Bangladesh, Global Capitalism, and the Garment Industry

May 3, 2013

As the death toll continues to rise in Bangladesh’s worst industrial disaster yet, we reproduce a previously published article on the global garment industry taking the examples of Bangladesh and Argentina. Readers should also see this interview of Prof. Anu Muhammad, an eminent Bangladeshi Marxist, on the place of Bangladesh in the global economy, published on Radical Notes.
– Editors

bangladesh_collapse

The Ready-made Garment Industry: Global Chain Of Imperialist Exploitation
By Debabrata Mondal. First published in the Marxist theoretical journal “For A Proletarian Party” published from Kolkata.
November 24, 2009

In two countries, at two opposite ends of the world, two remarkable incidents of workers’ revolt occurred almost simultaneously in 2006.

The workers associated with both these incidents were of the same industry, namely the ready-made garment industry. The comparably larger incident took place in Bangladesh. Spanning the period from March to October,2006, 1.8 million workers of the ready-made garment industry frequently came out on the road after striking work in a number of factories together and effectively laid siege on the capital Dhaka. Powered by the spontaneously crystallizing unity among themselves, the lower-rung workers revolted against the coercion of the factory-owners, braving the repressive terror unleashed by the goons/security guards hired by the factory-owners, the police and the military. Moreover, these revolts gathered momentum in spite of the concerted effort to pull in their reins by the trade-union organizations abiding by the dictates of the established parliamentary parties. All these had been achieved by the workers who had been denied even the right to organize in a trade-union till then!

The other incident took place in Argentina. On March 30, 2006, fire broke up in a ready-made garment factory and six workers were burnt alive. Spurred by this, the garment workers began to mount continuous protest demonstrations in the capital city of Buenos Aires. Camping in front of the offices of the renowned brand-name companies of ready-made garment, they began to campaign about the mindless coercion carried on the workers in the factories manufacturing the garments bearing those glittering brand-names. The factory owners, brand-name company managements and the government tried concertedly in various ways to smother the workers’ initiatives. These stretched to the extent that thugs hired by the owners kidnapped the nine-year old son of a worker-couple, who were in the forefront of organizing the protest demonstrations, and threatened that the child would be killed if they did not cease their activities. In spite of these, the workers are continuing their efforts to get organized. Most of these workers were immigrants, who had been denied legal identity certificate by the city-officials and who were also not allowed to form even any factory-based trade-union. Still, it was they who were trying to build up an industry-wide platform, which would unite all the workers for struggle.

Apart from these two remarkable incidents, in quite a few other occasions, revolts of ready-made garment workers have broken out in the last two years in different so-called ‘developing’ countries. Vietnam and Cambodia have witnessed two such incidents of great intensity.

Why are the garment workers so agitated?

Bangladesh: The least mandatory wage for the garment workers was fixed up twelve years ago. From that time till 2006, the cost of living for the workers increased three times, yet the least mandatory wage remained unrevised. Even this wage was not paid to the workers regularly in all factories. The hourly wage of the garment workers in Bangladesh was 0.23 dollars [Note:1], and according to the news media of Bangladesh, the unpaid wage of the garment workers was of magnitude 300,000 dollars [Note:2]. This implies that in 2006, the 1.8 million garment workers had to work without wage for 1.3 million hours!

Apart from this, there are other atrocities, like forcing the workers to work overtime without any additional pay, working hours being arbitrarily extended at the whims of the management and forcing the workers to comply by locking them within the factory-shops, there being no fixed holidays. Ninety percent of the workers are women, their age being between twelve and thirty years. Forget about any maternity leave, failure to turn up for work ends up in being sacked. Moreover, there is the constant threat of being sexually abused by the management personnels and their hired goons / security guards.

Within most of the factories, the conditions of the workplace are also very dangerous. Just in two months of 2006, namely February and March, three cases of accidents came up in news. In two of those incidents, after fire broke out in the workshops, the workers, who were locked in from outside, could not get out. Some were burnt alive. Some were desperate enough to try to save their life by jumping out from third / fourth floor windows, but ended as corpses with smashed skulls and broken bones on the road below. In the other incident, several blocks of illegal construction atop a two-storied building, serving as a garment-factory workshop, came down and buried under it the workers working there. Nineteen workers died and fifty were severely injured.

