The Bangladesh Factory Collapse: A Case for Intervention and Policy Change

March 20th, 2014 by Kara in Case Studies

By Edward Henniker-Major

Rana Plaza factory collapse Bangladesh

 

On April 24, 2013, an industrial building containing five factories collapsed in Savar, near Dhaka, the capital of Bangladesh.  More than 1,100 people, predominately young women producing garments for export to western retailers, were killed in South Asia’s worst industrial accident since the Bhopal disaster of 1984.[i] The factory collapse sent reverberations across the globe and reignited the debate on the role of corporate and consumer responsibility, and on the ethics of sweatshops. Pressure groups, governments, and multinational corporations vowed to clean up the industry. This incident caused a reassessment of working conditions in Bangladesh and has the potential, as Kolpena Akter, of the Bangladesh Centre for Worker’s Solidarity, has asserted, to be a ‘historical turning point’.[ii]

Yet, there is much disagreement on what changes, if any, the garment industry should implement to improve work conditions. The industry is vital to the Bangladeshi economy and some commentators believe regulation that demands improvements may damage its competitiveness and slacken economic growth. Sweatshop supporters fear strangling multinationals in legislation will increase costs and encourage businesses to relocate, causing a rise in unemployment and slowing growth. Sweatshop sympathisers are also against any interruption in what they see as a natural phase in economic development. For them, sweatshops are part of a necessary process that a nation goes through as it industrialises, and an attempt to manipulate this progression will harm a nation’s development.

On the other hand,  improvement in work conditions will not necessarily have a detrimental effect on the economy of Bangladesh. Consumers seem willing to pay extra for ethically sourced apparel and multinationals can benefit from having a ‘just’ image. This helps to offset the increased costs in production. Policy makers and multinationals can also make improvements to work conditions without having a detrimental effect on employment in Bangladesh. Governments and western firms can increase labour demand through other policy initiatives, and some western nations can increase trade with Bangladesh by reducing tariffs and import quotas. This can maintain, or even increase, employment. It is also contentious to claim that sweatshops are natural and that it should be left to a market-led process to provide economic development. Throughout history, there have been numerous examples where government intervention has combined with market forces to encourage growth and development.

Even if one considers the pro sweatshop argument, the reality is that sweatshops pay a very low wage and employees work long hours in poor environments with little representation from unions.[iii] On top of this, the Bangladeshi authorities lack the power to act alone and pave the way for change. In this regard, this paper argues that multinationals and western governments have a responsibility to help improve work conditions. This is especially important as it is appears that most factories in Bangladesh are vulnerable to collapse.[iv]

In addition, one should not measure the value of sweatshops in only long-run economic terms, as sweatshop supporters are prone to do, and ignore the abuses currently occurring. Commentators, economists, policy makers, and corporate managers need to assess conditions in garment factories from an ethical stance that analyses the morals behind business outsourcing, rather than ignoring human worth and evaluating the net economic result. All human beings should have basic human rights, as some western constitutions so elegantly enshrine, and sweatshop conditions compromise these sacrosanct principles.

This article advocates an approach that looks at the moral actions of those involved in the garment industry from the beginning of the supply chain, rather than only analysing sweatshops and its employees in long-run economic terms.

The Garment Industry and Bangladesh

The garment industry is vital to the economy of Bangladesh. It is worth nearly £20 billion and contributes to around 75% of export revenue.[v] It also employs around 3.5 million people and makes up 13 per cent of gross domestic product.[vi] As production shifts from China, economists expect the Bangladesh garment industry to become the world’s largest exporter of apparel.[vii]  The country owes its predominance to the wide availability of cheap labour and lax regulation. The monthly minimum wage of $38 is less than a fifth of the rate in China and is considerably below what the United Nations consider a living wage for Bangladesh ($60). Poor work conditions and low pay, however, mean that industrial accidents and labour disturbances are not uncommon.[viii] Yet, any far-reaching changes to the industry to improve labour standards may also have profound effects on the economy of Bangladesh.

The Case for Sweatshops: Do Not Interfere in a Natural and Beneficial Process

According to the Alex Massie, of The Spectator, ‘sweatshops in the developing world have, on balance, been a good thing. And it is not even close’. Sweatshop supporters hold that, while conditions in garment factories may be dreadful, they offer better conditions and pay than a life in agriculture.[ix] Matt Yglesias, of Slate, argues that the appalling work conditions are justified by the nation’s poverty and commented that Bangladeshis are willing to make ‘different choices’ (to Americans) ‘on the risk-reward spectrum’. To Yglesias, workers in Bangladeshi sweatshops make a rational and free decision to choose these jobs, and, as a result, the nation has become richer.[x] Publications like Slate and the Spectator highlight the economic benefits of sweatshops override the need for reform, and indicate the effectiveness of the system as the Bangladeshi economy has been growing at around 6 percent a year for the last decade, while the minimum wage in 2010 was near double what it was in 2006.[xi] Sweatshop supporters also highlight how the industry has broken down age-old social prejudices and uses resources that were previously under-employed. Indeed, some 80 per cent of garment workers in Bangladesh are women.[xii] According to sympathisers of sweatshops, Western consumers should therefore, buy more goods from developing nations in order to boost their economies and provide greater employment in the better paying industries, such as garment production. In short, for the defenders of sweatshops, the apparel industry has dramatically improved standards of living in the developing world.

