Guest Host: Marc Fisher

The South Asian nation of Bangladesh has risen rapidly within the global garment industry to become the world’s second largest exporter of clothing. European and American companies have been attracted by some of the lowest wages in Asia. But two recent deadly accidents in Bangladeshi factories — including a building collapse that killed more than 300 people — have raised questions about the true cost of cheap clothes. Kojo explores the global clothing economy.

Guests

  • Pietra Rivoli Deputy Dean and Professor of Finance and International Business, McDonough School of Business, Georgetown University; and Author, “The Travels of a T-Shirt in the Global Economy: An Economist Examines the Markets, Power, and Politics of World Trade” (Wiley)

Top 10 U.S. Textile Apparel Imports By Country (In Billions)

Country 1990 1995 2000 2005 2010 2011 2012
China 3.6 4.8 6.5 22.4 38.5 40.7 40.6
Vietnam 0.0 0.0 0.1 2.9 6.3 7.2 7.7
India 0.8 1.6 2.7 4.6 5.4 5.9 5.9
Indonesia 0.7 1.3 2.4 3.1 4.7 5.3 5.2
Mexico 0.7 3.0 9.7 7.3 4.5 4.8 4.6
Bangladesh 0.4 1.1 2.2 2.5 4.1 4.7 4.6
Pakistan 0.4 1.0 1.8 2.9 3.1 3.4 3.0
Honduras 0.1 0.9 2.3 2.6 2.4 2.6 2.6
Cambodia 0.0 0.0 0.8 1.7 2.2 2.6 2.6
El Salvador 0.1 0.6 1.6 1.7 1.7 1.8 1.9
Italy 1.0 1.5 2.1 2.1 1.4 1.6 1.7
Canada 0.5 1.7 3.4 2.8 1.4 1.5 1.4
Thailand 0.6 1.4 2.5 2.1 1.5 1.4 1.3
Philippines 1.1 1.7 2.3 1.9 1.1 1.3 1.2
South Korea 2.7 2.3 3.1 1.9 0.9 0.9 0.9
Taiwan 3.0 2.8 2.8 1.6 0.9 0.9 0.9
Dominican Republic 0.7 1.8 2.5 1.9 0.6 0.7 0.7
Hong Kong 3.8 4.4 4.7 3.6 0.2 0.2 0.2

(Credit: Office of Textiles and Apparel, U.S. Department of Commerce)

Transcript

  • 13:06:41

    MR. MARC FISHERFrom WAMU 88.5 at American University in Washington welcome to "The Kojo Nnamdi Show," connecting your community with the world. I'm Marc Fisher of the Washington Post sitting in for Kojo. Later this hour, justice with a side of vengeance. A new book explores how revenge and payback underpin the American criminal justice system. But first, the real cost of cheap clothing.

  • 13:07:12

    MR. MARC FISHERLast Wednesday, an eight-story factory building in Bangladesh collapsed, killing more than 380 people with hundreds still missing. Few Americans ever heard of the Rana Plaza building or the five factories that operated there with names like Phantom Apparel and New Wave Style. But their clothing is sold at Walmart, at other big-box stores and boutiques across the Washington area.

  • 13:07:36

    MR. MARC FISHERThese companies in Bangladesh operate at the bottom of a global supply chain. And over the last decade American and European companies have flocked to Bangladesh, attracted by low wages and a system capable of responding to the fickle demands of fashion consumers. It's made Bangladesh the world's second largest clothing manufacturer and the sixth largest exporter of clothing to the United States. But labor rights groups and some consumers are asking whether those cheap clothes carry a hidden ethical price tag.

  • 13:08:09

    MR. MARC FISHERAnd joining me to discuss this is Pietra Rivoli, who is the deputy dean and professor at the McDonough School of Business at Georgetown University. She's the author of "The Travels of a T-Shirt in the Global Economy." And this was a frantic and terrible scene in Bangladesh, rescue and recovery at the site of the former Rana Plaza factory. At the time of the collapse there were 3,000 people in that building. So far 380, as we said, people have been confirmed dead. And that number is expected to go up.

