Globalization

Globalization

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The show-windows of the clothes stores often attract attention of the fashion-mongers. Next, Marks and Spencer, Gap, Tommy Hilfiger, H&M and a number of other brand retailers offer numerous discounts, selections, prices and quality, and compete on a daily basis to build customer loyalty. However, what people cannot see through the show-windows is common global issues in which this companies participate. These issues are associated with ethical principles in production. All these retailers rely heavily on inexpensive outsourced manufacturers. This means that famous shoes and clothing retailers either buy the products from the factories located in cheap-labour countries, like Bangladesh, India, Sri Lanka, Pakistan etc through local intermediary companies, or outsource their own factories in those countries. As Hilary (2013) argues, even though our world became extremely flat due to globalization, polarization keeps being one of the key characteristics of the global system (Hilary, 2013). There is a huge gap between poor and rich not only at the national level but also across various countries. Possible industrialization and further development of the Southern countries that were assumed to be the core positive effects of the globalization, in fact, created even wider inequality gap between rich and poor countries (Hilary, 2013). As the source of the cheap labour, Sothern countries are willing to work for extremely low wages that are often not enough even for survival, as well as under unsafe conditions, without inability to form unions and bargain collectively, and even engage in child labour. Even though the employees of the factories reached some improvements with the help of extensive protests at the national level, the root of the problem lies in the global retailers, who control the market. Of course, this particular fact has its imprint on the consumer perception of fashion retailers. While some people believe that outsourcing is the best way to minimize the business costs and make the price of the final product cheaper, others find this way of leading business unethical and unsustainable. What is more, as John Hilary argues, “the responsibility for such injustice rests on the global retailers and purchasers who have the control over the supply chain at the global level” (Hilary, 2013). This paper will support the argument of the J. Hilary by addressing the issues of global domination of retailers in the apparel industry and the attitude of those retailers towards the existing problem. While the international retailers are creating the problem, the lack of legislative support still adds to this problem and does not restrict unethical production.

First and foremost, the miserable conditions of work in factories in Bangladesh are well supported by the extremely low prices retailers offer to manufacturers. Those prices are not enough to cover the business expenses and guarantee safe environment for employees. There is sufficient evidence that global retailers place extreme burden on the factories in countries, like Bangladesh or Cambodia. One of the examples is the hugest retailer Wal-Mart, who offers the unbeatably low prices to its customers. It was revealed that the closing department of the company used the so-called “plus one” strategy. The philosophy required the suppliers to provide cheaper merchandize each year without compromising the quality. According to Hilary, Wal-Mart buyers required the Bangladeshi factory owners to cut the sales price by 50%. Moreover, these happens on a constant basis without any regard to the fact that the cost of production increases each year. Therefore, in order to fulfil its “cheapest out of the cheap” strategy, Wal-Mart refuses to lower its revenues or margins. Alternatively, it chooses to suffocate its merchants and retail sales employees. As Nomi Klein (1999) mentions, smart companies prefer to be the organizers of the contractors, rather than the responsible employers. Thus, they cut their labour costs by all possible means. One huge switch was the possibility to outsource the productions to the third world countries. The second twist is a so-called “part time America”. Global retailers hire unpaid interns to cover a part of their labour expenses. Moreover, they wish to employ the young part-time cheap labour without providing quality package and bonuses. Employees take low-paid positions treating their job as a “starting point” in their career that helps to pay for living and studies. However, the wages paid by the retailers in the service sector are less than adequate for an adult who has to take care of children, their education and medical expenses. At the same time, retailers in the service sector provides the majority jobs in the USA, while most factories are outsourced (Klein, 1999). Thismeans that global retailers have a universal control over both domestic employment rates and the prices they offer to suppliers. By using the cost-cut strategy, global retailers minimize direct labour expenses and the cost of production, while maximize their own profits. In the case factory owners are required to decrease the prices, the Bangladeshi factories have two options, either to lose a huge client or to impose the limitations on their employees. Needless to explain that losing the client means the closure of the factory, so the owners choose to cut the salaries of their workers, increase the working hours and compromise the overall safety of production. The results of such approach are evidently supported by a number of collapses at clothing factories. Probably the most tragic event was the collapse of the eight-floor Rana Plaza building, where the facilities of the apparel factories were located. According to Marry Jane Bolle (2014), on April 24, 2013, the huge building Rana Plaza collapsed, leading to the death of more than 1100 apparel factory workers. Although the employees reported that they have seen the big cracks in the building that morning, the owners of the factories disregarded the warnings as they were under the pressure of the deadlines posed by the global retailers (Bolle, 2014). The avoidable catastrophe raised the issues of labour safety in Bangladesh. The problem was discussed at both the national and global levels. A number of factories were closed by the government due to the safety reasons. However, taking into account the fact that apparel is 80% of the country’s export, Bangladeshi factories continue supplying European and American retailers. Otherwise, the government will not be able to fill budget, as thousands of current employees will be thrown out of the labour market.

