What Price for Cheap Clothing?

I was listening to NPR on the way in to work today, as I do every morning. They were covering the tragic garment building collapse in Bangladesh, where the death toll has climbed above 500 and they estimate that hundreds more people are still missing. Apparently the owner knew the building was unsafe, after an engineer was called to inspect it following the development of cracks. The engineer advised the owner to evacuate the building, but the owner assured factory managers the building was safe and they told their workers to head inside. The building collapsed only hours later.

The engineer has actually been arrested for negligence, because he is accused of helping the owner add three additional illegal stories to the building. So, not only could the accident have been avoided right before it happened, but I imagine a collapse could have been avoided entirely if the building was constructed to code. 

What is the driving force behind such an avoidable tragedy? There are many layers, but money is at the heart of it. Bangladesh is hungry to capitalize on the globalization of the garment industry by offering a very low-cost product. With labor costs rising in China, companies are looking to countries like Bangladesh to help them maintain healthy profit margins. Workers in China make an average of $200 per month, compared to $37 per month in Bangladesh. Due to the incredibly low cost of labor, a shirt that would cost $13.22 to make in the U.S. costs only $3.72 in Bangladesh (these figures are taken from a CNN infographic). According to Elizabeth Cline, author of Overdressed: The Shockingly High Cost of Cheap Fashion, this has made it possible for consumers to buy cheap fashion, but with hidden costs to human rights and the environment.

While you can’t fault a company for trying to maintain healthy margins and deliver on promises to shareholders, the companies do bear some responsibility for ensuring that systems are in place to protect human rights in the factories where their products are produced. Retailers whose garments are made by some of the factories in the building have responded in various ways, some by trying to distance themselves from the factories, others by admitting a connection and pledging support for the victims. While the latter is commendable, more needs to happen on the front end to encourage safe conditions for workers in all countries. Author Elizabeth Cline thinks that the tragedy in Bangladesh will serve as a turning point in the responsible consumption of fashion, much like the locavore movement has encouraged more responsible consumption of food. I hope she is right. 

Sarah DerGarabedian, CFA
Director of Research

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