Scott Anderson

Weekly Roundup – 5/4/13 : The stain of trade in Bangladesh

What is my “made in Bangladesh” shirt actually worth?

In an article published by Maclean’s earlier this week, Rosemary Westwood did the math:

“According to a 2011 report by the consulting firm O’Rourke Group Partners, a generic $14 polo shirt sold in Canada and made in Bangladesh actually costs a retailer only $5.67. To get prices that low, workers see just 12 cents a shirt, or two per cent of the wholesale cost. That’s one of the lowest rates in the world—about half of what a worker in a Chinese factory might make—and a major reason for the explosion of Bangladesh’s garment industry, worth $19 billion last year, up from $380 million in 1985. The country’s 5,400 factories employ four million people, mostly women, who cut and stitch shirts and pants that make up 80 per cent of the country’s total exports.

For that $14 shirt, the factory owners can expect to earn 58 cents, almost five times a worker’s wage. Agents who help retailers find factories to make their wares also get a cut, and it costs about $1 per shirt to cover shipping and duties. Fabric and trimmings make up the largest costs—65 per cent of the wholesale price. Toronto-based labour rights activist Kevin Thomas says wages ultimately get squeezed most because businesses can easily control them, unlike the price of cotton or shipping.”

As the death toll in Bangladesh surpasses 500 people in the collapsed Rana Plaza that housed five garment factories employing more than 3,000 workers, new urgency has taken over old debates about the real cost of cheap garments and the role of globalization.

Paula Chakravartty, associate professor of communications at the University of Massachusetts-Amherst, and Stephanie Luce, associate professor of labor studies at the Murphy Institute, City University of New York, saw the disaster as another grim marker along the economic race to the bottom. In a column titled May Day: Reflecting on Bangladesh factory disaster and corporate terror published in Al Jazeera, they point the finger squarely at multinationals that refuse to sign pacts allowing third-party inspections of their contractors’ facilities, and local governments who fail to hold them accountable.

“What about the opportunities and benefits of globalisation for workers who are very much at the bottom of the pyramid? In the 1980s, the Bangladeshi government was pushed to focus on exports – promoting its abundance in cheap labour as its “comparative advantage” both at home in the textile industry and abroad from remittances by workers living abroad.

“… while garment manufacturing has led to impressive growth in the country’s overall GDP, profits from the industry go primarily to garment retailers and brands in Europe and the US, and to a lesser degree to Bangladeshi middle-men and factory owners. The government has little incentive to disrupt this cozy relationship as the industry accounts for so much of its economy.”

If Chakravartty and Luce represent one side of the spectrum, Alex Massie, in his colum, The Miracle of Globalisation: Most of the World has Never Had It So Good, constitutes the other. While lamenting the tragedy of the disaster, Massie argues that without the rise of industrial sectors China, India, Vietnam and Bangladesh would be exponentially poorer.

“Bangladesh has few cards to play. Cheap labour is its competitive and comparative advantage. So while there are good moral reasons for wishing to see working conditions improve in Bangladesh there are also good moral reasons for resisting calls – foolish in the extreme – to make doing business in Bangladesh a hugely more expensive matter. Because the people most likely to be penalised by that are the people of Bangladesh, not western clothing companies.”

Massie, a freelance journalist and former Washington correspondent for The Scotsman, asks us to consider the alternatives:

“Relatively few people, I think, appreciate just how many ‘winners’ globalisation has produced. It is true that the wealthiest westerners have done well from this new era of globalisation but their gains are less important than those enjoyed by so many people in so many developing countries.”

I suspect most people, including those of us with “made in Bangladesh” labels sewn into our clothes, fall in between these two relatively polarized perspectives. It’s tough to stridently hold fast to the macro view that Massie projects as hundreds remain missing in the rubble. Yet to deny the economic gains that these jobs have provided, on the micro level, is to fail to see reality.

It leaves me with more questions than answers – and I suspect those answers will be unsatisfactory. For instance, will this disaster shock multinational companies to really know, or really want to know, the intricacies of their supply chains? Will they be more transparent as a result? (Possibly. But as of this writing only two of the 30 major retailers who contracted with the factory have actually commented on the situation. The most vociferous has been Galen G. Weston, chairman of Loblaw Cos. that owns retail brand Joe Fresh, who said he was disturbed by the “deafening silence” of other apparel retailers).

Will enough conscious consumers demand changes in the way their clothes are produced at the expense of low prices? (Not likely, cost is still king).

Will the widespread and ever-growing protests in Bangladesh prompt companies pick up and move to countries with even fewer labor standards and even more poor populaces? (Possibly, but that’s a very short-term solution to a long-term problem. With the average worker in Bangladesh making less than $40 a month, it’s going to be difficult to find cheaper labor).

So what is the answer? For Massie, it’s clear: “More free trade, better governance, the application of the rule of law: these are the things that change the world and, more pertinently, change it for the better. Capitalism works.”

Yes, capitalism works. But it’s only sustainable for the company, the consumer and the worker when there’s a policy infrastructure, (i.e., building codes, worker safety, and fair labor practices) present to enforce. Neither those standards, nor the political will to enforce them, will magically appear. Real change will take pressure from the citizens of Bangladesh on their politicians, agitation from consumers, and realization from companies to see worker safety as important to their business models as the cost of fabric. It’s my hope that multinational companies will borrow some lessons from social enterprises and emerging sectors, such as impact sourcing, that have embraced shared value in their supply chains and business practices – balancing profits and social gains in the process.

Finally, it probably takes a more expensive shirt.

In Case You Missed It … This Week On NextBillion

NexThought Monday – ’Ed-Tech’ Opportunities : A new study delves into how social enterprises can work in the affordable private schools Sector By Kim Campbell

“Can You Heal Me Now? Good”: Mobile technology innovations in health care By Eric Clayton

A Wholesale Boost for Tenderos: Why SABMiller Latin America is investing $17M in small retailers By Karl Lippert

Avoiding the Generation Gap : Young people and financial access, going beyond mobile money By Monique Cohen

Building Impact Investing Momentum in Africa By Nompu Ntsele

Doctors on Wheels: Projeto CIES brings mobile clinics to Brazil By Rose Reis

Sankalp Unconvention Summit 2013: The Global Hotspot for Innovation By Nilima Achwal

Viva la Revolucion?: What can other countries learn from Cuba’s health care model? By James MilitzerWDI

Re-evaluating Impact Evaluation: Why solely focusing on financials is flawed and other key points from a recent workshop By Hui Wen ChanCiti Foundation

The Social Progress Index:: A new language for development, or 21st century Esperanto? By Michael AndersenMercy Corps