Saturday, October 29, 2011

Sweatshop Impossible: Musings on Better Work's October 2011 conference on the business case for better working conditions in global value chains

The Workers, Businesses and Government: Understanding Labour Compliance in Global Supply Chains conference held at the International Finance Corporation's Pennsylvania Avenue offices from October 26-28, 2011 was primarily an exercise in translation of the languages spoken by anti-sweatshop activists, worker rights groups and the International Labor Organization (ILO) on the one hand and business, development economists and banking experts at the World Bank and the International Finance Corporation (IFC) on the other.  The conference was part of the agenda of Better Work, a joint project of the ILO and the IFC started in 2007 to embed better working standards in the development projects financed by the IFC.  Better Work assists enterprises, worker advocate and governments in the implementation of improved working conditions in global value chains.  In the four years of its existence, Better Work has implemented projects in Cambodia, Haiti, Indonesia, Jordan, Lesotho, Nicaragua and Vietnam.  The underlying goal of the conference seems to have been to convince multi-national enterprises and other companies that there is a strong business case for improving working conditions in their global value chains.   

    The key to the inter-institutional and inter-ideology translation in the conference was in fact the presentation most incomprehensible to a good part of the audience.  While Subal Kumbhakar’s presentation “Does improvement in institutional quality help firm performance? Insights from a semiparametric approach” made most of the audience want to run frantically to the nearest community college for a refresher course in Calculus, he made his point clear with a pair of charts demonstrating that input data on the issue of whether labor standards improve or detract from productivity and profitability of factories - essentially casting doubt on the World Bank’s “Doing Business” Indicators which have been criticized for lowering countries’ investment friendliness scores based on higher labor standards.  Raymond Robertson of McAllister College and co-author of the paper “Measuring the Impact of Better Work” expanded on Kumbhakar’s point by analogizing human resources practices to technological advancements, noting that many of the factories in global supply chains utilize out-dated human resources and management technologies.  Assimilating modern human resources practices that incorporate respect for worker rights can actually make factories more competitive and profitable while improving worker rights.  The conversation brings to mind Robert Irvine’s show Restaurant Impossible on The Food Network.  Each week, Robert Irvine has two days and $10,000.00 to help transform a failing restaurant from bankruptcy into a profitable business.  In one show, Irvine spent an hour training a woman how to use a computer-based seating program - essentially using simple management training to professionalize the restaurant and eliminate the wait times for entering customers.  The problem, as evidenced in Verit√©’s 2009 report "Advancing Women’s Rights and Social Responsibility: Capacity Building in Mexico", is that it is not always easy to persuade factory owners and managers to participate in pilot projects and training programs to help improve their management practices.  Better Work adherents may have to follow the example of the Food Network and Sesame Workshop and invent a new TV series called “Sweatshop Impossible” in which Robert Irvine or an equally muscular management ace is able to transform a window-less unsafe textile sweatshop with fabric and cotton tufts floating around into a model factory - using a sledge hammer to break windows in the walls, rearranging all the work stations and taking managers through a harrowing and emotional crash course of tough love to eliminate abusive management practices, as Irvine did in one episode when he persuaded one restaurant owner to move the menagerie of chickens, goats and other barnyard pets to his home backyard and to let his French-trained chef son take charge of the kitchen instead of insisting on being in charge of every aspect of management and food production.

    One theme that permeated the conference was the importance of women to the Better Work agenda - not only as workers, but as untapped resources as managers, business owners and board members.  In her presentation of an extensive World Bank study Sewing Success  Gladys Lopez-Acevedo pointed out that the textile industry can be the entry point for women into the world’s formal economy and argued that countries need to develop policies to help those who are left behind by major events like the phase-out of the Multi Fibre Arrangement (MFA) in 2004 or the effects of the 2008 Financial Crisis.  Another of the gendered views of global supply chains was provided by Michelle Christian of Duke University, who in her presentation of the paper "A Gendered Tourism Global Value Chain: Economic Upgrading Lessons from Kenya" argued both that the global tourism industry (including hotels and tour operators) should be subject to a global value chain analysis similar to that applied in the textile, electronics and other manufacturing industries and that sexual harassment and violence must be addressed in global value chain actions, especially in the case of short-term, temporary and other contingent members of the workforce.  Christian emphasized the fact that women in contingent positions are more likely to be asked to provide sexual favors in exchange for jobs and job retention.  The notion of second-tier, third-tier, fourth-tier and even fifth-tier participants in global value chains was raised more than once in discussing the reach of programs such as Better Work.