Argentina: About four hundred garment factories had come up around the capital city of Buenos Aires. According to the official government record, these factories had no existence. The 100,000 workers, who toiled daily in these factories, were also officially non-existent, as they were immigrants, denied of any legal identity certificate by the collusion of the factory-owners and the government officials. Taking advantage of this vulnerable condition of the workers, the factory-owners exploited them brutally. They were forced to work twelve to sixteen hours daily on an average. Wage, though paltry, was not paid regularly. When paid, it was at the rate of one hundred dollars monthly, where the minimum cost of living for a four-member family was six hundred dollars. Hence, even if all the members of the family sell out their labour power, they would not be able to eke out a living!

Besides this, there is the usual saga of workers being forced to work indefinitely extended working hours by being locked in from outside in the workshops, fire in locked-in workshops resulting in workers being burnt alive, no holidays for the workers, any absence leading to termination of job, and rampant sexual abuse meted out on the female workers. [Note:3]

Other ‘developing’ countries: The conditions of the garment workers are similar as in Bangladesh and Argentina. The garment factories have grown up in the regions demarcated as the E.P.Z. (Export Processing Zone) or F.T.Z. (Free Trade Zone) by the governments of the ‘developing’ countries. Rather than modern technology or developed machinery, what is chiefly needed to run these factories is cheap human labour power. Hence, easy as it is to set up a unit in any ‘developing’ country, easier still is to relocate it. As a result, production units of the ready-made garment industry are constantly shifting location in search of cheaper labour power, and thus cheaper cost of production.

Let us exemplify. In Asia, Philippines was one of the first countries where such garment factories were set up, and in 1995, 13.8 % of the country’s export came from this industry. But in 2002, the quantity of garment export had a much lower absolute value, making up only 7.2 % of the country’s total export. The reality behind this statistics was the closure of numerous factories; pauperization of a large number of workers, mostly middle-aged women, who were robbed of their livelihood. At about the same time, Thailand also had similar experience. The reason behind this was that during the period, Bangladesh, Cambodia and Mexico emerged as vendors of much cheaper labour power; and garment industry shifted their production units largely to the E.P.Z. / S.E.Z. of these countries.

As of 2007, African countries, China and Caribbean Islands were providing labour power at further cheaper rate and threatening to draw the production units away from Bangladesh, Cambodia, Mexico. In the garment factories situated in the E.P.Z.s of Madagascar in Africa, the garment workers begin to work at 7.00 / 7.30 A.M. , the working day stretching to 6.00 P.M. in ordinary days and to 10.00 /11.00 P.M. in days of extra workload. Still the owners and managements of the factories there are claiming that they are losing out in competition to their counterparts in Mauritius and Seychelles as the factories have longer working days there. So the workers are being told that to ‘save’ their jobs they have to work for still more hours! [ Note: 4 ]

Thus there exists a terrible chain —intensification of exploitation of the workers at one juncture of it in one corner of the world directly creates the necessary condition for the exploitation to be intensified at other junctures in other parts of the world.

How has this chain come into being?

Industries for manufacturing ready-made garments originated in the developed countries of West Europe and United States in the 50’s of the last century. In those countries, during that period, organized trade union movement was able to exact relatively high price of labour power. From the beginning of the 1960’s, the relatively big capitalists investing in the garment industry began to explore the possibility of taking advantage of the cheaper labour power available in the ‘developing’ countries for decreasing the production cost.

They first chose Asia’s Taiwan, South Korea, and Hong Kong. At that time, these countries were taken under its influence by the U.S. imperialism, and the path of capitalist development from above through U.S. imperialist military and economic assistance was being carried on. The aim of this exercise was to create a foothold of the western imperialist powers which could counter the waves of anti-imperialist revolutionary movement spreading through Asia at that time. As a part of this scenario, ready-made garment manufacturing industries were set up with the capital and technical assistance of the ‘developed’ countries, primarily to cater the western market. Labour power being much cheaper in these countries, the production cost became a fraction of that in the western ‘developed’ countries.

