by Admin | Aug 21, 2013 | Highlights
Interestingly, the fire and collapse in Bangladesh’s garment factories in the last year, have not initiated a relocation of supply chain production for major apparel retailers. In this Reuters story, the sad truth that led to compromised safety standards, still seems to prevail- Cost is still King.
An employee sorts newly finished T-shirts at the Estee garment factory in Tirupur in Tamil Nadu June 19, 2013. Credit-REUTERS/Mansi Thapliyal
(Reuters) – With knitwear exports of over $2 billion a year, India’s garment manufacturing hub Tirupur has earned the nickname “Dollar City,” but its allure for price-conscious global retailers obsessed by discounts of as little as one U.S. cent pales before Bangladesh.
Indian and Southeast Asian apparel manufacturers had hoped the orders would come flooding in, after the deadly collapse of a Bangladesh garment factory complex this year galvanised global brands such as Hennes & Mauritz AB (H&M) (HMb.ST) to consider relocating production.
But several industry organisations and factories contacted by Reuters in Vietnam, Cambodia, Indonesia, Sri Lanka and India – Asia’s top apparel makers outside China – said international retailers were not beating a path to their door just yet. When it comes to price, Bangladesh is king.
“The reason Bangladesh went from zero to hero in the garment sector is because there is no country with such low labour and other costs,” said Arvind Singhal, chairman of India-based retail consultancy Technopak Advisors.
“No buyer is in a hurry to move from Bangladesh because Western retailers are stressed about passing any retail price increases to customers,” he said. “Currently, there is no substitute for Bangladesh, where manufacturers even risk operating from rickety structures to cap costs.”
Wal-Mart Stores Inc (WMT.N) has stood by its Bangladesh production, saying the South Asian nation remains an important sourcing market. H&M also said its quest for alternative manufacturers was not at the expense of Bangladesh.
“We are not reducing our purchases from Bangladesh. We aspire to have long-term relations with our suppliers,” H&M spokeswoman Elin Hallerby said. “We are always looking at new production capacity to support our continuous expansion.”
The latest data from Bangladesh highlights its enduring appeal: garment exports in June rose 26 percent year-on-year to $2.2 billion.
COST IS KING
More than four million people, mostly women, work in Bangladesh’s clothing sector, making it the second-largest global apparel exporter behind China.
The world’s biggest fashion retailers, Inditex SA (ITX.MC) and H&M, as well as Wal-Mart, Gap Inc (GPS.N) and JC Penney Company Inc (JCP.N) are a few of the brands manufacturing there.
The $21 billion-a-year industry has been built on low wages, government subsidies and tax concessions from Western countries. But the collapse of the Rana Plaza factory complex outside Dhaka in April raised concerns about safety loopholes. The disaster, one of the world’s worst industrial accidents, killed 1,132 people.
The collapse prompted global brands to consider tapping regional alternatives.
Indonesian textile firm Sri Rejeki Isman PT (Sritex) (SRIL.JK), which makes clothing for Zara, H&M and other brands, said it was in talks with H&M about taking over an as yet unspecified amount of Bangladesh-sourced production. H&M declined to comment.
But as large factory owners across the region discovered, translating talks into orders is difficult as, compared to Bangladesh, they are considered too expensive.
“Garments produced in Bangladesh have a very competitive price, around two-to-three times lower than in Vietnam,” said Nguyen Huu Toan, deputy director of SaiGon 2 Garment JSC, a Vietnam factory whose clients include British fashion retailers New Look and TopShop.
The cost disadvantage also impacts Sri Lanka’s $4 billion-a-year garment industry, and factory owners there say any shift in production from Bangladesh will be transient.
“We are much better than any other country in the region, but it is a temporary advantage,” said Tuly Cooray, the secretary-general of industry group Joint Apparel Association Forum. “At the end of the day, the price is going to matter.”
NOT CUT FROM THE SAME CLOTH
The economic slowdown in Europe and the United States has made retailers all the more keen to seek out the lowest-cost manufacturing centres to keep their store prices down.
N. Thirukkumaran, owner of Tirupur-based apparel maker Estee which racked up $8.3 million in sales last year, said he holds marathon haggling sessions with foreign customers demanding discounts as little as one cent per unit.
At least one U.S. retailer asked about moving production from Bangladesh, he said, but they have yet to place orders. Thirukkumaran would not name the brand, citing client confidentiality.
“There are positive signals from buyers, but they are still sceptical about price,” he added.
Monthly minimum salaries for garment sector workers in Bangladesh average around $38, far below the $100 average for Indian factory workers.
After the Rana Plaza collapse, the cabinet approved changes to the labour laws that pave the way for garment workers to create trade unions without the approval of factory owners.
The cabinet also formed a wage board to consider pay increases. But industry experts say Bangladesh has too much to lose by alienating global retailers, which means that for now, the low costs are here to stay.
“No other destination has what we have and that is skilled and cheap labour,” said Mohammad Mujibur Rahman, a Bangladeshi academic leading factory inspections.
“Foreign buyers realize this and nobody is in a hurry to move out … there might be a small trickle outside, but nothing significant that will hurt us.” (Additional reporting by Nandita Bose and Ruma Paul in DHAKA, Shihar Aneez in COLOMBO, Nguyen Phuong Linh in HANOI, Fathiya Dahrul in JAKARTA, Jessica Wohl in NEW YORK, Anna Ringstrom in STOCKHOLM; Writing by Miral Fahmy and John Chalmers; Editing by Ryan Woo)
by Admin | Aug 21, 2013 | Highlights
On August 20, 2013, the American alliance elected an Ellen O’ Kane Tauscher as the independent chair of its board of directors, and also welcomed three new members- Costco, Intradeco Apparel and Jordache Enterprises, bringing the total up to 20 retailers and apparel brands. Read more in this story from just-style.com.
