The deadly collapse of a Bangladeshi factory that claimed 1,127 lives has left governments and clothing retailers scrambling to find a viable solution to the shockingly poor safety standards in the South Asian country.
Coming to the forefront of the debate, both critics of global capitalism and pro-market supporters are asserting their opinions of what should be done to reform working standards in developing countries on the whole — ranging from complete boycott to a do-nothing policy.
In all, it is true that so-called sweatshop labor has been an overall boon to the Bangladeshi economy — raising the country’s average wages and standard of living. And it is true that past attempts to crack down on sweatshop factories and child labor have just led to increased prostitution and starvation. However, that doesn’t mean there is nothing to be done to improve working standards.
Here are some market-oriented reforms that could be championed by both sides of the debate and lead to increased safety.
1. Scrapping Useless Safety Regulations For Higher Company Liability
The recent push for stricter safety standards could be all for naught. Safety regulations in these countries have been notoriously hard to enforce and all but useless. For instance, the Bangladeshi garment factory that caught fire in November, killing 112 people, passed safety inspections by the government. Afterwards it was found that the fire extinguishers were empty and just put there to appease government officials.
Replacing these difficult-to-enforce regulations with a well-established system of company liability would provide an actual incentive for companies to increase safety standards. As it is now, most factories and foreign retailers aren’t liable in the event of an accident or death.
Now, in the complex chain of production we have in a modern economy, it may be hard to determine where the product comes from. Nonetheless, the clothing manufacturers and foreign retailers like Walmart and GAP can amend their contracts to determine joint or sole liability.
2. Cutting Red Tape
Reducing regulation and cutting bureaucratic red tape could actually increase worker safety. By freeing up the funds now used for compliance costs and trade tariffs, Bangladesh, the U.S., and the E.U. could make it less costly for companies to do business, thereby allowing them to use more of their funds for their workers.
According to the World Bank, Bangladesh has one of the highest trade barriers and difficult institutional environments in the world. Moreover, governments like ours in the U.S. hurt workers in developing countries by imposing higher tariffs on their products. For example, the U.S. imposes only a 4% tariff on the average but 15 percent duty on ready-made garments imported from Bangladesh.
Cleaning up this bureaucratic mess and freeing up trade would spur economic growth and increase the wages and working standards in Bangladesh.
3. Allow Unions to Play a Role
Increased economic liberalization and rule of law in Bangladesh could help workers not only start unions but maintain them as well.
Previously, the Bangladesh government allowed factory owners to veto the participation of any individual worker in a labor union. But the public outcry after the deadly factory collapse has fortunately made the government change its stance and allow workers to more freely organize.
Despite what many on the right would say, unions help establish reasonable and enforceable contracts between workers and employers. Many Bangladeshi garment laborers have lamented over employers who don’t pay their wages consistently and go back on agreed upon contracts.
Government reform of union restrictions and enforceable contracts between factory owners and workers could help find equitable agreements on safety, wages, and benefits.
Ultimately, though, economic development rather than legal mandates will improve safety conditions in Bangladesh as well as other developing countries. As productivity and wages rise over time, workers will demand and receive more safety.
It is up to governments to allow markets to work. Only by cutting overbearing regulation and bureaucracy under the rule of law can we achieve higher safety and well-being for those workers in dire need of change.