Does Cheap Fashion Come at a Human Price in Industrial Goods - Essay Example

?According to the British charity Action Aid, cheap fashion comes at a human price (BBC news 20th July . Critically discuss the validity of thisstatement with reference to trade in industrial goods. International trade is the precursor of globalization and it is based on a mutually beneficial exchange of commodities where a country exports a good in which it has comparative advantage (in terms of cost of production and technology) and imports a good in which it has comparative disadvantage than its trading partner. Therefore the basic theory of trade is supported by the fact that it makes both the participating nations better off in terms of their economic positions. Trade is further facilitated with reduction in protectionism or import tariffs. The advantageous position is usually assessed in terms of cost. This can further lead to the belief that: “When trading partners use more of their time and resources producing things they do best, they are able to produce a larger joint output, which provides the source for mutual gain” (Carbaugh, 2008, p.14). Now looking at the comparative advantage theory of trade one can study the labor market where Krugman observes that the developing nations have been able to compete with the developed ones on the basis of their ability to supply cheap labor. Therefore export-oriented growth is of great help to these people. The industries like textiles and garments firms have capitalized on the unskilled labor force of the developing nations and it might not be very just to oppose the idea of providing cheap fashion at human cost unless a suitable alternative can be provided to industrialization on the basis of low wages. While it cannot be denied that while people crave for the designer sport shoes, they might not realize that the products are manufactured at the cost of hard labor efforts of women and children compelled to work in malnourished conditions and almost “slave wages” (Krugman, 1997). Looking at the brighter side of the picture one can find that in the newly industrializing countries of Indonesia and Bangladesh the conditions are improving from the previous status though the per capita income still remains low. These basic improvements were possible through the foreign investments of multinationals that are pictured as merciless profit makers taking advantage of the cheap labor. Hence the remark of the British charity Action Aid, that is, “cheap fashion comes at a human price” might be analyzed in the light of trade in industrial goods with a specific focus on fashion and textiles. Trade is also supposed to keep the domestic producers busy in innovations and increasing efficiency of their production processes. It helps in curtailing monopolies and decreasing the prices of goods like electronics, clothes and household appliances. However other sectors like sport tickets, car repair and other service segments which are unaffected by globalization show rise in prices. Thus the industrial goods sector mostly witness a control of inflationary pressures. Now if one looks at the technology behind the production process there always exists an asymmetry of information across the nations such that one group shall have technological advantage over the industrial sectors than the other group. The dependency theory proposed by Baran also divides the world into center and periphery where the center is represented by the developed nations with the technological advantage and the periphery is concentrated by developing countries that mainly produce raw materials for the center and lack of the technological know-how is the essential factor behind their setback. A line of inequity also marked the multilateral trading framework. The GATT ignored two very significant sectors – textiles and agricultural and no stabilization was rendered for commodity prices which declines against the prices of industrial goods (WTO, 1999). The steady decline in commodity prices deteriorated their conditions further and hence led to worsening of economic conditions of the developing nations. The terms of trade became inclined in favor of developed nations at the cost of developing ones. While Marxists believed the periphery could not possibly catch up with the center in terms of development, the Structuralists argued the opposite ground. The latter proposed that with opening up of trade barriers the knowledge of technology would also be transferred to the periphery. The later dependency theory deviates from the issue of international division of labor and technological differences (components of Baran and Frank’s proposition). The latter authors claim that the main drawback of the periphery lies in the financial dependency of the developing nations (they are unable to borrow in the global market in their domestic currency). (Vernengo, n.d.) In this context, the Foreign Direct Investments of the developed world in these nations opened up brighter avenues for the major part of the population suffering in impoverished conditions. The MNCs, a direct consequence of globalization, largely influence the pattern of economy of the developing nations especially with respect to the labor conditions (apart from infrastructure building and transfer of knowledge) through their subsidiaries and investments. As per Raymond Robertson’s research, working conditions can be wage based and non-wage conditions (working ambience and safety). As per the Fair Labor association wages should aim at meeting the basic needs to employees (the minimum standard wage must be paid) and the International Labor law stands against any discrimination ob the basis of gender. Although the Dispute Settlement body of world Trade Organization (WTO) looks into trade related matters only, the WTO recognized the ILO (International Labor Organization) as the “competent body to negotiate labour standards” in the Singapore Ministerial Conference of 1996 (confirmed again by the Doha Ministerial Conference of 2001). The consensus of WTO in this respect states, “all WTO member governments are committed to a narrower set of internationally recognized “core” standards — freedom of association, no forced labour, no child labour, and no discrimination at work (including gender discrimination)” (WTO, n.d.). Firms like Reebok, Nike etc have tampered the human resource of developing nations extensively and hence these outlets are known as sweatshops. For instance, Indonesian workers earn a monthly wage of $39 and produces commodities with hundred dollars’ value. Yet, looking at the empirical evidence one may find that the foreign firms of the subcontractors pay higher wages than the local companies. According to a survey, “in Indonesia paid 33 percent more for blue-collar workers and 70 percent more for white-collar workers than locally owned firms” (Munich Business School, 2008). Even in Mexico, 80 percent of the sales are contributed by exports and the export led firms pay higher wages than the non-exporting companies. The issue of human price paid for cheap fashion centers on the garment industry especially the retail company Asda (a part of Walmart) is paying a wage to South Asian laborers which does not cover the cost of a decent living including “food, clean water, healthcare, education, clothing, fuel and transport”. Although the company’s representative claims to be trying to improve standards in the factories the British charity Action Aid claims that the company has not done anything ethical for the workers. According to Mr. Burch, “It is a laudable aim but we have to find a sustainable way of doing that”. He also states that they could have moved away from Bangladesh but they need to adhere to the strategic decision of working with them in the long term. Again one may stop to ponder that the MNCs