The term 'sweatshop' is usually used for a factory where the workers work for little pay, long hours, and under poor conditions. It is generally a pejorative term; one does not call a factory that one approves of a sweatshop.
In the 1980s and 1990s the fact that America and other rich countries were building factories in poorer countries where labor was cheep caused many people to worry. Some worried that we would lose important jobs to foreign workers, others worried that the richer countries were abusing the poor workers.
As it turned out, we did lose a lot of jobs to foreign workers, although most of the jobs we really miss ended up in the hands of other rich countries. Outsourcing to foreign countries is still a big issue today, although we no longer spend too much time worrying about sweatshops. The modern job-stealer works in a cubicle, not a factory. Regardless of who stole what jobs, the rich countries have continued to get richer, and appear ready to continue getting richer for the foreseeable future.
There are still some concerns about human rights issues in sweatshops. These are dwindling, as poor countries start to enter into the world market with generally positive results. Here are some of the issues at play in the world of sweatshops.
Health: The biggest problem with sweatshops is the same problem presented by factories everywhere -- they pollute, they poison, and they injure. In America and other richer countries governmental oversight and unions work to keep factories safe for the workers. But in a poor country the government may be unwilling to restrict the behavior of a company that is paying them good money, and the workers may not be informed enough to know that something the factory is doing may be harmful, or they may be afraid of loosing a well-paying job if they complain.
The pollution issue is a mixed bag; big multinational companies generally use modern equipment, which includes energy efficient design, safety features, and some pollution controls. They may pollute and injure, but they pollute and injure at a much lower level than the outdated and much repaired equipment often found in local factories. But at the same time, if a factory isn't required to keep the pollutants it dumps into local streams at safe levels, it probably won't bother to spend tens of thousands of dollars on an extra filtering system. Social pressure and the threat of boycott may keep some companies honest, but that's not something we can count on.
Generally speaking, sweatshops do improve health and environmental conditions in developing countries, as new machinery and practices are introduced that pollute less than the older local factories that are usually in operation. They also tend to be less healthy and environmentally friendly than factories in developed countries. It would be great if there was an effective worldwide regulating body. But in the meantime, foreign-owned sweatshops are often better than nothing.
Economics: A common argument against sweatshops, and 'shipping jobs overseas' in general, is that we are taking paying jobs from hardworking insert nationality here. The theory is that if Joe can't work at making little plastic Pokémons in America (for example), he will not be able to find any other job. Therefore, we must keep little plastic Pokémon factories in America. This argument stems primarily from a misunderstanding about the way international trade works.
It's important to remember that if an American company moves its factory overseas, it is paying for all labor with American dollars. It's not paying the workers directly with dollars, but in investing overseas the American company is sending America dollars out into the world which must come back to buy things from America. You cannot buy Japanese goods with American dollars.
So... An American company sets up a factory in Elbonia. They have an agreement with an Elbonian bank to pay the workers in elbs, and in exchange the bank takes American dollars. The Elbonian bank may not be the most sophisticated institution in the world, but it will only enter into this agreement if there is a market for American dollars. The only reason for there to be a market in American dollars is if someone, somewhere, is buying something from America. The very fact that other countries are willing to accept American dollars means that there is a market for American goods. If there was a lower demand for American goods, the Elbonian bank would demand more dollars per elb. If the demand for American good is low enough, it is not profitable to move factories overseas -- it's cheaper to produce goods in America.
Since the only reason for a company to send production overseas is because dollars are in high demand, if we are sending work overseas, then there must be a high demand for dollars. If there is a high demand for dollars, there must be a high demand for American goods. If there is a high demand for American goods, there is a high demand for the workers that make these goods.
Of course, it's not quiet that simple. If the demand for American goods is actually a demand for American pharmaceuticals, those of us who do not work in the pharmaceutical industry and do not have the qualification to enter into it might have a hard time. As you might imagine, there are many long and detailed papers written about how it all works out perfectly if you just let the free market run free, and many other papers written about how everything falls apart if you don't regulate carefully. I personally think the free market will take care of us in the case of sending jobs overseas, but IANAE (AITWH).
Pay: The weakest argument against sweatshops is that they pay poor wages, and that this is bad. It is important to remember that a sweatshop does not run on slave labor. The workers are free to choose to work in the factory, and the fact that they make only a few dollars an hour, or that they work 14 hours a day, only goes to show how very bad life must have been before the factory showed up to provide apparently desirable jobs.
If Robert can make $10 working in a sweatshop all day, or $5 digging through the landfill for recyclable materials, it is only logical that he chooses the factory job. He would be better off if the factory paid $100 a day, but he's still thankful for the $10-per-day job that he's got. If some stupid human rights group in America shuts down the factory, he'll be quite pissed off. Of course, if they human rights group raises his pay to $100 a day, he will be ecstatic. I just hope that that human rights group knows what it's doing.
Sweatshops also provide one form of economic magic that we all understand: they provide new jobs. Even if John is not qualified to work at the new Nike factory, Bob leaving the farm and making more money in the big city still benefits John directly. Now there's more demand for farm workers, and John can work more often and get paid more. This halo effect can be very important, although it's probably not healthy for a country with overpopulation problems to count on continued oversea investors to shore up their economy.
Why you should support sweatshops: If the above didn't convince you, here are some more Good Things that come from a healthy investment in sweatshops. While boycotting a company may improve working conditions, the best thing that can happen for sweatshop workers is for other sweatshops to open up in the area. Now the factories are in competition with each other, and wages and other benefits increase. Competition is particularly strong for experienced and capable workers, meaning that the value of education (both primary and continuing) increases.
At the same time, it is much easier for the local government to tax factory workers than to tax farmers and day laborers. In a well-run country this means more money for education -- and increased infrastructure, which may lead to more foreign investment. (Sweatshops are likely to avoid poorly run countries. Social unrest is bad for production). More education and more opportunities for work are generally seen as a prerequisite for a demographic transition, resulting in a stable population and, with luck, a high standard of living.
As you can tell, I am for increased investment in developing countries. The issues are complex, and I can't cover all of my opinions here. I do, however, want to point out that however wonderful traditional, isolated ways of life may be, they tend to be very bad in terms of human rights. For most of human pre-history the average life expectancy was about 35 years. It still is in some parts of the world. In other parts of the world modern medicine has increased life expectancy, and decreased infant mortality. This is generally regarded as a good thing, but the resulting population explosion leads to hunger, social unrest, and poverty. If our goal is to give all humans a chance at a long, healthy, and productive life we must stabilize population growth. Globalization is not the only way to do this, but it is an effective way to do this.
And so, I am 'pro-sweatshop'.