Why did 1,129 people have to die? This question has been running through my head since I began reporting on the Rana Plaza disaster. It’s a question that has been discussed on a global scale since the garments industry in Bangladesh so intimately connects the people who wear clothes by large brands in European and North American countries with the exploitation workers face producing them in Bangladesh. And it’s a question that is not easily answered.
There are many who are responsible for the deaths at Rana Plaza: A building owner who flagrantly violated regulations and a government that didn’t enforce them. Overseas buyers who push down prices and customers who buy their cheap clothing. Much points to the fact that Rana Plaza should not be seen as an isolated incident. The working conditions in the factories were hardly atypical, their overseas customers were unexceptional. The political corruption that came to light regarding the building’s owner Sohel Rana can hardly have surprised anyone familiar with rural Bangladeshi politics.
The deaths were systemic and one of the places that are seldom scrutinised in the search for answers is the garments industry itself. Discussions on the factory owners usually restrict themselves to a contrast of immense private wealth on one hand and miserable factory conditions on the other. The overlap of powerful politicians and powerful business owners is regularly evoked, as is the dim situation of workers’ rights activists and unions in Bangladesh.
But that is hardly the whole story. The fact is that only few of the business owners are actually rich enough to be adequately held responsible for disasters such as the Rana Plaza collapse. The fact is – and garments owners speak openly about this – the garments business model in Bangladesh is highly leveraged on borrowed money, making it financially extremely risky, but at the same time offering fantastic returns on investment. One influential business owner I spoke to showed me in a spot calculation how the entire investment for a company could be recovered within a year of stable operations.
The business model attracts a class of upwardly mobile businessmen looking to make their fortunes. And this is the open secret behind the Rana Plaza disaster: it is a risk inherent to the business model.
This was the case with two of the factory owners in Rana Plaza: Mahmudur Rahman Tapash and Bazlus Samad Adnan who owned New Wave Bottoms and New Wave Style. As I researched their stories for the German newspaper “taz.die tageszeitung” (see our complete report at http://www.taz.de/!119814 ) it struck me how often my interviewees made it a point to mention that they hadn’t actually been very rich. Not as rich as some garments owners are. “They were probably trying to grow their business as big as ours”, a friend of the two men told me, himself the owner of a number of factories.
Financial documents that outline their business show: They had invested 2 crores in their business, employed 1,600 people, turned over 67 crores in 2012 and made 2.5 crores net profit. Those are impressive numbers if one ignores the huge gap between own and borrowed money. And if one ignores that the garments business in Bangladesh can be very volatile thanks to corruption, load shedding and hartals. Miss shipments and your profit melts away. Pay back a loan late and high interest rates will eat into your earnings.
With a business model as risky as that there is significant incentive to cut corners wherever possible in the hope that everything will somehow work out. When it doesn’t, as is regularly the case in one disaster after another, the web of debts tightens like a noose. Consider the Rana Plaza: the ruins have destroyed what fixed capital Tapash and Adnan had, including hundreds of brand new sewing machines in a new factory floor. Two shipments were due to be sent off on the day after the disaster, meaning a whole batch of running capital was destroyed just before it could be liquidated.
If one assumes that only a fifth of their workers, say 320, died in the disaster and if they are paid only laughably low compensation of one lakh taka as is often the case, the total runs up to more than Tk three crore Takas. That is more than a year’s earnings from both factories. If one assumes that more people died, which is likely, and one assumes figures which are a fairer compensation for a long term loss of income, the sum is much higher.
In short: while these men had incomes that were significantly above average for Bangladesh, the money they made was hardly enough to allow them the financial flexibility of running a safe business. It’s plausible to imagine that buildings constructed with a higher standard may have been too expensive for them to rent and it is plausible to assume that they may have been under pressure to get shipments out on time leading to a disregard for safety. Their own and more importantly that of their workers.
The fact is, that while they pocketed the profits of their risky business for years, they will not be able to bear the costs of its collapse. Those are left to the families who lost earners, to volunteers who gave money, sweat and lives in the rescue work and to the government, which has declared that it will pay the hospital bills.
And since they are not alone in this risky business, we will very probably see Rana Plaza happen again.
