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Question 102: May an entrepreneur locate a factory in a third-world country?

The good news is that I have a product that looks like a winner. It is a line of construction sets designed for children in different age groups and made of very tough plastic. I had ten thousand sets manufactured and test marketed them in one city; they sold extremely well. Of course, I incurred a substantial loss on the test, but it was expected. It is not the bad news. That, instead, is that there is no way to make the product profitable unless it is manufactured outside the United States.

Costs here for both physical plant and labor are high. By locating in an economically less developed nation—I shall call the country, not yet selected, Elden—I can acquire suitable factory space and hire workers far more cheaply. The savings will be partly offset by the costs of setting up there, sending key personnel, training workers, freight, export-import taxes, and so on. But the manufacturing-cost differential will still be great, largely because wages in Elden are comparatively low and business is far less burdened with governmental regulations, such as costly U.S. requirements regarding environmental impact and workers’ health and safety. Moreover, in Elden people can be hired strictly on the basis of suitability for the job and retained strictly on the basis of productivity; a business need not comply with U.S. civil rights and labor laws, and the possibility of unionization is not a constant threat.

Critics no doubt will say locating in Elden for the sake of such advantages is unjust both to the people there and to fellow Americans. But I see no other way to set up this business.


The moral issues raised by this question concern the justice to fellow Americans and to Eldenians of manufacturing the product in Elden. Provided the questioner complies with all relevant U.S. laws, locating the factory in Elden is unlikely to be unfair to fellow Americans. However, the questioner’s statement of the economic advantage of locating in Elden suggests that doing so will involve injustices against that nation and the factory’s employees. The questioner must not only meet the just requirements of Elden’s laws but fairly treat everyone employed there and in all other respects act fully in accord with the Golden Rule.

The reply could be along the following lines:

You assert without qualification “that there is no way to make the product profitable unless it is manufactured outside the United States.” Are you absolutely sure? There are places in the U.S. where many people are unemployed, few workers are unionized, inexpensive factory space is available, state and/or local governments offer subsidies and/or tax breaks to attract businesses, and state and local regulations are not very burdensome. Since your test marketing went well, I am not convinced you could not manufacture the product, entirely or at least partly, in the U.S. with reasonable hope of making some profit. So, I reformulate the question: If at least part of the manufacturing could be done profitably in the U.S., could you be justified in doing all of it in Elden in order to reduce the venture’s risk and make it more profitable? I shall reply by considering, first, the question of justice to fellow Americans and, then, the question of justice toward Eldenians. (Still, if there really is no way to make the product profitable without manufacturing it outside the U.S., my reply would be the same.)

Assuming you comply with all relevant U.S. laws, I do not think locating the factory in Elden is likely to be unjust to fellow Americans. Your operation and the marketing of the product in the U.S. will employ some Americans and generate some tax revenues. American retailers will make a profit on the product, and, if you price it fairly, you will pass on some of the benefits to American consumers. Besides, import taxes and part of the cost of freight will contribute to the U.S. economy, and your key personnel who spend time in Elden may benefit from the experience. Furthermore, while Americans are rightly concerned about their own national economy, they and other comparatively affluent people have responsibilities toward poorer nations, whose citizens also are neighbors in the worldwide human community. Provided you do no injustice to Eldenians, those who work for you will benefit from training and jobs, and that will contribute to fulfilling Americans’ responsibility toward less developed nations. At the same time, even the poorest, unemployed U.S. workers you might employ in this country probably suffer less deprivation than the unemployed people you would employ in Elden. So, locating your factory there need not be unfair to fellow Americans.

Whether you can avoid treating Eldenians unfairly seems more questionable. You say the economic advantage will result largely from the fact that “wages in Elden are comparatively low and business is far less burdened with governmental regulations.” That statement is alarming, because a situation like that is an opportunity for injustice—for example, grossly exploiting nonunionized workers. Ask yourself whether it is morally acceptable to take advantage of Elden’s comparatively low wages and lack of regulations. In considering this question, bear in mind that many of the relevant American regulations were designed to protect the environment and workers’ health and safety, prevent unjust discrimination and unfair labor practices, and safeguard workers’ rights to organize and bargain collectively.