The success of this strategy to bolster the profit of the capitalists of the ‘developed’ countries and the fancy they took to it became evident when, from 1965 onwards, the model of these Asian countries began to be upheld by the imperialist authorities as the only ‘feasible’ path of development left to the ‘developing’ countries. Institutions spearheaded by the imperialist countries, like United Nations Industrial Development Organization, World Bank and International Monetary Fund started bringing the governments of the ‘developing’ countries in line with this policy of so called ‘export-led industralization’ by hook or by crook, through economic control, and, if needed, political control too.

Greater part of the ruling classes of the ‘developing’ countries also dreamt of quick ‘development’ of their own interests and became willing mates of the imperialists. The governments of the ‘developing’ countries began to adopt policies of eradicating all curbs on export / import, giving increasing powers in the hands of the multinational investors to deflate the price of labour power—- thus was brought into existence the Free Trade Zones. Simultaneously in 1974, the governments of the developed countries forged the Multifibre Agreement by which they could fix ‘quotas’ for each ‘developing’ countries, which had to be abided by the latter countries in their export of ready-made garments. Thus the ‘developed’ countries institutionalized their controlling hand on the ready-made garment industry of the ‘developing’ countries, which was initially used as a check to prevent any undesired effect on their own home industry. In this way, did spread in the ‘developing’ countries the production bases of the ready-made garments, which were sold in the ‘developed’ countries as commodities of multinational companies.

To build up the garment factories in South Korea, U.S. gave an aid of 40 billion dollars. To set up the garment factories in Sri Lanka, World Bank sent a ‘soft loan’ of 2 billion dollars and a team of ‘specialist / technicians’. The Sri Lankan factories erected with this support boasted of the lowest wage of the workers in entire Asia at that time.

There is still another facet of the imperialist assistance in the setting up of these garment factories —- assistance to curb down the workers’ resistance movements —- without which this model of ‘development’ could not have been enforced. U.S. and its allies had directly or covertly facilitated the establishment of autocratic rules in countries like South Korea, Philippines, Taiwan; backing up dictators in some cases and supporting military rule in others. These autocratic governments had drowned in blood any worker’s movement.

Apart from this, the U.S. and its allies had backed formation of organizations like Asian-African Free Labour Institute (A.A.F.L.I.), which under the garb of workers’ organization did everything to foil any spontaneous, independent effort of the workers to build up any struggle. Let us note here one elucidating example. In 1978, the women workers of the ‘Dong Il Garment Factory’ in Inchon, South Korea, organized themselves in an independent trade union and started agitating for higher wage and better working conditions. Their effort created sympathetic stir among workers of neighbouring garment factories. Musclemen of A.A.F.L.I. raided the office of this union with iron rods and buckets filled with human excreta. They stormed into the office, vandalized it, beat up the women workers, poured the human excreta into their mouth and left after giving explicit ‘instructions’ to stop the agitation and start ‘cooperating’ with the management. Thus acted A.I.F.L.D., bolstered by U.S. dollars.

From this time, another pattern began to emerge. The garment factories of Hong Kong, South Korea, and Taiwan supplied orders of West European and North American fashion companies. To take advantage of potentially increasing order, they had to find a way of bypassing the country-wise quota restrictions laid out in Multifibre Agreement. This they did by sub-contracting production to neighbouring countries like Bangladesh, Cambodia, China, where they helped in setting up garment factories with still lower worker’s wage.

In 1982, the government of Bangladesh adopted new export / import policy following the blueprint of ‘export-led industralization’ dictated by the World Bank and International Monetary Fund. Export Processing Zones ( E.P.Z.s ) were set up in the suburbs of Chittagong and Dhaka, giving free hand to the owners of the garment factories springing up there to exploit the workers at their will. As a result, the sector of ready-made garment production underwent massive expansion. While in 1980, there were about 50 factories employing a few thousand workers; in 2000, there were over 3000 factories employing 1.8 million workers.