  • 13:08:46

    MR. MARC FISHERThis is a story that seems to recur on a regular basis, whether it's in Bangladesh or China or elsewhere. Why have the various regulatory efforts and those of private companies so far failed to make any progress, or has any progress been made?

  • 13:09:04

    MS. PIETRA RIVOLIWell, of course that's the question that everyone is asking. I mean, it's important to start by understanding how apparel gets to the American consumer. You know, apparel is not produced like cars. There is not a single factory outside of Detroit that everyone can keep track of and inspect and count and measure, you know, all of the inputs and outputs and safety features and so forth.

  • 13:09:31

    MS. PIETRA RIVOLIApparel is produced in a very far-flung and very flexible fast-moving network of suppliers. And, you know, people use the word apparel factory but, you know, that's a bit of an overstatement. It's not really a factory that produces our clothing all the time. It's a network of suppliers because all you really need is a person and a sewing machine. So, you know, you can put people and sewing machines almost anywhere. And it's very hard to keep tabs on every person and every sewing machine and every collection of people with a sewing machine. So, you know, it's a matter of something that is very far flung, very fast moving and very easy to pick up and move.

  • 13:10:18

    FISHERNow some of the groups that have been monitoring this kind of business say that the American companies that hire firms in places like Bangladesh refuse to pay for a nationwide factory inspection system. And instead they say, well we're going to take care of this through private audits. We're going to check things on our own. Why do companies insist on that? Is it simply a matter of expense?

  • 13:10:42

    RIVOLIYou know, I don't think so. I think if you ask the question, you know, well who is responsible, for example, for fire safety in this building, people wouldn't necessarily say, well it's the customers, you know, of the businesses that produce whatever products they are. It's not necessarily a natural conclusion that, you know, certain western companies would be the responsible parties.

  • 13:11:06

    RIVOLIYou know, this was a building that was actually illegally constructed, so it did not have a building permit. There were no local authorities who inspected it. There was not a functioning system of building codes and so forth. So clearly there's, you know, responsibility to be shared. Now that does not let the western companies off the hook. But, you know, what we hope of course overtime is that countries like Bangladesh develop the internal governance structures to have things like functioning building and fire codes.

  • 13:11:42

    FISHERYou can join our conversation about the real cost of cheap clothing with Pietra Rivoli at 1-800-433-8850, or email us at kojo K-O-J-O @wamu.org. You can also send us a Tweet at kojoshow. And so we know the names of the companies that were operating in this factory building at the time of the collapse. It's not entirely clear who they were producing for, although the name of Walmart has come out over the weekend in some reports.

  • 13:12:13

    FISHERWhat -- you know, who does hire these companies and do they just sort of look the other way and not want to know about what the conditions are and how the clothing -- how their orders are actually being fulfilled?

  • 13:12:27

    RIVOLII think they actually very much want to know. You know, we've mentioned the word, you know, Walmart a couple times in the past five minutes. Of course, this is a nightmare for Walmart, right. They do not want to hear their name on the radio in this context.

  • 13:12:40

    FISHERRight.

  • 13:12:40

    RIVOLISo they have a huge investment in their brand, as do many companies that have name recognition. And they have a strong financial incentive to protect the value of that brand. And the value of that brand is very, very heavily damaged by events such as this. So I think they very much want to know. I think they very much do not want these things to happen. They hurt their reputation. They hurt their profitability. It's just a...

  • 13:13:07

    FISHERWell, let me challenge you on that. I mean, does it -- obviously no company wants to be associated with something where hundreds of people die, But does it really affect their bottom line? Or does the American passion -- consumer's passion for low prices trump this news from a faraway place that most of us have never been to or really heard much about? I mean, do you think consumers really make a connection in their minds and hearts between an event like this and how they choose to spend their money and what they choose to buy?

