Don't Blame U.S. Business for the Bangladesh Tragedy

The wrong conclusions are being drawn from the building collapse last week that killed hundreds of garment workers in Bangladesh. With more than 600 bodies having been recovered thus far from the rubble, many have pointed to the pursuit of profit from cheap labor by U.S. retailers as a contributing factor if not the root cause of the tragedy.

As my Foolish colleague Alyce Lomax points out, troubled retailer J.C. Penney (NYSE: JCP  )  apparently sourced some of its products from the factory, and even if Wal-Mart (NYSE: WMT  ) denies any of its clothes come from this particular factory, some of its clothes came from another Bangladesh garment maker that saw hundreds killed or injured last year in a factory fire. The moral is clear: Were it not for the willingness of U.S. retailers to source from factories paying subpar wages that allow inhumane conditions to exist, these people would be alive today and more would not be consigned to a life of a dangerous labor.

Yet more often than not, the presence of U.S. retailers is a force of good rather than evil that gives Bangladeshis hope for a better life. With or without the presence of Penney's, Wal-Mart, or Sears Holdings (NASDAQ: SHLD  ) -- another retailer that sourced product from last year's garment factory fire site -- the Bangladeshi workers are the lowest-paid in the world, behind those in Thailand, Vietnam, and China. (It should be pointed out both Wal-Mart and Sears say the factory that caught fire was not authorized to produce their clothes.)

As a Forbes article recently recounted, 43% of Bangladeshis subsist on less than $1.25 a day, but the country's 4 million or so garment workers earn on average more than $2 a day. That's not a princely sum by any stretch of the imagination, but it does mean that they're earning some 60% more than nearly half the country's population. 

And it's through the efforts of Wal-Mart, Gap (NYSE: GPS  ) , and other retailers who actively advocate for even greater improvements that these workers' lot in life has improved. The Bangladesh Center for Worker Solidarity has said 50% of the country's garment factories don't meet safety standards but those that have improved conditions have done so only because of pressure brought to bear by Western retailers. How would those workers be faring if those retailers avoided the country as Nike (NYSE: NKE  )  largely does?

Part of the reason for the rampant, deplorable conditions is because of government corruption. The BBC reports that Mohammad Sohel Rana, the owner of the building that collapsed, was reportedly closely tied to local officials who protected him. It's likely how he was able to change the building from a six-story commercial-use building to a nine-story industrial factory where heavy, unapproved, and architecturally unauthorized generators were placed on top floors and ultimately led to its collapse. 

One need only look at the parallels of the Chinese economy to see that the "pursuit of profits" by U.S. businesses actually leads to a better standard of living over time. Long criticized for using "slave labor" in China, American companies have helped create something of a market economy there that in turn led to the successful rise of the Chinese middle class. In fact, labor costs are rising so fast in China that even the Chinese are outsourcing labor to Bangladesh.

Rather than excoriate U.S. businesses for investing in these developing nations as the Pope did for companies tolerating "slave" conditions, they should be praised for more often than not raising the standards of living of their employees and improving their lot in life. 

When tragedy strikes as it just did, we need to realize it's not because American companies hire these workers, but it's despite their presence; and if we look hard enough, I bet what we'll really find is the heavy hand of government shielding the true culprits. 

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  • Report this Comment On May 06, 2013, at 3:06 PM, 123spot wrote:

    Thanks, as a WMT sh I feel better. I had drawn the same conclusions, but good to read them from you. God bless these poor people. I look forward to the day I'm sure is coming when they will join the "haves" of the world. Spot

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