Corruption and the Garment Industry

And the winner of the 2013 Country-with-the-least-Corruption Award is CHINA.

This is something we all know, but few of us have recognized.

I bet the Chinese Government never expected to receive this honor. However, it quite true and quite deserved — if you are working in the global garment industry — which gives you an ideas of the places we go to make your T-shirts and jeans.

Transparency International lists 177 countries in their 2013 Corruption Perception Index . Theoretical top score 100 and lowest score 0. As of 2013 Denmark and New Zealand were joint 1st with scores of 91, while Afghanistan, Somalia and North Korea were joint last with scores of 8.

At the head of our Top 10 garment supplier list is China ranked 80th with a score of 40, and at the bottom lays Cambodia ranked 160th with a score of 20.

All of which leads us to an anomaly

On the one had, economists and development specialists have come to recognize that economic development is a natural process, which would take place without any outside assistance whatsoever. When an economy fails to develop, the issue, therefore; is not to determine what steps are necessary to induce development, but rather to determine the obstacles that block the natural development process and to take the necessary steps to remove the obstacles. The economists and development specialists have reached a consensus that CORRUPTION IS THE SINGLE GREATEST IMPEDIMENT TO GROWTH.

On the other hand, these same economists and development specialists, also agree that developing a GARMENT EXPORT INDUSTRY IS ONE OF THE MOST IMPORTANT FIRST STEPS IN ECONOMIC DEVELOPMENt.

And, on the third hand it would appear, that EVENTHOUGH CORRUPTION IS THE SINGLE GREATEST IMPEDIMENT TO ECONOMIC DEVELOPMENT, THE GLOBAL GARMENT INDUSTRY FLOURISHES IN THE MOST CORRUPT COUNTRIES

We all know that corruption is the greatest obstacle to economic development, but here we are, working is some of the world’s most corrupt countries and doing quite well. Contrary to what our many critics claim, garment-sourcing specialists do not search out countries with the very worst governments to source our production.

There is clearly something wrong here (other than my having three hands).
It would appear that either corruption is not an impediment to economic development, or that the garment export industry is not in fact an important first stage of economic development

I have worked in every one of the top-10 garment exporting countries (actually I have worked in nineteen of the top-20 exporting countries) and have acquired some first hand knowledge of corruption. These are my conclusions.

When we consider corruption, we make two incorrect assumptions.

1. Corruption is all about government
2. Corruption is all about money

I: Corruption and Government

Whatever corruption occurs in our industry, relatively little concerns governments. In truth, very few corrupt governments care enough about the garment industry to cause trouble.

Property theft and development, mining, timber, privatization, these are things that attract the military and bureaucratic nomenklatura.

For the rapacious General or government minister, hotels is a much better investment than garments. All one need do is follow three easy steps
• You throw the peasants off their land;
• You find some friendly investors;
• You issue your new friends the required licenses;
And before you have time to finish your lunch you are part owner of the local (enter name of international group) hotel.

How can you compare garments with hotels? Garments is too much work for too little profit.

For us in the garment industry, it is non-government corruption that calls the shots.

The Downside

Cambodia: Rank 160-Score 20: Cambodia’s industry is currently in a state of chaos with workers facing soldiers in the streets. Cambodia’s problem is a corrupt labor movement. Cambodia was one of the first Asian countries to invite international institutions to set up a local labor union structure. The union structure set up by these institutions was totally dysfunctional. There were no provisions for collective bargaining, mediation, or arbitration. Union leaders were given no professional training. Unions themselves were not transparent. The result was a situation where almost every factory Cambodia was home to five or more in-house unions each vying with other for control, with the result that strikes became endemic.

In the end, factory management found it easier and more cost effective to pay the union leaders rather than their workers.

The industry and their customers are now paying the price for Cambodia’s corrupt and ineffective union movement, as workers have taken to the streets to agitate for higher wages and better conditions and the army mediating with guns and teargas. AND THERE IS NO ONE WITH SUFFICIENT CREDIBILITY TO NEGOTIATE A SOLUTION. Much responsibility must fall on the international institutions that came to Cambodia to set up the labor movement armed with an obsolete belief system based on class conflict but with no practical knowledge of union operations.

