The office building was not designed to hold heavy machinery for garment factories — but factory owners and the Bangladesh government had ignored the engineering limitations and ominous structural cracks.
Four years later, what do we know about the economics and politics behind industrial accidents? Here are four key questions:
1) Why do such industrial accidents take place?
The Rana Plaza casualties are sometimes termed “Fashion Victims” because such industrial accidents, in part, are due to the quickly changing fashion preferences of Western consumers. Major apparel brands such as Benetton, Gap, Mango and Primark, for instance, expect their subcontractors to rush new orders to meet the latest clothing trends.
These rush jobs become a problem because of how the garment industry is organized. These are low-skill jobs, and the industry relies on a low-wage labor force. Consequently, apparel companies and major retailers are able to source their garments from hundreds of factories across the developing world.
Supply-chain subcontractors have little bargaining power with Western buyers, however, and must meet the deadlines or lose their business. To fulfill these orders quickly, factories may disregard safety and human costs. Workers often work long hours without even restroom breaks. Workplaces such as Rana Plaza often have poor ventilation, and ignore basic safety measures such as clear fire escapes.
2) Don’t corporate social responsibility (CSR) efforts protect workers?
Brand-name companies typically design and market their products, but rely on outside manufacturers to produce the goods. In principle, these Western companies should anticipate the aforementioned supply-chain problems, and devise ways to preempt industrial hazards.
After all, these companies are extremely careful about protecting their brand image. This is what the consumer pays the big bucks for. Since the late 1980s, a series of sweatshop scandals and negative spotlights from activists and consumers have led famous brands such as Nike to realize how working conditions in supply-chain factories might affect their reputation and profits.
Many companies turn to internal or industry-wide CSR frameworks, which spell out their strategies to monitor and improve factory conditions. CSR codes can require companies to ask their overseas suppliers to participate in such self-regulatory schemes. Some Rana Plaza garment factories were audited by “third-party” inspectors under SA8000 private certification standards and also formally complied with the Business for Social Responsibility program.
Yet these audits and standards failed to detect structural cracks in the Rana Plaza building, or trigger attention to unsafe conditions on the shop floor and the long hours the workers were forced to work. Clearly, CSR codes failed to protect workers here.
3) How do economic downturns factor into worker safety?
Fashion changes in importing countries change product demand, thereby creating labor safety issues across the supply chain. In our forthcoming paper in World Development, we look at another way in which demand changes in importing countries influence industrial accidents in exporting countries. We examined occupational injuries in 83 developing countries for the 1980-2009 period.
We found that injuries increased during the economic downturns in export markets. Here’s why this happens.
Downturns mean that firms cannot grow profits by increasing sales. So they focus on cutting costs. This also means that firms ask their overseas subcontractors to reduce prices. Subcontractors, in turn, try to squeeze these savings from workers.
In return, firms may decide not to press these suppliers on labor standards or workplace safety. Even local governments may back off from their minimal labor enforcement activities, lest their exporters lose overseas markets (a dynamic that the Rana Plaza episode illustrated).
For reference, in Bangladesh, the apparel industry accounts for 83 percent of total exports. So if the government strictly enforces the country’s worker safety laws, factories may not make their deadlines and apparel companies might then source their products from another country that offers a more “favorable” regulatory environment.
Firms probably do not fear consumer retaliation for poor labor practices. After all, in economic downturns, consumers are likely to be more anxious about their next paychecks and low prices than about labor practices overseas.
4) Can we prevent these ‘preventable’ accidents?
These types of industrial accidents reflect power asymmetries in global supply chains. To some extent, unions can mitigate these asymmetries and shield workers from cyclical cost-cutting pressures originating from the export markets.
What are the implications? International trade affects exporting countries in unanticipated ways. Global supply chains reduce prices for consumers and allow firms to quickly provide the latest shoes or shirts in fashion. However, overseas workers bear the cost of the low prices and high level of choice for consumers in developed nations.
To satisfy demand changes at very short notice, garment subcontractors in Rana Plaza made their labor force work long hours and ignored cracks in the building so that work would not stop. Lack of organized labor and a tacit agreement with the government to look the other way led to labor and safety violations that contributed to this tragedy.
Here in the U.S., the concept of “free trade” is unpopular for many reasons. President Trump wants to roll back free trade to bring jobs back home.
Developing countries, however, might find free trade problematic for a different reason: It locks them in an unequal relationship with exporting markets.
But no matter what the reason for opposing free trade might be, workers at home and abroad might find some protection from the ill effects of trade if institutional mechanisms are in place to boost their bargaining power with employers. Consumers can also help workers if they are willing to punish and reward companies to ensure that workers are treated fairly, no matter where the product is manufactured.
Sijeong Lim is assistant professor in the Department of Political Science and part of the Political Economy and Transnational Governance group at the University of Amsterdam.
Aseem Prakash is professor of political science, the Walker Family Professor and the founding director of the Center for Environmental Politics at the University of Washington.