> Manufacturing has moved to these places in some cases because many customers just can't tell the difference or couldn't care less about the difference
Your argument does not hold in this case, because Etsy was established and sustained as a marketplace for handmade goods. This is true also for customers, who visited Etsy to support independent artists and artisans and to purchase unique and limited items.
Many of the sellers of cheap knock-offs are engaged in blatant theft of IP and misrepresentation as independent artists.
> Are the people organized under that website all wearing leather shoes hand sewn in Maine cottages? Or are they wearing more sweatshop produced junk
I don’t see what this has to do with anything. But, yes, many sellers try hard to support other artisans. Etsy is but one part of a culture and economy of handmade goods that includes in-person shows and other off-Etsy venues.