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Bangladesh Clothing Factory Collapse Tragedy Exposes Real Cost of Corporate Greed

Politics / Social Issues Apr 30, 2013 - 12:45 PM GMT

By: Money_Morning

Politics

Greg Madison writes: We've known for a long time that the things that fuel our lifestyles can come from some pretty ugly places.

The coltan that's used in our mobile phones and entertainment systems is mostly mined in the Democratic Republic of Congo, where millions have died in what's been called "Africa's World War." The United Nations has reported that warlords, guilty of numerous crimes against humanity, vie for control of coltan production while enslaving and killing thousands.


Many of the diamonds we buy for our loved ones come from West Africa, where diamond mining and the black market in the stones has fueled bloody wars in Liberia and Sierra Leone.

Now, in light of a recent tragedy in Bangladesh, it seems even the clothes on our backs may be contributing to a portion of human misery.

Why Clothing Makers Choose Bangladesh
The garment industry does close to $1 trillion worth of business worldwide each year.

Bangladesh is central to garment manufacture. The industry makes relies on cheap, plentiful labor. Some 4,000 garment manufacturers dot the country and its sprawling capital, Dhaka.

These factories supply goods for some big American and global brands and retailers. Wal-Mart Stores Inc. (NYSE: WMT), Swedish giant H&M Clothing and The Gap Inc. (NYSE: GPS), with its brands like Old Navy and Banana Republic, all rely on Bangladeshi contractors and subcontractors for product. Bangladeshi labor ensures that these retailers can offer garments of reasonable quality at competitive prices, while maintaining healthy profit margins.

It's well known that working conditions in these factories are tough, even deadly.

Last week's collapse of a factory building, Rana Plaza, killed at least 382 people, Bloomberg reported, and hopes for finding survivors were fading, authorities said today (Monday).

The reality is that as the companies that tap into Bangladesh for labor claim to keep tough standards and rigorous oversight of their contractors, conditions for Bangladeshi workers aren't improving.

These companies attempt to satisfy our collective conscience by touting labor reforms. The trouble is, they also reject programs that could bring about positive change for workers.

The Associated Press has reported that American and global retailers have balked at a safety proposal drawn up by Bangladeshi and international labor groups. The plan would have done away with corrupt and infrequent government inspections and established an independent body to police garment factories.

For a contribution of $500,000 per participating company, the proposed reforms would be fully funded. The Associated Press found that this proposal, if accepted, would be legally binding and enforceable. And that's why the proposed reforms are dead on arrival.

It seems that the prospect of actually being held legally responsible for worker safety is just too much for Wal-Mart to bear. The $500,000 contribution - the cost of hiring two or three executives in the middling ranks - seems to be too much for The Gap to bear, too.

Meaningful labor reform in Bangladesh is impossible if the customers - giant retailers - are fundamentally unwilling to embrace change.

It's tempting to lay the blame for all of these horrors right at the feet of capitalism, greed and the relentless quest for a dollar. But that would be disingenuous.

The real picture is far more nuanced. For all of its destructive excesses, wrought in the United States and around the world, the market has generated prosperity and freedom, lifting billions of people out of poverty. It's proved to be a powerful engine for positive change in people's lives, for entire societies.

What's more, there has been an explosion in the formation and marketing of socially responsible stocks and mutual funds, where large and small investors can put their money where their heart is, and use the power of the market to drive positive change.

Socially Responsible Investing: Where to Start
The Wall Street Journal has found that assets that follow at least some socially responsible investing (SRI) principles hit $3.7 trillion in 2012.

Domini Social Equity Investor Class (DSEFX) is a mutual fund that gives investors exposure to some big companies which have been screened for their social and environmental standards. Among others, companies like Apple Inc. (Nasdaq: AAPL) and Microsoft Corp. (Nasdaq: MSFT) round out the DSEFX's $824 million net assets. It paid a quarterly dividend, a modest 0.57%, in February 2011, and has given a 4.92% return this year to date.

Amy Domini, founder of Domini Social Investments, has said that effective socially conscious investing is about more than just screening out and avoiding "bad" companies. It has more to do with shareholder advocacy and community investing, making sure shareholders can use their vote to hold companies to task for social responsibility, and ensuring that these companies are a positive economic and social force in the community.

Individual investors can look at the social issues that matter most to them, evaluate a basket of companies or a class of investments, and pick the stocks that appeal to their consciences. The involved, informed investor always has the edge, and shareholder advocacy proceeds from being informed and involved.

The market, the customer and the active investor all have key roles to play in forcing companies to do the right thing. In the end, it'll be the market's irresistible driving force that will help lift workers - and maybe the rest of us - out of the chains that bind.

Source :http://moneymorning.com/2013/04/29/bangladesh-tragedy-exposes-real-cost-of-corporate-greed/

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