Race to the bottom refers to
governments competing for jobs by offering corporate subsidies and in the case
of poor countries, repressed workers who work cheap and don’t cause problems.
It’s not a phenomenon that applies only to poor countries as US states and
municipalities also lavish corporations with public money to lure their
facilities. The competition that Boeing set up when it wished to move its
corporate headquarters provides one of the most egregious examples. They didn’t
look around for the best location, they searched out suitable locations and
chose the one that offered the biggest subsidy. Did they really need to do
that? Was the corporation going through hard times and requiring a handout? Was
it really right for the people of Chicago where Boeing landed – many of whom
are in difficult straits, not to mention the city itself which has mountainous
social and financial problems - to spoon feed one of the world’s largest and wealthiest
corporations? And yet that’s where we’ve descended as a society – starve the
poor to feed the rich. I’m not referring just to America here, but a large part
of the world has adopted that corporate philosophy.
In Cambodia, race to the bottom
involves granting tax holidays of 5 or 7 years to new factories. Recently a
minister mused that Cambodia should end those generous tax benefits since the
country really needs to increase revenue. He want on to speculate that many
businesses close up and move when the tax holiday ends, with some merely
changing their names and starting over with new tax breaks. The news article
then pointed out that all the neighboring countries do the same, so it might be
difficult to implement such a change. Public subsidies for private businesses
is just as evil in a developed country like the US as in Cambodia, but at least
workers in the US pay income taxes to make up part of the shortfall in revenue.
In Cambo workers are too poor to pay taxes so all the additional costs caused
by providing infrastructure to the new factories or education for worker’s
children, etc. is born by the people as a whole. Bangladesh also provides tax
holidays of 5 years to new businesses. Countries get jobs for their people, a
good thing for sure, but not the money to provide social services to improve
their lives.
Bangladesh has been in the news a
lot lately. In its desperation to provide jobs for its people, one of the
world’s poorest, they’ve gone through great lengths to repress worker’s rights
and income, thinking that was the way to make international corporations happy,
since that gives them the ability to provide extra cheap garments for people in
rich countries. The country is also hopelessly corrupt, which means common
sense safety rules are routinely and easily ignored, like having factory doors
locked so when a fire erupts, workers have no exit. They do that to prevent
workers skipping out surreptitiously and to prevent theft. Late last year more
than 100 workers died for that very reason. They can do that because small
bribes there can solve all problems.
More recently, more than eleven
hundred workers died in a building collapse in which multiple illegal and/or
unethical and/or corruption factors were involved. In the first place the
factory was built on a former wetland, which doesn’t automatically preclude
developing an 8 story building there but does require extra care and higher
costs in construction, which obviously didn’t happen in that case. Secondly,
the building permit was issued by the local jurisdiction, though only the
central government is authorized to do so for that type of building. The area
is not zoned for industry so the building should’ve never been allowed in the
first place. The permit was for a 5 story building to which an extra 3 stories
were added illegally. None of those reasons would have necessarily caused the
building to collapse if it had been designed properly for its purpose.
Corruption takes on many guises.
In South Asia – Bangladesh, India, Pakistan, Nepal – corruption is social and
ethical as well as financial. For instance, during the great flood in Pakistan
in 2011, people who lost everything were denied basic food aid if they couldn’t
show ID. Their whole lives had been washed away but they didn’t qualify for basic
sustenance because of bureaucratic callousness and intransigence. In India, it
takes 29 permits to open a supermarket, each one in a different office
requiring a separate bribe unless the permit seeker is willing to wait
interminable lengths of time for the permits.
The following is an experience I
had at the Kathmandu Post Office on my first trip there in 1992; I doubt if
it’s changed all that much. I was sending some paintings to the states in a
mailing tube. I went into the office and stood in one of three lines with my
package. When I got to the front – it took a while, there were about 10 people
ahead of me – I was told I was in the wrong line, so I went over to the correct
one. When I got to the window the clerk weighed the package, put a little
scribble on it and told me to go to another line. A little odd, but okay, next
line, another long wait, the clerk looks at the scribble and sells me stamps
and tells me to put them on the tube and to go to a third line to mail it. What?
All that rigmarole to mail one package? Well, at the time the largest
denomination stamp had minimal value so I had to practically fill up the tube
with stamps. That required that I separate long strips of stamps from a whole
sheet and a half of them. In the process, I ripped off a very small portion of
the corner of two of them, partly because they were printed on low quality
paper. I thought nothing of it, but when I got to the head of the third line
where the stamps were to get postmarked, the package was rejected for the two
little corners that had gotten ripped off. Well, I freaked, said some decidedly
unkind words to the clerk and stormed out, only to be forced to return some
days later if I actually was going to get the thing mailed.
In all three cases you have
bureaucracy run amok, seemingly almost gleefully devising rules designed to harass
the citizen, and by the way stymieing growth, progress and advancement. That is
in contrast to Cambodia where the permit process, with a little facilitating
money thrown in, is very speedy and hassle free. Bureaucracy here also has its
flexibility. For example, recently the process for obtaining a license plate
for motorbikes was changed in a way that required long waits in an
uncomfortable setting and was very confused since the government hadn’t properly
made the process clear. Previously one paid an agent who charged a little extra
but did all the paperwork and the plate was obtained very quickly. After a week
of complaints the process was simplified and streamlined.