Ellen O’Kane Tauscher. Source- Wikimedia Commons
US: Bangladesh Safety Alliance Names Chair as Talks Begin
The group of leading retailers and brands who make up the North American Alliance for Bangladesh Worker Safety has named Ellen O’Kane Tauscher as the independent chair of its board of directors.
The Alliance also said it has been joined by three more companies – Costco, Intradeco Apparel and Jordache Enterprises – bringing the total to 20 apparel companies, retailers and brands.
With the new members, more than US$45m has been committed to administer the programmes developed by the Alliance over the next five years to help improve factory safety conditions for garment workers in Bangladesh.
A two-day board meeting is now underway in Chicago, where members will be briefed on progress toward several milestones taking place next month, including development of a common Fire and Building Safety Standard and Inspection Protocol, and the fire and safety training curriculum that will be given to factory managers and employees.
In September, the Alliance expects to announce the selection of its operating team, including the executive director for the programme.
Leading the board of directors, Tauscher is a seven-term member of Congress and has worked for the US Department of State. She was appointed by president Barack Obama as under-secretary of state for arms control and international affairs, serving in the role from 2009-2012.
When she returned to the private sector in 2012, she joined Baker Donelson Bearman, Caldwell & Berkowitz PC, in Washington DC as strategic advisor to clients in national security, defence, transportation, export control and energy policy areas.
“The respect Ellen has earned in Congress, the State Department, and the private sector will serve her well in the role as an independent leader and convener who can work with Alliance members and governments to pursue the critical safety mission and aggressive implementation schedule,” said Ambassador James Moriarty, an Alliance board member and former US Ambassador to Bangladesh.
The board also includes three other stakeholder representatives, including Mohammad Atiqul Islam, president of the Bangladesh Garment Manufacturing and Exporters Association (BGMEA); Randy Tucker, global leader of the fire protection and safety team at CCRD, a Houston-based engineering firm; and Muhammad Rumee Ali, managing director of enterprises at BRAC, the international NGO founded in Bangladesh.
Four Board members from Alliance companies include: Daniel Duty, vice president of global affairs for Target; Jay Jorgensen, senior vice president and global chief compliance officer forWal-Mart Stores Inc; Tom Nelson, vice president for global product procurement for VF Brands; and Bobbi Silten, senior vice president of global responsibility for Gap Inc and president of Gap Foundation.
Other retailers and brands that have signed up to the Alliance include: Canadian Tire Corporation; Carter’s; The Children’s Place Retail Stores; Gap; Hudson’s Bay Company; IFG; JC Penney; The Jones Group; Kohl’s Department Stores; LL Bean;
by Admin | Aug 20, 2013 | Highlights
This story from fashionunited.co.uk, reflects the negative criticism the American Alliance for Bangladesh Worker Safety is receiving as it begins to implement the plan to meet its September deadline.
Credit-http://www.bangladeshworkersafety.org
Major US retailers including Gap and Walmart are expected to begin implementing the Bangladesh safety-plan, to meet the September 10 deadline. In the wake of the Bangladesh factory that collapsed last April, a group of 20 retailers will appoint an executive director and management firm to oversee the 45 million dollar funding in place to improve worker safety.
The retailers, which also include Macy’s and Target, struck a five-year deal to train workers and inspect factories. It will, however rely on factory owners in Bangladesh to pay for their own safety renovations despite the retailing committing to providing 100 million dollars in low-cost loans toward the effort. Participation in the lending program is voluntary and varies by retailer, according to the Wall Street Journal.
The agreement continues to attract scrutiny from labour activists and worker groups who say the safety plan falls short of a separate, legally binding agreement that commits Hennes & Mauritz, Tommy Hilfiger parent PVH Corp and 70 other, mostly European companies to directly pay for the costs of repairing and renovating some 5,000 Bangladesh garment factories.
Critics also complain of the absence of labor organizations from the North American alliance’s board of directors and say that nothing will change as long as the retailers continue to control the inspection process by choosing and paying the auditors, as well as electing a board that is supposed to conduct oversight and ensure the companies follow through with their safety plan.
“They are essentially asking the companies and factory owners to regulate themselves,” said Scott Nova, executive director at the Worker Rights Consortium, who helped craft the European-led accord. “They want people to see this as an alternative plan, but it’s no different than what companies have been doing without success for decades.”
The North American retail alliance’s eight-member board includes four company representatives from Target, Wal-Mart, Gap and VF Corp. as well as former US Ambassador to Bangladesh Jim Moriarty and fire-safety consultant Randy Tucker, both of whom were employed by the companies on previous safety programs.
by Admin | Aug 8, 2013 | Highlights
Fast Retailing Joins Inditex, H&M’s Bangladesh Safety Accord
A tag with Fast Retailing Co.’s Uniqlo logo is displayed on a sweater at the company’s store in the Ginza district of Tokyo. Credit- Bloomberg
Fast Retailing Co. (9983), Asia’s largest clothing retailer, joined Inditex SA (ITX) and Hennes & Mauritz AB (HMB) in signing an accord to improve factory safety in Bangladesh after an April garment complex collapse killed more than 1,000 people.
Fast Retailing has independently reviewed fire and building conditions at plants run by its partners in Bangladesh and detailed results are expected by November, it said in today’s statement.
Inditex and H&M, Europe’s two largest clothing retailers, signed the safety pact initiated by international organizations IndustriAll Global Union and UNI Global Union, after an eight-story garment complex collapsed in April in Bangladesh’s worst industrial disaster. The accord includes plans to survey all factories on related risks within the next two years and implement reforms to improve conditions, Fast Retailing said.
Seventeen North American retailers, including Gap Inc. and Wal-Mart Stores Inc., announced a separate five-year plan earlier in July to improve factory safety in the country.