According to Paul Krugman, improvements in living standards ‘have not taken place because well-meaning people in the west have done anything to help. Nor is it the result of the policies of national government, which are as corrupt as ever. It is the indirect and unintended result of the actions of soulless multinationals and rapacious local entrepreneurs, whose only concern was to take advantage of the profit opportunities offered by cheap labour. The result has been to move hundreds of millions of people from abject poverty to something still awful but nonetheless better’.[xiii] Krugman and other sweatshop sympathisers ultimately agree that unbridled globalisation, and its accompanying sweatshops, have brought untold wealth to impoverished nations, such as Bangladesh. Defenders of sweatshops generally argue that any form of regulation will interrupt this transition towards economic improvement. According to this thought, labour codes that require multinational corporations and their subcontractors to improve worker conditions and pay a living wage will have detrimental effects on economic growth. Tom Chivers, of the Telegraph, echoes this view. He fears that higher safety standards will increase labour costs and harm Bangladesh’s major advantage, cheap labour.[xiv]

For Irwin and Sengenberger, increased regulation of sweatshops would derail a natural market-led development process.[xv] They see sweatshops as useful ‘stepping stones’ for developing nations to move further up the ladder of economic development. For these sympathisers, history has shown that sweatshops are a natural point on the trajectory of a nation as it moves from a rural economy to an industrial economy.[xvi] According to this thought, sweatshops will disappear through a market led development that encourages productivity, and not through regulation or boycotting.[xvii] For sweatshop supporters, free trade is mainly responsible for improved work conditions, whereas unnatural intervention in the garment industry will increase production costs and encourage companies to move to new shores where overheads are lower. Bangladesh would therefore lose income from a source that is vital to its economy and instrumental in improving standards of living.

Supporters of sweatshops also highlight other Asian economies as examples where sweatshops have been vital to economic development.  According to this argument, unregulated export industries and its suppressed labour are vital to economic growth in developing countries, which in turn leads to improved work conditions and to the eventual abandonment of sweatshops. [xviii] Common examples are Japan, which experienced rapid growth in the early twentieth century and again after the Second World War, and the Tiger economies of Korea, Hong Kong, Singapore, and Taiwan, all of which experienced rapid industrialisation between the 1960s and 1990s. These nations used sweatshops at some point in the twentieth century, however, they are now free (mostly) of sweatshops and are considered developed nations with high standards of living. Authors such as Chalmers Johnson, Hagen Coo, and Frederic Deyo argue weak labour unions were necessary for growth in the Tigers as they gave the countries a comparative advantage in a global economic system.[xix] Clyde Prestowitz, of Foreign Policy magazine, echoes this sentiment and attributes the prevention of labour unions as having a major impact on the economic growth of developing nations.[xx] Similarly, Vikas Bajaj suggests that oppressed labour is an advantage and improved labour conditions may cause a relocation of western corporations.[xxi] The point is that sweatshops and their exploitable labour were, and still are, necessary for economic development in developing nations. The Asian Tigers and Japan did not, supposedly, develop and outgrow sweatshops through state intervention or by the imposition of regulations and codes, but rather through a market led process that began with sweatshops, which in turn encouraged the export sector and stimulated growth.[xxii]

Two Sides to Every Story: A Stronger Case for Intervention and Regulation

However, sweatshops are not a natural and inevitable process, as the anthropologist, Jason Hickel stresses.[xxiii] Indeed, deliberate strategies have encouraged the proliferation of sweatshops. Initially, western colonisers in undeveloped regions compelled farmers to move to industrial cities to swell the ranks of the urban poor and lower wages. In the 1970’s, the World Bank and the International Monetary Fund (IMF) began a more recent wave of migration to the cities through policies that hurt small scale farming in developing nations. Structural adjustment policies compelled third world governments to stop subsidising their agricultural sector and allowed for the importation of cheap grain. At the same time, trade barriers and labour regulations were discouraged, while market deregulation and privatisation were promoted. In return for these policy changes, the rich counties consented to the IMF and the World Bank giving developing nations loans and to the World Trade Organisation granting them access to western markets. This policy created an ideal environment for western corporations to move their operations to nations where labour is cheap and the conditions most exploitable.[xxiv] According to Hickel, structural adjustment policies have not helped poor countries, as they were supposed to do, but have slowed down economic growth in developing nations and tied the economies of poor countries to the whims of rich nations through perpetual debt.  It has benefitted multinational corporations and led to the widening of the income gap between the world’s richest and the world’s poorest people.[xxv] Thus, while sweatshop conditions may be one of the initial stages of economic development in a capitalist world, rich nation sponsored intervention has helped to create and maintain the necessary conditions.

The argument that unregulated export industries and their sweatshops were instrumental in the economic development of the Japanese and the Asian Tiger economies is also contentious. While the economists Jeffrey Sachs and Paul Krugman contend the proliferation of suppressed labour working in sweatshop conditions is a precondition for growth in developing economies, Rebecca Cassler highlights that there is little correlation between GDP and social freedoms in her analysis of developing nations in the 1980’s.[xxvi] This suggests that labour suppression is not a major factor in economic growth. These findings are echoed in a study by the University of Michigan, which show that suppressed labour lowers productivity and deters investment. This article contends the implementation of labour standards generally has a positive effect on international trade and investment. It argues that foreign investment is drawn toward stable labour markets that are not disturbed by the kind of political and labour violence that can occur in nations that use sweatshops and exploit labour.[xxvii]

Even if one accepts that labour suppression in these regions played its part, it does not follow that it will have a similar impact on developing nations in the twenty-first century. Unique factors affected the economies of Japan and the Tigers. For example, as Cold War allies, these nations benefitted from western investment and global commerce, while US trade breaks allowed them to dominate an expanding market for third world manufacturing products.[xxviii] However, the economic conditions facing developing nations today are not the same.

