Sustainability in business: ethics, responsibility and the profit motive

I recently watched the documentary ‘Schmatta: Rags to Riches to Rags’ (see reference, resources and links page), which chronicles the history of the ‘rag’, trade in American (Schmatta is Yiddish for rags).   In 1965, 95% of American clothing was made in the USA and by 2009 only 5% was manufactured there.  So what happened to this industry that had, as the documentary explores, been the source of wealth, employment, added economic value for so many for so long? 

Several questionable industry based decisions but principally to blame was the failure of Reaganomics or the laughingly called ‘Trickle Down’ theory.  Which in my very simplistic understanding offers tax cuts and incentives to industry and the wealthy with the rather naïve expectation that the benefits would ‘trickle down’ through the tiers of the economy from the wealthiest down to the poorest.   It didn’t.

The profit motive overrode any ethical caution or fiscal responsibility for the livelihoods of the workers and led to a pursuit of larger ‘greed is good’ profit margins.  Taking the lowest level jobs overseas to countries with lower daily wage requirements and non-existent union protection very quickly offered shareholders of fashion houses lower unit costs, higher profit margins and instead of benefits trickling down unemployment trickled up through the tiers of the industry.

The suppliers soon became affected by the same price pressures and their businesses followed the same pattern of being driven offshore; this then led to complementary businesses suffering.  With the resulting depressed economy, the demand for lower cost products furthered the downward spiral of the American clothing manufacturing trade into a cycle of even lower cost production, leading to unsafe and unethical practice.

The plight of the ‘rag trade’ industry workers (both the unemployed American and the unprotected overseas sweatshop workers) highlights the danger of applying an economic model which underestimates the powerful drive of, and the subsequent impact of, the profit motive and ignores the need to motivate an imperative to provide a competitive, sustainable, financial future rather than the lure of the short term gain.


Industry, Government and the community need to holistically view economic decisions and directions in recognition of their responsibility to still be there; responsible to the shareholders, employees and the  community economy.