Race to the bottom

 

Under capitalism, brands compete with each other to make the most profit. One easy way to do this is to cut costs to production. While in some instances this may not be possible, for example, the cost of transport, one way that costs can be cut is by lowering the cost of labour – i.e. the money given to workers to make the clothes. By saving on labour, brands can afford to make the price of goods cheaper, appealing to more customers, and thus selling more than their competitors and increasing profits.

Globalisation and neoliberal policies made it easier for brands to go around the world looking for places to get cheap labour, putting workers across the world in competition with each other to attract investment from these brands. This results in countries dissolving protections safeguarding workers, preventing them from organising, and lowering wages, to reduce labour costs and prevent retaliation from workers, in turn attracting foreign investment.

The impact of the race to the bottom was examined by Olney (2010), who found that reduced protections in a country correlated with increased foreign investment in that country. Moreover, if one country reduced protections, other countries would follow suit (Ibid.). This indicates brands are actively seeking countries with little protection for workers, allowing them to easily lower costs.

This was seen in a recent study, showing that the exploitation of garment workers has intensified, as brands continue to lower the prices they give to factories to produce their clothes, while simultaneously demanding clothes be made in shorter spaces of time – as a result of the fast-fashion model which involves frequently launching new lines and shortened clothing seasons. Brands will penalise factory owners if they fail to comply and delay payments to the owners. By doing so, this paves the way for exploitative working conditions, as suppliers are compelled to find ways to cut costs in order to meet brands’ increasing demands with limited financial support, while simultaneously attempting to meet the ethical codes of conducts set by the very same brands. These cuts to costs inevitably exacerbate abusive working conditions and risky work environments, including subcontracting work to unregulated, unauthorised factories, with worse conditions and wages.

In this ongoing race to the bottom, workers in the newly developed Ethiopian garment industry are the latest victims, as brands including PVH (pwns Tommy Hilfiger and Calvin Klein), and H&M flock to Ethiopia, under the guise of lifting up the poor working population with new opportunities. In reality, Ethiopia provides another opportunity for these brands to cut labour costs, with no laws on minimum wage or laws to protect workers. Unsurprisingly, abusive working conditions are being reported, and a recent study has confirmed that workers in Ethiopia are now the lowest paid in the garment industry, at $26 a month. In comparison, Bangladeshi garment workers earn $95, those in Kenya earn $207 and in China $340. 

Do not for a second believe that brands are here to help Ethiopia. They have simply found more workers to exploit, in order to meet their excessive demands for profit, in the ongoing race to the bottom.

 

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