The economist Alan Tonelson emphasises how the recent wave of economic liberalisation across the developing world has opened up new markets, causing a glut in cheap labour and helping to depress the value of workers. The opening of much of the developing world’s economies has multiplied the number of nations now following export led growth strategies, all competing for a share of saturated western markets.[xxix] Growth in the developing world is therefore, dependent on stable economic conditions in the west. With economic crises, stagnations, and slow growth in developed nations suppressing global demand, it is likely that sweatshop conditions will remain without intervention. Indeed, a study by the Workers Rights Consortium has concluded that apparel wages in nine of the fifteen developing nations analysed, including Bangladesh, fell in real terms between 2001 and 2011. In the other six, real wage increases were unimpressive. Only in China, where there was a substantial increase in the minimum wage, did real wages increase at a rate to move apparel workers toward a living wage.[xxx]

The effects of globalisation are therefore not always as wonderful as some economists would have us believe. Its consequences vary between regions and groups and can have detrimental effects on some sections. Rural areas will often lose out as cheaper imports displace food producers, while the actions of some multi-nationals have caused massive environmental damage to agricultural land and worsened the lot of the poor.[xxxi] According to Fisher and Lovell, it is therefore, ‘unlikely that world trade liberalisation can be morally justified by its impact on reducing poverty’.[xxxii] Trade liberalisation has also compelled developing countries to deregulate and not enforce labour standards in order to maintain their comparative advantage, low costs. This phenomenon, known as a ‘race to the bottom’, means that incidents like the Sava collapse are all too common as labour rights and work conditions decline due to competition among developing nations for foreign direct investment. A 2011 study provides compelling evidence of, what the paper calls, an ‘economically meaningful’ race to the bottom in labour standards. The research suggests that labour standards across the developing world have considerably declined from 1985 to 2002, highlighting the exploitative side of globalisation in its encouragement of bad practices. This leads the authors to conclude that international coordination is needed to ensure labour laws are enforced and standards improved.[xxxiii]

Yet, is it conclusive that improving conditions will severely hit profits and damage an industry on which Bangladesh is so reliant? According to a study that looked into a 100 percent increase in the pay for Mexican apparel workers, there is only a 50 cents increase to the production cost of a shirt sold for $32 in the United States. However, even if this increase passed onto the consumers, which is likely, the economists John Miller and Robert Polinn stress that US consumers are willing to pay a higher price for goods made under decent work conditions.[xxxiv] A study by the National Bureau of Economic Research echoes this sentiment. According to this research, consumers are willing to pay 28 percent more on an item costing $10 and 15 percent more on a $100 item, if the items are produced under ‘good working conditions’.[xxxv]  The point here, as Jason Hickel highlights, is that companies do not have to use sweatshops to maintain profits, but can instead raise wages and improve work conditions to conform to an approved standard.[xxxvi]

Scholars Against Sweatshop Labour (SASL) also contest the principle that wage increases and improved working conditions will reduce labour demand and cause higher unemployment. This principle is a theoretical device that assumes all other economic factors remain constant, whereas in reality there are many factors that affect the demand and supply of labour.[xxxvii] Governments and multi nationals can enact other measures to offset the effects that higher wages may have on labour demand. According to SASL, such initiatives include: ‘measures to expand the overall number of relatively high quality jobs; relief from excessive foreign debt payments; raising job satisfaction and productivity and the quality of goods produced; and improving the capacity to bring final products to retail markets’.[xxxviii]  Businesses and governments that put more investment into workers and the local environment will also create a more advanced workforce that will in turn, produce better quality goods. Indeed, multinationals that use sweatshops and ignore working conditions face damaging their reputation, while a more concerned attitude toward their workforce could lead to the enhancement of their image among ethical consumers. Corporate and state investment in their workforce can therefore, help to offset cost increases and maintain profit margins. In short, the claim that improving work conditions in developing nations will reduce the number of jobs and cause a net loss in worker welfare does not take into account other variables, nor does it acknowledge the buying power of western consumers.

The economist Simon Kuznets also contests the argument that sweatshops are merely a natural stage in economic development and that countries, if left to market forces, will outgrow sweatshops. ‘In democratic societies the growing political power of the urban lower income groups led to a variety of protective and supporting legislation, much of it aimed to counteract the worst effects of rapid industrialization and urbanization and to support the claims of the broad masses for more adequate shares of the growing income of the country’.[xxxix] Sweatshops thus disappear when economic growth is combined with social legislation.

With this in mind, John Miller highlights the hypocrisy in the pro sweatshop proponents. Their aversion to regulation and their championing of free trade principles which purportely improve work conditions is not borne out in history. Miller highlights previous incidences of government intervention in western nations that enacted legislation to improve working conditions. According to Miller, ‘sweatshops were not extinguished by market forces alone but when economic growth was combined with the very kind of social action, or collective choice, that defenders of sweatshops find objectionable’.[xl]

For example, the 1911 New York Triangle Shirtwaist garment factory tragedy, which killed 146 workers, highlighted the need for labour reform.  An enquiry exposed health and safety standards as woefully inadequate. Fire escapes led nowhere, locked doors blocked exits, and fire fighters’ equipment was inefficient. This tragedy led to a glut of legislation regulating the garment industry and inspired union organising in an attempt to improve health and safety and address work standards.

In the wake of the Great Depression, federal legislation further enhanced the labour reform movement with the Fair Labour Act, which established the national minimum wage, demanded a premium pay for overtime, and restricted the use of child labour.[xli] In Britain and other western nations, governments have also passed numerous factory acts over the last two hundred years to improve work conditions. In these cases, respect for human rights has helped social and economic development. Regulation can aid growth and a well-treated and contented workforce underpin social stability.

Although economists at the IMF and the World Bank view economic growth in developing nations as a vindication of free-market principles, other non-market factors play a greater role than they give credit.[xlii] This includes the use of well thought out domestic policies that look to stimulate trade, promote sustainable growth, protect infant industries, and encourage income equality and political stability. Wise government spending and the proactive role of the state in using protectionist measures are policies that all of today’s wealthiest nations used to develop their economies, and the non-Western nations that have not implemented all-embracing free market principles have fared well.[xliii] Governments can therefore, intervene in the economy to spread the benefits of economic growth and help foster social stability, but without hindering economic development.[xliv] The state is an important and necessary market participant. Unrestrained sweatshops in themselves are not responsible for economic growth, but rather a combination of free trade principles and considered interventionist policies. This encourages sustainable and equitable growth, which in turn discourages human rights violations, and enables nations to move beyond sweatshop economics.

Responses to the Bangladesh Factory Collapse: Are Multinationals and Western Governments Doing Enough?