At about the same time, expansion of ready-made garment industry took place in India in the post-1991 period of ‘pro-market export-oriented’ economic policy. Tirupur in Andhra Pradesh accounts for 40 % of total ready-made garment production in India. Compared to 1985, garment production increased in this area 22 times. [Note: 5]

In this way, the production units working for the multinational fashion companies based in the ‘developed’ countries began to spread worldwide in search of more and more cheaper labour power.

How does this global chain work?

Brand-name company —> Trading company —-> Supplier company

The multinational fashion companies / ready-made garment companies based in the imperialist countries has now almost stopped production in their own countries as a consequence of the globalization of the production process described above. They have been converted into ‘brand-name companies’. Garments manufactured in production facilities scattered throughout the ‘developing’ countries worldwide are brought together and stamped with their brand-names before coming to the market. But the brand-name companies are in no way associated with the ownership or management of the production units. The brand-name companies, on one hand, control worldwide the ‘retail chains’ of sale of ready-made garments, and on the other hand, after developing new designs, allot orders of a definite quantity of production in that design. Let us get a picture of their control over the retail market.

In 2000, of the total market of ready-made garments in the world, one-third was in North America, one-third was in West Europe, and one-fourth was in Asia. The biggest 50 brand-name companies of U.S. had grip over 28 % of the North American market in 1977, which they increased to 53 % in 1992. Out of this 50, if we consider the largest 5, then they increased their market share in North America from 9 % in 1977 to 18 % in 1992. In West Europe and Britain, 7 brand-name companies held 40 % of the total market among themselves in 2000, and this share was growing at the rate of 6 % annually for the preceding 10 years. [Note:6].

Many bourgeois observers have commented that this handful of large brand-name companies are increasing their market-share in Asia at a much faster rate than in North America or West Europe, though we have no concrete quantitative measure. [Note:7]. In our common experience we have seen in India that the middle class and upper class customers are increasingly getting addicted to ‘branded ready-made garments’ in the recent years. Among them, brand-name labels like Nike, Levis, The Gap, Wall Mart, Marks & Spencer, Disney, Tommy Hilfiger, Lacoste are becoming increasingly popular. This also bears testimony to the increasing clout of the brand-name companies in Asia.

Hence, as a whole, not only is the grip of the brand-name companies becoming ever more firmer on the world ready-made garment market, but the giants among them are getting even more bigger, the smaller ones getting gobbled up by them through merger and acquisitions or getting extinct.

The companies to which the brand-name companies give their orders are called the ‘trading companies’ or ‘sourcing agents’. Mostly these are those companies of Hong Kong, Taiwan, or South Korea which did production jobs in the 1960’s, but now mainly do not do so. They distribute the production jobs as sub-contracts to the garment factories spread over the ‘developing’ countries and act as bridges between the brand-name companies and the manufacturing factories. They provide the raw materials to the manufacturing factories, which are known as the ‘supplier companies’, collect the finished products from them, undergo the quality control check, and finally deliver the goods to the brand-name companies.

The key of the control which they exercise on the supplier companies spread worldwide is that both the order and the raw materials are in their hands.

Let us consider one example. Lee Fung & Company, based in Hong Kong, is a trading company which currently supplies 40 % of the world’s total garment production. It distributes production to supplier factories in Bangladesh, India, Sri Lanka of Asia, and Egypt, Madagascar, Morocco, South Africa of Africa. 75 % of the products sourced through it are sold in North America, and 21 % in West Europe. From the supplier companies to which it distributes orders, it buys from 30 % to 70% of their production. This quantity is carefully calculated so that the supplier companies remain dependent upon it for their orders, but it does not become dependent upon any particular supplier company, nor upon supplier companies of any particular country for getting its job done.

