The ongoing controversy about sweatshop labor has mainly focused on economic, on the one, and ethical aspects, on the other side. While proponents of sweatshop labor have argued that low wages would attract foreign investments, would create new workplace opportunities and thus improve economic welfare in less-developed countries, opponents of sweatshop labor argue that such treatment of laborers would violate their dignity, and they prompt western buyers to stop this kind of exploitation. However, the arguments in this debate are not new. As we will show, they can be traced back to the early “sweatshop” debate between social reformers and classical liberals in the 19th century. Interestingly, the 19th century debate identified sweatshop labor not as an industrial system but as a social phenomenon which becomes more likely when several social preconditions are fulfilled. It will be shown that the social preconditions identified in this debate determine working conditions till today and can be used to identify industries were sweatshop labor is more likely than in others—even in western countries.