There is little evidence to suggest that the Bangladesh Government possesses the strength or resources to act alone and enact far-reaching legislation to improve conditions in its factories. Corruption and social strife are endemic to Bangladeshi politics and society. It ranks 144th out of 174 countries on the Corruption Perception Index, a survey based on how corrupt the public sector is perceived to be.  Bangladesh is also regularly paralysed by political strikes and religious violence.[xlv] In view of this, western governments and multi-national corporations must take a greater responsibility in helping to pave the way for change in Bangladeshi factory standards.

However, in the immediate aftermath of the factory tragedy, some companies astonishingly expressed bewilderment about whether the Sava factories produced their products.[xlvi] Indeed, as a result of multinational corporations outsourcing their production to countries like Bangladesh, independent contractors often make decisions in complex supply chains. Companies must know that cost differentials, the reason they outsource in the first place, between developed and developing nations suggest conditions at factories are probably unsatisfactory, and only empirical evidence can disprove this.[xlvii] Arnold and Bowie argue that ‘multinational enterprises have duties, both in their own factories and in contract factories…to ensure that the dignity of workers is respected’.  These duties are paramount, ‘because of the power they have over the owners and managers of such factories and because of the substantial resources at their disposal’.[xlviii] Companies should therefore, be responsible for sourcing transparent suppliers and for rapidly identifying issues in their supply chains. Ignorance is no excuse, and the advent of new data technologies and improved communications now enable businesses to manage their supply chains more efficiently.

The responses of multinational corporations and governments to the factory collapse have been varied. The European Union threatened to alter its General System of Preferences (GSP) in order to force the Bangladesh government to comply with international labour standards. Bangladesh exports some 60 percent of its garment production to Europe under the GSP, which gives the Asian nation duty-free and quota free access to the EU market.[xlix] However, the EU decided against such an impulsive reaction. In a statement, the organisation announced that it wished to remain engaged in Bangladesh so, ‘that it can preserve the preferential treatment access to the EU market which has greatly helped socio-economic development over the years’. The EU, the International Labour Organisation (ILO), and the Bangladesh Government have reached a tripartite agreement that envisages improvements in labour rights and work conditions, and has set targets for the industry to meet.[l]

The United States, which receives about 25 percent of Bangladeshi garment exports, has, in response to the building collapse, chosen a different path.[li] The US has decided to suspend its GSP trade benefits for Bangladesh. Yet, the move is ‘more symbolic than substantive’, as 90 percent of Bangladeshi exports to the US is clothing that does not receive benefits under the US GSP.[lii] Apparel exports to the US face an average duty of 15 percent, while the £35 million of exports hit by this decision make up less than 1 percent of total Bangladeshi exports to the United States.[liii] Kim Elliot acknowledges that if President Obama were serious about improving work conditions in Bangladesh, he would have tried to ‘increase the paltry trade benefits that Bangladesh receives, contingent on serious and sustainable improvements in worker rights’.[liv] The Americans could therefore, help to foster economic growth and improve factory conditions by following in the footsteps of the EU.

As for the multinational companies themselves, there was a fear that many firms would emulate the reaction of Walt Disney and withdraw operations from Bangladesh altogether. [lv] This would have been incredibly rash given the importance of the garment sector to the Bangladeshi economy and the employment vacuum it would have created. Instead, after negotiations with trade unions and nongovernmental organisations (NGOs), a mostly European group of 70 businesses has agreed to inspect, within nine months, all Bangladeshi garment factories that supply their companies. These companies have joined a legally binding plan, known as the Accord on Fire and Building Safety, in order to maintain minimum safety standards in the garment factories of Bangladesh. It includes the signatories H&M, Carrefour, Marks and Spencer, Primark, Benetton, and the American parent of Calvin Klein and Tommy Hilfiger, PVH.[lvi]  The firms have vowed ‘to insure that sufficient funds (up to a maximum of $ 500, 000 a year per company) are available to pay for renovations and other safety improvements’.[lvii] These multi nationals have exhibited, some faster than others, an appreciation of the uproar from the factory collapse. The work of the ILO, demonstrators, and pressure groups such as the War and Want, Avaaz, Labour Behind the Label, Ethical Trade Initiative, and the Clean Clothes Campaign (CCG) has been particularly influential in forcing a reassessment among clothing retailers.[lviii] Indeed, this has prompted one member of the CCG to declare that changes in labour and safety conditions generally occur ‘not for philanthropic reasons but because protests were starting to disturb the supply chain’.[lix]

However, few American firms have joined the proposal.  They dislike the agreement as it might subject them to lawsuits and unclear obligations. Walmart, Target, and Gap are instead working on their own agreement. Critics, however, are worried that it will not go far enough to improve work conditions, and may instead discourage European retailers who fear that they will be unfairly hit by agreeing to a plan that excludes major US competitors.[lx] According to Yesilevsky, ‘the best way to bring about lasting change is legally’.[lxi] With this in a mind, a sensible way to push US firms, and other firms not signed up to the accord, is to make it a legal requirement to join the agreement. The US and other western governments can pass laws prohibiting non-compliance, and punish firms that continue to violate human rights by not addressing conditions in sweatshops that produce their products. With regard to western businesses, basic work conditions accepted at home should hold as the norm abroad.

Western governments can also compel contractors and multinationals to pay employees a minimum wage that is equal to Bangladesh’s living wage. This wage increase need not force companies and firms to relocate as their costs increase. As Hickel suggests, an international minimum wage pegged to local costs of living prevents[lxii] firms moving from one sweatshop nation to the next (ending the race to the bottom), as a standard wage is set across countries on a similar development footing. Furthermore, a minimum global wage that varies according to local economic conditions allows nations with lower living costs to maintain their comparative advantage, i.e., cheap labour, over those more developed nations where costs are higher. If western nations combine a decent wage with a targeted trade quota system aimed at the poorest regions, there is the added benefit of foreign direct investment tackling poverty in those areas where it is most needed, rather than investment going to where labour is most exploitable.[lxiii]

