Thursday, May 02, 2013 - Dying to Work for Slave Wages

Dying to Work for Slave Wages

by Sinclair Noe

DOW + 130 = 14,831
SPX + 14 = 1597
NAS + 41 = 3340
10 YR YLD - .01 = 1.63
OIL + 3.04 = 94.07
GOLD + 9.30 = 1468.40
SILV + .18 = 23.93

Yesterday the Federal Reserve left interest rates unchanged and announced they would continue buying $85 billion a month in Treasury bonds and mortgage backed securities; they might increase or reduce the purchases depending; they blamed politicians for fiscal policy, or lack thereof.

Today, the European Central Bank cut interest rates for the first time in 10 months, promising to provide as much liquidity as eurozone banks need well into next year and to help smaller companies get access to credit. The ECB lowered its main interest rate by a quarter percentage point to a record low 0.50 percent in response to a drop in eurozone inflation to an annualized 1.2%, well below its target level, and rising unemployment. ECB President Mario Draghi said the central banks was “ready to act if needed', should more be required to boost the eurozone's economic health.

Sounds good; doesn't mean much. The late moves by the ECB probably won't do much to lift the economic health. The best analogy I heard today was that the ECB action is like opening the windows in a convertible when the top is already down.

In recent months there have been growing calls for European countries to move away from austerity measures. Both French President Francois Hollande and newly-elected Italian Prime Minister Enrico Letta have urged a reconsideration of austerity policies. Yesterday, Spaniards took to the streets to protest 27% unemployment; 57% among the Spanish youth; Greeks staged a one day national strike, shutting down almost everything; The Greek government is cutting government jobs.

We don't hear much about May Day protests in the US. Seattle seems to be the only US city that can muster a crowd; yesterday, 3,000 people marched through Seattle; it was not without incident; protesters threw bottles and did some property damage; police threw pepper spray grenades and arrested 17 protesters.

In Indonesia, tens of thousands of workers marched, many dressed as ants, complete with bright red outfits and antennae to depict the exploitation of workers.

In Dhaka, Bangladesh the protests drew thousands. This was the scene of a building collapse last week. A eight-story garment factory, originally built as a three-story building, suddenly collapsed. The landlord and some of the factory owners have been arrested. The death toll stands at 433, while more than 2,400 survivors were pulled from the rubble, hundreds more are still missing. Bangladesh's prime minister is promising reforms in the nation's garment industry, which is now the second largest in the world, behind only China. In the days after the collapse, thousands of Bangladeshi workers took to the streets in protest, demanding the death penalty for those responsible for the collapse.

Perhaps the most intriguing response to the building collapse in Bangladesh came from the new Pope Francis; according to Vatican Radio,  he condemned the “selfish profit” motive of the companies whose search for low prices meant “slave conditions” for workers.

He was quoted as saying: “Today in the world this slavery is being committed against something beautiful that God has given us - the capacity to create, to work, to have dignity. How many brothers and sisters find themselves in this situation. Not paying fairly, not giving a job because you are only looking at balance sheets, only looking at how to make a profit. That goes against God.”

Later, in his weekly sermon in St Peter’s Square in the Vatican, Pope Francis called for more concern for “social justice.” “Work is fundamental for dignity,” he said, and denounced unemployment as the result of “an economic conception of society based on selfish profit outside the bounds of social justice”. Saying: “There are many people who want to work but cannot. When a society is organised in a way that not everyone is given the chance to work, that society is not just.”

Human dignity derived from work, he said, but too many countries had “made choices that mean exploiting people.”

The collapsed factory produced apparel for large Western brands like Benetton, Children’s Place and Primark. Sadly, without the Western-brands angle, the collapse might not have even made news. And the companies have started to respond, however the response is not always satisfying. There have been efforts to turn blame toward Bangladeshi officials and an environment of corruption and lax oversight. And then there is the old saw of globalization, that without the demand from Western brands, the Bangladeshi economy would implode; the argument is that people are dying to get a job. This is the idea that slave wages are better than no wages, and our slaves are happy slaves. The Pope said the typical garment factory wage is 38-euros a month, the equivalent of $49 a month. Or what the new Pope calls “slave labor”. In fact, wages are even lower, with the legal minimum salary routinely paid to employees only $37 a month for a six-day week with 10-hour shifts.

The 70-mllion strong Lutheran World Federation has also condemned the circumstances in the market that led the tragedy. The Anglican Church and the Seventh Day Adventists have joined in rescue operations.

The Bangladeshi prime minister noted that workplace disasters have occurred in the United States, too; she cited last month's explosion of a fertilizer plant in West, Texas, in which 14 people died and 200 were injured.

"Anywhere in the world, any accident can take place," she said. "You cannot predict anything."

Of course, it is still to be determined if the building collapse in Bangladesh or the fertilizer plant explosion in West, Texas were in fact mere accidents. It is unlikely that the owners of the West plant intended to kill anyone, but there was, at least, gross neglect in the siting of the plant in the midst of a town, where the company was situated - so close to the town, schools and other infrastructure; certainly it raised red flags in the way they stored the ammonium nitrate, the construction of the building, and the amounts of chemicals they reported as stored on site – 1,350 times more than what normally triggers Department of Homeland Security oversight. Perhaps it was in someone's financial interest to ignore the danger.

The Senate yesterday announced an investigation into what went wrong at the plant. One of the leading problems was likely that the Occupational Safety and Health Administration – which is responsible for the enforcement of workplace safety regulations – hadn't inspected the site since February 1985.

OSHA has too few resources to do the job assigned to it. This year, OSHA has a budget of $535 million to protect workers at over 8 million workplaces. OSHA conducts about 40,000 inspections each year. Together with state OSHA programs, it has 2,000 inspectors; with those resources, federal OSHA can conduct an inspection of every facility only once every 131 years. And the sequester is expected to reduce OSHA's budget by 8.2%.

This lack of attention to the safety of our workplaces and neighborhoods is no accident. It is the work of industry trade associations, think tanks, opponents of regulations, Congress, and even the Supreme Court; in other words, its what the folks in Bangladesh would describe as an environment of corruption and lax oversight.

The traditional cure to our economic ills has always been growth. But now, despite the various and sometimes contrasting efforts, the economy refuses to grow. The economic tools that have been applied – lower interest rates, quantitative easing, and strict austerity, are failing or found to be insufficient. Suppose that instead of chasing after more stuff, more jobs, more consumption, and more income, we aimed for enough stuff, enough jobs, enough consumption and enough income.

Our main indicator of progress, GDP, is a measure of economic activity—of money changing hands. It doesn't tell us anything about what kind of activity is occurring. If the police came to your door and said that "activity" in your neighborhood had increased by 3% last year, you'd want to know what kind of activity. Was it more children playing in parks, or was it the clean-up following an explosion at a nearby fertilizer plant? We need to ask the same kinds of questions about GDP. Did it grow because our society became wealthier, or did it grow because we ran up huge debts and liquidated our natural assets?

Perhaps the biggest fear that most people have when they hear "no growth" is "no jobs", but the evidence for a relationship between economic growth and job creation is much weaker than you would expect and varies remarkably between countries. In the US, for example, a 3% increase in GDP tends to be accompanied by a 1% fall in unemployment. In France, the same amount of GDP growth reduces unemployment by only half a percent. In Japan, there is no relationship whatsoever.

I can't recall a Pope talking about slave labor. I think it might be the beginning of a new dialogue, and if that is the case, the conversation is starting from a very different place than what we've heard before. The new Pope has a pretty large base, and that balcony looking over Vatican Square is quite the bully pulpit.