locals through long working hours, out-competing local businesses, accidents, poor working conditions, or side effects from medical testing, but we also provide employment choice, slightly increased pay, and purchase some of our materials locally, driving local economic activity. You can tell that we provide a net benefit because the locals willingly work for us- we're not forcing anyone to do anything and it seems plausible that if the harm out-weighed the benefit, they would refuse to participate and I would have to raise wages or take my business elsewhere.

To summarize-

We build a factory in a poor country with cheaper labor (meaning more profit)
The factory causes both harm and benefit to the locals
We can assume it is more beneficial than harmful because-
We raise wages (increase the benefit) until people willingly work for us

My disagreement comes in two parts:

Assumptions are made in this example that aren't being explicitly acknowledged, and I think they weaken the argument for exploitation.
In practice, shopping for cheap labor sets up incentives and power disparities that lead to very bad outcomes.

No one that I've discussed this with seems interested in talking about those bad outcomes. They would rather talk about the toy example, rather than how it will (obviously, in my opinion) immediately lead to widespread suffering when introduced to the real world. I admit, again, that I agree with the simplified example and I'm not arguing for any particular policy- I don't know if trying to institute bans or laws against the practice would work. I don't know what the appropriate action should be.

But it's deceptive to argue for the model and then use that as anything other than very weak support for the actual implementation.

Disagreements

Assumptions

The scenario assumes, or seems to assume, a few things-

First, it assumes that the locals are making a free choice to participate in your business, and are therefore responsible for any harm that they receive, while you, as the provider of the opportunity, are only responsible for the benefits you introduce.

In a wealthy country with several hundred years of economic development, hundreds of thousands of job opportunities filling every conceivable economic niche, where the average person is at least minimally educated and somewhat secure from violence- this is a reasonable assumption. It's still technically wrong, because you could argue that everyone has to work for someone or perform some action in order to not starve (at a minimum, they have to acquire or convince someone else to acquire food and insert it into their body), but it's accurate enough.

In a country plagued by internal and external conflict, political strife, food insecurity etc, is it really a free choice? If the alternatives are subsistence farming or working in local businesses that could disappear tomorrow because they don't enjoy support from rich foreigners, then it doesn't seem like much of a choice at all. It feels a lot like shopping around for people dying of preventable diseases and then offering a temporary cure in return for labor.

Second, it assumes that because people will work for you, you are more beneficial than harmful. This is not an assumption that you can make unless your workers are spherical and operate in a vacuum. In reality, people willingly do lots of things that are either harmful to themselves or useful in the short term but harmful in the long term.

This doesn't mean that we should try to pass laws to stop people from eating fast food or watching more than ten consecutive hours of television, but it does mean that we can't rely on them to be perfect signals when we're trying to judge whether a plan causes suffering or not.

Third, this model assumes that a little bit of help is better than none at all. I don't believe that this is always the case. As an unrelated example- I've met a number of underpaid software developers who were self taught and working at large software companies. When they entered the workforce, they had the choice of either pursuing work immediately with what they knew, or living in relative poverty for a period of time and trying to get a degree. They took the first choice and are now in a position in which they can't easily quit their job and go back to school- they have families, bills, and responsibilities that make it very difficult.

They're trapped in a local maxima and the only way to get out of that trap is to temporarily lose a large chunk of their income in order to get a much larger income later.

Given time, a poor country could develop businesses that provide work and opportunities to locals but that also keep the produced wealth inside the country rather than siphoning it off to the already wealthy home country of the founders.

Fourth, it assumes that because market forces are "natural", then they must be right in some sense. Maybe "inevitable" is a better word to use here. This was more of a "vibe" that I was getting from the last person that I had this discussion with. He seemed somewhat baffled that I would argue against the market- Obviously corporations are going to move their factories to areas where they can take advantage of cheap local labor. It's inevitable. Trying to force them to conform to some squishy, vague system of ethics when they have a profit to make is irrational and pointless.

I'm not going to spend a lot of time arguing this assumption because it's likely that no one would admit that they made it. It was more of a feeling that I had during the discussion that I couldn't put my finger on until much later. If I'm not imagining this, and the assumption was made, then I would like to gesture broadly at modern medicine, space and air travel, automobiles, computers, and air conditioning.

Human beings find ways to avoid the natural order all the time- why should market forces be exempt?

Incentives

We create incentives when we introduce wealthy outsiders to a local economy- outsiders who are invested (both literally and figuratively) in keeping the locals poor and the local economy in shambles. As long as the area around the factory (which, remember, is only there for the cheap labor) is destitute, the factory makes higher profits than it otherwise would. As soon as the local economy begins to compete its way toward higher wages, the value of the location as a destination for factories begins to vanish.

There is an incentive here to keep the locals poor and reliant on the jobs provided by the factory. Because of the wealth disparity between the foreign company and the local economy, there is also a power disparity that provides the means.

During the same conversation in which the factory scenario came up, the group also discussed taxes. One member of the group who isn't originally from the US asked, confused, why we had to do our own taxes if the government already knows what we owe (or could, with minor changes to the tax code). The answer is because there is a tax preparation lobby that benefits from a complex tax code and government inaction.

Imagine this same sort of regulatory control, except the companies are almost as wealthy as the government itself, and are actively trying to sabotage any increases in pay or economic mobility rather than just make a few bucks once a year. It's a recipe for a humanitarian disaster. And a large corporation influencing the local government to create/keep policies that negatively impact the local population is only one way that a properly incentivized corporation could cause harm. Other ways include-

Buying and then closing other businesses that compete for the same workforce
Purchasing and holding land that could be used by rival companies
Dumping waste that causes sickness (in combination with lobbying to avoid safety regulations)
Purchasing housing used by workers in order to reduce overhead and limit worker mobility (raise rents to reduce worker turnover)

Or you could just convince the local government to kill your workers when they go on strike:

In Colombia, on Dec. 6, 1928, Chiquita—then the United Fruit Company (UFC)—got the police and army to massacre hundreds of banana workers striking for better conditions. Colombians still refer to the so-called "masacre de las bananeras."

The point is not to argue that any of these things absolutely will happen, it's to point out that there are brutally hard limitations on the real-world application of a simple model like "manufacture widget X in country Y, raise wages until country Y citizens will work for us." Especially when the organization doing the manufacturing has selected the country specifically for it's poverty and lack of better options.

I'm not a historian or an economist, but I don't think that it takes one to know that introducing [organization that exists to make money] into [environment in which making money most efficiently causes mass suffering] is a recipe for mass suffering.

Conclusion

So, to summarize, I think the simplified example sidesteps a number of assumptions. Those assumptions make it less-obvious that shopping for cheap labor is beneficial more than harmful to the locals. In addition, it sets up one hell of an incentive to keep the local region in the same shape as it was when the factory was created- poor and powerless. On top of that, by virtue of the same features that drew the factory builder to the location in the first place, there is a wealth disparity between the intruding corporation and the local economy that gives the corporation the leverage to act on that incentive.

If you're arguing that building factories in poor countries is cost-effective, then I think you can dismiss this entire essay- it doesn't matter whether it's slightly more helpful than harmful. But each time I've heard the argument, it's that shopping for cheap workers is both good business sense and good for the people that you're using for labor, and I don't believe that that is the case.