minimal minimum wage

In order to stimulate economic growth and end sweatshops, the Bangladeshi state must also be allowed to protect infant industries and implement import substitution programmes. Although this is anathema to devotees of neoliberal capitalism, it is a policy, as Chang addresses, which ‘almost all of today’s rich countries used to develop their industries’.[lxiv] This includes both Britain and America, who aggressively protected their industries in the past, achieved competitive advantages, and then lobbied free trade policies to be able to take advantage of their positions in a global market. Taiwan, Japan, Korea, Germany, and Sweden are just some of the other examples of nations that used tariffs, subsidies, and state support for key industries to produce growth.[lxv] According to Pollin, since the 1980’s the adoption of structural adjustment polices has led to a loss of $480 billion per year in potential GDP for developing nations.[lxvi] An unwinding of this rich nation sponsored policy enables developing nations to stimulate domestic investment and better promote their infant industries in the early stages of development. This encourages the growth of an economy less dependent on the export of one type of light industrial product. It also is beneficial if this balanced growth occurs alongside a significant voluntary reduction in third world debt, fairer rules on loan repayments and access to foreign aid, and an international minimum wage.[lxvii] These strategies reduce the leverage richer nations have over poorer countries, and allow those poorer countries to instigate their own unique policies in order to stimulate higher rates of growth and equality. This in turn helps to more rapidly end sweatshops in countries like Bangladesh.

The Value of Human Dignity: a Deontological Verses a Utilitarian Assessment of Sweatshops

The Guardian asks the question: how free is the choice to work in a sweatshop when the alternative, subsistence agriculture, pays below what the UN considers the threshold for extreme poverty?[lxviii] Is it not just absolving oneself of any moral responsibility by simply saying that employment in a sweatshop is the lesser of two evils? This hardly represents a choice. Carolyn Beringer points to the fact that these jobs are the only option for many in developing nations. As consumers of their products, we should be encouraged to try improving conditions for sweatshop workers.[lxix] Conditions in many of these factories are utterly deplorable and must be challenged. In the words of Anna Yesilevsky, sweatshops are ‘an affront to human dignity and an extensive violation of human rights. It is our duty to our fellow human beings to strive for a world where everyone is guaranteed dignity’.[lxx]

Publications like the Daily Telegraph, the Spectator, and Slate analyse the sweatshop industry in economic terms (but still miss some interesting economic arguments in the process) rather than looking at the ethics of the processes that has led to the factory collapse in Bangladesh. The case for sweatshops is thus akin to a form of utilitarianism: the ends justify the means.  For sweatshop supporters, one must allow sweatshops to exist because the alternative is worse and the net gain in the future will be increased wealth and prosperity.  However, a more deontological view looks past economic consequences, which are debateable anyway, and towards the moral principles governing business decisions. Deontology advocates that one is morally obliged to act according to a set of principles, regardless of the outcome.  Sweatshops are an assault on human dignity. While sweatshops are not acceptable in the developed world but permissible in poorer countries, business principles are not being consistently enforced. Commentators, multinationals, governments, and pressure groups must therefore address work conditions in developing nations in order to promote a global standard of business practices and safeguard human rights.

Conclusion

The utilitarian analysis of sweatshop supporters only values the Bangladeshi garment industry in financial terms and highlights the value of free market economics. Yet, there are many controversies in their arguments. Improvements to work conditions need not damage the economy and society of Bangladesh, while multinationals can profit from an enhanced reputation in seeking reputable suppliers. Nor is free market economics solely responsible for nations moving beyond the sweatshop stage in economic development. Unrestrained globalisation has its flaws, and government intervention and social movements have throughout history helped to influence economic growth, which has in turn led to improved work conditions and further growth.[lxxi] In fact, the IMF and the World Bank need to rewrite the rules so that developing nations can more easily use protective measures for industrial and economic development, as developed nations themselves have done previously.[lxxii]

While caution is needed in setting minimum standards for workplace conditions, so as not to damage the Bangladesh economy, intervention in the garment industry need not guarantee a loss in labour demand.[lxxiii] There are other means to maintain the demand for labour and promote economic growth, as outlined by SASL and demonstrated by the policies that developed nations previously used. A sensible option is a flexible international minimum wage, upheld by the parent nations of multinationals that outsource to developing countries. This improves work conditions, puts a floor on the pernicious race to the bottom, and still allows developing nations to attract investment with cheap labour. Nor does it appear that improved work standards will dramatically hit western buying habits and damage the economies of developing nations. If improved work conditions cause a rise in production costs and increase the end product price, the pressure for manufacturers to reduce their employees is offset by western consumers willing to pay a higher price to ensure their garments are not produced under sweatshop conditions.

Western governments must continue to work with the Bangladesh authorities and suppliers to make certain standards are improved. The West can reward Bangladesh with trade concessions and investments if factories meet targets, and penalise when they do not. In this regard, the United States needs to change its approach and encourage more trade with Bangladesh. Governments must also compel their multinationals to join the Accord on Factory and Fire Safety and ensure that firms address sweatshop conditions. Institutions and pressure groups need to maintain focus on businesses that are continuing to use suppliers who flagrantly dismiss human rights. From a Hobbesian view of human behaviour, people will not behave ethically unless there is the threat of retribution.[lxxiv] NGO’s and demonstrators, by damaging a firm’s reputation, and government legislation, by fining recalcitrant businesses, can compel change by hitting multinational companies where it hurts: their profits.

