Saturday, May 11, 2013

How should we respond to the Bangladesh garment factor debacle?

Many of us – particularly those hailing from the Indian sub-continent – are still reeling from the recent tragedy in Bangladesh which has claimed more than 400 lives. Many of these are children who were brought to work by their mothers. Hundreds are still missing and the death toll might climb.

Incidentally I find it ironic that here and elsewhere the Boston bombing has received more air time than the accident in Bangladesh where the death toll was multiples more!

Unfortunately, these accidents have become all too common.  This is the second such gruesome incident in Bangladesh within a short period following a devastating fire in another garment factory.

In many cases, these are accidents just waiting to happen. When they do there is an outpouring of outrage and guilt; we rush to donate money for the victims and then after a while things settle and we go back to hunting for bargains at our local chain store.

In the aftermath of the tragedy commentators have suggested different responses.

One is to boycott the products of companies who get them made in third-world sweat-shops. Disney has responded by stating that they will no longer rely on Bangladeshi factories to make their merchandise. This is the worst possible response.

Because pitiful as these jobs are, workers sign up for them willingly because the alternatives are far worse; unemployment and starvation. Boycotting these factories will throw thousands of workers out of their jobs and deprive them of the meagre living that they are making now.

It is also worth remembering that low wage countries do not stay that way for ever. Over time as more jobs are created wages increase so that countries that were low wage twenty years ago have much higher wages now leading to higher living standards. This is exactly why more and more companies are moving to countries like Bangladesh and away from countries like China where the wages have started to rise.

A second suggestion is to ask customers to pay more for goods that are produced under more humane conditions. I call this the “fair trade coffee” argument. The problem is that this creates a problem. I am willing to do this but only if others are too and all too often some of us are not.   

Besides, in the middle of a world-wide recession where a majority of households are struggling, it would be silly to expect people to not look for bargains.

We should also not lose sight of the fact that Bangladesh is one of the most corrupt nations in the world. Most of the buildings in Dhaka are shoddily constructed. Builders and developers routinely get around existing regulations by bribing government officials.

And while words such as “corporate social responsibility” sound good, businesses always have an incentive to cut costs. That is the fundamental driving force of the market place. High cost producers will be inevitably be displaced by low cost producers.

It is not surprising that the pursuit of cost savings often crosses into unethical behaviour. Inhuman working conditions have been part and parcel of the development of many major industries across the world and over the years.  There is little point in expecting businesses to monitor this because they have little incentive to do so.

So what can be done? For now the initiative needs to come from the government.

Here I am assuming that the governments of low-wage countries like Bangladesh actually care about the lives of their citizens and are interested in preventing such catastrophes. This might be a heroic assumption.

The only way forward is to get international chains to internalize the costs of such catastrophes.  Yes, there is some negative impact from the adverse publicity but clearly that is not enough of a deterrent. The point is to make these companies explicitly take into account the cost of an accident.

First, workers must be allowed to have a voice and the only way to do that is through powerful unions. Unions have been an integral part of securing the rights and well-being of workers in the first-world countries of today and countries like Bangladesh have to follow that trajectory.

Second, legislated minimum wages may well have to be part of the equation as well.

Third, there needs to be mandatory accident insurance for workers. Of course the fledgling owners of these garment factories cannot be expected to provide such insurance. But when they sign a contract with an international company promising to deliver goods at low cost there needs to be quid pro quo in that contract which stipulates compensation in the case of loss of limb or life. This provides an incentive to ensure safe working conditions because the insurance pay-outs will affect the bottom-line of those companies.

Governments need to implement audits of employers to make sure that such compensation is built in and at the same time allow worker unions to voice complaints when they are not.

But why should international giants continue to do business in Bangladesh or a similar place if the costs are higher? Here the point to remember is that as long as the cost per worker is less than the value of the output produced by the worker the company stands to make a profit. Given the low wages, the mark-ups between cost and price are still large and there will be enough profit left over.

Of course, this does not rule out the possibility of companies bribing officials to get around the regulations but at least it will be a start and a message that the democratically elected government of Bangladesh places some value on the lives of its own citizens.

1 comment:

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