Why should retailers keep buying from Bangladesh?

A recent workplace disaster is causing companies to reconsider sourcing materials from Bangladesh. How should they deal with their dissatisfaction?
Written by Tyler Falk, Contributor

With more than 600 dead, the recent collapse of a garment factory in Bangladesh is being called "one of the worst industrial accidents in history." This incident coupled with a fire at a Bangladesh garment factory in November that killed 112 are the most recent and explicit signs that working conditions are poor for the workers helping the country's garment industry bring in $20 billion annually, accounting for about 80 percent of its exports.

The logical step for companies and consumers to take to show their dissatisfaction with the country's poor worker safety standards and regulations is to boycott items made in Bangladesh, right?

Not exactly, says Charles Kenny, a fellow at the Center for Global Development, writing for Bloomberg Businessweek. Multinational corporations sourcing products from the country should work with the government to improve safety regulations for workers and consumers should boycott companies that do not do this, Kenny argues. Why? Because pulling out of the country -- like Disney recently decided to do -- is like "kicking rungs out of the ladder" that lifts people out of absolute poverty.

[J]obs in the garment industry in Bangladesh are better than other options. Work by Abhijit Banerjee and Esther Duflo at MIT, among others, suggests that for people in the developing world, a steady paycheck is better than small-scale farming, or microenterprise, or scraping by in the informal sector—just as it is preferred by most in the rich world. In countries like Bangladesh, the vast majority still do work in small-scale farming and the informal sector. But demand for products made in Bangladesh by Wal-Mart (WMT), Gap (GPS), and other retailers helped create jobs for 3.6 million garment workers in the country.

The industry is part of the reason why the country saw an average GDP growth of 5.9 percent from 2000-2011 and why the percentage of people in Bangladesh living on $1.25 a day fell below 43 percent from 59 percent. Plus, Kenny says, studies suggest that trading with Western nations can help improve safety:

Political scientist Layna Mosley, at the University of North Carolina at Chapel Hill, has found (pdf) that trading with countries such as the U.S. appears to be a powerful tool for countries like Bangladesh to improve their labor standards. Safety norms tend to be set by Western retailers and then passed down to manufacturers in developing countries.

So are these incidents just (very acute) growing pains?

Why You Shouldn't Stop Buying From Bangladesh [Bloomberg Businessweek]

Photo: Flickr/jankie

This post was originally published on Smartplanet.com

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