About 70 percent of the Japanese retailer’s production comes from China with the rest coming from Southeast and South Asian countries, including Bangladesh, Keiji Furukawa, the company’s spokesman, said today. The company plans to reduce the percentage of clothes it produces in China to about two-thirds as it seeks to diversify risks and improve efficiency, he said. None of the company’s suppliers or workers were involved in the April building collapse, Furukawa said.
by Admin | Aug 15, 2013 | Highlights
Story sourced from Bloomberg News.
Mourners hold up portraits of their missing relatives at the disaster scene during the one hundredth-day anniversary of the Rana Plaza garment building collapse in Savar, on the outskirts of Dhaka, on August 2, 2013. Credit- Munir uz Zaman/AFP via Getty Images
A meeting to determine compensation for victims of two factory disasters in Bangladesh was postponed until September after a union official fell ill, workers threatened to strike in Dhaka and European brands balked at attending over the summer.
“We thought it was a better solution to do this in Europe in September,” IndustriALL General Secretary Jyrki Raina, who is organizing the meeting, said by phone. “The problem is Rana Plaza workers and families aren’t receiving money, so it’s not as it should be.” The initial meeting to aid victims of the Rana Plaza collapse and Tazreen factory fire was planned for Aug. 11 and 12 in Dhaka.
The union and the Clean Clothes campaign want retailers including Benetton Group SA, Mango and Wal-Mart Stores Inc. (WMT) to agree to a lump sum payment for pain and suffering as well as lost earnings for the victims and dependents of those involved in the disasters. IndustriALL estimates the long-term compensation cost will be $71 million for the Rana Plaza collapse, where 1,131 people were killed in the nation’s worst industrial accident, and $5.7 million for the Tazreen garment factory fire, which killed 112.
Clothing bound for Wal-Mart was found in the charred ruins of Tazreen, and documents provided by the Worker Rights Consortium, a Washington-based labor-rights monitoring group, show that merchandise bound for Wal-Mart was produced at Ether Tex Ltd.’s factory in Rana Plaza. Still, Kevin Gardner, a Wal-Mart spokesman, said the company’s own investigation showed “no evidence of authorized or unauthorized production at the time of the tragedy” at Rana Plaza.
Primark Agreement
Wal-Mart has declined to compensate victims of the factory fire and did not join a fire and building safety pact supported by labor groups and signed by more than 80 companies this year, according to a July statement from IndustriALL.
Associated British Food Plc’s Primark chain, which used a supplier in Rana Plaza, has agreed to pay compensation to survivors and dependents. It’s the only retailer to do so for Rana Plaza, in accordance with existing frameworks established after the Spectrum factory fire in 2005, according to the Clean Clothes campaign, which is working with IndustriALL on the meeting.
Some European brands including C&A Group, Tengelmann Group’s Kik and El Corte Ingles SA agreed to pay compensation for the Tazreen fire in April, though that process stalled due to the Rana Plaza collapse, Raina said.
Representatives for the brands sourcing that received goods from those two factories, who had been invited to attend the IndustriALL meeting, will receive an invitation for the re-scheduled September event, including Walt Disney Co. (DIS) and Li & Fung Ltd. (494)
To contact the reporter on this story: Sarah Shannon in London at [email protected]
by Admin | Aug 8, 2013 | News
Pulitzer Prize-winning former reporter and editor for The New York Times, Emmy Award-winning producer for PBS’ show Frontline and author of five best-selling books, Hedrick Smith, explains what happened to America’s economy after WWII in his book Who Stole the American Dream? One of the greatest journalists of our time, Hedrick Smith, analyzes the decline of the American middle class and the crumbling of the country’s economy in the last four decades, in this book. Below is a review on Smith’s book published in the Huffington Post.
Defying Gravity: The History of 40 Years of Wealth Falling Up
Dan Froomkin, Senior Washington Correspondent, Huffington Post
Who stole the American Dream? The short answer to the question in the title of Hedrick Smith’s new book is: The U.S. Chamber of Commerce and Wal-Mart.
But the longer answer is one heck of a story, told by one of the great journalists of our time.
In his sweeping, authoritative examination of the last four decades of the American economic experience, Smith describes the long, relentless decline of the middle class — a decline that was not by accident, but by design.
He dates it back to a private memo — in effect, a political call to arms — issued to the nation’s business leaders in 1971 by Lewis F. Powell, Jr., a corporate attorney soon to become a Supreme Court justice. From that point forward, Smith writes, corporate America threw off any sense of restraint or social obligation and instead unstintingly leveraged its money and political power to pursue its own interests.
The result was nothing less than a shift in gravity. Starting in the early 1970s, every major economic trend — increased productivity, globalization, tax law overhauls, and the phasing out of pensions in favor of 401(k)s — produced the same result: The benefits fell upward.
Smith, a 1970 Nieman Fellow, is at his very best as he examines, one by one, the key economic shifts of the last 40 years and shows that in each case the money flowed to the very richest Americans, particularly those on Wall Street, while impoverishing the middle class.
Nowhere was that more blatantly the case than in the housing sector. We are all well aware of how the bursting of the housing bubble has left many middle-class Americans without the nest egg they were counting on for their retirement. But Smith describes how the banks had been sucking the home equity out of the middle class for years before that.
“Instead of enabling ordinary Americans to achieve The Dream, they fashioned stratagems that stole the dream,” Smith writes, describing what he calls the “New Mortgage Game.” The sales pitch “was that homeowners should think of their houses not as nests … but as ATM machines,” Smith writes. The goal was “perpetual hock” — and correspondingly high fees.
The banks “seduced millions of middle-class families into draining the precious equity that they had painstakingly built up in their homes” and the result was “a monumental transfer of the absolute core of middle-class wealth from homeowners to banks. Trillions of dollars in accumulated middle-class wealth were shifted from average Americans to the big banks, their CEOs, and their main stockholders.”
Again and again, Smith exposes the same relentless pull. He examines the merciless toll on the American worker of globalization, fueled in no small part by the relentless outsourcing championed by Wal-Mart, which one of Smith’s sources describes as being essentially engaged in a joint venture with China.
