“The fire caused the deaths of 146 garment workers, who died from the fire, smoke inhalation, or falling or jumping to their deaths”. This is not a description of the fire at Tazreen Fashions in Ashulia that happened this week. This is how Wikipedia describes the Triangle Shirtwaist Factory fire in New York City on March 25, 1911. A good 102 year ago. Most of the victims were recent Jewish and Italian immigrants who were young and between the ages of 16 and 23. The youngest victim was 11-year-old Mary Goldstein. To make things worse, the manager of the factory had locked the doors to the stairs and exits – a common practice at that time to prevent pilferage and unauthorized breaks – many of the workers who could not escape to the stairs jumped to their deaths from the higher 8th and 9th floors.
This is depressingly similar to what happened in Tazreen Fashions 102 years later. Similar fires have happened in Bangladesh, China and other countries but no one seems to learn from these horrible experiences. How can this happen? Of course there are those who will want to boil the factory owners in hot oil or shut down the rest of the factories in Bangladesh. Short of destroying the healthiest industrial sector what can we do to mitigate these terrible events? The solution may very well be within our grasp if we are willing to grasp it. As I just said, one solution of course is to make the factories go away by making the production process extremely expensive and bureaucratic. Bangladesh needs its garment industry as it is the first plank of industrial development. The other option is to try to improve the way these factories are run. Here are some thoughts:
Put a tangible value on human life: Before all of you jump up and down and call me a callous murderer, just know that we put value on human life every day. It is the foundation that allows us to quantify risks and moderate our risk taking behaviour. If we kill someone out of spite we know that we may end up dead too or at least endure a long prison term. When we buy insurance of any kind we are placing a value on human life. In parts of the world (mainly the Muslim Arabia and South Asia) there is the concept of Blood Money, which is given in exchange for a life. These are mechanisms to define and quantify risks associated with our behaviour and actions. Otherwise societies will simply go on fighting and eventually wither away. It seems that in Bangladesh the factory owners place more value on keeping the low cost production going as opposed taking some production losses due to pilferage and unauthorized breaks.
Let us say that for the 112 lives the factory owner knew that his/her liability would be say US$1 million per loss of life. The $112 million potential loss would be too much to risk and he would price the extra cost into his prices. This is no theory. This is one reason why regulations are adhered to in most developed countries. The price for the loss of life is prohibitively expensive and as such most business owners evolve towards safer work places.
Recently, BP learned the hard way by paying close to $40 billion in damages and more coming. It is hard to quantify a life subjectively. The actuarial folks in insurance companies take into account the potential income, loss of companionship and loss of pleasure. These things are not necessarily quantifiable but at least go a long way to mitigate the pain and let the aggrieved families know that their losses are not totally in vain.
Move up the value ladder: Bangladesh is fast becoming the go to place for garment manufacturing. Lot of it driven by the fact it is a low cost manufacturer of commodity garments. On top of that Bangladesh has a tax advantage for its exports into the EU which gives all garments made in Bangladesh a 12% to 16% built in advantage over say, China or Vietnam. These are real competitive advantages in a globalised marketplace. Most of the garments made in Bangladesh are destined for the likes of Wal-Mart, K- Mart, Primark and their ilk. These are low-end retailers in the West and cater to the “smelly masses” but they do a lot of volume. Their whole game is discount pricing to attract consumers who are not loyal but basically trained to look for the cheapest deal. The retailers also do not believe in any loyalty. These retailers will change suppliers at the drop of a hat. They have what the economists call Monopsony power. So, at the end of the day they have created a world for themselves whereby in order to keep their margins (which the shareholders judge them by) they are relentlessly pushing the factories to lower costs and forcing the factories to shave their own margins.
Bangladesh garment factory owners have no other competitive tool in their arsenal except for low price. So, the factory owners are inside their own trap of low prices and low margin. This forces them to save every red paisa even at the cost of a human life. The key is to move parts of the garment industry towards high value products and high value markets without sacrificing the volume business. This is easier said than done. Overall fixed costs of owning a factory probably drives the owners to keep it running at all costs and producing things at very low margin. Since there are no tangible costs associated with disasters they simply keep on going on hope and prayer until the disaster does strike, like what happened at Tazreen.
There needs to be a paradigm shift for the factory owners. In order to move up the value ladder they have to understand that it will take time to improve quality and it requires that they reduce their overhead so that they can sustain lower volume until they have moved up the value ladder. This is where the government can help by making credit for higher margin garment factories little easier to come by. This would also mean that the factories start to improve their safety record by investing in safety and security. The government should enforce the laws for violating the safety rules without compromise. If all these things work out and the stars are aligned, maybe in 10 years Bangladesh garment industry will have long term sustainable business model as opposed to being a hostage to the low cost pirates of the global retail sector. Big If, unfortunately!
Rule of Law: At the end of the day Rule of Law is an ironclad precondition for any progress towards an accountable garment sector in Bangladesh. The guys at Tazreen probably know that they will not be held responsible for their actions and there will be no price to pay after all the chest thumping is over. There is no system for prosecution of law breakers which is routine and relentless. In the US, once the Justice system is involved your rank in society, your money and your power all become irrelevant. The system takes on a life of its own. This is why Wall Street tycoons, Governors of places like Louisiana and many congressmen end up in prison. The one thing we need to be able to do is to make sure that once someone breaks the law he/she is prosecuted to the fullest extent of law regardless of the money and power they have. This requires a truly independent judiciary. Maybe we can achieve these things with time but for now let us hope that the market place, meaning the consumers in the West, will start to exert some pressures on these low end retailers and their constant drive for lower costs and higher margins.
As we go into 2013, let’s hope that the BGMEA and Bangladesh government will take some very prosaic actions like making the price of padlocked doors prohibitive in any factory or workplace. Let us start somewhere and this is an easy place to start.
Kayes Ahmed lives in Boulder, Colorado, USA with his three dogs. He runs a small yet global apparel and design business based in Boulder.