Mistaking the horse and the cart

Are conditions in Bangladeshi garment factories bad? Yup, they sure are.

All the companies concerned publish official policy statements on these issues – Walmart, Gap, Sears, Disney, Target, Abercrombie & Fitch, H&M, JC Penney, and KiK (pdf) – but the problem is straightforward: it costs more to produce under good working conditions than bad. While brands and retailers claim to be concerned about protecting the rights and safety of the workers who make their clothes, they demand prices from their suppliers that virtually guarantee that those goals will be ignored. Josh Green, chief executive of Panjiva, a leading supplier of supply chain data to the apparel industry, recently described the \”relentless pressure\” that these companies \”put on their suppliers to deliver lower and lower prices\”, calling that pressure \”a key reason why you see factories cutting corners\”.

As long as that price pressure continues, more deadly fires are inevitable.

It would not cost brands and retailers much to make apparel factories safe and pay workers decently: labor costs are a small percentage of the final retail price of their garments. Any impact of safety reforms on prices paid by consumers would be modest.

Ah, no, that\’s not the solution though.

The actual solution is to send more such work to such places. Much more such work. As much as we possibly can in fact.

This is one of those areas where Marx was actually correct. As long a there is that reserve army of the unemployed (which in the Bangladeshi case means landless rural peasantry) then you\’re just not going to get anywhere by tinkering at the margins with the conditions of work, nor pay. What you actually need is for there to be enough work that that reserve army is exhausted. At which point the competition between the capitalists for access to the profits that can be made by employing that labour will increase wages.

And we\’ve a recent example too. Factory wages in China were around $1,000 a year as recently as the year 2000 AD. They\’re now, in 2012 AD, around $5,000. Why? There\’s been so much damn work sent their way that that reserve army of rural peasantry is exhausted. There just aren\’t any more workers to be tempted into the Big City and the factory floor. Thus wages are rising strongly.

We know this works: we\’ve both the theory and the empirical evidence in front of us.

The way to make poor people in poor countries rich is to buy things made by poor people in poor countries.

Get out there and get shopping!

31 comments on “Mistaking the horse and the cart

  1. Presumably the logic is that we can only help others if we suffer ourselves. A perverted reminant of Christianity. And of course there are those that want Capitalism destroyed, not successful. And no doubt a few who merely object to colourful people in the Third World giving up their vibrant and colourful way of life for the wealth and decadence of the modern industrial world.

    Scum all of them.

  2. Given the fact that despite horrible conditions, the workers still want the jobs, it illustrates how unpleasant the alternatives must be. Yet the caring soul is supposed to say, shut the factories and let them starve.

  3. Perhaps I’m missing something here (wouldn’t be the first time tbh!) but where does the article suggest shutting the factories?.. it talks about improving working conditions with retailers bearing the cost so that workers don’t burn to death, what’s wrong with that?

  4. @KJ ‘it talks about improving working conditions with retailers bearing the cost so that workers don’t burn to death, what’s wrong with that?’

    Nothing, per se. But it also points out that: ‘It did not attain that status by achieving high levels of productivity, or a strong transportation infrastructure;’

    So, if you make the clothes more expensive, which they would be, then the reason for making the clothes in Banga is…?

  5. I think the caring souls are actually saying make the factories not death traps, not close them.

    If the cost of putting a couple of fire doors in makes the business unviable there is something seriously wrong with the business. Which would suggest that the savings in unit labour costs compared to the first world are more trivial than we are led to believe (yes westerners cost a lot more per hour, but they also tend to produce a lot more than poorly-motivated and poorly-skilled third-worlders – the motivated and skilled third-worlders largely move to the west anyway, if they can).

    In any case, not having 100 of your staff burn to death can hardly be the cheaper of the two options, can it?

  6. KJ,

    it talks about improving working conditions with retailers bearing the cost so that workers don’t burn to death, what’s wrong with that?

    So, you’ve now made Bangladesh more expensive. So, when Disney needs to make more Princess dresses, they don’t go to Bangladesh to get them made, they go to Poland or the UK instead.

    What happens to the Bangladeshi workers? Well, probably they’re back to being peasant farmers. And most of them will take working in a factory with risks to being a peasant farmer with a short life span.

  7. “The way to make poor people in poor countries rich is to buy things made by poor people in poor countries.

    Get out there and get shopping!”

    Added bonus: doing so makes little Georgie Monbiot cry… ;)

  8. Tim

    The post title is absolutely germane. I can recall (as I’m sure many commentators here) can the days before brands like Matalan,H&M and Primark ( to name a few) were omnipresent on every UK high street (at least for now!), and none of the big Supermarket chains stocked clothing! Being chastised by. Y parents for putting yet another hole in my school trousers playing football in the playground as the price of clothing was so relatively high.