Another significant argument that confirms the fact that responsibility for unethical business rests on global retailers is that the employees of the factories in Bangladesh, Cambodia, Pakistan and other countries have already gained the legislative support at the national level. Employees have more rights, they can bargain collectively, have at least the minimum salary and work less hours. Nevertheless, the situation did not change dramatically. They still have very low earnings, extremely unsafe conditions of work and even the governments of those countries (that represent the face of the supply chain) cannot resist the overwhelming power of global retailers who control the prices. In Bangladesh workers have faced this issue personally. The employees at the factories were extremely unsatisfied with the miserable salaries and poor conditions. They held massive protests that led to the increase of the minimum wage from 1662 taka (taka is a local Bangladeshi currency) in 2006 (which was also the first raise since 1994) to 3000 taka in 2010. However, this increase did not cover the minimum baseline of the cost of living that was set at a level of 5000 taka. The employees were constantly fighting for the improvements. Many activists were intimidated and persecuted by the forces of the Bangladeshi government. The tragedy of Rana Plaza increased the opposition and called for international condemnation. Citizens hoped that the situation would change. However, right now, employees of the factories are fighting for their rights with the owners and local government. They have reached some progress in terms of the wage increase, child labour and lengths of the working week. However, the root of the problem is in the unlimited power of global buyers, who pressure factories’ owners and demand lower and lower unit prices. Hilary is right when defining such type of business relations as “exploitation without end” (Hilary, 2013). Therefore, factory owners who bear the increasing cost of unit production are not able to provide any benefits for their workers. Moreover, in order to ensure that they meet customer’s price expectations and deadlines, factory owners compromise on safety. Rana Plaza is the most glaring but, unfortunately, not the only factory that violates safety requirements in Bangladesh. And also, it is the example of how the greed and unethical behaviour of the global retailers results in the loss of Bangladeshi people.

The latest events in Bangladesh attracted international attention to the problem. Retailers have acknowledged the existence of the issue and even put some efforts to solve the problem. However, most of their attempts seemed to be used as the red herring to distract customers and improve their own reputation. For example, as Fukuhawa mentions that the multinational corporations, like Tesco, have chosen the defensive approach. When Tesco was criticized by its stakeholders for outsourcing from partners who did not pay the living wage to its employees, Tesco threatened the suppliers to cancel all orders if they would not improve the conditions of work. But, such behaviour is not ethical, as they require low prices and at the same time want factories to pay good salary to workers. It seems that Tesco, as well as other MNCs, just create a vision of being ethical and care for safety while, in fact, they only worry about their own reputation (Fukukawa 2010). Another example of most retailers promoting ethical approach with an aim to save their reputation is the fake audits. According to the Fashion Victims Report, the owners of the factories usually know the date of the inspection 20 days in advance, so they have enough time to prepare. They clean the dormitories where workers live, prepare falsified time-notes and pay-sheets. Besides, they provide employees with the “right” answers to the questions of auditing inspectors. One of the employees who works in the factory that supplies clothing to Tesco argued that audits are not looking after employees, but manly after owner’s needs. The workers have to lie to the auditing team in order to maintain their job. If they reveal the truth, the auditors will share this information with the management, and the employee will be fired immediately (Alam & Hearson, 2006).  

The famous English retailer Tesco has signed a five-year safety pact called the Accord on Fire that aims at improving safety conditions in Bangladeshi factories. This agreement requires the signers to hold annual independent safety inspections and to communicate their findings with public through their annual reports. Besides, they are obliged to pay each year up to $500000 for the effort to terminate cooperation with the factories, who oppose to improve working conditions of their workforce (Greenhouse, 2013). After joining the agreement, Tesco started to follow the rules. For instance, according to Reuters (Addison, 2013), Tesco stopped cooperation with one of the Bangladeshi factories, owned by Liberty Fashion, after revealing a number of safety violations. As Tesco argues, the factory owners were offered the alternative to cease the production, but they did not want to improve the conditions. Besides, Tesco had stopped cooperation with 15 Bangladeshi factories before this case during 2013. The termination of the relationships with so many garment manufacturers is the sign of some positive change, or at least the hope for the awaited change.

Moreover, the legislative system in the outsourced countries is underdeveloped. Lack of regulations, low income per capita and cheap resources give a green light to businesses who are seeking to minimize their expenses. According to Fukukawa, the country has to overcome the three phases on the way to corporate social responsibility. The first stage is the survival. In the case of Bangladesh, after the MFA era ended, Bangladesh suffered from high competition from India and China. Since the apparel industry is one of the key areas of the Bangladeshi trade, the owners of the factories had to offer more competitive and cheaper prices to maintain the relationships with the MNCs. To achieve such low costs of production, the owners had to employ all sorts of safety violations, including child labour, overtime, and work at home to meet the deadlines, unsanitary and cheap equipment. However, right now, the phase of survival is over as exports increased and Bangladesh won its share of international pie. Yet the second (reactive) or third (proactive) stages have never come to Bangladesh. After exploiting workers to make ends meet, factory owners continue the habit of mistreatment. Besides, they mainly employ poor people who lack education and courage to change the situation. Even though employees form unions and transnational organizations, like Asia Floor Wage, the corrupted legislative system still allows to exploit apparel industry employees.

Needless to say that most fashion retailers benefit from outsourcing the production to cheap-labour countries, where the conditions of work are harsh. The issue is very debatable, as each party tries to support its viewpoint. Nevertheless, the retailers dictate the prices for the manufacturers, which leaves the last with no chances to improve the conditions and safety of work. In spite of some progress reached at the national level, employees of Bangladeshi factories are the victims of the global issue. The MNCs admit the existence of the problem and pass various regulations, including agreements on safety, to change the situation. Unfortunately, most of their solutions are the attempts to save their own reputation, whereas the demand for the ever-cheaper price is the driver for unethical practices. Besides, the undeveloped legislative system and corruption are the additional issues that encourage exploitation.

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