How to Put a Stop to Sweatshop Abuse

John Miller, Guest Blogger

The April 24 collapse of the Rana Plaza building, just outside of Dhaka, Bangladesh’s capital city, killed over 1,100 garment workers toiling in the country’s growing export sector.

The horrors of the Rana Plaza disaster, the worst ever in the garment industry, sent shockwaves across the globe. In the United States, the largest single destination for clothes made in Bangladesh, newspaper editors called on retailers whose wares are made in the country’s export factories to sign the legally binding fire-and-safety accord already negotiated by mostly European major retailers. Even some of the business press chimed in. The editors of Bloomberg Businessweek admonished global brand-name retailers that safe factories are “not only right but also smart.”

The business press, however, also turned their pages over to sweatshop defenders, contrarians who refuse to let the catastrophic loss of life in Bangladesh’s export factories shake their faith in neoliberal globalization. Tim Worstall, a fellow at London’s free-market Adam Smith Institute, told Forbes readers that “Bangladesh simply cannot afford rich world safety and working standards.” Economist Benjamin Powell, meanwhile, took the argument that sweatshops “improve the lives of their workers and boost growth” out for a spin on the Forbes op-ed pages.

For sweatshop apologists like Worstall and Powell, yet more export-led growth is the key to improving working and safety conditions in Bangladesh. “Economic development, rather than legal mandates,” Powell argues, “drives safety improvements.” Along the same lines, Worstall claims that rapid economic growth and increasing wealth are what improved working conditions in the United States a century ago and that those same forces, if given a chance, will do the same in Bangladesh.

But their arguments distort the historical record and misrepresent the role of economic development in bringing about social improvement. Working conditions have not improved because of market-led forces alone, but due to economic growth combined with the very kind of social action that sweatshops defenders find objectionable.

U.S. economic history makes that much clear. It was the 1911 Triangle Shirtwaist fire, which cost 146 garment workers their lives, along with the hardships of the Great Depression, that inspired the unionization of garment workers and led to the imposition of government regulations to improve workplace safety. Those reforms, combined with the post-World War II economic boom, nearly eliminated U.S. sweatshops.

Since then, declining economic opportunity, severe cutbacks in inspectors, and declining union representation have paved the way for the return of sweatshops to the United States. This trend further confirms that economic development, by itself, will not eliminate inhuman working conditions.

In contrast, a combination of forces that could eliminate sweatshops is forming in Bangladesh today. Despite the government’s record of repressing labor protest and detaining labor leaders, the horror of the Rana Plaza collapse has sparked massive protests and calls for unionization in Bangladesh. In reaction, the government has amended its labor laws to remove some of the obstacles to workers forming unions, although formidable obstacles remain (including the requirement that at least 30% of the workers at an entire company—not at a single workplace as in the United States—be members of a union before the government will grant recognition).

Meanwhile, 80 mostly European retail chains that sell Bangladesh-made garments have signed the legally binding Accord on Fire and Building Safety in Bangladesh. For the first time, apparel manufacturers and retailers will be held accountable for the conditions in the factories that make their clothes. This “joint liability” aspect, a long-held goal of labor-rights advocates, is precisely what makes this international accord so important.

Negotiated with worker-safety groups and labor unions, the five-year accord sets up a governing board with equal numbers of labor and retail representatives, and a chair chosen by the International Labor Organization (ILO). An independent inspector will conduct audits of factory hazards and make the results public. Corrective actions recommended by the inspector will be mandatory and retailers will be forbidden from doing business with noncompliant facilities. Each retailer will contribute to the cost of implementing the accord based on how much they produce in Bangladesh, up to a maximum of $2.5 million over five years to pay for administering the safety plan and pick up the tab for factory repairs and renovations. The accord subjects disputes between retailers and union representatives to arbitration, with decisions enforceable by a court of law in the retailer’s home country.

The signatories include Swedish retailer Hennes and Mauritz, which has more of its clothes made in Bangladesh than any other company; Benetton Group S.p.A., the Italian retailer whose order forms were famously found in the rubble of the collapsed Rana Plaza factory; and Canada’s Loblow Companies, whose Joe Fresh clothing was also found at Rana Plaza. Together, their clothes are made in over 1,000 of Bangladesh’s 5,000 factories.

However, only two U.S. companies, Abercrombie & Fitch and PVH (parent of Tommy Hilfiger and Calvin Klein), have signed the accord. Walmart, The Gap, J.C. Penney, Sears, and the rest of the major U.S. retailers doing business in Bangladesh have refused. The industry trade group, the National Retail Federation, objected to the accord’s “one-size-fits-all approach” and its “legally questionable binding arbitration provision” that could bring disputes to court in the highly litigious United States. Several of those retailers cobbled together an alternative agreement signed so far by 17 mostly U.S. retailers.

But their “company-developed and company-controlled” plan, as a coalition of labor-rights groups described it, falls well short of the European-initiated plan. It is not legally binding and lacks labor organization representatives. Moreover, while retailers contribute to the implementation of their safety plan, they will face no binding commitment to pay for improving conditions. An AFL-CIO spokesperson put it most succinctly, “This is a matter of life or death. Quite simply, non-binding is just not good enough.”

John Miller is a professor of economics at Wheaton College and a columnist for Dollars & Sense magazine.

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