A Response to Mr.Panagiriya

http://economictimes.indiatimes.com/opinion/comments-analysis/no-use-in-blaming-multinational-retailers-for-industrial-tragedies-in-bangladesh/articleshow/20282015.cms


In the sourcing relationship between a clothing brand, contractor and the labourer, the brand outsources production not out of philanthropic intention but merely to get the product at the lowest possible price. By using clever manipulations, Mr.Panagiriya says that implementing better prices will mean exodus of contracts to other countries. The arrogant mindset of those advocating unbridled capitalism and globalisation is revealed here. First, he implicitly accepts a race to bottom where owners do anything to cut down cost of production. Secondly, by saying that I have other cheap places to produce from, he means these nations will also not demand better contract prices but never says that it should be done by all nations. Market is a better way to price discovery, but this happens between unequal systems with huge disparities in economic conditions and power. Corporates like Walmart are more powerful, not just financially but by lobbying with foreign governments, forcing them to accept unfair deals through pressure from US government and most recently  a  than most other 3rd world nations to which they outsource production contracts. Such a market is obviously lopsided and so price discovery is obviously a scam.

By comparing a apartment owner-real estate builder-labourer, he forgets several things-
1) There is always a transfer of adversities by the contractor/builder but never a transfer of benefits. He implicitly accepts this by saying that we need government regulations to ensure better workplace safety and ensuring better payment to contractors is not enough. The builder has a benefit in the real estate deal, but in the case of the garment factory, unless there is a benefit, it cannot be transferred

2) there is no real estate regulator in India as of now. The consumer is duped through lack of promised facilities, inordinate delays, need for regular maintenance and repair and hidden costs. The builder has benefits, which is clearly not transferred

The new age of globalisation and capitalism can lead to loss of lives if not regulated in the interest of the public, but when there are sound regulations and a fair deal- in this case, better payments to the contractor who transfers the benefits to the workers- it will benefit the labourer, contractor, brand owner and the consumer.