have been able to offer the impoverished families at least a better standard of living than before and hence their decision to leave the nation might negatively affect their conditions. The Ethical Trading Initiatives have helped in mending the situation to some extent though. In this case companies like Marks and Spencer has taken built ethical model factories and has been following the codes related to wages, labor hours, health and safety along with trade union issues. Their efforts have improved the wages of factories and reduced absenteeism. Yet there are still factories where the conditions are unpleasant in the garment industry. When Zara’s director of corporate social responsibility decided to investigate the matter and arrived at the factory at Dhaka, he also agreed that the conditions were unhygienic and warned the storeowner of closing all deals with them. His intrusion improved the conditions of workers who now work in cleaner ambience. However it might be difficult to monitor everything. Sometimes the sub contractors might pass on orders to other factories where the workers might live in stuffy conditions sleeping on the aisles such that they might begin work on the machines as soon as their shift starts. They even eat in the same unit in order to avoid wastage of time and works for long continuous shifts. Now in most of the cases, without this work the young workers will have no job at all. Asda also has produced their explanation to the accusation of BBC who spotted labels of George series of garments in a tailoring unit. However the team that visited from Asda claims that there were no such logos when they arrived and the logo spotted by the media is one, which is obsolete now. This also reflects the indirect impact of globalization and brand developments where the local factories buys these logos and puts them without the knowledge of the international producers. While Asda denies their direct involvement and has put forward logical explanations to back it up too, yet one cannot deny the poor conditions of workers in the garment factories which might be the local ones but are influenced by global branding and strives to produce low cost products with such brand labels (Melik, 2010). Yet, the unskilled workers are at least finding some jobs and this might be extremely crucial to their families. The two main factors working behind the growth of ready-made garment industry of Bangladesh is the advantage of cheap labor and its tax-free entry into the American and European market. With rising inflation and high standard of living the workers are demanding higher wages in Bangladesh and this has led to the phasing out of the Multi-Fibre Agreement, which granted them the free entrance. The comparative advantage of cheap labor has turned gradually into competitive advantage as the nation finds itself into the open market characterized by competition. Productivity depends on the working conditions and safety to great extent and hence improving upon these conditions is essential. However the country was forced to increase the monthly wages by 80 percent owing to severe protests against unfavorable conditions. Bangladesh has set the minimum wage level at 3000 takas, that is, ?28 per month. This is a raise from 1662 takas in 2006. the pay structure has been redesigned with seven grades and the ceiling is 9300 takas. The country mostly employs women in its 4000 factories with 2million workers in this garment export industry. Rigorou protests led to the closing down of over 700 factories in Dhaka. Big firms like Walmart, Tesco, Zara, Kohl’s Strauss and Hilfiger all import form the country in bulk (Bangladesh sets minimum wage for garment workers, 2010). A task force of US comprising of representatives from apparel industry and other activists for human rights have been striving to maintain codes of conduct for the labor practices by the foreign firms. In fact the Federation of International Football Association declared against using soccer balls for which child labor was involved in the production process. These actions obviously raise apprehension regarding the labor conditions of developing nations. Simultaneously, the rising level of unemployment in European and American countries is a negative impact of the MNCs taking advantage of the low cost labor in developing countries. This has raised the issue of social dumping as brought to the front by the social activists. There has been a fear against the “Race to the bottom” in terms of wages and gains. (Carbaugh, 2008, p.244) Now, two arguments can be put forward in this respect. On one hand, the low wage levels and standards of workers in developing nations will also threaten the employment position of workers in the developed nations. Apart from this economic argument the moral case suggests that being forced to live at a below subsistence level is against human rights. Exploitation of children at work and discrimination of wages on grounds of gender are common moral issues, which are intolerable at times. However the participants in these activists’ groups against improper labor standards do not declare the protectionist intention while developing nations might suspect such a hint especially if the trade sanctions (social clause) are issued. The human rights groups still emphasize on the point that wages and benefits should also find a place in the labor standards agreements (Carbaugh, 2008, p.244). The child labor laws of the West might not always be applicable in developing nations like India and Bangladesh where people are striving for two square meals a day. It is morally wrong to find the small children toiling under harsh conditions and low wages without getting access to education but their earnings often decide their survival. Setting such rigid standards and codes might compel them to work in the unregulated sector with even worse treatment. The proponents of the labor standards however do not suggest any other alternative than including low wages in the social clause of trade sanctions, for instance, allowing free migration to the developed nations. Yet, one might argue that if the labor standards are not observed then the overall competitiveness might be hampered because the suppression of overall wage rates owing to exploitative and child labor might in turn prevent the people with specific skills from entering into the sectors which best match their abilities and therefore lead to reduction in productivity (Golub, 1997, pp.20-23). One ground can however be commonly agreed upon – fairness should be ensured in the international competitive market. Therefore questions may be raised whether the production of cheap labor in China would be unfair to the market producing goods, which require abundant supply of unskilled laborers. In fact Carbaugh (2008) puts forward a genuine argument to support this. He points out if this be the case then the abundance of coconut trees in Philippines will make it an unjust competitor in the global market for coconut oil. Therefore to reach a specific inference in this context the debate could go on forever as there are economic and moral grounds on both sides of the argument and come from groups with conflicting interests. Once a harmony may be reached in terms of satisfying the interest groups’ demands, one might look forward to a resolution of this problem. The most obvious and safe conclusion would be to recommend a provision for safer and hygienic ambience or improvement in non-wage conditions rather than any sharp rise in the wage and benefits conditions. The latter (wage and benefits) however should be kept at the subsistence level at least or the regular food and shelter (or either one) might be provided at the company’s expense in order to help them sustain at a very low wage. 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