The Cost of Saving Lives in Bangladesh

A third, related question is whether these garment factory owners are willing to allow workers to organize in unions or associations in order to have a voice in health and safety conditions (again assuming decent labor laws and decent enforcement). Following the building collapse stories emerged at how anti-union both the government and the owners have been. Yet worker "voice" is necessary to speak to government, owners, buyers, NGOs and the media. But, although right and necessary, such voice--overcoming the "organizing deficit"-- has a cost too which must be understood if it is realistically going to grow, importantly with the support of the international retailers.

A fourth key issue relating to "who pays" and "who is accountable" questions is, of course, the role of those global retailers who buy the low-cost Bangladesh garments, the "buyer deficit." Approximately 60 percent of the clothing made there goes to United States or the European Union. Many international brands buy from Bangladesh suppliers, including Wal-Mart, Benneton, Calvin Klein, Tommy Hilfiger, Children's Place, Primark and Joe Fresh.

The Rana Plaza catastrophe represents a complicated set of fractured global relationships, responsibilities and financial capabilities.

Having been criticized sharply for poor labor practices in suppliers, most well-known global companies (or their brands) have established labor standards for the companies from whom they buy product, either individually or through industry associations. They audit compliance with those standards themselves or through independent organizations. But, there are several problems. The standards may depend on local law which is inadequate or does not cover key technical issues (like building codes). When there are violations, the buyers may simply cut off the suppliers rather than helping them improve their practices, leaving workers no better off. Standards therefore my lead to buyers with visible brands to find select suppliers who are "up to code" but leaving many, many more who impose sub-standard conditions on workers. And sometimes, global buyers simply leave the country when they conclude that conditions are so bad, and compliance with standards so hard to ascertain, that they don't want to take the risk of having their brand associated with product from that country. In the case of Bangladesh, both Walt Disney and Levi-Straus, two iconic U.S. brands, have pulled out of the country altogether.

The question then becomes whether international buyers are willing to go beyond imposition of standards and supplier cut offs and to pay, in some form, for the undetermined costs of the government "regulatory," supplier "compliance" and worker "organizing" deficits. But, this aspect of the "buyer deficit" has no easy answer. Many have called for international buyers not to leave Bangladesh but invest in it because, deeply flawed though it may be, the garment industry has been a source of growth for the country and a way station, however dangerous and exploitive, out of even worse rural poverty for many women. But such calls have often been short on details about funding and implementation.Given corruption in the government and untrustworthiness of manufacturers, creating funds through higher taxes on buyers or higher prices from garment makers are unlikely and ineffective sources of finance for real reform.

Buyers could, perhaps, work directly with a few trusted manufacturers to use their own funds to help bring a small percentage of factories up to decent standards. But, this would leave hundreds, if not thousands, of facilities in sub-standard and hazardous condition. A few companies have committed funds for building fire safety (Gap pledged $22 million) or for training plant managers (Wal-Mart offered $1.8 million) or for compensating victims. Other retailers have indicated a willingness to finance some safety efforts (amounts undetermined) if other buyers will join them in such concerted action. (See, for example, the proposal of the Clean Clothes Campaign, a worker's right NGO).

Perhaps an international non-profit organization could be created to receive and disburse such funds from international retailers, but target amounts, criteria for potential recipients and implementation planning are far from being defined. And, even in the immediate wake of catastrophe, many companies have not even made vague commitments to spend funds on actual improvements rather than just set and audit standards and reject suppliers who don't meet them, although buyers are meeting to discuss what can be done. Ensuring that such private retailers funds are used for their intended purpose by manufacturers is yet another issue. Thus, actually implementing major substantive change--not just articulating good plans--by a concerted, critical mass of outside buyers, rather than by the government, is a significant challenge in a weak state like Bangladesh.

Then there is the "customer deficit." If international retailers were willing (and able) to finance changes in Bangladesh factories in a meaningful, could they pass those costs on to bargain hunting customers in the U.S. and the EU through higher prices -- or would they just reduce their profits by the amounts dedicated to real change. Under competition laws, companies cannot, obviously, agree on such a price rise so there will be disparate responses from retailers in amounts spent on reform and pricing actions, leading again to lack of coordination and free-riding. But, if price is not the only consideration, consumers can, as with other products like coffee and fruit, demand that retailers disclose supplier standards and auditing. Can a robust consumer movement arise among those shopping for discount clothing in response to the Bangladesh building collapse?

Finally, there is the question of what the EU and U.S. can do to leverage trade preferences for Bangladesh imports (given in the name of stimulating economic growth in one of the poorest nations) for better health and safety standards in the factories producing those imported products. To address this "trade law" deficit, and all the other "deficits" described above, Sander Levin and George Miller, Democrats on the House Ways and Means Committee, have asked the Obama Administration to review US trade preferences (which cover only part of apparel imports) and to join with the EU and Bangladesh in convening a task force of governmental, business and NGO representatives to develop a concrete plan of action.

Such a task force must address the fundamental issues raised here. What are the standards? What is the cost? Who is accountable? I am not advocating a comprehensive solution which could take years to devise and implement. Yet, priority, near-terms actions can flow more sensibly from the work of a special task force addressing the fundamental, longer term financial and responsibility issues affecting the various interconnected actors.

Many commentators have drawn an analogy between the collapse of the Rana Plaza in the Bangladesh Capital of Dhaka and the 1911 Triangle Shirtwaist factory fire in New York which claimed 146 lives. The 1911 event led to formation of a strong union (The Ladies Garment Workers) and much-needed reforms. But the Rana Plaza catastrophe represents a more complicated set of fractured global relationships, responsibilities and financial capabilities. Without greater clarity from an authoritative international body about these relationships, responsibilities and ability to pay, needed reform -- which goes beyond mere rhetoric urging change -- may be buried just as tragically as the more than 900 people under the Bangladesh rubble. And a double tragedy would be if reform efforts in Bangladesh drive garment makers and international retailers to other low cost countries which have not been in the spotlight--e.g. Pakistan, Myanmar, Vietnam, Cambodia--but where worker health and safety problems are much the same.

Presented by

Ben W. Heineman Jr.

Ben Heineman Jr. is is a senior fellow at the Belfer Center for Science and International Affairs, in Harvard's Kennedy School of Government, and at the Harvard Law School's Program on Corporate Governance. He is the author of High Performance With High Integrity.

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