Who benefits? Well, the Walton family, for one, which as Smith points out currently enjoys as much wealth as the bottom 40 percent of the U.S. population, or 120 million people.
The familiar story of the decline of guaranteed pensions and the rise of retirement accounts nevertheless carries a new emotional wallop in Smith’s telling. Get ready for waves of retirees who run out of money long before they die not just because they didn’t put enough money into their 401(k)s but because of the huge bite taken by mutual fund managers, whose fees and transaction costs average 2 percent a year.
At 5 percent a year, $1 over 40 years becomes $7.04 — but at 3 percent, it only comes to $3.26. Smith quotes Jack Bogle, founder and CEO of the Vanguard Group, explaining that “you the investor put up 100 percent of the capital. You take 100 percent of the risk. And you capture about 46 percent of the return. Wall Street puts up none of the capital, takes none of the risk, and takes out 54 percent of the return.”
There’s so much more in the book: How bankruptcy laws have served as a means of transferring money from the middle class to the banks. How poor credit-card users have come to subsidize rich credit-card users. How stock options are “the primary vehicle for the corporate super-rich.”
And there is the complete lock that the super-rich — most ably represented by the Chamber of Commerce, the Business Roundtable, and the like — seem to have on tax policy. In 2010, for instance, a majority of the public supported ending the Bush tax breaks for the top 2 percent of Americans. The argument that tax cuts were necessary to free up job-creating capital was not credible, given that corporate America was sitting on well over a trillion dollars in idle capital it just didn’t want to spend. But when corporate CEOs issued a demand that all the tax cuts be extended, Senate Republicans took their side, and no one could stop them.
Smith’s extraordinary clarity in describing this sometimes obscured narrative arc evidently emerges from his sense of journalistic outrage. He sees a country splitting into two, divided by a vast wealth gap. He sees the social fabric of the nation tearing. He wants to make it better.
But the hopeful chapters at the end of books like this are always jarring, and none more so than here. After showing so effectively how the rich have everything rigged in their favor, Smith nevertheless calls for average Americans to rise up and make themselves heard.
“Changing America’s direction will not be easy,” he writes. “It will happen only if there is a populist surge demanding it, a peaceful political revolution at the grass roots, like the mass movements of the 1960s and 1970s.” He puts forth a succinct and attractive 10-point plan to fix the country that closely mirrors the typical progressive wish list. He calls on American business leaders to change their mindset and share.
He cites the Occupy movement as a positive indicator, but the fact remains that Occupy never rose to the level of mass movement, and didn’t really return after winter.
Mass movements do happen, of course. Smith actually covered the ones in the ’60s and ’70s — along with just about every other major story of the last half-century.
But to turn things around — again, now — would seem to require leverage and power that the middle class, by Smith’s own accounting, no longer possesses. Forty years ago, corporate America managed to get the money and power to flow from the bottom to the top. Now it’s collected there, and congealed, and it’s hard to see how to get it to flow back.
Click here to visit Smith’s website and order a copy of Who Stole the American Dream?
Click here to read an exclusive interview with Hedrick Smith on the political and historical decisions that have shaped private businesses in America and to understand why American brand names reacted in a less than satisfactory manner to the collapse in Bangladesh.
by Admin | Aug 6, 2013 | Highlights
Garment worker woes, in Bangladesh, are not a recent development. In this report from the International Labor Rights Forum in 2010, the suffering and repression of factory labor in Bangladesh is made apparent. Their meager monthly wage of $43 not only far behind their demand for $72, but was also nutritionally less than prisoners in the country! Trade union leaders and human rights groups that challenged their unfair situation were subjugated. The recipe was ripe for disaster and it hit three years later.
November 1, 2010 – A report by the International Labor Rights Forum (ILRF) released today reveals a severe government crackdown on labor rights activists in Bangladesh in the last few months as the country’s garment workers demanded higher wages. Bangladeshi garment workers are the worst paid workers in the world. Worker protest against low wages and poor working conditions peaked in early August this year following the government’s announcement of a new $43 monthly minimum wage, well short of workers’ needs and expectations. The new wage is scheduled to take effect today.
“We were forced to take to the streets as the owners exploited us right under the government’s nose,” said a garment worker quoted in The Daily Star, a Bangladeshi newspaper, after the government announcement of the new minimum wage.
According to the ILRF report, Enemies of the Nation or Human Rights Defenders? Fighting Poverty Wages in Bangladesh, the new $43 dollar minimum wage is still a “malnutrition wage.” Even Bangladeshi prisoners are better off than garment workers in nutritional terms, the report claims. It estimates a garment worker needs almost four times the new minimum wage just to feed her average-sized family.
The ILRF report criticizes the Bangladeshi government for scapegoating labor activists for inciting worker unrest and branding them “enemies of the nation” instead of dealing with workers’ genuine grievances. Focusing on the experiences of the leaders of the Bangladesh Center for Worker Solidarity, one of the most prominent labor rights groups in Bangladesh, the report relates a harrowing story of persecution as Bangladeshi police and security forces, including the notorious Rapid Action Battalion, raided staff members’ homes and attempted by subterfuge to discover the hideouts of the organization’s leaders. When captured, two of the labor leaders were tortured in custody to extract a confession that the organization had fomented worker riots.
Human rights groups, labor rights groups, and industry groups have denounced the Bangladeshi crackdown on labor rights activists. Human Rights Watch condemned the “serious harassment of trade union leaders and other labor rights activists and workers in the ready-made garment (RMG) industry who have been pressing for the right of workers to organize in unions and seeking increases in Bangladesh’s minimum wage regulations” in a letter to Prime Minister Sheikh Hasina on August 10, 2010.
The ILRF report calls on both companies and the Bangladeshi government to take action to protect civil liberties for the Bangladesh Center for Worker Solidarity and other labor rights defenders and increase the minimum wage for garment workers to at least $72 per month, the workers’ demand.
