The Factory Collapse in Bangladesh, the Consequence of a Closed, Repressed Economy

How should we think about the textile factory collapse in Rana Plaza, Bangladesh last month that killed 1,100 garment workers and the fire in Tazreen, Bangladesh that killed 112 last November?

According to the Economist

When visible cracks appeared in the building on April 23rd, both the police and the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), a powerful industry lobby group, warned the owner that the building was unsafe. They were ignored and the complex stayed open for business. The accident’s survivors say their employers had pressed them to turn up for work as usual on Wednesday. Even well before Rana Plaza collapsed, some of the workers claim, the building would vibrate whenever its diesel generator was running.

Given this report, I would think that the first problem is that there is a lack of a predictable and enforceable rule of law. A predictable rule of law punishing negligence and awarding damages to the harmed and their dependents would not only be just, it would create incentives for other factory owners to reduce their negligence going forward.

Ideally, the government should enforce these principles consistently and objectively. However, classic behavior in response to such conspicuous tragedies is to create new legislation or a “task force” to show the public that the government is “doing something.” But is it reasonable to expect that this legislation or task force will actually do anything? Will the Bangladeshi government be wise in its prescriptions and consistent, fair, and impartial in its enforcement?

Notice that the police were already aware that the Rana Plaza building was unstable. Notice also that the owner, after whom the plaza is named, is a local politician. Doing “something” will appease the rationally ignorant voter. But what incentive is there to actually solve the problem?

The second — and more fundamental — problem causing these string of tragedies, is that these factories are unsafe because Bangladeshis are too poor to afford safer working conditions. Even if government could consistently enforce legislated standards, economic reality will frustrate such legislation.

What most people don’t understand is that conforming to safety regulations and standards (fire escapes, sprinkler systems, fire proof rooms for textile storage, etc.) have a cost and that these costs fall predominantly on employees. Insofar as they are part of the cost of having employees, the resources for paying for them come out of the income of labor.

The primary reason working conditions improved in the Industrial Revolution was that investment increased the income of workers, who after a certain level of wealth demanded safer, cleaner working conditions as part of their compensation.

The truth is, there is already ample government regulation that Bangladeshis just can’t afford. For example, there is so much red tape, restriction, and cronyism, it takes 200 days to build a “legal” building in Bangladesh. This means many buildings and activities will remain extra-legal and avoid the regulations all together.

Why did the workers in Rana Plaza voluntarily go back to work in such dangerous conditions? Why didn’t they refuse to go in? Maybe some were ignorant of the dangers. Hopefully, this incident will cause people to reassess the risks and avoid being victim to similar tragedies. But most can’t afford this option because they have so few opportunities. They are SO poor, that these working conditions are — sickeningly — the best opportunity they’ve got. Their productivity is low, there is little opportunity for alternative employment, and there are so many others ready to take the difficult and dangerous job in their place.

Freedom of livelihood, property rights for the poor, domestic and foreign investment, and competition for labor would do more to help raise the wages and working conditions of Bangladeshis than anything else.