Rana Plaza and union labels

By Edward Hadas
May 8, 2013

The 1911 Triangle Shirtwaist Factory was a turning point in the history of American labour relations. It led directly to a slew of new laws on safety and labour practices in New York State, and indirectly to a less exploitative approach to industrial labourers throughout the country. Last month’s Rana Plaza disaster in Bangladesh, where the collapse of a clothing factory killed more than 700 people, demonstrates that the lessons need to be learned again, this time on a global scale.

It is not a coincidence that both these accidents involved the garment trade. This is an industry of mostly small, poorly capitalised companies, which jostle against each other in a long and rapidly shifting supply chain. Retailers shop around aggressively, suppliers sub-contract freely and the price pressure is relentless. No one takes responsibility, and it can seem like almost everyone involved is irresponsible.

It does not need to be like this. In the first few decades after Triangle, the common good increasingly prevailed in the clothing trade in the United States, and eventually in other rich countries. Trade unions protected workers, customers learned to pay enough for their clothes to support fair wages, and price competition was muted.

Then developing economies entered the market. The conjunction of poor workers with rich customers has been beneficial in some ways; clothes became cheaper and producing nations gained export income and industrial expertise. However, the Rana collapse is more than collateral damage. It is a sign that rich customers are too dedicated to seeking bargains and that poor suppliers are too anxious for business.

Customers and suppliers can say they are following the rules of free markets. But Rana shows how too much freedom – to push for lower prices and to use lower wages and less safety as competitive tools-  can bring out the worst in human nature. No wonder that the economic history of the last century in rich countries has largely been a retreat from crude market forces to what might be called a post-Triangle consensus – fair treatment of workers, fair prices and firm regulation.

The consensus relies on national solidarity – the recognition that my fair price is my neighbour’s fair wage. That solidarity is harder to summon on a global scale. When shoppers pick up a bargain t-shirt, they are less likely to see a neighbour suffering if the inhumane working conditions that keep the price low are located in a foreign country.

Development is the best cure for this problem. Wages and working conditions tend to improve as economies become more productive. But consumers and retailers in developed economies can help now.

The best way forward is a solidarity cartel. All the major retailers and brands could agree to take responsibility for the entire supply chain. They would delegate an independent agency to enforce safety standards and an agreed minimum wage in every country for everyone connected with the goods they sell. Producers refusing to join would find sales channels blocked; member suppliers would boycott non-participating retailers.

Why would anyone sign up to a cartel that raises everyone’s costs and takes away a source of potential competitive advantage? For the same reason that producers often support environmental regulation – because they feel uneasy harming the common good for the sake of a single company’s gain.

Like all cartels, the solidarity league would be hard to organise and manage, but the main problem is that it would probably violate anti-trust laws. I have a less contentious alternative: a new form of the “Union Made” label on clothing. Popular in the United States in the post-Triangle decades, the seal of approval was accepted by retailers and customers as a mark of fairness.

Those labels could not withstand the import flood, but a modern version might work. The “Fair and Safe” label would be awarded for a supply chain that was indeed fair in its pay and safe in its practices. To work, it would need to be far more ambitious, and more enthusiastically endorsed by retailers and brand owners, than the existing “Fairtrade” movement.

A label campaign may sound utopian. Perhaps most consumers will never willingly pay more for “Fair and Safe” goods, even if the additional cost to them is much lower, relative to their incomes, than the corresponding workers’ gains. Perhaps Wal-Mart and other large retailers will never sign up to a plan which firmly commits them to higher costs and more intensive supervision.

I don’t think such pessimism is warranted. The history of American and European labour relations shows the power of solidarity. What was once radical thinking about wages and working conditions gradually became mainstream, largely because most people, including many employers, understood that the fair treatment of workers helped everyone in the country. Photographs of Rana Plaza could help make that thinking global.

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