“We hope that this report will help bring justice for the leaders and staff of Bangladesh Center for Worker Solidarity and, in so doing, advance the cause of Bangladeshi garment workers who seek only the basic dignity of decent work and good wages,” said Bjorn Claeson, author of the report and director of the SweatFree Communities program at ILRF.
Enemies of the Nation or Human Rights Defenders? Fighting Poverty Wages in Bangladesh is available at www.sweatfree.org/bcws.
***
The International Labor Rights Forum (ILRF) is an advocacy organization based in Washington, DC, dedicated to achieving just and humane treatment for workers worldwide. ILRF serves a unique role among human rights organizations as advocates for and with working poor around the world. We believe that all workers have the right to a safe working environment where they are treated with dignity and respect, and where they can organize freely to defend and promote their rights and interests.
A program of the International Labor Rights Forum, SweatFree Communities, coordinates a national network of grassroots campaigns that promotes humane working conditions in apparel and other labor-intensive global industries. SweatFree campaigns build broad community support for sweatshop-free government purchasing and help build a market for decent working conditions.
by Admin | Aug 8, 2013 | Highlights
In an interview with Boston Global Forum (BGF), esteemed journalist, political analyst and author, Hedrick Smith, lends a political historian’s perspective to explain the reactions of American retailers to the tragic Rana Plaza collapse in Bangladesh, in April 2014. Smith’s book WHO STOLE THE AMERICAN DREAM describes the transition and evolution of the American economy over the latter half of the 20th century. Smith explains how industrial trends like switching from push manufacturing to pull manufacturing, deregulation and changing corporate attitudes have had a deleterious effect on worker safety standards in offshore manufacturing processes.
Credit- www.hedricksmith.com
BGF: In the evolution of the American economy, when did large American brand names start outsourcing their manufacturing processes overseas to other countries? And, was this a gradual shift or something that happened rapidly in a short span of time?
Mr. Smith: My understanding is that this shift really developed during the 1980s. Individual companies, like Motorola or General Electric and other American electronic firms, were among those who led the way to overseas production in the 1980s. At the time, radios and other electronic products and cars were being built in places like Japan. American manufacturers got interested in those countries, particularly in Japan, Taiwan and Korea. While Japanese, Taiwanese and Hong Kong exports were the first to hit the American market in scale in the 1970s, the real acceleration in American companies’ offshore exports to the U.S. happened much later – much of it under pressure from Wal-Mart. Wal-Mart was very interested in getting what they called the ‘lowest opening price point’ products made overseas so they could offer the cheapest goods available for American customers. Sam Walton, founder of Wal-Mart, went to Korea and returned fascinated with Asia and convinced that Asia could become a very important source of Wal-Mart’s imports and a real boost to Wal-Mart’s profits. From then on, Wal-Mart’s profit margins on goods from overseas were tremendous.
But the first major change that ultimately led to overseas production by U.S. companies was the shift in economic power here at home from big producers to big retailers. Wal-Mart led the way. It was an enormously powerful influence on American manufacturers, particularly of low-cost goods including goods like garments. Wal-Mart developed the bar code and other logistical systems that gave American Big Box retailers powerful market leverage that they had not previously enjoyed. This resulted in an economic power shift in American manufacturing. We went from ‘push manufacturing’ to ‘pull manufacturing’. ‘Push’ meaning that producers like Proctor and Gamble, other appliance manufacturers and electronics goods manufacturers determined what products they would produce, and they would push these products to the retail networks across the country. Retailers would simply sell the items they produced.
Under ‘pull manufacturing’, Wal-Mart and the other big-box retailers came to dominate the producers and the marketplace. They became highly organized and efficient by using tools like the bar code. At the cash register, retailers could far more rapidly, than the producers, see what products were being sold fastest and instantly place orders for more. That information shifted market power to the big box retailers. With that knowledge and its growing volume of sales, Wal-Mart was able to dictate the products it wanted produced to the producers. Not just what products, but what size, what color and what shape! They knew whether straight-legged jeans were selling or flared-legged; were button-blouses in fashion or not; whether large microwaves were popular or small toasters? These big-box retailers had very detailed information on the products they wanted to sell and so they told producers what to make. Then, led by Wal-Mart, which was seeking that low opening price point, they began to develop international supply lines, that is, overseas producers.
China was not the first target for overseas manufacturing. China came along after the Plaza Accord of 1985 in which there was an upward evaluation of the Japanese, Hong Kong, Taiwanese and Korean currencies to offset alarming flow of imports made from Asia to America. At the same time China devalued its currency. From that time onwards, because there was such a difference in the currency valuations between China and the rest of Asian exporters, China rapidly became the destination that American manufacturers went to. So after the Plaza Accord revalued currencies, the Chinese took market share away from the rest of the Asians. By the 1990s, Chinese supply chains took off. And their operations have become a model for other lower cost Asian producers like Vietnam and Bangladesh.
Talking about Wal-Mart’s role in this trend, in Chapter 15 of Who Stole the American Dream?, I described a meeting of Wal-Mart executives with various American producers. I was told that Wal-Mart pushed them hard to move their manufacturing, especially of low-cost consumer goods, overseas and particularly to China. This did not involve Bangladesh at the start, but there was a sequence here. Japan was the first destination, followed by Hong Kong, Taiwan and Korea. After Korea, the American manufacturers went to mainland China, which has maintained a strong hold for a long time. From 2000 onward, China was supplying 80 percent of Wal-Mart’s overseas imports. From China, the businesses moved to Bangladesh and Vietnam and other lower cost countries.
What you’re watching in Bangladesh, today, is really the outcome or the latest phase in this movement to low-cost production.
