“The Low Price” of the textile discounter KiK – consequences for labour conditions in textile factories in Bangladesh

General introduction on globalization

Globalization is more than a word for a worldwide phenomenon; it affects all of us in our today’s lives. It can have considerable, concrete negative effects like the loose of someone’s job or can rest rather unseen, which means without consideration of the consumers when for example parts of cars are built in Eastern Europe and the complete car is later sold in Germany and therefore considered as “German-Quality-Product”. Processes of globalization have direct impact on our consumption, like the availability of fresh tropic fruits, coffee and cheap clothes. Globalization has also touristic and migrational aspects that affect the cultural perspective of a country (Backhaus, N. 2009, 13-14). It is really complicated to define globalization in general, because different groups like globalization supporter and antagonists have a very unequal look on this issue. Another problem is that globalization creates winner and loser, so it is problematic to make a general judgement on if the globalization process is good or bad.

I really like the attempt of a general definition of globalization by Anthony Giddens (1996, 85) where he describes globalization as a process during which social interactions between human beings from our entire world are widening and an intensification happens. Caused by this process distant places get connected in a kind that actions at one place affect and are affected by others far away (Backhaus, N. 2009, 16).

Dimensions of globalization

An attempt to structure the theme of globalization will be made in the following paragraph. Because of the complexity of this theme globalization is divided into different dimensions. This divition is based on Giddens (1996, 92). The figure is adapted from Backhaus (2009, 24).

My focus lies on the capitalistic global economy, because it has a deep impact on the globalization and has a strong influence on our lives. The system of the world market is very powerful and can lead to negative consequences like the financial crisis in 2008/2009 in a very global form.

Outline of my case study

In my case study I like to concentrate on the economic side of globalization. As introduction I will focus on market economy and the allocation of world trade. Then I will highlight global crises that can be seen as consequences of a global economy. After that I like to focus on some detailed example like the textile industry as an example for changes in production and the labour conditions. I also like to do a short side track to the Global Compact and the Corporate Social Responsibility (CSR) and the limit of such commitments. As possible future prospects I will finish with an overview about some models of employment for the future.

First version of the case study

Introduction

This is the first version of my case study. It is a kind of collection of important quotes especially from my key resource. I will use them as a skeleton for my final text.

As I already wrote in my outline of the subject, I like to focus on the textile industry. Discounter, like KIK, buy clothes that are produced very cheaply at low wage countries like Bangladesh. At the beginning I like to give a short presentation of Bangladeshi economy and social situation. Then I want to show the influence of globalisation on the Bangladeshi textile industry.

Brief introduction of Bangladesh

Bangladesh is a country that is very affected by agriculture, because the land is very fructuous. “Eighty percent of the agricultural land is used for rice growing, but there is also wheat, barley, maize, potatoes, pulses, bananas and mangoes.” Nevertheless around 25 % of the population is suffering from hunger. The garment industry contributes enormously to the economic development. 2 million people are working at the 3.500 factories. 85 % are women from the rural regions who need to work in the cities because of job shortage in their home regions. The work at the garment factories is their only chance to receive income that helps to save the survival of the family.

The Bangladeshi garment and textile Industry

“Since 1990, Bangladesh has experienced a spectacular growth in the area of clothing and textiles. Whereas the value of exports amounted to 600 million US dollars in 1990, this rose to nearly eight billion US dollars in 2006. The reason: Bangladesh is one of the poorest countries in the world and, in the past, with favourable customs regulations, was able to export clothing to Europe and the USA without quantitative restrictions. However, in other countries, the bulk buyers, in accordance with the Agreement on Textiles and Clothing of the World Trade Organisation (WTO), restricted imports through quotas. Bangladesh was able to take advantage of this trading advantage, in order to establish itself alongside the textile giants China, India and Hong Kong on the world market.” The export products of Bangladesh shifted from raw material, like jute, and jute products (90%) to clothes based on cotton. The problem is that cotton has to be imported first before it can be part of the garment production. “Bangladesh’s clothing industry did not collapse after the phase out of the Agreement and its preferential treatment.” “In most factories, labour laws are being massively violated. Thus, the extremely low wage level is the main reason for contracts with buyers from the EU and the USA not being lost. Low wage costs make it attractive, i.e. cheaper, for buyers to allow production to continue in Bangladesh – at the cost of the workers, who, with these wages are barely able to survive.”