My personal experience with Bangladesh
is very limited but telling nonetheless. The first time was in 1992 when I
chose to fly Biman Air, the Bangladesh national carrier, from Bangkok to
Calcutta, to save money. That involved a long layover in Dhaka. During the
wait, I was able to observe the main waiting room being expanded right outside
the big picture window. They - mostly women - were bringing concrete for the
floor by carrying one bucket at a time on their heads up a flight of stairs...
at an international airport.
I used Biman a second time in 2000,
also to save money. On that trip I spent overnight till mid-morning in Dhaka at
a special hotel run by the airline near the airport. The special hotel was
supposed to be for emergency use only when flight connections didn’t happen,
but obviously wasn’t an emergency in our case. This time it was a flight from
BKK to Kathmandu, but since they had little traffic on the Dhaka-Kathmandu leg
they used us travelers to add to the nearly empty plane. They served us a very
simple dinner and breakfast the next morning and I got to walk around the
neighborhood for about two hours before the mid-morning flight. The meal served
to the hotel staff consisted of rice colored with spices and a small amount of
eggs, no vegetables or meat... not much to it.
Though the immediate area around
the hotel was middle class, just a short distance away the poverty was
impressive even compared to India. One picture that stands out in my mind was
seeing people breaking up new bricks with small sledgehammers, which I assumed
was to take the place of construction rock. Almost the entire country consists
of the vast delta formed at the confluence of the Ganges and Brahmaputra
rivers. Except for some foothills in the north and far southeast of the
country, there’s just no place to quarry rock. Being a delta makes it a very
fertile land, but it’s also one of the most crowded places on Earth. It has a
population of about 160 million in an area the size of Wisconsin in the US –
about 55,000 square miles or 135,000 square kilometers. It’s about 2/3 the size
of Cambodia which has less than one tenth the people.
The industrial makeup of
Bangladesh is very similar to Cambodia’s. In both cases garments make up 80% of
export earnings. Bangladesh’s garment industry is ten times the size of
Cambodia’s, which matches the population differential. Per capita income is
very similar - $2000 for Bangladesh, $2400 for Cambodia - based on Purchasing
Power Parity which is a better indicator of wealth than merely converting to US
dollars.
Treatment of workers, however, has
been very different. Minimum wage in Bangladesh’s garment industry was recently
raised from $25 per month to $38, whereas Cambodia’s wage was recently raised
from $61 to $75 – almost twice as much though Cambodia’s income is only 20%
larger. Where the countries diverge is in worker’s rights. Cambo, being
dependent on the international community for the last 20 years was forced to
allow unions and today the entire industry is unionized with several unions
vying for worker support. Some buyers, like The Gap, for instance, purposely
have located here so they can say the workers that make their clothes have the
right to join unions and are treated fairly. Cambodia’s garment workers are not
at all shy about work stoppages and asserting their rights. Manufacturers and
the government don’t like it, but they live with it.
In contrast, Bangladesh has
prohibited all union organizing. Change towards improving worker rights is
being talked about with the recent disasters affecting so many workers. It’s
possible, maybe even likely, that unionized workers would’ve refused to enter
the building that later collapsed. It was evacuated the day before because of
serious cracks in the concrete, but workers were told they had to return to
work. With no rights whatever and in fear of their jobs, they felt they had no
choice.
At the time of the collapse, I was
thinking that it couldn’t happen here, or at least wasn’t very likely, but then
in quick succession two events in Cambodia caused death and injury. In the
first an illegally constructed mezzanine floor collapsed killing two and
injuring another 20 or so and then only four days later a dining area on a
raised platform fell down and injured about two dozen. Both were cases of
shoddy construction and careless thinking. Still a sharp contrast to the large
numbers killed in Bangladesh. There, because of extreme population density,
they have no choice but to build multistory. There’s no way they could take
very large greenfields, as in Cambodia, to build one story factories.
Multistory factories in themselves
are no problem but require good design and conscientious engineering. They’re
an efficient use of land and in some ways, in my mind, preferred to sprawling
Cambodia style factories build on open land in the middle of nowhere. Many Cambo
workers are forced to travel as much as two hours each way to get to work, a
tremendous burden added to an already long workday. The industry of late has
been having difficulty recruiting workers; getting to the worksite is one of
the drawbacks of current development.
Even if only one story, it’d be
far preferable to locate compact factories in or close to population centers.
There’s a factory located close to the heart of Kampot which, until recently,
employed about 300 workers (I’m not sure why it closed down). The vast majority
of its workers were within 15 minutes of the factory by walking, bicycling or
motorbike.
Cambodia and many other places in
the world are being designed as if fossil fuels will always be cheap and easily
available, a dubious proposition at best. They’re obviously oblivious to
shortages that are inevitable and not in the distant future.
In America, good planning
principles encourage industrial zones near the heart of the city since that’s
where the workers are. Industrial jobs need to be balanced with retail,
commercial and office jobs since there are a lot of people who are not suited
to the latter. Having people travel long distances to work is never a good idea
for the individuals involved or the increase in traffic that results. A few
years ago a multistory garment factory employing hundreds of workers which was
located on Street 51 in the center of Phnom Penh was replaced with an English
school. Few would suggest that a garment factory is a better use of very valuable
land in that location than an English school but it made it possible for large
numbers of workers to easily get to work. Instead factories are being built 20,
30, 40 kilometers from the city in former rice paddies. This will at some point
constitute a big problem.
