The Bangladesh factory tragedies: Is this the end of cheap labor?
American Apparel's Dov Charney seems to think so
Bangladesh has been beset by industrial tragedy. The factory complex Rana Plaza in Dhaka collapsed two weeks ago, killing more than 1,000 workers. And this week, a fire at a Dhaka knitwear factory killed eight more people. It was the fourth fatal disaster involving Bangladesh's garment industry since November. The collapse at Rana Plaza was the world's deadliest industrial disaster since a horrifying gas leak at a factory in Bhopal, India, nearly three decades ago.
Because the factories involved in Bangladesh's recent tragedies made inexpensive clothing for large Western retailers, including Target, Walmart and JC Penney, some labor activists have put the onus on the apparel industry and Western consumers who expect clothing to be made quickly and inexpensively. And Dov Charney, the controversial founder and CEO of American Apparel is going a step farther. He told Daniel Gross at The Daily Beast that "the era of cheap labor is coming to an end."
Does Charney, whose vertically integrated, sweatshop-free clothing company operates 269 clothing stores worldwide, have a point? Here's Gross:
Charney argues that his peers and rivals should embrace voluntary higher wages, for a host of reasons. First, the world is changing. A strategy that is already yielding diminishing returns for many is likely to offer even more meager ones in the future. If global growth continues, wages will eventually harmonize and converge across the world, much as they have done in Europe and in the U.S. "It used to be that Maine was so inexpensive," he notes. Many garment factories have already left China in search of cheaper areas. At some point in the not-too-distant future, today's low-cost locales will be middle-class societies. "I'm in Korea right now, and you can see pictures from 40 years ago. Most places are getting richer and richer," he said. [The Daily Beast]
The idea is essentially this: As developing countries' economies grow stronger, they push cheap labor to other developing countries —which in turn grow stronger as well. And sooner or later, you run out of developing countries to push these low-wage jobs to.
Indeed, despite the recent tragedies in Bangladesh, the garment industry has arguably had positive effects on the country, said Fazle Hasan Abed in the New York Times.
In the past, for example, a poor family's vision for a newborn daughter's future was often to marry her off as young as possible, since the dowry paid to a husband's family grows as a daughter gets older. Even after the dowry was outlawed in 1980, the practice continued. A girl would often be married off as young as 13, and would never leave her village, never know a brighter future for herself or her children.
Partly because many women and their daughters now take garment industry jobs — even in factories where workers' rights are virtually nonexistent — families living in poverty have changed their vision of the future. More have acquired long-term goals, like educating their sons and daughters, saving and taking microloans to start new businesses, and building and maintaining more sanitary living spaces. [New York Times]
This is the sort of philosophy that Jeffrey Sachs advocated in his 2005 book The End of Poverty. "My concern is not that there are too many sweatshops, but that there are too few," he wrote, arguing that these sorts of factories help lift populations out of poverty over time.
So what happens if Bangladesh's economy grows as China's did, and workers start demanding better wages and working conditions? What would stop the garment industry from moving manufacturing to other struggling regions? How long would it take, realistically, before workers in every country are demanding higher wages?
Charney argues that there's more to it than just these economic effects. He believes business ethics will play a role in ending cheap labor, too.
"A lot of well-educated businesspeople will say, 'I don't know if I want to be part of this,'" Charney said. "I'm a young entrepreneur from Montreal. I could have dealt drugs. I could have been a party promoter. But selling heroin isn't good for anyone. I want to assert my self-interest, but I don't want to hurt people. People don't want to be evil if they can avoid it. It doesn't feel good." And running a business that relies on paying people 20 cents an hour to work in potentially fatal conditions doesn't make people feel good. [Daily Beast]
Kate Heartfield in the Ottowa Citizen seems to agree that "conditions can improve when employers, and their international partners, are embarrassed into it" — which seems to be happening in Bangladesh. On Wednesday, the government said it had shut down 18 garment factories that weren't up to code, reports the Guardian. Heartfield also argues that "once an industrial cluster springs up in an emerging country, the region can remain attractive to companies for other reasons, such as expertise or the regulatory and taxation environment."
That said, what works for Charney and American Apparel won't necessarily work for Walmart and Target. "American Apparel is a small firm, with a market capitalization of about $210 million," writes Gross. "While American Apparel's vertically integrated approach may prove more morally satisfying, it hasn't necessarily proven to be a better business model."