Bangladesh may or may not need tougher workplace safety rules, but it's entirely appropriate for Bangladesh to have different—and, indeed, lower—workplace safety standards than the United States.
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The reason is that while having a safe job is good, money is also good.
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Safety rules that are appropriate for the United States would be unnecessarily immiserating in much poorer Bangladesh.
Yglesias backtracked some of his comments later, but this poses some interesting questions nevertheless. We addressed some of these issues, for instance regulatory races to the bottom, earlier in class. But there are a number of interesting questions worth asking:
- What can political economy tell us about why this disaster happened?
- What can it tell us about why regulations are the way they are?
- What can it tell us about the gap between laws and regulations on the one side and practice (the condition of the building) on the other?
- What can a political economy approach tell us about how such tragedies might be avoided in the future?
I'm looking forward to hopefully a few posts this week that address these or other questions related to this event.
The idea of applying American labor standards to all corporations, "no matter where they site their factory," is very interesting. It seems a good idea because it would most likely serve as a solution to the "race to the bottom" dilemma and it would also prevent future disasters from happening. However, I think it is worth noting that the chances of this are slim, particularly given the international collective action problem. Loomis talks of an international enforcement body that would ensure that these standards are being upheld, but I would expect that American corporations would simply circumvent this enforcement. Additionally, I would expect that if one country (like Bangladesh, for example) raised its safety standards because of this, another would soon lower its standards, and MNCs would simply move their factories. Capitalism is going to push corporations to seek out the lowest production costs, and when other countries realize this, I'm sure they will forgo higher safety standards in order to receive more FDI.
ReplyDeleteI think workplace disasters such as this are going to be something that will forever be a part of a global society with increasingly free trade. While it's certainly better to have the Bangladeshi people working in factories as opposed to turning to worse alternatives as we've seen in other countries that instituted labor reforms, that doesn't excuse the owners of capital. However, as long as capitalism exists (and within that framework, free trade), these disasters will happen. Companies are driven to turn as high a profit as possible, leading to a race to the bottom. What's the result? Labor loses through stolen wages and workplace catastrophe.
ReplyDeleteSo until a solution that doesn't hold capital's wealth far above the interests of labor's safety, we'll see LDCs striving for increased investment that leads to a race to the bottom and lax regulations.
This is a perfect example of the regulatory races to the bottom that result in poorer countries trying to compete in free trade. Because demand is so high, those export-oriented industries that are profiting from free trade are willing to sacrifice regulations in order to meet the level of production demanded. The poorer people have no other options within the country that to work where they can find work, in the under-regulated factories. While this allows those who own the factories to profit more, those who work in the factories are actually paying more in the long run, either from deaths in the family or health issues related to the conditions in the factory. As those running the factory will most likely continue to under-regulate so as to continue profiting more, it is up to those who are demanding the products to require regulation. In the short run, the regulation may cost the factory more, but in the long run its workers will be healthier, happier, and all together more productive.
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ReplyDeleteYes!
I like the idea of applying American labor, safety, engineering , and environmental standards to manufactures, regardless of where they physically reside. Sure, enforcement would be very hard. However, I do think the conditions would generally improve if the manufactures were required to meet higher safety standards. We may have a slightly lower standard of living in the U.S. and there would be fewer workers working because the tougher standards would increase prices.
Take your pick, lower standards of living and fewer workers working or a higher probability of death and destruction.
A truly classic economic discussion!
Checkout the discussion with Milton Friedman regarding the Ford Pinto.
See: Youtube: Milton Friedman ford pinto
http://www.youtube.com/watch?v=jltnBOrCB7I
One key point of this issue is access to accurate information on the part of the consumers.
As consumers, do we know what items we buy are made in conditions that are unsafe?
The idea of putting a safety labor standard just like United States is tempting but it is not feasible in Bangladesh. If Bangladesh puts a strict labor standard like United States they will not be able to fulfill the market demand for garment field or whatever they are producing in Bangladesh right now. Also regardless of what safety measure you put in Bangladesh right now people are willing to do anything to provide food for their family. Labor is ridiculously cheap people in Bangladesh are happy that they have jobs, United States specially Wal mart is happy because of cheap imports to US and the factory owner makes ridiculous amount of profit so I don't see how Bangladesh government is going to chance the labor law. Consumer wants cheap good any time and they actually don't care where or how it is made they just want cheap good and producers all they care about is profit margins at any cost. It all comes down to the good old capitalism. In fact if the labour standard gets reformed then Bangladesh will lose business to other countries.
ReplyDeleteI think it is important to remember that most of the factories in places like Bangladesh are contracted out by American or Western European companies and these companies can have significant influence on how well standards are upheld in these countries. Though not all of the burden should be put on these corporations as companies supply what customers want. So it is partially up to us, as consumers, to be conscious of the products that we buy. Take Apple, for example, they were having significant problems after news stories came out about conditions at Foxconn. Afterwards, Apple implemented a contract that enforced better labor standards at their factories. Apple being a company to imitate, similar companies took similar steps. I do not think it is fair to say that labor standards will never change because of the way that capitalism works. People will pay more for products for which they know are coming from better sources it is just about knowing the company knowing the threshold about when prices become too much.
ReplyDeleteWhile this is a tragic disaster, there are clear political economy explanations for why regulation is the way it is in Bangladesh and developing countries. While we enjoy things like environmental and labor regulations that keep us safe from acid rain and dangerous work environments, it is essentially only a function of our wealth and development. Workplace regulations can be looked at as a luxury good because as wages good as wealth increases and people do not have to worry about day to day survival and have increased time for leisure and education they begin to think more long term and more fully recognize the implications of unsafe work environments and begin to demand regulations. Additionally, governments in developing countries do not have the resources or demand to create work place regulations. Governments who impose these regulations in a sufficiently under developed nation they could damage their economy by rising costs for employers and creating unemployment. There is really no way to ensure tragedies like this do not occur because many governments can not enforce regulations in developing countries. A potential way for economies to enjoy better work environments could be by allowing responsible MNC's to produce there. Many MNC's who serve developed countries are becoming more accountable for their poor labor practices in foreign countries because of increased media coverage and the quick spread of information via the internet. In this way laborers who are employed by MNC's in developing countries could enjoy a safer work environment and could help increase competition between domestic employers to raise labor regulations.
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