  • 13:13:36

    RIVOLIYou know, I think that's a really interesting questions because if you, you know, try to trace back the responsibility for this awful event, you know, some would argue it actually starts with the behavior of the consumers. Because we are the ones demanding, you know, the pink sequined T-shirts in the right size. And we want it this afternoon. So consumer demand is very fickle. It's very volatile. And it is because consumers are so demanding and wanting their needs met immediately that companies feel pressured to get the goods to the port immediately.

  • 13:14:12

    RIVOLIAnd it's the same reason that the factories overseas, you know, felt the pressure to have those people go back in the building and keep sewing, even though they had complained about the safety conditions. So, you know, it is true that, you know, consumers are, you know, pushing on this system and causing a lot of pressure that these companies, you know, say the companies in Bangladesh didn't at least feel that they could push back on.

  • 13:14:44

    RIVOLIBut at the same time, I think the more widespread the name, Walmart, you know, and H & M and so forth, the more potential is there to do a long-run damage to the brand.

  • 13:14:58

    FISHERThe garment factories in the Rana Plaza building were producing products for major European and North American brands, such as the Spanish brand Mango, a low-cost British chain PrimeMark and the Canadian brand Joe Fresh. Bloomberg News reported this morning the Walmart connection to this factory but now the AP is saying that Walmart says none of its clothing had been authorized to be made in the facility. But it is investigating whether there was any unauthorized production.

  • 13:15:26

    RIVOLISo that gets to this whole issue of it's really kind of a wild west world out there in clothing production. And American manufacturers may not even know exactly what the full chain of production is.

  • 13:15:38

    RIVOLIIt's very difficult to trace, you know. If a store needs 100,000 of those pink T-shirts with sequins, they will contact their supplier. And if that supplier has an approved factory, that has the capacity and fabric and everything else to make those T-shirts, then that's great. If they do not then they will start, you know, to do this subcontracting. And when they start to subcontract in response to that consumer demand, it becomes very, very difficult to trace. So it is very, very possible that, you know, Walmart has a list of approved factories that it worked with, and that this clothing was being produced in a, you know, subcontractor of a subcontractor of a subcontractor.

  • 13:16:21

    FISHERLet's hear from Mohammad in Silver Spring. Mohammad, you're on the air.

  • 13:16:25

    MOHAMMADHi. Thank you for taking my comments and follow-up question. The comment is on Walmart they have a worldwide advisory governance, a guidance website how things need to be handled in Ukraine, in Bangladesh and other countries like Pakistan. The comment about that is just putting out an advisory is that our corporate overall ethical standard that we have told them do not engage in any illegal behavior. And that's our responsibility and that's where it ends. It's more of a rhetorical question and comment.

  • 13:17:01

    MOHAMMADAnd the second part of that is when we say that it's almost impossible because there are so many sub vendors or subcontractors to trace. ENCY Something, that is a company out of New York, actually did pay the victims of a horrible tragedy that, yes, we recognized a horrible thing has happened and we love these cheap products. But at the same time something like this is uprooting lives. The bigger corporations have never stepped in. In fact, they refuse to pay into a cumulative fund. If you folks can address these two issues, that'll be great.

  • 13:17:36

    FISHERPietra Rivoli?

  • 13:17:37

    RIVOLIWell, I think the question really relates, you know, to what extent do the western brands have the responsibility? And, you know, that's almost a -- that's a question for business ethicists and philosophers. And they have been -- they've been grappling with this question. I think that there is essentially a pie of responsibility that needs to be shared here. It should be share with the bosses that ordered those folks to go back in the building. It should be shared with the local authorities who allowed the building to be built illegally. It should be shared with the people who actually constructed the building.