This condition it uses to its advantage when exerting pressure on the supplier companies to diminish the price of garments it pays by asserting that factories elsewhere are providing cheaper rate. In this way, the average price paid to the supplier companies in Sri Lanka had been reduced by 30 % in the period from 2002 to 2004, in Honduras by 23 % in the period from 2001 to 2004, in Philippines by 20 % in the period from 1998 to 2002. This in turn is resulting in further decrease of the real wage of the workers.

Beside this, the delivery time given to the supplier companies for each order are also being curtailed continuously to cut down on the inventory cost of the brand-name companies and so that the brand-name companies can bring to market new designs at very short notice. Thus the profit margins of the brand-name companies are being enhanced, but at the level of the supplier company this implies concentration of excessive orders with short delivery time at some particular periods of the year corresponding to the cycles of the fashion world of the western ‘developed’ countries. For the workers of the supplier companies, this means excessive workload periodically, which coupled with the management’s obsession to cut cost, result in imposition of forced overtime on the workers, no fixed working hours, locking in the workers to force work, no holiday, constant threat of lay-off…and these are increasing globally. [Note:8]

Recognition of this vicious controlling grip that the few giant multinational brand-name companies have on the numerous supplier companies spread worldwide can be found in a report of the United Nations, from which we quote:

Barriers to entry are low on the production side of the garments, in comparison to complex technology-and-scale-intensive industries like electronics and automobiles…There is an ample supply of capable garment makers, and it is relatively easy to create new ones by providing design inputs and some technical assistance. Thus, the fragmentation of the production process is very advanced… However, there are high entry barriers in marketing in the garment industry. Buyers therefore occupy an important place in global value chains and dominate the industry. …. [Note:9]

The thoroughness with which the ‘buyers’ referred to above ( i.e. the brand-name companies and the trading companies ) have established their dominance over the industry and their further ambitions have now made the Multifibre Agreement unnecessary to them. In the Doha round of W.T.O. negotiations, it had been decided that the Multifibre Agreement would be phased out gradually and replaced by a new agreement.

This new agreement called A.T.C. seeks to further their interest in a number of ways. Inducing the governments of the ‘developing’ countries to reduce further taxes and duties on export, using greater part of the taxes of the people of those countries to subsidize their production works in the E.P.Z. / F.T.Z. / S.E.Z.s, gaining more freedom to shift orders from factories of one country to another in search of cheaper labour power—- these are some of them. The condition of the bourgeoisie of these ‘developing’ countries is such that they are not able to think beyond fattening their own kitty by a minor share of the huge profit expropriated by the giant multinationals of the imperialist countries. Bourgeoisie of countries of Africa, Caribbean Islands, South Asia are vociferously pitching in for A.T.C. in the hope that it will result in more orders of ready-made garment manufacturing coming their way. On the other hand, bourgeoisie of some countries like Bangladesh are begging pitifully for the Multifibre Agreement to be retained, fearing that the termination of the quota system will result in their losing orders to the competitors. Such is their capitulation to the dominance of the giant multinationals!

The grapes of dominance

We have already discussed the condition of the workers of the ready-made garment factories in the ‘developing’ world. Let us now discuss the imperialist plunder exacted as a result of the economics of this ‘global value chain’ dominated by the giant multinationals.

Let us assume that the market price of a branded ready-made garment is Rs. 400.

Then, out of it,
Cost of raw materials (fabric / material) = Rs. 40
Overhead and other costs = Rs. 13
Quota-fee = Rs.20
Transport expenditure = Rs.2
Workers’ wage = Rs. 7
Profit of the owner of the supplier company = Rs.18
Total upto this = Rs. 100

Hence, the value appropriated by the brand-name company and the trading company = Rs. 300

Out of this Rs.300, (which is 75 % of the total value produced ) a very small part goes for the running of the retail outlets and design-making centres of the brand-name companies, and for advertisements; the remaining lion’s part is their profit! [Note:10]

Thus we see that when ready-made garments are being manufactured in the ‘developing’ countries, more than 70 % of the value produced is being appropriated by the ‘developed’ / imperialist countries as profits of their giant multinational companies; while in the ‘developing’ countries, the workers get 1.75 % and the factory-owners get 4.5 %. This hideous machine of drainage of the ‘developing’ countries by the imperialist countries is being held up as the ‘engine of growth for the developing countries’ as a part of the package of ‘export-led industrialization’!

