Bangladeshi Incident: A Dilemma of Development for Third World

During the 1970s there was a popular joke in Eastern Europe: “What is the difference between capitalism and communism? Capitalism is the exploitation of men by men. Under communism, it’s the other way round.”
 
With the end of the Cold War, capitalism is effectively the only game in town. Throughout the Cold War, the social and economic conditions of the developing countries -- both in the western and in the eastern camps -- were less than desirable and poverty was rampant.
 
After the collapse of the Berlin Wall and the Soviet Union, the painful transition from central planning toward free markets took place. It must be remembered, nevertheless, that Socialist countries still continue to exist in the world. China is still organized according to socialist principles and central planning, as is Cuba -- to name two countries that still regard themselves as following the path of socialism. However, all of the successor states of the Soviet Union have to one extent or another achieved, or are on the road toward, a market economy.
 
Countries that were in either the western or eastern camps have continued to muddle along the developmental ladder. Whilst there has been an increase in the standards of living in the developing world in the past couple of decades, many problems continue to persist. One of the major difficulties remains the position of theory and practice. By this, what is meant is the passage of legislation and the enforcement and implementation of that legislation. All developing countries have relevant legislations in place to ensure basic human rights and minimum safety standards in the workplace.
 
The problem concerns the state and the rule of law. The extent of implementation lies at the heart of the matter. This was tragically witnessed by the whole world last month with the terrible losses of life in Bangladesh due to the collapse of the Rana Plaza garment factory building. More than 1,100 people lost their lives with 2,000 or more barely escaping death. This terrible incident has provoked an essential debate concerning the future of the relationship between developing countries and western firms in terms of contracting and subcontracting.
 
Proposal offers possible solution to prevent similar Rana Plaza tragedy
 
Perhaps the most well-received proposal was put forward last week by 2006 Nobel laureate Muhammad Yunus, who considered this tragedy to be one indicative of national failure. He believes that it is a duty to the dead to investigate this matter and offer proposals for possible solutions so that such terrible occurrences can be prevented from happening again in the future.
 
Yunus’ proposal is to establish a minimum international wage for the garments industry, which he believes should be $0.50 per hour -- double the level typically found in Bangladesh. Quite obviously, large western firms which contract out to Bangladesh would see this as an extra cost, therefore, regarding it as a partial loss to their competitive edge. This means that an equivalent increase in productivity would be required to offset this increase to $0.50 per worker. This proposal has been criticized due to it not factoring in the concept of purchasing power parity. Very basically, what $0.50 buys in one country will not necessarily buy the same in another developing country. Therefore, there needs to be a variation along regional lines.
 
The extra price increase could also be marketed quite wisely to actually increase sales. Through informing consumers that they would be paying more for a very socially worthwhile cause, it would be an added incentive for customers to buy such products. To increase the price of clothes by half a dollar is not seen to be excessive; it would not discourage people from buying such goods.
 
This suggestion is supported by the experience of The Fairtrade Foundation, which identifies itself on its website as being “about better prices, decent working conditions, local sustainability and fair terms of trade for farmers and workers in the developing world. By requiring companies to pay sustainable prices (which must never fall lower than the market price), Fairtrade addresses the injustices of conventional trade, which traditionally discriminates against the poorest, weakest producers. It enables them to improve their position and have more control over their lives.” It has been quite successful in reminding and re-educating western consumers to channel their money to developing workers.
 
Furthermore, looking at recent social history in the Western world, one can observe that staunch attitudes have been changed a number of times. For example, child labor was an accepted part of the economy not so long ago in the West and gay relationships were frowned upon and, in fact, criminalized. Furthermore, African-American people in the United States were not even allowed to sit together on the bus. Through a thorough campaign in education, such attitudes have been changed significantly. Therefore, there is hope that an extra tax to improve the lives of developing workers could also be successful.
 
Pursuing this line of thought, some have argued that consuming countries’ governments could also take the lead in this regard through advocating a policy of minimum standards being implemented. Until and unless these are validated and seen to be enforced, then imports could be temporarily halted. However, the problem with such an idea is that it would be considered as effectively an extra tax on imports if they fell below the identified standards.
 
Workers management system could improve worker safety
 
One related assertion -- and a very pessimistic one at that -- concerns capitalism: that it is nothing but a race to the bottom in this globalizing world, with some of the poor getting poorer whilst other sections of the poor are able to better themselves economically. The large multinationals of the west are much more concerned about their obligations to their shareholders. They are primarily responsible to them, and the only other factor that they need to be aware of is the requirement to obey the laws in the countries they are operating in. None of them has the betterment of their workers’ safety regulations as their priority when making day-to-day decisions. Businesses are not particularly interested in high levels of safety; they are more interested in high levels of profit.
 