The second factor that in my mind is important to understanding the American response to the terrible factory conditions in Bangladesh, even though it doesn’t seem related, is the beginning of a push for de-regulation of American industries that began in 1978 under Jimmy Carter. It began with trucking and telecommunications and not with garment manufacturers but this deregulation began a long-term trend that reversed the policies of Richard Nixon, the Republican President from 1969-74. Nixon and his administration probably put in more new regulatory agencies and more new regulations on business than any other president since World War II, certainly more than the Democrats like Kennedy and Johnson. And there was a strong business reaction against Nixon’s regulatory regime. This reaction reached its peak in the mid 1990s, when Newt Gingrich was Speaker of the House and Tom Delay, a Congressman from Texas, was the majority whip. Delay was known as “Tommy Dereg'” because of his aggressive push for deregulation. Deregulation had started under Carter but it really blossomed under Gingrich and the Republicans. You don’t get much re-regulation until the financial collapse of 2008.
But, why is that important to Bangladesh?
It’s important because if you look at the American manufacturers and their response to the collapse of the factory and the fire in the other factory in Bangladesh, they resisted any form of regulation that would make them responsible or accountable for the safety of those buildings. They are responding to it very differently from the Europeans. By 2012 and 2013, the American companies had become accustomed to de-regulation. So they were opposed to any regulatory response to the Bangladesh disasters. The European retail firms have responded differently. They are used to more regulation in their economies, so it was more natural for the European firms and their retail customers to step in and accept both some financial responsibility and some legal and moral responsibility. On the contrary, American manufacturers led by Wal-Mart, Target and some of the others, are staunchly resisting any effort to codify rules of behavior, financial responsibility and legal responsibility for the death, damage and destruction of workers and factories in Bangladesh.
To better understand what’s happening in Bangladesh, it’s important to study these two trends in America: ‘push’ manufacturing to ‘pull’ manufacturing where retailers pushed production overseas, and the deregulation trend that accelerates in the mid 1990s. Understanding those trends helps us understand how U.S. companies behave today, what their attitudes are, what their expectations are and what their corporate culture is. And their corporate culture has a lot to do with their financial and legal response to the disaster in Bangladesh. Historical roots are very important to corporate habits of mind and actions today.
BGF: You raised the point about ‘responsibility’, why do you think there was such a sharp contrast between the reactions of American brands and their European counterparts?
Mr. Smith: That leads to a larger question about the ‘social compact’ and about corporate ethic. In the last 30-35 years, we in America have experienced a breaking of the old social compact and the Europeans have not had that. Earlier on, in America, we had labor agreements and labor contracts that determined pay and working conditions. But over and above that, there was a sense among American business leaders and the government that corporations had some responsibility to society. Charlie Wilson, head of General Motors, once said “what’s good for America is good for GM and vice versa.” But now American multinational corporations make a point of stating that they don’t think of themselves any more as American corporations. Typically, they call themselves “global” and they no longer say what Charlie Wilson said, that what’s good for our country is good for the company, too. In Europe, there’s still that sense of a social compact that corporations have an obligation to society as a whole. They have an obligation to their workers, they have an obligation to their customers and they are economic and social citizens, not just corporations.
In Chapter 16 of my book, I describe the change in corporate culture in the US when American corporate leaders came to reflect the new attitude that they are no longer American corporations but global corporations. “We just happen to have our home office in America,” they say. This change starts to happen significantly in the 1990s but it really accelerates in the 2000s after the US – Chinese trade agreement following which there’s a great rush by large American corporations to set up shop in China.
How does that relate to your question? It helps explain the different European and American responses to the crisis in Bangladesh. Well, if you as a business don’t feel rooted in a country, you don’t feel any particular obligation to your customers in that country or to your workers in that country. So as American firms globalize their operations, they look at the problems of their Bangladesh suppliers strictly on a profit-and-loss basis. They’re response is-“What does it cost us to get out of trouble in Bangladesh? We don’t want to take on any permanent responsibility there.” But European companies are looking at Bangladesh and saying, “How do we maintain credibility with our domestic customers? And how do we remain a good German or French or Dutch or Danish corporate citizen in our country? We would be regarded as a bad citizen if we buy garments and make a profit from a country where there are scandalous working conditions.” The Europeans have a responsible corporate ethic at work.
The corporate ethic at work in America today is the ethic of ‘shareholder capitalism’. Our goal is to maximize the return to our shareholders, our owners. Our focus is on the stock market price of our company shares. That also matters to European firms, but they are operating on a broader stakeholder basis. They are talking about ‘stakeholder capitalism’. The Europeans believe that their stakeholders include owners, shareholders, workers, customers, and the communities they operate within. They want to maintain good relations with all their stakeholders. So when they look at the terrible working conditions in Bangladesh, they’re looking at how to protect those relationships between their corporations and the home society where they sell their products.
The American CEOs are thinking what’s profit and loss? They’re thinking, “If I’m going to take a loss here because American customers are upset for a little while about the collapse of a factory in Bangladesh, what do I have to fork up now? What do I have to do to make myself look good for the moment because these people are going to forget about this in another six months.” It’s a crass profit and loss calculation, very different from the Europeans. I believe that’s why they’re behaving differently. American businessmen used to believe in a pretty similar corporate ethic to the Europeans. And some do now too, I think Costco is quite different from Wal-Mart. I think Costco is much more concerned about its relationships with its customers and employees. In general, they behave like a good corporate citizen, but for other companies, the Wal-Mart model is more prevalent. I would say that’s the third great change.
So I see three long-term trends affecting the corporate responses to what’s going on in Bangladesh today: the change in the corporate mindset and social contract at American companies; the shift in economic power from ‘push’ production to ‘pull’ production; and the growth in corporate expectations of deregulation and their freedom from legal and financially accountability so that they can make maximum profit at minimum risk and minimum cost.
BGF: It took a factory collapse that killed 1100 people to start a conversation about worker safety. What could bring about a change in American corporate attitude akin to the kind that Europe is reflecting now? What is that catalyst for change, if there is a possibility for one?