    One of the other information highlights in the conference was the fact that there may be a global cocoa shortage by 2020 unless price and working conditions in cocoa farming - which can only occur in a narrow band of agricultural lands near the equator - improve so that young cocoa farmers are enticed to enter into or remain in cocoa farming - although the unintended beneficiaries of young male cocoa farmers migrating to cities for better opportunities are young women cocoa farmers who are afforded opportunities to move into cocoa farming.  Another surprising point was that factory owners and managers interviewed as part of Daniel Vaughan-Whitehead’s global assessment of wage practices along the supply chain in 2010-11 stated they often keep two or three sets of books as part of managing their manufacturing operations.  While the fact that a factory owner hoping to engage in business with multi-national enterprises might keep books to appear more compliant with corporate codes of conduct than the facts would otherwise indicate is not surprising, the fact that factory owners were forthcoming with this information is extremely surprising - and shows how complex and challenging the task of improving working conditions, competitiveness and productivity in global value chains can be - not to mention addressing the issues of non-payment, delayed payment and under-payment of wages to workers in the textile and apparel and other industries.

    In his presentation on creating an enabling environment for responsible labor practices, Richard Feinberg emphasized the importance of branding not only for companies, but for countries as well, pointing out that as early as the 1970s, Costa Rica branded itself as a “green tourism destination,” preserving nature parks to attract tourists and improve its economy.  Feinberg’s presentation echoed the presentation made by Annelies Goger on the export garment manufacturing industry in Sri Lanka, in which Goger noted that the Government of Sri Lanka made efforts to re-brand garment manufacturing (primarily ladies under-garments) within its borders so that working in garment factories would not be seen as an immoral activity for young Moslem Sri Lankan women, but rather as a path toward prosperity and respect within the factory and community.  Goger also noted that three Sri Lankan factories are among the first “green” factories in the world.  Sri Lanka, it appears, is experimenting with branding itself as a socially and environmentally sustainable source of goods in global value chains.  These efforts are hindered by the low number of unions in Sri Lanka and the issue of accountability for human rights abuses during Sri Lanka's recently-ended civil war, however.

    Another of Feinberg’s insights was that the “WoG” (Whole of Government”) approach needs to be applied to labor standards enforcement.  Many countries - Central American countries in the CAFTA-DR are primary examples - have labor departments that are highly understaffed and under-resourced.  The key is to engage all of a country’s government agencies to create an enabling environment for responsible labor practices.  This theme was echoed later by Adam Greene of USCIB, who pointed out that non-labor-based issues such as corruption, cronyism, general lack of governance and rule of law as well as informality (lack of registration of live births, for example, making it difficult to allocate social security benefits to people who are undocumented in their own countries) can affect a country’s investment climate as well as its capacity or incapacity to effectively enforce labor standards.  The WHOLE culture must be improved to improve labor practices.

    The outcomes and conclusions of the conference will be presented in Geneva, Switzerland on December 5.  The next stop for the Better Work program will probably be Bangladesh, which has a growing textile industry that is garnering a bigger and bigger share of global textile production and has been the center of a labor-led social movement for improved working conditions and minimum wage increases.  The long-term goals for Better Work include considering projects in industries other than textile and garment manufacturing (such as leather and shoe manufacturing or agriculture as recommended by U.S. Undersecretary for International Labor Affairs Sandra Polaski or electronics manufacturing as implied by Adam Greene), strengthening the “third leg” of the labor-employer-government stool as recommended by Cathy Feingold of the AFL-CIO to ensure that Freedom of Association is a fundamental key to accessing the world market and to continue to persuade international finance institutions like the World Bank to incorporate Better Work principles into their operations - as evidenced by remarks made by Martin Rama of the World Bank who announced that the World Bank’s World Development Report 2013 (to be published in 2012) will address jobs and job creation for the first time since 1995.  The speakers and participants concluded that manufacturers need more incentives to improve, buyers need to improve their practices and everybody must “combat the corrosiveness of casualness.”