    The arrival of cheap manufacturing premises in countries like Bangladesh has been a godsend for Western consumers, and has transformed the lives of millions of Bangaldeshis. Indeed, Bangladesh is named as one of the ‘next big 14′ by Goldman Sachs. I can remember it being described even in the late 1970s as ‘Fourth World’, so this progress, although still having huge problems, is for this writer undesirable?

    With regard to the fair comments of KJ @3 and JamesV @6 (Arnald, take note, this is how to make a constructive criticism) I am also assuming some law regarding Corporate manslaughter exists in Bangladesh, but that sounds far too much like hard work for the author to investigate. Better firing off an anti big corporation screed that the denizens of @commentisfree will enjoy.

  9. @KJ, these are factories, not mines or offshore oil rigs. Making buildings safe is a science going back decades to centuries. We know how to do it and it doesn’t cost very much – we aren’t doing marginal calculus about how many millions of dollars we are prepared to spend per life saved. It’s knocking a hole in a wall and putting a bloody door in.

    Even if you take the ruthless capitalist approach it is cheaper to use a safe building than have 100 dead, and hence no longer productive, staff.

    And whether or not you take the ruthless capitalist approach there is indeed a moral imperative in accepting a slightly lower profit margin, or slightly more expensive frock, to not kill people. It’s obvious that trivial costs that result in not turning people into ex-people are worth incurring, without a second thought.

  10. @JamesV ‘Even if you take the ruthless capitalist approach it is cheaper to use a safe building than have 100 dead, and hence no longer productive, staff.

    And whether or not you take the ruthless capitalist approach there is indeed a moral imperative in accepting a slightly lower profit margin, or slightly more expensive frock, to not kill people.’

    So why do you think (non snarky) the factories are being built and maintained in the way they are, James?

  11. It sounds to me as though the ones cutting the corners and not providing safe places of work are the local factory owners and managers, not the retailers a continent away. And I suspect a factory owner in Bangladesh does just fine. And I also suspect the commercial pressure is used as a handy excuse by the owners to shift the blame onto foreigners when he relatives of the dead, or dense foreign journalists, come knocking.

    Now there is a case to be made that western companies should dictate to their overseas suppliers the safety standards which should be complied with. Only when this happened in the oil business, foreign companies tried to set up decent workshops in places like Russia, but ran into local content laws which, effectively, said the work must be carries out by the company owned by the local strongman, mayor, or gangster. Who doesn’t give a shit about workplace safety. A decent journalist would have looked into the factory ownership and the ease of opening a decent factory in Bangladesh instead of whining about evil capitalists for the tenth decade running.

  12. @ Interested

    “So, if you make the clothes more expensive, which they would be, then the reason for making the clothes in Banga is…?”

    This extreme of the argument is every bit as idiotic as the other.

    There is an underlying cost of making stuff in ways that provide for basic human safety and dignity. Those costs exist wherever things are made, and the various savings from going to poorer countries come after that.. and are far greater.

    As has been said, we’re not talking about building gold-plated factories and paying everyone a western living wage. It’s about getting the basics right.. like we learned to do in the West many years ago.

    If the argument is that this trade will help Balgladesh in its journey up to ourliving standards, then they’re going to get the health’n’safety stuff right eventually… and whilst the benefits of some of our recent h&s innovation can be, er, ‘queried’, I think we can all agree that the earlier stuff was to the benefit of, pretty much, everyone. Why make the people of Bangladesh go through a period of outright disregard for worker safety when we’ve already realised it’s not a very good idea?

    Making workplaces safer might increase the cost of manufacturing in Balgladesh, but it would have the same effect anywhere else where it’s not already been done. So all we do is narrow the ‘advantage’. If it’s narrowed to such a degree that low-skilled manufacturing comes back to the West then.. well… someone is lying to us about something!

  13. @Interested, because they aren’t weighing the potential future costs of doing nothing against the definite, but rather smaller, cost of acting?

    Just because something can be described as “economic” doesn’t mean it is “rational”.

  14. Interested>

    I think James raises an interesting point. It certainly wouldn’t be unusual for even quite large businesses to make decisions regarding penny-pinching which are simply daft. I’ve seen a (UK-based) business incur over a hundred grand in recruitment fees replacing a handful of highly-paid members of staff who left because the company got rid of the coffee machine to save a few hundred pounds a year. On a smaller scale, I regularly have trouble explaining to businesses that when you pay someone upwards of a thousand pounds a week, possibly several times that, it is senseless to cut corners on the IT equipment you provide for them in an attempt to save a small amount, because when they’re unable to work for an hour or two – let alone a day or two – as a result, it’ll cost you a lot more in lost productivity than you’ve saved.

