Bangladeshi accord shows limits of market forces

May 14, 2013

By Edward Hadas

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Tragedy can concentrate minds; minds can be more powerful than markets; globalisation can be a force for good. Those are the lessons of the success of the Accord on Fire and Building Safety in Bangladesh.

Business is never so powerful that owners can monopolise the gains of economic development. Labour conditions in Bangladesh would probably have improved eventually, even if the factory at Rana Plaza had not collapsed on April 24, killing 1,127 people. It was the process of national enrichment that pushed Chinese wages high enough to shift the labour-intensive garment trade to Bangladesh and other poorer countries.

The key word is “eventually”. Until the latest industrial catastrophe, the Bangladeshi producers, the national government and consumers in the developed world were all basically content with sharp price competition, very low wages and lax safety standards. It looked like progress was going to be slow.

Rana Plaza accelerated history. A combination of conscience and concern for public relations has pushed most major European retailer customers to sign the Accord, which commits them to ensure factory safety, with violations liable to legal action in their home countries. The Bangladeshi government announced an immediate increase in the minimum wage. It will probably have to go further, and catch up with the labour rules of Cambodia and Vietnam.

Many retailers say that customers cared more about low prices than the suppliers’ working conditions. Maybe, but the harsh market logic is yielding to humanitarian concerns. The commercial sacrifice for each co-operating retailer is small, both because most competitors will be following the same rules and because the cost of labour represents such a small portion of the final price – 2 pence on a 5 pound t-shirt, according the UK Trade Union Congress.

It should not take a tragedy to force action to remedy some of the deficiencies of economic globalisation. But without the export business, development would have been much slower in Bangladesh. And without the worldwide publicity and pressure from developed economies, workers there would have had to suffer more and for longer.

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