Earlier quoted context omitted.
Markets "decide" what is best by responding to price signals. If you buy a cheap T-shirt then you are saying to the market that you value low price over an ethical supply chain. Buyers from first world countries do not (in general) deal first-hand with the labourers, they deal with factory owners who have the capital equipment necessary to do the manufacturing at the required scale. All the while that there is price…
Let me respond to your final paragraph first. I actually don't agree with the idea that people should "act more responsibly" and "choose" to get educated. Or rather, I think they are never given the choice. Children working are forced to do so by the poverty of the parent, who were in turn forced into their life path by poverty. Of course this is not always the case, but what I have seen indicates that economic pover…
I would be slightly wary of making predictions from historical trends, because we don't have a very large sample size, and there are a lot of confounding factors, a good example being cultural differences between countries, by which I mean differences in social organisation rather than what clothes people wear.
Irrespective of those differences, the general idea of an increase in skill level with continued investment has both common sense and, as far as I am aware, theoretical appeal. The issue, however, is really one of degree, and that is important for people at the hard edge of poverty. Whether it is going to take 1, 10, or 100 years for the conditions in a given region to improve matters to people who have so little money to live on that they can't afford to send their children to school, or pay for proper housing. If there is no money left over for workers to improve their lot because they are living at subsistence level, which is distressingly common, then the development process you describe cannot take place.
Distorting the free market in order to temporarily redistribute wealth downwards, with the goal of speeding up the process of improvement, is in my view an ethical action. An example of the kind of distortion that I think could be appropriate is supporting an oversight organisation along the lines of the Forest Stewardship Council. Bodies like that are by no means perfect, and are themselves often subject to market pressures, however they seem to me to be a pretty good balance of economic freedom and social ethics.
A slight aside; it strikes me that a not insignificant proportion of the increase in wealth that we enjoy has come not from people being able to afford more of everything, but rather from technological progress in methods of producing things. So for example the desk on which my computer sits is a fairly cheap affair constructed from what looks to me like veneered MDF. I do not have a nice oak writing desk, because those are still very expensive. The same kind of comparison applies to almost everything I own that has a historical counterpart: food, clothing, furniture, writing materials.
My point is that my increased "apparent" wealth seems to be driven as much by these technical improvements as by an increase in "actual" wealth (I wouldn't dare guess the actual ratio beyond saying that I feel the factors are comparable). Furthermore, I am confident in saying that technological improvement is not predicated on market freedom on the basis that there have, historically, been civilisations who have undergone technological improvement without free markets: the Romans being one example amongst many. I would also point out that we don't have enough data to know whether the current burst of technological improvement was dependent in any way on market freedom, because we only really have one data point: this particular rise of standards.
To return to your question about an ethical supplier: it kind of depends on your taste. My partner is Indian and I seem to end up getting my clothes on visits there these days, mostly as a result of laziness whilst here. Fabindia is one supplier that seems to put quite a lot of effort into ensuring good conditions in their supply chain, though they don't have the range you'd expect from a western supplier (they do seem to ship internationally though, not sure about stores). There are lots of workers cooperatives in Kerala, where my partner is from, so all the stuff they make must get on to the market somehow! Also, I don't know if you're aware but somewhat coincidentally NPR's Planet Money are doing a series of podcasts and associated things on t-shirts, and the economics of the global t-shirt trade, that sounds like it's going to be quite interesting.
Sorry for the long post :-|