The discounter KIK and its methods

In general : How discounter determine the prices

"The retail houses and discounters have developed enormous economic power. They are able to determine the prices and are interested in keeping them down. Producers in Asia, Latin America and Eastern Europe are powerless. They have to swallow whatever the corporations dictate.”

“In 1992, Germans spent 64 billion Euros on clothing, but only 56 billion Euros in 2005. This lower expenditure, however, does not mean that, in terms of volume, less is actually being purchased. Indeed, the very opposite is the case.” “In other words, we are consuming
more, but more cheaply. More and more goods are on offer for ever-decreasing prices.”

“The largest discounters pay their suppliers up to 15-20 percent less for their goods than normal department stores (ActionAid,2007, p.16). Because of the great amounts of goods they can order, they are able to force down purchasing prices to an enormous extent.”
”Suppliers in developing countries are becoming increasingly dependent on a few multinationals and their importers. With continually decreasing prices, they force down wages. Ultimately, it is the garment workers in the factories who suffer.”

“The phase-out of quotas led to price reductions and strong competition among the poor countries that export clothing and whose national income is heavily dependent on exports.” “The poor countries, competing to retain their clothing industry, try to offer the lowest wages. If, however, one looks at the various cost components from the viewpoint of the buyer/company, wages only account for 0.5-1 percent of the ultimate selling price of the product, as the following chart illustrates. In contrast, marketing and advertising, as well as the profit for the company in Germany/ Europe amount to about 25 percent of the endselling price. An increase in wages is, therefore “peanuts” in the eyes of the buyer.”

Literature review

Resource 1:

Title: Internationale Arbeitsstandards in einer globalisierten Welt. Published by Ellen Ehmke, Michael Fichter, Nils Simon, Bodo Zeuner (Hrsg.). Published in VS Verlag für Sozialwissenschaften / GWV Fachverlage GmbH, Wiesbaden 2009.

a) Content of the resource

This book is based on and developed during a project module about International Labour Standards (ILS) in a globalised world at the Otto-Suhr-Institute for politics at the University of Berlin 2005 until 2006. The texts were written by students of this course and their professors. It is an overview about the problem of International Labour Standards (ILS).

b) Usefulness of the resource

This book offers 4 main chapters in which different sub-texts are located. The first chapter gives an introduction and shows a theoretical placement. This chapter is interesting for me because I get an overview of the interaction and the consequences of globalisation and labour standards in deveolping countries. The "race to the bottom theory" is of special interest for me. The second chapter introduces actors and organisations of ILS. The third chapter highlights instruments of ILS. In this part two articles are especially interesting. The first gives a concrete example in the textile industry: the code of conduct by Hennes & Mauritz. The second article appeals to the question "why" the compliance with core labour standards is so low in developing countries. Chapter four ends with an outlook and shows some perspectives.To sum up: This book provides information on ILS and some general aspects on globalisation and its consequences on labour conditions in developing countries. I think it is very useful.

c) Limitations of the resource

It doesn't offer information on the special case I like to highlight as an example in my case study. I like to present the German KIK company as an example for the textile industry that uses globalisation for obtaining cheap manpower.

Resource 2:

Title: Globalisierung. Author: PD Dr. Norman Backhaus. Published by Prof. Dr. Rainer Duttmann, Prof. Dr. Rainer Glawion, Prof. Herbert Popp, Prof. Dr. Rita Schneider-Sliwa. Published in Westermann Bildungshaus Schulbuchverlage, Braunschweig 2009.

a) Content of the resource

This book provides a general overview on globalisation issues. It catagorizes globalisation and gives a historical background to the development of globalisation. The book offers a chapter on the field of economy.

b) Usefulness of the resource

For me this book is of interest because it offers me on the one side an overview and introduction on globalisation, so that I can get in touch with the theme, and on the other side it provides a description of the production-development in the textile industry.

c) Limitations of the resource

It doesn't offer so many concrete examples. It is more kind of an overview.