To counter this, some have professed to reintroduce in Bangladesh, and other developing countries, the workers management system as was espoused in Former Yugoslavia. Having a worker represented at every level is considered to be a very welcome strategy with self-management being the aim. This model contemplates the factory operating without a boss. Such a model of decision making would not involve consulting all employees for every small issue in a time-consuming, inefficient and ineffective manner. Only large-scale decisions would be made by all employees during council meetings, and less important decisions would  be made by those implementing them and following more general agreements. The ultimate idea behind this suggestion is to aid and educate workers with regard to their rights under the law, encouraging collective responsibility and action.
 
In terms of law and regulations, one must not forget that the current conservative economic philosophy advocated in Europe is one in which governments tend to view all sorts of codes as unnecessary bureaucracy -- as red tape. For example, fire safety rules, environmental protection regulations and building safety and planning codes are all thought to unnecessarily slow down entrepreneurs. Political parties of the right regularly campaign in elections to reduce -- as they see it -- such governmental obstacles. Given that this philosophy is quite widespread in conservative political circles, one can begin to understand the challenges that developing countries face in their far more trying circumstances.
 
Pursuing the theme of regulations, the problem in developing countries is not legislation, as they have relevant laws already on the statute books. The problem is that they are simply not enforced. To answer this dilemma some have suggested the adoption of a Chinese model of enforcement, which, simply put, means regulations must be enforced to the letter and deviations be punished severely. One is very much aware of the punishments meted out by the Chinese state on administrators who have failed to meet their standards or who are caught engaging in illegal activities, usually for the purposes of personal enrichment at the expense of their regions.
 
It has been pointed out that despite these tragedies and difficulties, the long-term solution to developing countries manufacturing problems remains in the promise of free markets. Examples of Japan, Hong Kong, Taiwan and South Korea are usually put forward as role models of countries and territories that were very poor not very long ago. These are nations that have elevated themselves to become wealthy and prosperous societies. It’s these developing countries with successful growth stories which were once home to industrial, low-wage workshops that have now moved out of the sphere of “sweatshops” to become great industrial examples to the world.
 
Bangladeshi government responsible for improving worker conditions
 
Ultimately, of course, it is the Bangladeshi government that needs to become involved and lead from the front in improving the conditions of its own workers. Governments are always the most active agents when it comes to improving health and safety conditions. As for the Bangladeshi electorate, it is their responsibility to keep on reminding their politicians and ministries that it is their duty to protect their citizens in the workplace and to be an effective watchdog on any and all corrupt measures. This is difficult enough in a developed democracy and a much harder uphill struggle in a poor, developing state with many deficiencies.
 
Whilst much is demanded and expected from the state, developing countries share a common problem: the state failing to meet those hopes and expectations of its citizens. It is the state which is expected to provide an adequate infrastructure -- and this is a major challenge in the developing world. This can be seen very clearly in the Bangladeshi case with regard to power supply. The state is simply incapable of providing a reliable supply of electricity to the country at large. This means that all businesses have no option but to invest in quite expensive backup generators to ensure power supply so that they can continue with their economic endeavors.
 
One of the affected areas of business is the garment industry. Despite many criticisms of this particular industry in Bangladesh, one must note that it has had a positive social impact. That is with regard to the role of women, which has seen a transformative change in social recognition and understanding, allowing for an increase in women’s household incomes. It has also had the very positive effect of reducing the high birthrate. Bangladesh has one of the fastest falling birthrates in the developing world; furthermore, life expectancy has also risen faster than in other developing countries in the same situation as Bangladesh.
 
In the 19th century, the United Kingdom was seen to be the workshop of the world. Most garments were produced in the British Isles. In the early 20th century, the United States took over the role of being the world’s sewing machine. Today, we see that most clothes are made in the developing world. Therefore, the location of industries does change with time, and in the future it is highly possible that other countries in different phases of development will contract out clothes-making. The dilemma that remains for developing countries relates to lower wages. For wages to increase, productivity will have to increase as well. In order for that to happen, one needs capital -- which, unfortunately, is always in short supply in countries such as Bangladesh. Squaring that cycle has been a challenge for all developing countries since World War II.
 
Concerning the role of state power, the prevailing view since the 1980s has been of a downsizing the state. Some allocate a more powerful developmental role for the state in the third world. Countering this, however, has been the argument that commerce, trade and the economy as a whole have grown in developing countries in spite of the state -- rather than because of the state. There is much evidence that state institutions are bedeviled with corruption.
 
Concerning corruption, it is worth remembering that the owner of the Rana Plaza building which collapsed in Dhaka happens to be a member of the Bangladeshi Parliament. Therefore, lawmakers pass legislation in the legislature but when it comes to their own companies, they refuse to implement that law. This is a blatant example of the lack of power behind the rule of law in developing countries. Whilst it is easy and highly commendable to offer the increase to $0.50 in wages for developing countries workers as a way out, as Muhammad Yunus has, it is much, much more difficult to propose a solution to immediately implement the rule of law in one fell swoop.