Bangladesh: Rank 136-Score 27: The problem is here is that a corrupt industry went into partnership with an equally corrupt customer base. The result is a totally flawed industry structure where sewers are forced work up to 16 hours a day, 7 days a week in terrible conditions where the possibility of death by fire or building collapse is known to all. Bangladesh may be home to one of the world’s premier kleptocracies, but in this instance government is not to blame.

With regard to the future of Bangladesh’s garment export industry, the jury is still out. Recent fires and building collapses have had only a marginal effect on garment exports. However, given the condition of that industry, further catastrophes are almost inevitable.

The Up-Side

Vietnam: Rank 116-score 31: No one has ever accused Vietnam’s government of being corruption free. Their adventures in shipbuilding and other state owned enterprises (SOE) have provided jobs for the boys coupled with unaccountable losses of billions of dollars. However, with regard to the garment industry SOEs, government has been more pragmatic. They off-loaded these in a series of Russian style privatizations; i.e., the insiders get to buy the shares at bargain-basement prices. This was a good policy. Government reduced their future losses while the better run SOEs (now Joint Stock Companies) compete in the open market

The good news is that the from time of the quota phase-out, when the last trove of corrupt benefits disappeared, Vietnam’s garment export industry flourished with a minimum of interference. The industry has a reputation for good quality and reliable delivery at competitive prices. Wages are among the highest in South East Asia.

Vietnam’s government might be corrupt but its garment industry operates with a high degree of governance, with result that foreign investors are putting hundreds of millions of dollars into Vietnam’s garment industry because Vietnam is looking increasingly as a safe bet.

China: Rank 80-score 40: Finally we come to China. There are many reasons why China is #1. One important reason is that the Chinese Government gives everyone a level playing field in which to operate. Textiles are not favored over garments, as occurs in many countries that are home to both industries. The country is home to the major production base for many if not most of the world’s largest garment factory groups, with the result that compliance and sustainability levels are relatively high.

Problems do still exist, particularly with regard to water treatment and overtime work, which must be dealt with. However, after all is said and done, while many customers are fleeing to countries lower wages and less governance, the majors continue to operate and expand in China.

II: Corruption and Money

China also has a further advantage, which relates directly to the second incorrect assumption listed at the outset, the mistaken belief that corruption is all about money.

Power: In truth power is a much greater source of corruption than money. Most of the truly corrupt dictators cared little about money. Think of Stalin, Hitler and The Great Helmsman Mao Zedong. None were particularly rich. Unlike, the Indian Maharajahs of the past and their current counterparts in the U.S. and elsewhere, money was not a consideration to the truly powerful elite.

China’s leaders recognize Lord Acton’s famous 19th century dictum, “Power tends to corrupt and absolute power corrupts absolutely. Great men are almost always bad men”

Following the death of Mao Zedong China’ leaders moved to ensure that in future power would exercised collectively.

The downfall of Bo Chi Lai and the recent purge of his followers — ironically accused of corruption — show the Romantic Age of the great leader on the white horse is gone, at least in China

Ideology: The Chinese have rediscovered an even greater truth. Ideology is by far the greatest source of corruption, and the most destructive. The need to shoehorn reality into the narrow confines of dogma has resulted in the death of more people than the total of all plagues and natural disasters in recorded history.

In this regard the religious fanatics — Christian, Jewish and Muslim, the U.S. Tea Party, the European far right and the European far left —all those who would divide all of us into orthodox and heterodox. They are the ultimate corrupt —the children of the Nazis, Fascists, Maoists and Stalinists.

It is indeed ironic that a “Communist State” should be the first to realize this. The end of the Soviet Union was a wakeup call the China’s Communist Party. They recognized that the USSR collapsed because its governing party was unable to feed its own people.

Taking a page from a 2500 year old book, the Chinese Government rediscovered the mandate on which all power should be based— those few who have authority over the many, must be responsible for the wellbeing of the many. When rulers fail their people they lose the mandate to rule.

Today, the Government of China is in involved in a great pragmatic experiment to determine what they must do to live up to the expectations of the Chinese people.

Is China corrupt?

Not as far was we garmentos are concerned. We garmentos might be even more correct than we realize.

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One Response to Corruption and the Garment Industry

  1. Keerthi Abe says:

    Sri Lanka is at the position 91 in Corruption Perception Index. We shall make to the Top 20 garment supplier list soon as we have steady growth and in 2013 recorded 13% yoy.

    Religious fanatics are the ultimate corrupt? Fresh KPI that need to be focused upon.

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