Wal-Mart in Bangladesh — The Positive Side

Wal-Mart has been the subject of much deserved criticism for their sourcing in Bangladesh, and I must admit that I have provided more than my fair share of that criticism.

However, at least in some areas the good old boys from Bentonville deserve a pat on the back for having acted correctly when those around them have not.

Customers are now trying to decide what steps to take to raise standards in Bangladesh factories.  Three customer strategies have emerged:

1.   Customer take a proactive approach

Provide funds to upgrade factory structures and working conditions:

I believe this to be a terrible idea.

While I certainly applaud participating customers’ good intentions, the results will be counter-productive.

First of all they are dealing in a country where the level of corruption is staggering.

It will be difficult to ensure that factory inspections are honest, unless the customers bring in outsiders to do the job. It will be even more difficult to ensure that the selection process to find local companies to carry out the remedial work is corruption free and that those selected will sufficiently honest to carry out the necessary remedial work to international standards.

Secondly the amount of money required will be staggering.  This is not just a question of cleaning up the existing factories. As we have learned from the disasters at Tazreen and Rana Plaza, many of these factory buildings are structurally unsound and must first be torn-down and then rebuilt.

Finally and most importantly; by providing funds, participating customers become part of the problem.  In most people’s minds, providing financial assistance to effect change is synonymous with ensuring that change is made.  Customers will be held molly liable for each new Tazreen and Rana Plaza tragedy.

2.   The Wal-Mart Option:  Hold the factories responsible

In-depth Factory Inspections — Zero Tolerance — Total Transparency

This is compassion or what we in the West call tough-love.

It has two advantages:

It is honest

It just might work

There can be no question; factory workers in Bangladesh have been forced into a state of penury.  However, the same cannot be said for the factory owners who as a group are the wealthiest and most powerful people in the country.  Begging for charity while sitting in one’s multi-million dollar home is simply one more indication of the Bangladesh’s corrupt society. It is only reasonable that the factory owners be held responsible to maintain their factories and to ensure reasonable wages and working conditions. However, the Bangladeshi factory owners take a different view (which under the circumstances is not entirely unreasonably). Why should they spend their money, when the customers are standing in line to pay?

Subcontracting in Bangladesh is one of the industry’s great scams. The factory owners have developed a very profitable system. The customers pay low CMT prices while the factory owners make a double profit: a first profit for the supplier, and a second profit for the sub-contractor.  Almost everybody benefits, except the workers. The good news is that Bangladesh has an almost unlimited number of desperately poor people willing to work for slave wages.

Wal-Mart has the right idea:

  • A complete inspection of each supplier.
  • Orders are given only to those that pass.
  • Failed factories are black listed

Within year, an industry of 5000+ sweatshops will be reduced to 800 decent operations: at 0 cost to the customers.

3.The Disney Option:  Recognize that the Bangladesh industry has moved beyond the pale:

The Customer Packs-Up and Leaves Bangladesh

 To some degree Disney is a special case.  The company must be the apotheosis of family values.  It cannot afford the risk of negative publicity.  Opting out is a guarantee of remaining on the side of the angels.

At the same time, the company licenses all their garment products.  As a result, Disney need only notify their licensees who must then do the heavy lifting.

Personally, I believe that the Disney option is the only sensible long-term approach; and that eventually everyone will be forced to move elsewhere.  However, for those customers who want to make the effort, the Wal-Mart option is cost effective and does not place the customer in a bad position when the next Bangladesh disaster occurs, which is inevitable.

By far the worst option is the pro-active approach in which the customers pay money only to be held responsible for each successive disaster

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