    It really is depressingly common. A while back I bid for a contract with an asset management firm in Kensington where the office’s total payroll for a dozen people was several million quid a year. They wanted a basic office network and some basic office PCs, but turned down a bid of around £10k for something robust, reliable, and with a reasonable degree of redundancy because it was ‘too much when we can get PCs from Dell for £200 each’. They still call me from time to time asking me if I can fix things for them because they have so much downtime, but they still won’t spend even a few hours wages on the computers they need to do their work.

    Come to think of it, there’s a far more relevant example of companies making mistakes that cost them in the long term – all the companies who use Lotus Notes.

  15. The Market is not immune from the usual human issues of egotism and stupidity. The Market tends to be more effective (tho’ not completely so) at weeding out the stupid and egotistical and delivering them to a lower level lifestyle.

  16. ” On a smaller scale, I regularly have trouble explaining to businesses that when you pay someone upwards of a thousand pounds a week, possibly several times that, it is senseless to cut corners on the IT equipment you provide for them in an attempt to save a small amount, because when they’re unable to work for an hour or two – let alone a day or two – as a result, it’ll cost you a lot more in lost productivity than you’ve saved.”

    This. You see this in the oil business several times a day and it does my fucking head in. It costs m employer thousands per day to have me put in a 9 hour day in Nigeria. Yet they’ll have me doing menial form-filling for hours to justify $100 of expenditure.

  17. So the “economically literate” perspective on fire doors is that they shouldn’t be installed no matter how cheap or effective they are. Got it.

    It’s obvious that trivial costs that result in not turning people into ex-people are worth incurring, without a second thought.

    Apparently that kind of thinking makes you some kind of communist.

  18. @TTG
    ‘This extreme of the argument is every bit as idiotic as the other.’

    Well, yes, if you take it to the extreme. But the fact is, doing business in Bangladesh isn’t all that easy (for a British company); it is easier to do it in Eastern Europe. So there has to be a Laffer style point at which Bangladesh prices itself out of the market.

    @JamesV
    ‘@Interested, because they aren’t weighing the potential future costs of doing nothing against the definite, but rather smaller, cost of acting? Just because something can be described as “economic” doesn’t mean it is “rational”.’

    Hmmm. But, as you say, it isn’t that expensive, or that hard (I also refuse, just refuse, to accept that many ‘capitalists’ really are so ‘evil’ that they literally don’t care if mothers and fathers and indeed children burn to death in their place of work).

    Is it a thin end of the wedge sort of thing? If you fire proof the factories, the next thing is people want lunch breaks, loo breaks etc?

    @Dave ‘I think James raises an interesting point. It certainly wouldn’t be unusual for even quite large businesses to make decisions regarding penny-pinching which are simply daft.’

    I suspect we’ve all see it Dave. I used to be one of three partners in my last business. We had one particular secretary who in my view was invaluable to the business, but I had to fight the other two to give her a £500 bonus each Christmas, on a salary of (from memory) about £16,000. She was worth £250,000 to the business in my view, but they just could not see it.

    (She was also tremendously fit, with particularly superb breasts; after we sold the business, one of the other two shacked up with her and they are now married!)

    I should say, I think it’s horrific that people die in factory fires. I would much rather people had decent working conditions, and one day they will have. I just don’t know how possible it is to do it all now, this minute.

  19. Installing fire doors in most deathtrap sweatshops in Bangladesh will cut a bit off this year’s profit margin. A few deathtrap sweatshops will instead go bust. While that makes me sad for the owners and employees of the latter set of deathtraps the world is still a better place for mandating that deathtrap sweatshops should have fire doors.

  20. JamesV>

    Do you have any evidence that fire-doors are the most effective way to spend that money? It’s a tricky question to answer.

    One thing we can say for sure is what Tim points out: that if we send them enough work, the workers will get enough power that these changes will be made according to what the workers most want.

  21. Dave, the proposed spending on rudimentary life-saving fire measures is not being weighed up against spending on other rudimentary, essential, long-overdue life-saving stuff. It is being weighed up against gold-plated taps in the factory owner’s yacht, or one more never to be worn frock in the wardrobe. So yes, putting some fucking fire doors in does indeed have rather greater utility than what else could (rather, would) be done with the surplus. And it means that next year the factory owner still has a factory with which he can earn those gold-plated taps, rather than a smouldering ruin with which he can no longer earn gold-pated taps.

