DAVID Starkey is never short of something controversial to say. His appearance on BBC Question Time last week was no different, with a bizarre rant about the awful collapse of Bangladeshi factory, which killed over 500 in tragic circumstances. Starkey put the blame of the incident firmly at the door of globalisation and free trade. He claimed that globalisation drives down wages and social welfare to the lowest common denominator. His means of preventing all this? Tariffs and trade protectionism.
Of course, workers should be able to go to work in the knowledge that their factory will not collapse on them. There was a clear breach of safety standards even within current Bangladeshi law. Hand-wringing over our demand for cheap clothes – that we might be “to blame” for the incident because we buy things produced there – is understandable. Nevertheless, Starkey’s solution, a world of tariffs and protectionism, is a less desirable counter-factual.
Life for Bangladeshis in other occupations outside of sweatshops is not sweetness and light. If we pulled up the drawbridge on buying their clothes, the Bangladeshi population would suffer. As terrible as working conditions might be, incomes from these clothing jobs are much more significant than rural wages. The 45 per cent who work in subsistence agriculture could attest to that. The idea of an unattainable utopia of well-paid jobs for all Bangladeshis to replace the status quo “might assuage our consciences, but is no favour to its alleged beneficiaries” (as Paul Krugman once said).
In fact, globalisation and trade has already had significant benefits for Bangladesh. Since shifting towards an export-oriented agenda in 1975, it has enjoyed increasing, and fairly stable, growth rates. Annual GDP growth averaged 5.9 per cent between 2001 and 2011, compared to 1.2 per cent per year 30 years earlier. According to the World Bank, gross national income per capita (in US dollar PPP terms) more than doubled between 2001 and 2011. Save the Children says that “headline rates of poverty have fallen from 57 per cent in 1992 to 31.5 per cent in 2009. That means a child born in 2008 can expect to live to 66, while in 1970 it was 44.” The labour force participation rate for women at 59.9 per cent is particularly high compared to Pakistan (23 per cent) and Saudi Arabia (18 per cent). Yes, there’s much more development to be achieved. But as both India and China found before, in the longer term it’s competition and private investment induced by trade which drive up wages, contrary to Starkey’s claims.
All the evidence suggests that the trade Starkey resents is a necessary, but not sufficient, condition for sustained development. It’s not the only factor. Daron Acemoglu’s work has shown the important role of inclusive institutions, and a recent World Bank Policy Research Working Paper suggested trade has the most beneficial effect in specific settings: where financial sectors are deep, education levels high, and governance strong. It’s thus at this institutional level where the Bangladeshis must focus to prevent repeats of these shocking incidents. An effective rule of law, and anti-corruption practices are what are needed. But tearing down the country’s export industries will help no-one.
Ryan Bourne is head of economic research at the Centre for Policy Studies.