  • 13:18:15

    RIVOLIAnd it also should be shared with the western importers who do have to take responsibility for events that go back into their supply chain. How that pie gets divided up specifically, you know, who is responsible for what, you know, is a tremendously difficult question. But I don't think -- well, let me put it a different way. Twenty years ago I think it was commonly believed that the western companies who bought the apparel had no responsibility for what happened in the supply chain. They were just customers, anymore than, you know, I have responsibility for how my milk is produced when I go to Giant.

  • 13:19:00

    RIVOLIBut there has been a shift in corporate behavior and there's been a shift in what we expect of corporations. And the trend has been for the companies to assume greater and greater responsibility for that supply chain. Has it gone far enough? Probably not. Will it go further? I think it will but, again, it's just a very, very hard thing to track down.

  • 13:19:22

    FISHERIn your research for your book "The Travels of a T-Shirt in the Global Economy," you visited factories in China. And obviously there have been some very high profile cases -- Apple obviously has had to deal with the issues you were talking about with Walmart earlier, where they've had to take some responsibility for the egregious conditions in Chinese facilities where their products are made. Have you seen any company that has gotten a handle on this in any effective way that could serve as a model? Or are they all sort of lost on this?

  • 13:19:55

    RIVOLIWell, you know, I think if you look at what happened in Bangladesh, you know, one of the things that's going on here is that Bangladesh is actually taking the market away from China very, very rapidly. So what happened in China is you have very rapidly increasing labor costs. And so the companies are saying, I can't produce my apparel in China anymore. It's not cost effective. So I'm going to move to Bangladesh. So there's this very fast moving response in...

  • 13:20:19

    FISHER...race to the bottom sort of thing.

  • 13:20:20

    RIVOLIIt's a race to the bottom, that's exactly right. A race to the bottom in terms of labor costs. Now at the same time conditions have actually improved somewhat in China. So it's worth kind of asking how that happens, you know, how does improvement happen. It's also worth remembering that we're about a hundred years away from the anniversary of the Triangle Shirtwaist fire which happened in lower Manhattan. A very, very similar story to what we hear coming out of Bangladesh.

  • 13:20:47

    RIVOLISo why do those fires no longer happen so often in the United States, and why, at least in the apparel industry, do things seem to be improving in China? And I think what you would observe is that it's no single one thing. Certainly the western customers have put greater pressure on their supplying factories. Certainly labor activism has played a huge role. If you look at what's happening now in Bangladesh, those people are refusing to work. The unions are in protest. Labor activism plays a huge role. It did in the United States' industrial history as well.

  • 13:21:24

    RIVOLIEconomic growth plays a role. You know, you need some resources to be able to put the different kinds of governance in place. And you certainly need government action. So I think, you know, again you have a smorgasbord of possible sources of solutions that have to start to engage.

  • 13:21:45

    FISHERLet's hear from Monica in Rockville. Monica, you're on the air.

  • 13:21:49

    MONICAYes, thank you for taking my call. I was -- I have a comment and I was outraged to hear that the consumer pressure may be also responsible for kind of like this kind of act. I think that the companies are responsible and not because the consumers put pressure. They can kind of like have an outrageous or criminal act because the consumers want a product. We have also responsibilities and it's the companies that have ultimately to act responsible and in a fashion that's like they don't hire in a fashion that like puts people's lives in danger.

  • 13:22:30

    FISHERBut Monica, if you and I and other consumers insist on buying only the cheapest possible product, aren't we, in a sense, sending those companies a message about how they have to go about buying the products that they sell us?

  • 13:22:43

    MONICANo. But I don't agree of saying like the consumers will buy only the cheapest And the thing is, if like people make that assumption and that's why the jobs are not here anymore. It's like you have good things here. people won't need to kind of like buy the cheapest. It's because of globalism that like you take advantage on the manpower of the people that cannot talk for themselves. Sometimes unions and movements from the people, they are not allowed to talk for themselves. So companies move abroad so people here should see that like we're paying a very high price actually to pay a very cheap labor and cheap products.

