As details of the tragedy unfolded live on TV, fingers began to be pointed at the factory owners, the builders & US multinationals, as well as American consumers that prefer low-priced clothing.
The presumption of those that rushed to judgment seems to be that there is something peculiar about the nature of profit seeking or bargain hunting when it comes to Bangladesh.
It seems to have occurred to few of them that much of the blame can be traced to the government & civil authorities of Bangladesh. As it is, the building containing the factory was constructed illegally since it takes many months to obstain a construction permit in Bangladesh.
To get some insights into this, check out Bangladesh’s standing in the Transparency International polls on corruption, its rank on the Economic Freedom Index & the World Bank’s “Doing Business” report.
In all these, Bangladesh scores poorly in terms of facilitating business operations, including receipt of business licenses or building permits, etc.
This all matters inasmuch as excessive “red tape” due to extensive regulation & corruption contribute to, indeed insure, that individuals or firms will operate outside the law.
In turn, reducing regulation, making it more transparent or reducing graft are a better way forward than heeding the call to impose more labor force regulations that will most likely lead to higher unemployment.
A quick survey of where such disasters occur will reveal a common thread of “government failure” in that there is an insufficient institutional infrastructure to minimize the risk of such catastrophes. Besides the most fundamental problem is the lack of the “Rule of Law”.
As such, the mechanisms to hold malefactors accountable are weak or are blocked by political privileges.
There are several ways for labor conditions to improve in Bangladesh or any other less-developed economy. One is for there to be more open global trade so that there is broader access to foreign markets for all their goods. Similarly, more open capital flows that allow foreign ownership of productive means (e.g., factories) will improve working conditions. And lastly, more open immigration will lead to an increased scarcity of labor that will cause wages to rise.