  22. All this talk of fir doors might be moot. From http://ohsonline.com/articles/2012/12/05/fire-kills-112-factory-workers-manufacturing-walmart-and-disney-clothing.aspx

    “The fire that killed 112 people last week inside a warehouse in Bangladesh filled will apparel for companies including Wal-Mart, Sears, and Disney was so deadly because the exit doors were locked. The owner of the building has said he was not even aware that he needed to have an emergency exit sign.”

    Locked exit doors are something we’ve seen in other disasters, I’m thinking of in nightclubs where all the doors are locked to stop gatecrashers. In the panic they’re never opened in time when a fire starts.

  23. Presumably the owners have considered this, James. I agree with the earlier point by Interested that it’s more a thin end of the wedge argument: if it’s fire doors this year, it’s six months’ paid maternity leave next.

    Not a nice argument to advance, it’s true, but I think it perhaps scotches your suggestion that it’s sensible, from a *purely* economic point of view, to install the fire doors.

  24. “the proposed spending on rudimentary life-saving fire measures is not being weighed up against spending on other rudimentary, essential, long-overdue life-saving stuff. It is being weighed up against gold-plated taps in the factory owner’s yacht”

    Emotive nonsense. They are two entirely separate issues. For any given sum of money, the best way to spend it needs to be worked out because there isn’t an unlimited amount to be spent.

  25. Carlos>

    It’s not ‘thin end of the wedge’ so much as picking off low-hanging fruit. The point to be considered is whether in fact fire-doors are the lowest-hanging fruit – or whether, if they’re equal lowest with many other things, we should look at plucking them along with the others and what the total cost would be.

  26. Its the responsibility of the Bangladeshi govt, not the buyers. Bangladesh is an independent country, that’s what independent means. If Bangladesh were (say) part of some european country’s empire, then the responsibility would fall on that european country.
    Perhaps the Bangladeshi govt might like to impose a small export tax to pay for inspection (and perhaps implemetation) of safety regulations.
    Of course non of this affects the non-export sector, which is surely worse than the (relatively high end comparatively) export sector.
    Bangladesh needs to industrialise and modernise, and it needs regulations to be enforced ( one imagines that there are already safety regulations and that they are much ignored).

  27. JamesV – “If the cost of putting a couple of fire doors in makes the business unviable there is something seriously wrong with the business.”

    Well the costs are greater than you might think. If you have one door, you need one reliable guy on the front door. If you have a fire door all sorts of things can go back and forth. Someone might clock on for instance and then walk out the back. You will need a fire door with an alarm. That can’t be disabled. Someone might clock on, work their shift, and in the tea break, pass some stuff out the back to a friend. Someone might let their friends in for whatever reason.

    Factory owners aren’t monsters. They just know the costs of their business better than you do.

    “In any case, not having 100 of your staff burn to death can hardly be the cheaper of the two options, can it?”

    You would hope not but it is an externality. The costs of that are mainly borne by other people.

  28. You bleeding hearts will probably find if you look, that it is already a strict requirement for factories in Bangladesh to have fire doors and an effective evacuation plan. So now you plan to make a double special extra requirement ?

    Presumably you’ll send a squad of European factory safety inspectors over to make sure these rules are followed, and take over the government to ensure that the laws are prosecuted when broken and bribed around ?

    Good luck with that, but I suspect like most who sound off on these things, you don’t think what is actually involved, rather you want to invoke a morally superior feeling for yourself. To bad about all the Bangladeshi’s you then wish to condemn to peasant slavery.

  29. I suspect like most who sound off on these things, you don’t think what is actually involved, rather you want to invoke a morally superior feeling for yourself. To bad about all the Bangladeshi’s you then wish to condemn to peasant slavery.

    Conversely, Ed Snack, I sincerely doubt you care a monkey’s fart about the welfare of Bangladeshi peasants. So long as you can enjoy a limitless supply of cheap stuff, who cares how many factory workers have to burn to death making it, eh?

  30. Hmmm. Thing is, Larry, Ed doesn’t have to prove anything if (as I think you wrongly suspect) he’s absolutely happy with the status quo.

    The onus is on the keyboard warriors; if they give two fucks about the welfare of the Bangladeshis they can get on a plane, go to Bangladesh and start investigating/complaining.

    Then they can come back here with all the evidence they’ve gathered and put pressure on British retailers and consumers.

    If they really cared, people could easily give up their Western materialist Christmases and go and do it. Next week. Every anti-Christian (ie not missing Christmas) Guardian CiF-er worker on a public service salary of £30k or more. En masse. That would make an impact, for sure.

    It wouldn’t cost very much – two weeks in Bangladesh is peanuts, after all.

    Of course, the down side is, it would take a bit longer than typing in two or three paragraphs of bien pensant bollocks on a keyboard – a keyboard, almost certainly, manufactured in a factory with fairly similar safety regs, ironically.

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