More on the Bangladesh factory catastrophe ... clothes cheaper than food!

In an earlier post, I noted the logic that if we as consumers want to pay nothing more than $14 a shirt, then it can happen only with the kind of conditions that led to the catastrophe in Bangladesh.  The New Yorker's James Surowiecki's point is the same:

The problem isn’t so much evil factory owners as a system that’s great at getting Western consumers what they want but leaves developing-world workers toiling in misery.

How much have American consumers benefited from textile manufacturing in countries that are desperate for economic growth and development that will bring in jobs?

U.S. consumers have become accustomed to spending relatively little on clothing compared with other items—and getting a lot for their money. Americans last year devoted just 3% of their annual spending to clothing and footwear, compared with around 7% in 1970 and about 13% in 1945, according to Commerce Department data.

The decreasing proportion of the annual spending doesn't mean we buy less clothes.  It is the other way around: we buy a lot more clothes than ever before but at remarkably low prices:

"Apparel prices are lower in absolute terms now than they were in the 1990s," says Dean Maki, an economist at Barclays

Compare this fashion expense with food:

Since 1990, clothing prices in the U.S. have risen just 10% compared with an 82% jump in food prices during the same period, according to Jessica Tenvose, an economist with the U.S. Bureau of Labor Statistics, which compiles the Consumer Price Index. If adjusted for inflation, clothing prices would show a decline.

Our fickle sense of fashion, and an appetite for attire, means that the market works in overdrive to make that happen. That led to flexible manufacturing processes, writes Surowiecki:

Flexible supply chains are great for multinationals and consumers. But they erode already thin profit margins in developing-world factories and foster a pell-mell work environment in which getting the order out the door is the only thing that matters. Locke says, “Often, the only way factories can make the variety and quantity of goods that brands want at the price points they’re willing to pay is to squeeze the workers.” Suppliers in the garment industry rarely have contracts that last more than two seasons. “If you don’t deliver on time,” Locke says, “you don’t get the next order.” The problem is made worse by the fact that many of these factories are simply poorly run, with managers who generally have little training. This means that profits are smaller and there’s less money to pay workers or to invest in better conditions. And since in many developing countries, including Bangladesh, labor unions are frowned upon, there’s no one to speak up for workers in these factories. So safety becomes an afterthought at best.

Now, it is not that I want us American consumers to apologize and feel sorry for such trends.  Instead, as I noted in that post, if only we are willing to pay a few more cents per shirt, which can then go a long way to both pay higher wages and to enforce occupational safety.

In my post, I agreed with the following quote:

Real reform will mean paying a lot more than $14 for a shirt.

US and European retailers are working on responses to this crisis in their own ways, and I am sure soon they will work out a mutually agreeable set of conditions.  Meanwhile, the Bangaldesh government is also responding:

April's collapse of the eight-story Rana Plaza, one of the world's worst industrial accidents, has put pressure on Prime Minister Sheikh Hasina's government to address concerns about working conditions in Bangladesh. Ms. Hasina's administration said on Sunday that it planned to soon raise the minimum wage in the sector from $38 per month, about a quarter of China's wage. It closed 18 garment factories for safety violations last week and is planning broad inspections of other facilities.

And that is exactly what Surowiecki also had to say:

Even so, while there is much that companies can do themselves, the real lesson of the past two decades is that if labor standards are actually to improve government has to play a role. Private power alone won’t cut it: as long as consumers and companies insist on the lowest price and endless variety, there’ll always be factories that are willing to cut corners to get the business.

We have a long way to go.  But, in our haste to do something good, I hope we will not drive out the manufacturers from Bangladesh; that will be terribly counter-productive because as horrible as the situation is, it will be worse if these jobs didn't exist.  

Saira Banu, a seamstress from a factory in Rana Plaza who suffered broken ribs in the collapse, says she would like to quit. But Ms. Banu, who is in her 20s, says she doesn't want to return to a previous job as a housemaid, an informal position that isn't covered by a minimum wage and pays about $20 per month. "I'd like to find alternative work," she said. "But I don't know what I can do."

As my dissertation adviser once remarked in class, only the rich can afford to be unemployed.

Caption at the source:
Rozina Akter, a seamstress injured in the factory collapse, said she will go back to work as soon as she can, adding, 'Not all buildings will collapse.