One must also not exclusively value the Bangladeshi garment industry in financial terms. A more deontological assessment seeks to analyse the moral actions of players in the garment industry, rather than just the end financial result. This enables commentators, businesses, and governments to assess the ethical dimension of the sweatshop in relation to their own values. In this sense, sweatshops in Bangladesh, and in other nations, are an affront to human dignity. Multinational corporations and western governments must therefore be prepared to address compromised work conditions and uphold a basic standard of human rights. Indeed, while ethical conduct can be financially beneficial to firms, businesses must acknowledge the importance of ethics, not just to secure profits, but also to help perpetuate and institutionalise better practices.[lxxv] In other words, as Mellah, Morrell, and Wood point out, ethics can be partially secured by legislation, ‘but must also be borne out through actions’.[lxxvi]

 

 

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Internet articles and other journals

A. Amsden, ‘Why isn’t the whole world experimenting with the East Asian model to develop?: Review of the East Asian miracle’, World Development, vol. 22, iss. 4 (1994), pp. 627-633

Anon, EU not to go US way’, bdnews 24 (June 30, 2013)

Anon, ‘Primark to pay compensation to Bangladesh victims – brands must act to ensure it never happens again’, War on Want (April 30, 2013)

Anon, ‘SASL Statement’, Political Economy Research Institute (Oct, 2001)

Anon, ‘Sweatshops in Bangladesh’, War on Want

D. Arnold & N. Bowie, ‘Respect for Workers in Global Supply Chains: Advancing the Debate Over Sweatshops’, Business Ethics Quarterly, 17, 1 (2007), p. 135-145

C. Beringer, ‘In Defense of the Anti-Sweatshop Movement’, Martin Institute Political Review (Oct 23, 2011)

D. Brown, A. Deardorff, R. Stern, ‘Labor Standards and Human Rights: Implications for International Trade and Investment’, Working Paper Series, 119, International Policy Centre, University of Michigan (Aug 19, 2011)

R. Cassler, ‘Re-examining the role of labor suppression in economic development-Labor is not a commodity’, International Labor Rights Forum (Nov 22, 2010)

R. Davies & K. Vadlamannat, ‘A Race to the Bottom in Labour Standards? An Empirical Investigation’, IIIS Discussion Paper, No. 385, University of Dublin (Nov 2011)

K. Elliot & R. Freeman, ‘White Hats or Don Quixote? Human Rights Vigilantes in the Global Economy’, National Bureau of Economic Research (Dec, 2004), pp.  47-98

K. Elliot, ‘Why Penalising Bangladesh Isn’t the Answer’, Bloomberg Businessweek (June 28, 2013)

Ha-Joon Chang, ‘Kicking Away the Ladder’, Post-Autistic Economics Review, no. 15, 3 (Sept 4, 2002)

P. Krugman, ‘Does Third World Growth Hurt First World Prosperity?’, Harvard Business Review, Vol. 72, 4 (Jul-Aug, 1994), pp. 113-121

P. Krugman, ‘In Praise of Cheap Labour’, Slate, 20 (March, 2000)

S. Kuznets, ‘Economic Growth and Income Inequality’, American Economic Review, 45, no. 1 (March, 1955)

B. Hensler, ‘Global Wage Trends for Apparel Workers, 2001-2011’, Worker Rights Consortium (July, 2013)

J. Hickel, ‘A Short History of Neoliberalism (And How We Can Fix It)’, New Left Project (April, 9, 2012)

J. Hickel, ‘Rethinking Sweatshop Economics’, Foreign Policy in Focus (July 1, 2011)

H. Husock, ‘The Bangladesh Disaster And Corporate Social Responsibility’, Forbes (2 May, 2013)

IMF staff, ‘Global Trade Liberalization and the Developing Countries’, International Monetary Fund (Nov, 2001)

K. Johnson & J. Alam, ‘Major Retailers Rejected Bangladesh Factory Safety Plan, Huff Post Business (27 April, 2013)

P. Lo, ‘H&M Responds Slowly to Bangladesh Factory Collapse Killing 1,100’, Corp Watch Holding Corporations Accountable (May 19, 2003)

D. Macaray, ‘Sweatshops, Then and Now’, Counterpunch (June 4, 2013)

J. Miller, ‘Why Economists Are Wrong About Sweatshops and the Antisweatshop Movement’, Challenge, vol. 46, no. 1 (Jan/Feb, 2003), pp. 93-122

B. Montopoli, ‘Bangladesh factory disaster: How culpable are Western companies’, CBS News (April 26, 2013)

A. Pasick, ‘Want to improve working conditions in Bangladesh? Boycott the Gap’, Quartz (May 2, 2013)

R. Pollin, J. Burns & J. Heintz, ‘Global Apparel Production and Sweatshop Labor: Can Raising Retail Prices Finance Living Wages?’, Political Economy Research Institute, Working Paper Series, 19 (2010)

F. de Sam Lazaro, ‘After Factory Disaster, Bangladesh NGO Offers Support to Improve Work Conditions’, PBS Newshour (July 3, 2013)

M. Scholte, ‘An Awkward Truth: Bangladesh Factories a Way Up for Women’, Spiegel Online (July 10, 2013)

Z. Seward, ‘If Benetton wasn’t using the Bangladesh factory where 377 died, why are these shirts in the rubble’, Quartz (29 April, 2013)

D. Viederman, ‘Overseas Sweatshops Are a U.S. Responsibility, Bloomberg BusinessWeek (June 5, 2007)

A. Yesilevsky, ‘The Case Against Sweatshops’, The Humanist (May/June, 2004), pp. 20-21 & p. 46

M. Yglesias, ‘Different Places Have Different Safety Rules and That’s OK’, Slate (April 24, 2013)

Other Internet sources

A Berg et al, ‘Bangladesh’s ready-made garments landscape: The challenge of growth’, McKinsey and Company: http://www.mckinsey.de/sites/www.mckinsey.de/files/2011_McKinsey_Bangladesh.pdf

Accord on fire and building safety:  http://www.industriall-union.org/sites/default/files/uploads/documents/2013-05-13_-_accord_on_fire_and_building_safety_in_bangladesh_0.pdf

Avaaz: http://www.avaaz.org/en/crushed_to_make_our_clothes_loc/

New Age Online Edition: http://newagebd.com/newspaper1/archive_details.php?date=2011-05-04&nid=17590

Office of the US Trade Representative: Bangladesh: http://www.ustr.gov/countries-regions/south-central-asia/bangladesh

Transparency International: http://www.transparency.org/cpi2012/results

Trading Economics: Bangladesh: http://www.tradingeconomics.com/bangladesh/gdp-growth

Books

C. Fisher & A. Lovell, Business Ethics and Values Individual, Corporate and International Perspectives (London, 2009)

D. Irwin, Free Trade Under Fire (Princeton, 2002)

K. Mellah, K Morrell, & G. Wood, The Ethical Business Challenges and Controversies (London, 2010)

W. Sengenberger, ‘International Labour Standards in a Globalized Economy: The Issues’, in International Labour Standards in a Globalised Economic Interdependence, ed. Sengenberger and C



[i] Anon, The Economist, ‘Disaster in Bangladesh Rags in the ruins’ (May 4, 2013)

[ii] J. Burke, ‘Majority of Bangladesh garment factories “vulnerable to collapse”’, The Guardian (June 3, 2013)

[iii] Anon, ‘Sweatshops in Bangladesh’,War on Want

[iv] Ibid.