Resource 3:

Title: Die KIK-Story - die miesen Methoden des Textildiscounters. Published in TV at „Panorama -- die Reporter"  ARD. Author: journalist Christoph Lütgert. The video was first broadcasted at August 4th, 2010: http://daserste.ndr.de/ndrsondersendungen/ard1584.html

In addition: Online newspaper article: Das schäbige Geschäft der Preisdrücker (TV-Film über Textildicounter KIK). Published at Spiegel Online. Author: Christian Teevs. Published at August 4th, 2010: http://www.spiegel.de/kultur/tv/0,1518,709922,00.html

a) Content of the resource

This video shows the methods of the German textile discounter KIK to reduce their costs. The sufferer are the German sales people and especially the worker of the textile facility in Bangladesh. The sewer were interviewed about their labour conditions. The Bangladeshi sewer earn only 25 Euro per month and have barely enough money to buy food.

b) Usefulness of the resource

These two resources are very useful. They are the starting point of my case study. They provide a special case that I like to focus on. The theme is based on these resources, the labour standards in the textile industry focused on especially Bangladesh. The video offers an insight view in the textile facilities and the living conditions of sewer in Bangladesh. Khorshed Alam, a researcher on labour standards, is also interviewed and bemoans that KIK hasn't changed labour conditions even though there has been lot of criticism in the last years.

c) Limitations of the resource

This reportage only views some aspects of labour conditions. It is necessary to see it as a starting point and investigate more resources connected with ILS.

Resource 4:

Title: Textilarbeiter in Bangladesch wollen höhere Löhne. (Protest gegen Ausbeutung). Published at Spiegel Online. Author: Christian Teevs. Published at Juli 30th, 2010: http://www.spiegel.de/wirtschaft/soziales/0,1518,709358,00.html

a) Content of the resource

This online newspaper article informs about the demonstrations of worker and sewer in Bangladesh. They demonstrate in Dhaka for higher minimum wages. Bangladesh has the lowest industrial wages worldwide. It was about 19 Euro and is now raised to 34 Euro. That isn't enough for the worker. They say that the government acts the way the textile industry desires to.

b) Usefulness of the resource

It shows another side of the labour standard problem and how the exploited people start to engage for their needs. It gives me additional points for new investigation. What are the wishes of the textile working labour union?

c) Limitations of the resource

This article is very short but leads me to investigation about special aspects of labour standards. I also read in another article that says that often the buildings of the facilities are not quite safe. Fire and collapses of buildings occured in the past. During such catastrophes many workers died.

Resource 5:

Title: Who pays for our clothing from Lidl and KIK? Published at Kampagne für Saubere-Kleidung (Clean Clothes Campaign; CCC). Published as brochure at January 1st, 2008: http://www.saubere-kleidung.de/downloads/publikationen/2008-01_Brosch-Lidl-KiK_en.pdf

In addition the online article: http://www.saubere-kleidung.de/2008/ccc_08-01-30_pu_discounter_lidl-kik.html

a) Content of the resource

This brochure offers a lot of information about the textile industry in Bangladesh and the methods of the textile discounter KIK.

b) Usefulness of the resource

It is very useful for my case study. There are articles included of the expert for labour standards in Bangladesh Khorshed Alam. These detailed descriptions support me with the key information I need for developing my case study. The campaign is launched by activists who are really engaged in the issue of labour standards and know about globalisation influences. They highlight many important points.

c) Limitations of the resource

The study for the campaign was published in 2008 and is therefore 2 years old. But I think that this doesn't matter much, because the other articles I read support my opinion that unfortunately nothing has really changed since 2008.

--Reibe 23:32, 15 January 2011 (CET) --Reibe 09:06, 16 January 2011 (CET)