  • 13:23:35

    FISHEROkay. Pietra Rivoli.

  • 13:23:38

    RIVOLIWell, you know, yesterday I was down in downtown Washington. And I walked by the old Woodrow and Lothrop Building. We used to call it Woody's. It was a grand department store in downtown Washington. You know, every city had its old grand department stores. Most of them have closed or been bought out but the Woody's is still there. It's a beautiful building but of course it's no longer Woody's. It's actually and H & M.

  • 13:24:01

    RIVOLIAnd so, you know, the question kind of, you know, is well, what happened to Woody's and why is it H & M instead? You know, in the old Woody's model, this was a very stable industry. They ordered the spring fashions once a year and the fall fashions once a year. They had a stable supply chain that pretty much came out of the deep South. Alabama apparel factories in particular. Most importantly the stuff stayed on the shelves until it was time for the seasonal sale, okay. So it was a relatively predictable eco system. And -- but it did have consequences for the consumer. Choice was limited and, you know, costs were high.

  • 13:24:42

    RIVOLIWe have -- the reason that Woody's is no longer there and the apparel factories in Alabama are no longer there is, you know, at the end of the day the result of a market system where apparel consumers wanted lower prices and more choice. Now, the caller is right that this doesn't describe necessarily every consumer. You can still choose to buy a T-shirt made in America for $20. American apparel has such a brand model. There are other companies that produce in very -- you know, in very clean supply chains, but the cost is higher.

  • 13:25:20

    FISHERAnd so this sort of chain that you've set up for us where we don't have the Triangle fire in this country anymore because we've improved conditions. Now China has done that as well. And each country that does that then loses jobs. So is there a direct tradeoff between doing the right thing for worker conditions then losing those jobs down the road?

  • 13:25:44

    RIVOLIYou know, I don't think it's quite that simple. And I don't want to be -- I don't want to say that all the problems are solved in China either. But what has happened now in China is a process of economic growth and development. And in that process, one industry has shrunk, apparel, and other industries are growing. So...

  • 13:26:05

    FISHERElectronics.

  • 13:26:05

    RIVOLIElectronics or cars or biotech. And so, you know, the process of economic development is moving up that value chain. And so, yes, some jobs will be lost in apparel but actually in China right now it's very hard to find apparel workers. They have other opportunities.

  • 13:26:22

    FISHERWe have just a moment left, but if you could talk briefly about some companies that have tried to prove that you can do this work ethically. In the Dominican Republic a factory called Alta Gracia, what have they done there?

  • 13:26:34

    RIVOLIAlta Gracia is a fascinating company. It was actually conceived in the -- partly at Georgetown University with two of my colleagues there. Alta Gracia is a factory in the Dominican Republic which pays a very high wage. It pays a living wage. It offers health benefits, health care. It offers education. It offers training. It offers upward mobility. And it produces apparel mainly for the collegiate market. You know, so you have university T-shirts and so forth. And that clothing is distributed in university bookstores, all right.

  • 13:27:07

    RIVOLISo it is a successful business model. At the same time, it has fairly limited distribution into the university market and the cost is higher. But, you know, there is a market there for goods such as this, you know, with a compelling ethical story that people can feel good about purchasing.

  • 13:27:27

    FISHERAnd this was the result in part of student protests at the university.

  • 13:27:31

    RIVOLIAnd this was the result -- again, you know, we have to give labor activism, student activism its due. They do play a role overtime in improving conditions.

  • 13:27:39

    FISHERPietra Rivoli is the deputy dean of the McDonough School of Business where she is a professor at Georgetown University. She's the author of "The Travels of a T-Shirt in the Global Economy." Thanks so very much for joining us. When we come back after a short break, we will talk about the case for revenge, how our justice system could possibly improve by emphasizing vengeance. That's after a break. This is "The Kojo Nnamdi Show." I'm Marc Fisher.

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