[vi] J. Gapper, ‘Business must take the lead on Bangladesh’s working conditions’, Financial Times (May 1, 2013)

[vii] Anon, The Economist, ‘Disaster in Bangladesh Rags in the ruins’ (May 4, 2013); A Berg et al, ‘Bangladesh’s ready-made garments landscape: The challenge of growth’, McKinsey and Company, http://www.mckinsey.de/sites/mckinsey-de.mckinsey.com/files/2011_McKinsey_Bangladesh.pdf

[viii] M. Rafi Atal, ‘The Bangladesh factory tragedy and the moralists of sweatshop economics’, The Guardian (April 29, 2013); http://newagebd.com/newspaper1/archive_details.php?date=2011-05-04&nid=17590

[ix] A. Massie, ‘In Praise of Sweatshops’, The Spectator (April 26, 2013)

[x] M. Yglesias, ‘Different Places Have Different Safety Rules and That’s OK’, Slate (April 24, 2013)

[xi] http://www.tradingeconomics.com/bangladesh/gdp-growth; A. Massie, ‘In Praise of Sweatshops’, The Spectator (April 26, 2013)

[xii] M. Scholte, ‘An Awkward Truth: Bangladesh Factories a Way Up for Women’, Spiegel Online (July 10, 2013)

[xiii] P. Krugman, ‘In Praise of Cheap Labour’, Slate, 20 (March, 1997)

[xiv] T. Chivers, ‘Bangladesh disaster: Forcing sweatshops to radically improve safety standards could do more harm than good’, The Telegraph (April 26, 2013)

[xv] W. Sengenberger, ‘International Labour Standards in a Globalized Economy: The Issues’, in International Labour Standards in a Globalised Economic Interdependence, ed. Sengenberger and Campbell (Geneva, 1994), pp. 10-11; D. Irwin, Free Trade Under Fire (Princeton, 2002), p. 214

[xvi] R. Recih in D. Macaray, ‘Sweatshops, Then and Now’, Counterpunch (June 4, 2013);

[xvii] P. Krugman, ‘Does Third World Growth Hurt First World Prosperity?’, Harvard Business Review, Vol. 72, 4 (Jul-Aug, 1994), pp. 113-117

[xviii] Krugman, ‘In Praise of Cheap Labour’, Slate (2000)

[xix] Quoted in R. Cassler, ‘Re-examining the role of labor suppression in economic development-Labor is not a commodity’, International Labor Rights Forum (Nov 22, 2010)

[xx] C. Prestowitz, ‘Lie of the Tiger’, Foreign Policy (Nov, 2010)

[xxi] V. Bajaj, ‘Bangladesh, With Low Pay, Moves In on China’, The New York Times (July 16, 2010)

[xxii] Krugman, ‘In Praise of Cheap Labour’, Slate (1997); P. Krugman, ‘Does Third World Growth Hurt First World Prosperity?’, Harvard Business Review (1994),  pp. 113-117

[xxiii] J. Hickel, ‘Rethinking Sweatshop Economics’, Foreign Policy in Focus (July 1, 2011)

[xxiv] Ibid.

[xxv] J. Hickel, ‘A Short History of Neoliberalism (And How We Can Fix It)’, New Left Project (April, 9, 2012)

[xxvi] Sachs quoted in A. Myerson, ‘In Principle, a Case For More ‘Sweatshops’, The New York Times, (June 22, 1997); P. Krugman, ‘In Praise of Cheap Labour’, Slate, 20 (March, 1997); R. Cassler, ‘Re-examining the role of labor suppression in economic development-Labor is not a commodity’, International Labor Rights Forum (Nov 22, 2010);

[xxvii] D. Brown, A. Deardorff, R. Stern, ‘Labor Standards and Human Rights: Implications for International Trade and Investment’, Working Paper Series, 119, International Policy Centre, University of Michigan (Aug 19, 2011)

[xxviii] J. Nasir, ‘The Making of a Tiger’, The News International (July 27, 2013)

[xxix] A. Toneslson, ‘There’s Only So Much That Foreign Trade Can Do’, The Washington Post Sunday (June 2, 2002)

[xxx] B. Hensler, ‘Global Wage Trends for Apparel Workers, 2001-2011’, Worker Rights Consortium (July, 2013)

[xxxi] For example, the major oil companies that exploit oil deposits in the Niger delta have not benefitted the locals of the region, but have instead caused environmental damage to crops and worsened the living standards for the general population. C. Fisher & A. Lovell, Business Ethics and Values Individual, Corporate and International Perspectives (London, 2009), pp. 474-476

[xxxii] Ibid.