Efforts to dampen revolt

Opposition against this imperialist exploitation is brewing in the form of spontaneous revolt of the garment-workers in several ‘developing’ countries. In the 70’s and 80’s of the last century, we witnessed how so-called ‘worker’s organization’ like A.A.F.L.I. and A.I.F.L.D., run with the imperialist’s backing, worked to derail any workers’ movement. Similar processes are also present today, though under different garbs. A number of N.G.O.s like Oxfam, who draw their salaries from the imperialist’s coffers, are coming forward with reports / programs aimed at the garment workers, with the avowed intention of ‘increasing the worker’s consciousness’, but in reality intending to restrict the worker’s movement within some petty demands not affecting the overall chain of imperialist dominance. The conscious workers have to take their role such that the garment worker’s spontaneously erupting revolts become a part of a revolutionary struggle to eradicate imperialism.

Postscript: An Indian story

For a little over one year now, Indian Rupee is appreciating against U.S. Dollars. As a result, the cost of production in an Indian supplier company is increasing in terms of dollars. This can eat into the profit of the trading companies, which they are not ready to allow. Hence, orders are being shifted from Indian supplier companies to those in other countries. As a consequence, many ready-made garment factories are closing down, others are retrenching workers furiously. Only at Tirupur, in the three months following July,2007, ten thousand workers have lost their jobs; and by the end of the year, this number is estimated to go up to eighty thousand. Just one garment factory of Gurgaon, Orient Crafts, has retrenched eight thousand workers.

A retrenched worker of Tirupur has summed up: “Just when the lamps are being lighted countrywide for Deepavali, the festival of light, all light has been extinguished from our life.” How many times will such darkness descend, before you alight the fire burning up the whole lot of capitalism, imperialism?” [Note:11]

Notes
1. Quoted in the report to the Indian Parliament by central minister Sankar Singh Baghela on December 17, 2004, from ‘Cost Benchmarking Study: India vis a vis Bangladesh, Indonesia, Sri Lanka, China, & Pakistan’ by Cotton Textile Export Promotion Council, India.
2. Source: ‘Garment Workers’ Revolt in Bangladesh’ in libcom.org.
3. Source: ‘Worker’s Power in Argentina: Reinventing Working Culture’ by Marie Trigona, published in Analytical Monthly Review, July-August, 2007.
4. Sources for data used in this section are: ( a ) Oxfam Hong Kong Briefing Paper, April, 2004: Turning The Garment Industry Inside Out. ( b ) Behind The Brand Names, I.C.F.T.U.
5. References for the history of the garment industry discussed in this section are: (a) ‘Women In The Global Factory’ by Annette Fuentes & Barbara Ehrenrich, 1983, South End Press, U.S.A., Cornerstone Publication, India. (b) ‘Rags, Riches and Women Workers: Export Oriented Garment Manufacturing in Bangladesh’ by Naila Kabeer & Simean Mahmud, 2004. (c) same as 4(a).
6. Sources for the data quoted: (a) World Investment Report, 2002 by U.N.C.T.A.D. (b) http: / www.heureka.clara.net / gaia / global02.htm.
7. Example: Birnbaum (2000): ‘Birnbaum’s Global Guide To Winning The Great Garment War’, Hong Kong, Third Horizon Press.
8. Descriptions of activities of Lee & Fung and other trading companies can be had at ‘World Investment Report 2002: Transnational Corporations & Export Competitiveness’, by U.N.C.T.A.D.
9. Quoted from Pg.129 of the source cited in Note:8
10. Quoted from Table 3: Value Chain Of Garments in the source same as in 4(a)
11. Source: Economic Times, 25.10.2007. and Times Of India, 28.10.2007.

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