Imperialism in the Twenty-First Century. John Smith
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earns €1.36 per day, for 10–12 hours, producing 250 T-shirts per hour, or 18 T-shirts for each euro cent paid in wages. Her factory is one of 5,000 garment factories in Bangladesh employing 4 million people, 85 percent of whom are women. According to the ILO, the average wage of female “machine operators and assemblers” is 73 percent of their male counterparts.13 Despite the massive influx of women into garment factories, female participation in the labor force in Bangladesh as a whole remains one of the lowest in the world. In 2010, 33.9 percent of working-age women were employed, compared with 79.2 per cent of working-age men.
As noted above, factory wages in Bangladesh are the lowest in the world. An investigation by a UK parliamentary committee into conditions in Bangladesh’s garment industry following the Rana Plaza disaster reported that “Bangladesh’s comparative advantage, its sole asset value, is cheap labor and its correspondingly low unit costs.”14 An in-depth report by leading U.S.-based management consultancy McKinsey & Co. into the growth of Bangladeshi apparel exports included an extensive survey of the outsourcing behavior of U.S. retailers, reporting that Bangladesh “competitive price level is clearly the prime advantage—all CPOs [chief purchasing officers] participating in the study named price attractiveness as the first and foremost reason for purchasing in Bangladesh.”15 The price that CPOs find so attractive, of course, is the price of labor-power, but McKinsey & Co., not wishing to offend the sensibilities of their big-business clients, make no mention of low wages anywhere in their study. For months following the Rana Plaza disaster, Bangladesh’s Ready-made Garments (RMG) industry was hit by waves of strikes and demonstrations centering on the demand for wage increases (or payment of wages due), the right to form unions, and the enforcement of widely ignored health and safety legislation. The Bangladeshi government, many of whose top officials are factory owners, responded in the same way to previous upsurges in 2006, 2010, and 2012—with violent repression, using the regular police, the ansars (village-based militias), and the “antiterrorist” Rapid Action Battalion—in addition to the Industrial Police, formed in the midst of the 2010 strike wave, whose sole task is to police garment districts and repress workers’ protests. Its 2,900 officers contrast with the grand total of 51 inspectors who, at the time of the Rana Plaza disaster, were charged with enforcing health and safety, minimum age and minimum wage laws in all of Bangladesh’s 200,000 workshops and factories, including 5,000 in the garment sector.16
Nevertheless, with worker militancy growing and with the glare of world attention upon them, in November 2013 the government conceded a 77 percent increase in the minimum wage. This was a significant victory, but far short of the 170 percent wage increase the workers demanded and for which they continue to struggle. It leaves their wages a long way below all estimates of what is needed to feed, clothe, and house their families. According to the Asia Floor Wage Alliance, an alliance of Asian trade unions and activist groups such as the Clean Clothes Campaign, the new basic wage is barely one-fifth of what is necessary to nourish, house, and clothe a garment worker, one adult, and two child dependents.17 The 2013 wage hike was the first increase since 2010, and since then inflation has raised overall prices by 28 percent, and basic necessities like food and cooking oil by much more.
Low wages make big markups possible. In this example, the total markup on the production cost of the “fast fashion” T-shirt is 152 percent. Much higher markups are to be found on more expensive products; one notorious example being the replica football shirt, “a big money-spinner with 80 percent of those sold in the UK made in the Far East for around £5. The factory then sends them on to the sportswear companies at around a 50 percent markup. They in turn mark them up by another 100 percent and sell them to the retailers for around £14. The retailers add their own markup of at least 150 percent to bring the price tag up to the recommended retail price of at least £35. That’s 700 percent more than the manufacture cost.”18 Another analyst estimates that a Bangladesh-made KP MacLane polo shirt, retailing in the United States for $175, generates a cool 718 percent markup on its cost of production, and a Hermès polo shirt retailing at $455 boasts a markup in excess of 1800 percent.19 These eye-watering markups contrast with the wafer-thin margins left to Bangladeshi suppliers. Writing in the Wall Street Journal, Rubana Huq, owner of a garment factory in Bangladesh, claims to make 12.5¢ on each shirt, whose cost of production is $6.62, a markup of 2 percent.20 This Bangladeshi factory owner is hardly a disinterested party and her claims must be taken with a pinch of salt, but ruthless price-gouging by global buyers is an incontrovertible fact, as a report by British parliamentarians recognized: “In the buyer-driven supply chain margins are thin and the fear of undercutting is strong. As such the purchasing practices of brands can incentivise violations of health and safety through undisclosed subcontracting, excessive working hours, and unauthorized factory expansions.”21
Eloquent testimony to the pressures focused on supplier firms by TNCs was provided by factory owner Ali Ahmad, speaking after 289 garment workers were burned to death in a factory fire in Karachi in September 2012:
You have strikes, load shedding [power outages], local mafias charging you turf protection money—you name it…. Plus you have ruthless buyers sitting in the U.S. who don’t care what you do, as long as you do it on time…. We take a hit every time we’re late. That means lost margins. That means we do what we need to do to make our orders, fast. This factory owner may have been working extra shifts just for that purpose.22
According to John Pickles, a leading authority on the global apparel industry, so successful have global buyers been in forcing down wages that they have recently shifted their attention elsewhere: “Marginal gains from squeezing labor costs have been reduced significantly in recent years. When wage levels were driven below subsistence costs, and could not be driven any further down, buyers and suppliers sought out savings in other areas of the value chain (input costs, transaction costs, logistics, coordination costs, demand management, etc.).”23 The result is intensifying pressure on suppliers to slash overheads, ignore health and safety legislation, to impose forced overtime, and to subcontract work to other factories lower down in the pecking order, where working conditions are typically even worse than in the first-tier suppliers, or, as UNCTAD’s World Investment Report 2013 put it: “In labor-intensive sectors (such as textiles and garments) where global buyers can exercise bargaining power to reduce costs, this pressure often results in lower wages…. In addition to downward pressure on wages, the drive for reduced costs often results in significant occupational safety and health violations.”24
The “global buyers” can, however, count on some academic witnesses to protect them against charges of culpability. “Factory owners face huge losses if they cannot complete an order and stiff financial penalties if they do not complete it on time,” reported a major study by Sarah Labowitz and Dorothée Baumann-Pauly for New York’s Stern School of Business.25 Yet this report blames low wages and lethal workplaces on Bangladeshi government corruption, intermittent power supplies, overpopulation—anything but the conscious and deliberate policies of multinational corporations. Abandoning even the pretense of objectivity, Labowitz and Baumann-Pauly state at the outset that their study “is written in the context of … a shared desire for higher standards…. It starts from the premise that the garment sector has greatly benefited the people and the economy of Bangladesh … [and] that business can and does work for the good of society. We support the goal of business to create value while emphasizing high standards for human rights performance.”26 This fawning tone contrasts with the harsh rebuke handed down by the authors to “the government of Bangladesh [which] lacks the political will, the technical capacity, and the resources necessary to protect the basic rights of its workers. Bangladesh ranks at or near the bottom across all measures of good governance, including civil justice, regulatory enforcement, and absence of corruption.”27
Also jumping to the defense of big business is Professor Jagdish Bhagwati of Columbia University, considered to be among the foremost theorists of international trade and who confesses to feeling miffed that he is yet to be awarded the Nobel Prize for economics.28 “Since the factories were locally owned and operated, the blame surely belonged to their owners and managers, not to their clients any more than to those of us who purchased the garments at home or abroad.”29 For such a brilliant theory, he clearly deserves