[xxxiii] R. Davies & K. Vadlamannat, ‘A Race to the Bottom in Labour Standards? An Empirical Investigation’, IIIS Discussion Paper, No. 385, University of Dublin (Nov 2011)

[xxxiv] J. Miller, ‘Why Economists Are Wrong About Sweatshops and the Antisweatshop Movement’, Challenge, vol. 46, no. 1 (Jan/Feb, 2003), pp. 93-122: R. Pollin, J. Burns & J. Heintz, ‘Global Apparel Production and Sweatshop Labor: Can Raising Retail Prices Finance Living Wages?’, Political Economy Research Institute, Working Paper Series, 19 (2010)

[xxxv] K. Elliot & R. Freeman, ‘White Hats or Don Quixote? Human Rights Vigilantes in the Global Economy’, National Bureau of Economic Research (Dec, 2004), p. 51

[xxxvi] J. Hickel, ‘Rethinking Sweatshop Economics’, Foreign Policy in Focus (July 1, 2011)

[xxxvii] C. Beringer, ‘In Defense of the Anti-Sweatshop Movement’, Martin Institute Political Review (Oct 23, 2011)

[xxxviii] ‘SASL Statement’, Political Economy Research Institute (Oct, 2001)

[xxxix] S. Kuznets, ‘Economic Growth and Income Inequality’, American Economic Review, 45, no. 1 (March, 1955), p. 17; C. Beringer, ‘In Defense of the Anti-Sweatshop Movement’, Martin Institute Political Review (Oct 23, 2011)

[xl] J. Miller, ‘Why Economists Are Wrong About Sweatshops and the Antisweatshop Movement’, Challenge, vol. 46, no. 1. (Jan/Feb, 2003), pp. 93-122

[xli] Ibid.

[xlii] IMF staff, ‘Global Trade Liberalization and the Developing Countries’, International Monetary Fund (Nov, 2001); A. Amsden, ‘Why isn’t the whole world experimenting with the East Asian model to develop?: Review of the East Asian miracle’, World Development, vol. 22, iss. 4 (1994), pp. 627-633

[xliii] Ha-Joon Chang, ‘Kicking Away the Ladder’, Post-Autistic Economics Review, no. 15, 3 (Sept 4, 2002); J. Hickel, ‘A Short History of Neoliberalism (And How We Can Fix It)’, New Left Project (April, 9, 2012)

[xliv] Miller, ‘Why Economists Are Wrong About Sweatshops’ (2003), Challenge, pp. 93-122

[xlv] http://www.transparency.org/cpi2012/results; A. Pasick, ‘Want to improve working conditions in Bangladesh? Boycott the Gap’, Quartz (May 2, 2013); T.J, ‘Bangladesh: Violence on the streets’, The Economist (May 7, 2013)

[xlvi] D. Viederman, ‘Supply Chains and forced labour after Rana Plaza: lessons learned’, The Guardian (30 May, 2013); Z. Seward, ‘If Benetton wasn’t using the Bangladesh factory where 377 died, why are these shirts in the rubble’, Quartz (29 April, 2013)

[xlvii] C. Fisher & A. Lovell, Business Ethics and Values Individual, p. 502

[xlviii] D. Arnold & N. Bowie, ‘Respect for Workers in Global Supply Chains: Advancing the Debate Over Sweatshops’, Business Ethics Quarterly, 17, 1 (2007), p. 135

[xlix] ‘EU mulls trade action against Bangladesh over factory collapse’, The Telegraph (May 1, 2013)

[l] ‘EU not to go US way’, bdnews 24 (30 June, 2013)

[li] S. Greenhouse, ‘Clothiers Act to Inspect Bangladeshi Factories’, The New York Times (July 7, 2013)

[lii] K. Elliot, ‘Why Penalising Bangladesh Isn’t the Answer’, Bloomberg Businessweek (June 28, 2013)

[liv] K. Elliot, ‘Why Penalising Bangladesh Isn’t the Answer’, Bloomberg Businessweek (June 28, 2013)

[lv] S. Greenhouse, ‘Bangladesh Fears an Exodus of Apparel Firms’, The New York Times (May 2, 2013)

[lvi] S. Greenhouse, ‘Clothiers Act to Inspect Bangladeshi Factories’, The New York Times (July 7, 2013)

[lviii] ‘Primark to pay compensation to Bangladesh victims – brands must act to ensure it never happens again’, War on Want (April 30, 2013); http://www.avaaz.org/en/crushed_to_make_our_clothes_loc/; P. Lo, ‘H&M Responds Slowly to Bangladesh Factory Collapse Killing 1,100’, Corp Watch Holding Corporations Accountable (May 19, 2003)

[lix] Ibid.

[lx] S Greenhouse, ‘US Retailers Offer Plan for Safety at Factories’, The New York Times (July 10, 2013)

[lxi] Yesilevsky, ‘The Case Against Sweatshops’, The Humanist (May/June, 2004), p. 46

[lxii] J. Hickel, ‘Rethinking Sweatshop Economics’, Foreign Policy in Focus (July 1, 2011)

[lxiii] Ibid.

[lxiv] Ha-Joon Chang, ‘Kicking Away the Ladder’, Post-Autistic Economics Review, no. 15, 3 (Sept 4, 2002)

[lxv] Ibid.

[lxvi] J. Hickel, ‘Rethinking Sweatshop Economics’, Foreign Policy in Focus (July 1, 2011)

[lxvii] J. Hickel, ‘A Short History of Neoliberalism (And How We Can Fix It)’, New Left Project (April, 9, 2012)

[lxviii] Rafi Atal, ‘The Bangladesh factory tragedy and the moralists of sweatshop economics’, The Guardian (April 29, 2013)

[lxix] C. Beringer, ‘In Defense of the Anti-Sweatshop Movement’, Martin Institute Political Review (Oct, 2011)

[lxx] A. Yesilevsky, ‘The Case Against Sweatshops’, The Humanist (May/June, 2004), pp. 20-21

[lxxi] C. Beringer, ‘In Defense of the Anti-Sweatshop Movement’, Martin Institute Political Review (Oct, 2011)

[lxxii] Ha-Joon Chang, ‘Kicking Away the Ladder’, Post-Autistic Economics Review (Sept, 2011)

[lxxiii] ‘SASL Statement’, Political Economy Research Institute (Oct, 2001)

[lxxiv] C. Fisher & A. Lovell, Business Ethics and Values, p. 421

[lxxv] K. Mellah, K Morrell, & G. Wood, The Ethical Business Challenges and Controversies (London, 2010), p. 243

[lxxvi] Ibid.

 

Photos: Courtesy of Flickr Creative Commons, Propaganda Times
Rana Factory Collapse: Andrew Biraj/Reuters

 

 

 

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