Mr. Smith: I have to admit that, as far as American businesses are concerned, I’m skeptical. In Europe, social pressures, laws and regulations, and a pact among the major European retailers are going to change their conduct. European retailers have committed themselves to take action, make investments to improve working conditions in Bangladesh and monitor conditions there. I am skeptical that the American retailers are going to change fundamentally unless there is continued public pressure and public unease about buying goods from companies in which there is blood on the hands of the Bangladesh producers. They have been making a profit by failing to protect their workers and blood was spilled. There was an immediate reaction of horror in North America as well as in Europe but public concern has subsided substantially in America now. I think unless there is public pressure or legislative action, most American retail giants will carry on pretty much as they have in the past, without taking direct corporate responsibility to improve the situation. The $100 million pledged by American brands, is a loan fund, not a direct investment by the American firms in safety improvement. They’re offering to lend the money to the Bangladesh producers, but it is up to the Bangladesh producers to spend the money and pay back the loans. The Bangladesh producers have already established themselves as unconscionable on these issues of worker safety. Counting on the Bangladesh manufacturers to improve the situation is like waiting for the tooth fairy.
The American firms have said they will demand that Bangladesh producers comply with certain standards but their standards are vague, so it will be pretty hard for the rest of us to know whether the Bangladesh garment manufacturers will have done enough to improve the situation. And who’s going to monitor progress and on what basis? Theoretically that kind of corporate monitoring has been going on all along, but when the factory collapsed, American firms were quick to deny that they knew about those bad conditions. I would like to believe that from now on that there is hope for improvement, but this is not a new situation. It’s been going on a long time and not just in Bangladesh. There are bad factory conditions all over China. They have not had one single disaster as bad as in Bangladesh. So there’s no single incident to highlight Chinese working conditions. And theoretically, U.S. firms monitor working conditions there, periodic revelations show that not very much has been done to significantly improve working conditions in China, not by firm such as Wal-Mart, which is getting a huge percentage of its products from China. So on that basis, I don’t see these American retailers taking an aggressive initiative in Bangladesh without there being an intense amount of public pressure or some new disasters.
And we would all hate to see that it required more disasters to generate sustained pressure for improvements. That would be terrible.
by Admin | Aug 5, 2013 | Highlights
In all its reports about the Bangladesh factory collapse, the western media seems to have overlooked an important question- Was Rana Plaza an example of capitalism gone wrong? David Rowlands from Australia’s Green Left Weekly says that the disaster, that rocked the developed world, stems from a deep deficiencies in what he defines as the “neoliberal capitalist model.”
Credit- Green Left Weekly
Bangladesh: What has changed after Rana Plaza?
In the aftermath of the April 24 Rana Plaza collapse, the plight of Bangladeshi garment workers occupied global media attention in a way it never had before.
The inconvenient thing about Rana Plaza, as far as the fashion brands that rely on outsourced sweatshop labour were concerned, was that so many workers — more than 1100 — died in one spectacular incident.
The 1800 workers killed in separate incidents since 2005 had been easy to ignore, but Rana Plaza was different. It was a big, uncontrollable story that caused the mainstream media to raise questions about the nature of the relationship between retailers and their labour force in Bangladesh.
For a brief moment, the wide conceptual gulf between the consumer goods on our shelves and the exploited foreign workforce that makes them was bridged. With research indicating that the consumer base in Western nations was concerned about the situation in Bangladesh, there was a general feeling that “something” should be done.
Three months on from Rana Plaza, what has changed?
Rhetorically, some progress appears to have been made. For instance, scores of global brands, including several Australian ones, have now signed on to the Bangladeshi Fire and Building Safety Accord, a step they had previously resisted.
It was public pressure, generated in part by campaigning NGOs such as Oxfam, that shamed the retailers into signing up.
Oxfam said: “The Accord, which has been signed by more than 80 global retailers, including Target, Kmart, Forever New and Cotton On, gives workers the right to refuse dangerous work, and mandates independent building inspections, workers’ health and safety training, and repairs and renovations to unsafe factories.”
This development has been cautiously welcomed by Bangladeshi labour organisations, but the sign-up has been far from universal and it remains to be seen how effective it will actually prove in reducing the industrial attrition that has been accepted for so long in the Bangladeshi garment export free-for-all.
Several large Australian companies have flatly refused to take part. Oxfam reports that, as of July 24, the hold-outs included, “Woolworths (Big W), the Just Group (Just Jeans, Jay Jays), Best and Less, Rivers, and Pacific Brands (Bonds, Berlei).”
Safety Accords make for good corporate public relations exercises, but in their current form they do not challenge the deep structural mechanisms of exploitation that have underpinned the global capitalist economy since the age of conquest began five centuries ago.
Like the 5000 or so other factories where 3.5 million Bangladeshi garment workers, mostly rural women, earn less than $40 a month working 15-hour days for six days a week, the factory at the shoddily built Rana Plaza represented a significant victory for the “market forces” that have driven the post-Cold War globalisation project.
Since its inception, the globalisation campaign has been involved in a continuous “race to the bottom” in terms of wages and conditions. This race has moved from continent to continent, leaving devastated societies in its wake.
One of the first low-wage frontiers was Mexico, which was handed over to multinational corporations courtesy of the 1994 North American Free Trade Agreement (NAFTA). For a few years, boom conditions prevailed on the Mexico-US border zone and the world became familiar with the term “maquiladoras”, glorified sweatshops filled with poorly paid female workers.
And then, almost as suddenly as it had begun, the NAFTA boom was over. The low wages paid in Mexico were not low enough to satisfy the profit-hungry corporations, who found an even more cut-price workforce in Asia as China increasingly integrated itself into the world economy.
In recent years, rising wages and higher production costs in China have prompted another wave of capital flight to places like Bangladesh and Pakistan. In Bangladesh, one of the poorest and most flood-prone countries in Asia, the corporations found conditions that were almost diabolically ripe for exploitation.