Still, if you pay just wages and provide good working conditions and reasonable benefits, it could be morally acceptable to take advantage, within certain limits, of Elden’s freedom from regulations.

To begin with, though most regulations in force in the U.S. were meant for good purposes, what they actually require can be unfair, especially insofar as all their requirements, which are not always fully harmonious, must be met simultaneously. Like most laws, these probably were not perfect even at the outset, and their original value may have been lessened by changed economic and social conditions, perhaps calling for their amendment or even, in some cases, their repeal. Moreover, like all laws, these regulations were designed for typical cases. So, sometimes—namely, when their requirements are not just—it would be morally acceptable even for businesses in the U.S. to do what the regulations forbid, except for the moral duty in most cases to conform even to unjust requirements of law. Now, if such regulations do not exist in Elden and justice does not require them there, plainly there is nothing wrong in taking advantage of the situation.

Besides, some regulations that are reasonable in the U.S., a relatively prosperous nation with its own problems and its unique set of capacities and opportunities for economic and social development, would not be reasonable in Elden. For example, if the cost of living is far less in Elden than in the U.S., an entirely adequate family wage there might be less than the U.S. minimum wage. Then too, due to social and cultural differences, different injustices afflict different nations. Elden may not need laws like those in the U.S. forbidding unjust discrimination and dealing with unfair labor practices, and businesses operating in Elden, without acting unjustly, avoid some of the burdens of complying with relevant U.S. laws. Furthermore, it would be morally acceptable for a business there to do things U.S. regulations justly forbid, insofar as in Elden those actions are just. For example, it can be just in the U.S. to require using resources that otherwise would go for luxuries to protect the environment and to minimize risks to workers’ health and safety, but in Elden it would be unjust to require that resources necessary for people’s survival be used for anything less urgent.

Nevertheless, there are limits. Even though not constrained by law, a business operating in Elden should avoid policies and actions that unfairly damage the environment or risk workers’ health and safety, involve unjust discrimination, lead to unfair working conditions, prevent workers from exercising their right to organize, or are unfair to anyone or any group in any other way. To judge what is unfair, it is not enough to look to prevailing practices or to learn by experience what the Eldenian government will tolerate or its people will accept without argument or complaint. Rather, as always in applying the Golden Rule, you must consider all the relevant facts of the situation, including facts which most Eldenians ignore or care little or nothing about, and imagine yourself or your loved ones in the places of each of those affected by any choice you consider making. For example, bring to bear all available information about sociocultural anthropology, ecology, and the causes of disease in considering impacts on Eldenian society, the environment, and workers’ health; then imagine your grandchildren as part of the country’s future generations and yourself or your spouse as a worker in the factory.

Suppose you conclude that you would be justified in setting up production in any of several less affluent nations. In that case, your choice should not be guided solely by considerations of self-interest. Rather, you ought to take into account the legitimate interests of everyone else involved. For example, other things being equal, a nation with a greater need for jobs and tax revenue would benefit more by having your factory located there.

Suppose, on the other hand, that, having conscientiously considered what justice toward Eldenians will require, you conclude that the prospect of profitability would not be improved by locating your factory there—in other words, to make manufacturing your product in Elden worthwhile, it would be necessary to exploit the nation in general and/or your workers in particular. Must you then give up your project, which in other respects would do much good? If you cannot carry it on anywhere without injustice, yes, you must give it up. All the requirements of justice are gathered up in love of neighbor (see Rom 13.8–10), and “those who do not love a brother or sister whom they have seen, cannot love God whom they have not seen” (1 Jn 4.20). Those who do not love God will of course suffer eternal loss, compared with which no earthly profit matters.