"[There is a] strong correlation between market freedom and lower government corruption -- not terribly surprising, since the effect of increasing regulatory power is to shift 'cheating' from the private to the public sphere." ~ Julian Sanchez
Column by Jim Davies.
Exclusive to STR
The recent tragedy in Bangladesh took over 1,000 lives, and I hope blame is properly attributed and some kind of compensation awarded. It has unfortunately re-awoken a slew of guilt merchants known, curiously, as “liberals,” who are shrieking for something to be done to stop Walmart, J.C. Penney and other retailers doing business with Bangladeshi companies.
The oddity of that L-word is that it was coined in early 19th Century England to describe those favoring free trade, particularly in the business of fabrics (and food). The Lancashire mills famously bought cotton from growers worldwide, wove it and made cloth and clothes for sale, also worldwide. The country became known as the “workshop of the world.” Workers were attracted to the mills by wages better than they could earn on the farms, and by housing that was advanced for the era though less attractive now – it's still in use. Working conditions were again good compared to agricultural ones, but still crowded and less than healthy by modern standards – hence the term, “sweatshop.”
Parts of Southeast Asia have reached a stage of development today comparable to England of that time, and I think it's wonderful that international trade is bringing millions of people there out of centuries of abject poverty. It's win-win; we buyers in the “West” get good quality and low prices (I bought a nice shirt only last month, made in Indonesia), they get a better wage than available elsewhere locally, and their employer does good business. Sears does too.
Sadly, some of the factories are ill-built. Fire traps perhaps, or constructed like the Dhaka one with what my grandfather (a builder) used to call “two of sand and one of water.” In this case, reportedly, the owner was warned of cracks in the structure the day before the collapse, yet disregarded the warning. He will have to account for that.
Why the low standards, the crowding? Obviously to minimize costs and so to get the business, without which everyone would be worse off, but possibly there is corruption at work as well. I hope that too gets investigated. If a building contract specifies a certain standard and the builder delivers something lower, the blame is on him; no free society would condone such conduct because contract-breakers would have a short business life – so the evidence of frequent poor construction in Bangladesh suggests that it's far from a free society.
Back then to the shriekers in this country. They say they want US retailers to enforce higher standards on their suppliers, as if in some way Walmart is responsible. Walmart is not.
US retailers are responsible to their shareholders for the bottom line, period. To make that line healthy, they need well-satisfied and -motivated employees, and merchandise that competes well in quality and price. Due partly to government-mandated costs, US garment makers long ago priced themselves out, so foreign ones have taken up the slack – with the splendid effect noted above, of pulling them out of poverty. It's up to those foreign mill owners to compete for the business, and they in turn need well motivated employees and safe, healthy working conditions – those terms being relative to what else prevails in their localities; for if they fail to provide them, the quality of work they are buying will suffer. If their factories burn or collapse, they lose their whole business – so it's absurd to suppose they are kept unsafe on purpose.
Suppose the “liberal” screamers got their way, and retailers here declined to buy goods from manufacturers that failed to provide working conditions pleasing to the screamers. The effect would be to discontinue some or all of the business with foreign suppliers and to shorten the supply of garments. In turn that would stimulate domestic mills to re-open and hire workers--something probably on the agenda of those screechers, with their many Union connections--and so to raise the prices of clothing here. Customers need that like a hole in the head.
Next, millions of foreign workers would be thrown out of work and back into even greater poverty. They don't vote in US elections, of course, so not many Stateside would worry too much, but resentment would fester. There are about 160 million Bangladeshis, squeezed nearly 2,700 to the square mile; if Western garment orders fell off a cliff, we could expect consequent death from disease and starvation far in excess of the thousand suffered this month. So the hysteria of the guilt-peddlers here would, if it were to succeed, bring a result opposite to the one allegedly intended.
Unsavory work is preferable to no work, and provides an economic stepping stone to greater prosperity. It's how the Pacific Rim countries pulled themselves up by their bootstraps, and the same is true of this country and the English Workshop in the 1800s. A generation hence, if left alone by American do-gooders, the same is in prospect for this part of the Third World.
Unfortunately, the latest news suggests that those stepping stones will not be used; that the necessarily gradual but well-proven and sure method of increasing living standards has been discarded in favor of a superficial quick fix whose real effect will be the opposite. Not only are the US shriekers prevailing, the Bangladeshi government has itself shot its own people in the foot by (a) forcing factory owners to deal with unions whether they want to or not, and (b) raising the minimum wage. Two measures that are certain to raise the prices of products made there and so to reduce the sales its entrepreneurs can achieve. Simultaneously, Western buyers have signed a “legally binding agreement to help finance fire safety and building improvements in the factories they use” in that country. That finance will not come from a Liberal money tree, but from higher US prices for the products imported from there.
If any, that is. Such a “legally binding agreement” could be sidestepped easily by switching orders to other suppliers so that “the factories they use” in Bangladesh no longer exist.
Such is the appalling cost, when market choices are trumped by political ones.