Bangladesh has a total land area considerably less than the Australian state of Victoria and a population of 150 million, almost eight times larger than that of Australia.
During the 1980s, Bangladesh was encouraged by institutions like the World Bank to begin using its “comparative advantage” to carve out a niche for itself in global manufacturing.
The comparative advantage was, of course, its desperately poor and highly concentrated population, which would be willing to work longer hours for pay rates lower than almost anywhere in the world.
Bangladesh was one of many developing nations to undertake “structural adjustment programs” during this period. These programs were designed to soften up the already vulnerable Bangladeshi economy, like a heavy artillery barrage before troops move in to occupy.
Under the close direction of the World Bank, Bangladesh removed almost all protection for domestic industries and embarked on a scorched-earth campaign of denationalisation and privatisation. Restrictions on direct foreign investment were dramatically slashed, as were tax rates for foreign companies operating in the countries.
Tariffs on agricultural imports were cut, resulting in agribusiness “dumping” and the loss of agricultural livelihoods for millions of Bangladeshis. Once the “anti-export bias” in the economy was removed, Bangladesh emerged as an “open”, “liberalised” economy, meaning that it was ready for plunder — like Mexico before it.
Research by Bangladeshi academic Mohammed Nuruzzaman has found: “Instead of distributing benefits among different societal groups [the neoliberal reforms] have brought an economic windfall mainly for the business and industrial class in Bangladesh.
“There is now a small group of 40 to 50 families who effectively control the total industrial and financial assets of this poor nation. The lack of policies of distributional justice has resulted in widening disparities in income and wealth between the low and high strata of the society and deterioration in the overall poverty situation of the country.”
As in its dealings with other developing nations, Washington has sought by a variety of means to keep the general Bangladeshi population under strict levels of control.
During the neoliberal era, it has been a key objective of US foreign policy to bolster client regimes that implement policies designed to enrich foreign corporations at the expense of host societies.
Billions of dollars of “aid” has been funnelled to the Bangladeshi state since 1972, in return for compliance with Washington-approved development policies.
The US military has forged close links with the Bangladesh Armed Forces, ostensibly to remediate natural disasters and counter “terrorism”, but actually to suppress internal dissent as the society polarises between a tiny wealthy elite and a vast underclass.
Western-backed death squads and neoliberalism have always gone hand in hand. In Bangladesh, the extrajudicial torture and killing of labour activists and other dissenters is performed by the Rapid Action Battalion [RAB], a specialist military outfit established in 2004 which openly engages in so-called “crossfire killings”.
The RAB has claimed over a thousand victims in recent years, probably including a prominent labour organiser, Aminul Islam, who was disappeared in April last year.
At the time of his death, Islam was involved in negotiations on behalf of workers in a dispute with factories making products for Tommy Hilfiger and American Eagle.
In 2010, secret US diplomatic cables released by WikiLeaks showed that the RAB was receiving extensive training from the British government in “rules of engagement” and “investigative interviewing techniques”. Another leaked cable reveals that the US ambassador considered the RAB the “enforcement organisation best positioned to one day become a Bangladeshi version of the US Federal Bureau of Investigation.”
The repression of the Bangladeshi workforce, a task carried out with the active assistance of Western governments, has led to a climate of impunity for garment manufacturers — with foreseeable consequences.
Only a month before the Rana Plaza collapse, the report “Fatal Fashion” by the Dutch-based Centre for Research on Multinational Corporations said: “Bangladesh has the lowest hourly wage in the world at US$0.32 cents per hour …
“As a consequence, the volume of orders … has exploded, but the production capacity of factory buildings has not been adequately adapted to these changing circumstances.
“In combination with failing or absent government inspections and inadequate buyer policies, this creates a ticking time bomb and the certainty that many more calamities will occur unless considerable investments in building and fire safety in … Bangladesh are made.”
Oxfam and other NGOs have rightly called on the recalcitrant firms in Australia and elsewhere to sign on to the Fire and Building Safety Accord.
However, even if all retailers were to sign on tomorrow, their past conduct in Bangladesh raises serious doubts as to whether their commitment to meaningful safety standards would last after the ink had dried.
It is the relentless squeezing of Bangladeshi suppliers, the endless and shameless haggling by Western companies for lower and lower production costs, that creates the criminally negligent safety standard in Bangladesh.
And as for workers’ dignity, forget about it.
By design, wages in Bangladesh are not living wages, and when the corporations talk piously about promising to pay Bangladeshi workers the “minimum wage” or even slightly above it they know full well that it is impossible to live decently on it.
Kmart Australia managing director Guy Russo said: “Kmart’s strict requirement for supplier factories is that they must pay at least the minimum rate to all workers or we will not do business with them.
“Lifting people out of poverty through economic development is vital.”
This is pure spin, designed only to get Kmart through the next media cycle. After decades of neoliberal “economic development”, the average Bangladeshi yearly income remains under $650 (compared to the global average of $8000).
More than a third of the Bangladeshi population lives below the poverty line. Most of the rest hover just above it in perpetual insecurity.
A relevant question that might be addressed to Kmart and other Australian exploiters is whether they will formally commit to paying their Bangladeshi workers a living wage.
Reform measures will not in themselves lead to a meaningful reconfiguration of the power relationship between foreign capital and Bangladeshi labour — and it is this grossly unequal power relationship, the deliberate outcome of decades of neoliberal policies implemented by Western governments, global financial institutions and their Bangladeshi elite collaborators, that actually led to the “ticking time bomb” of Rana Plaza in the first place.
This disaster was the outcome of capitalist globalisation logic, a point that the vast bulk of media coverage of the event has simply shied away from.
If we really want to improve conditions for garment workers, the neoliberal capitalist model must be challenged from within the Western societies that have imposed it on the rest of the world.
