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  May 1, 2013

The War on Wages and The Road to Bangladesh

Bill Black: In the name of competitiveness, the criminal conditions that led to the deaths and injuries of thousands of workers in Bangladesh, are being created around the world in a race to lower wages and working conditions
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William K. Black, author of The Best Way to Rob a Bank is to Own One, teaches economics and law at the University of Missouri Kansas City (UMKC). He was the Executive Director of the Institute for Fraud Prevention from 2005-2007. He has taught previously at the LBJ School of Public Affairs at the University of Texas at Austin and at Santa Clara University, where he was also the distinguished scholar in residence for insurance law and a visiting scholar at the Markkula Center for Applied Ethics.

Black was litigation director of the Federal Home Loan Bank Board, deputy director of the FSLIC, SVP and general counsel of the Federal Home Loan Bank of San Francisco, and senior deputy chief counsel, Office of Thrift Supervision. He was deputy director of the National Commission on Financial Institution Reform, Recovery and Enforcement.

Black developed the concept of "control fraud" frauds in which the CEO or head of state uses the entity as a "weapon." Control frauds cause greater financial losses than all other forms of property crime combined. He recently helped the World Bank develop anti-corruption initiatives and served as an expert for OFHEO in its enforcement action against Fannie Mae's former senior management.


JESSICA DESVARIEUX, PRODUCER, TRNN: Welcome to The Real News Network. I'm Jessica Desvarieux in Baltimore. And welcome to this edition of the Bill Black report.

Bill Black is an associate professor of economics and law at the University of Missouri-Kansas City. He is a white-collar criminologist and former financial regulator. He is the author of The Best Way to Rob a Bank Is to Own One and a regular contributor to The Real News.

Thanks for joining us, Bill.


DESVARIEUX: So, Bill, today marks--is May 1, which marks May Day, of course. What sort of news do you have for us related to workers rights?

BLACK: Well, a demonstration of how critical those rights have been to working people. So we're talking today about the terrible loss of not only life but thousands of people maimed in the collapse of the factory in Bangladesh and the fact that this isn't some, you know, random act of God, but a combination of crime, it appears, from the top of the organization and good old physics, that building a building in what used to be a swamp without very special construction techniques is inherently unsound and likely to lead to terrible loss of life.

DESVARIEUX: Okay. And you mentioned, though, that there was a road in getting to Bangladesh. I mean, there have been incidents like this in the past. I mean, the number of people who were killed, we're talking about 400-plus people, and the number of those injured could be--are definitely in the hundreds, even thousands, perhaps. How did we get here? It's not just one morning we woke up and there were these types of conditions in garment factories. What is really the driving force behind them [crosstalk]

BLACK: No, you're quite right. That is the fundamental question. And I have been writing about it. And, of course, we're trying to urge policy changes to prevent this kind of thing.

As we speak, the latest numbers are over 400 confirmed dead, 2,500 injured, and many of those injuries are very severe. And, in fact, three of the recent deaths have been of people in hospital. But many amputations--the usual type of thing when you have the collapse of a heavy structure. And a list of 1,300 missing. Now, that list probably has many duplicates, so we are hopeful that there aren't an additional 1,000-plus people dead, but we don't know. In any event, it's just the latest tragedy within Bangladesh.

And, of course, it's again not some random tragedy. These are acts of crime by people who profit--not from the collapse, but from having cheap buildings and having workers that are suppressed to the point that the Pope, as we--you know, just hours before we spoke, the Pope said that these workers were living in conditions that he equated to modern slavery. So some of the workers were getting EUR 38 a month. Now, that is almost exactly the definition of what the United Nations calls extreme poverty. So these are people who are fully employed, often working substantial overtime, and with all that employment they are in extreme poverty. And that's become the norm. And that's why I dub this process the road to Bangladesh.

And in the European context this has come up recently, because the euro, as we've talked about in the past, doesn't provide any good means of responding when your nation is caught in a severe recession or great depression. And so what Germany is imposing on the periphery of Europe is a combination of austerity, which makes the recession much worse, and a demand for what they call labor reform. And, of course, reform sounds like a good word, but it's mostly designed to make it far easier to fire people so that you can lower working-class wages very substantially and force the workers into ever deeper price competition with each other.

And so, you know, I've been to Ireland and Spain and Italy and such. And in Ireland, there the whole strategy is to lower working-class wages to the point that they can out-compete the Spanish. But the Spanish are trying to lower wages for Spanish workers to the point that they can out-compete Portugal, which is trying to lower wages to out-compete southern Italy, which is lowering wages to try to out-compete Greece, which is lowering its wages to try to out-compete Turkey.

And the result of all of this dynamic is that you end up in a Bangladesh-like circumstance where even if people are fully employed, they're in extreme poverty, where you pit the poor against the poor so that they can't insist on safe dwellings. This is, you know, a building collapse that's caused more losses, but the fires in Bangladesh, again in garment factories, have killed hundreds recently as well. And it's the usual thing. You find that the fire codes aren't enforced, the key exit doors are locked, supposedly to stop theft. If anybody's familiar with the Triangle fire in the United States, we're recreating these conditions in much of Bangladesh.

And two things that--I warned about this dynamic in a group, a conference, an economics conference in Ireland in November 2012 called Kilkenomics. And my copanelist said, what are you talking about? You're crazy. Bangladesh is the great success story of rapid economic growth. If we're putting Greece on the road to Bangladesh, then that's great for Greece. And so you get an idea of how really criminogenic these kinds of theoclassical economic dogmas are, where they don't see anything as to what's happening at the level of the people. They see the profits of the businesses, and they think, that's great.

And the second one was--I did the keynote speech, this Public Eye Award, which is a shaming award, for Goldman Sachs. And this is--the Berne Declaration and Greenpeace Switzerland do this annually, and they do it in Davos, which is the site of the World Economic Forum. Well, it turns out the World Economic Forum is this very right-wing group of business types, and they have a supposed scale that talks about whether a country is competitive. And other even more right-wing folks have ones that call it freedom. But the World Bank has something called the Doing Business index. And all three of these things share a common theme, which is, if you comply with the International Labour Organization, the ILO, standards to protect workers from, you know, being killed at work, which you would think could be a noncontroversial thing, thing you're a bad place. You're a bad nation. You're not competitive. It's not a good place to do business. It's a place where you're denied economic freedom if you are protected from bosses like in Bangladesh, who deliberately build on a swamp and then bribe officials, allegedly, to get the building done, and then tell you, even when the cracks appear in the foundational pillars, that it's nothing, the plaster is just, you know, rupturing a little and the building's perfectly safe, and they tell you, go back and work or we will dock your wages.

So that dynamic, which is at the level even of an associate enterprise of the World Bank, is steadily pushing--those indexes are used in the parliaments of all these nations to say, see? See? This is a race, and we've got to win the race. And the way you win the race is to destroy worker protections. And the result is this dynamic. You create what we call a Gresham's dynamic, where bad ethics drives good ethics out of the marketplace, what happens when people who cheat gain an advantage in the marketplace.

And, of course, it's cheaper to not even buy the land. The person who supposedly own the land it is alleged actually stole the land in this case. But it's cheaper not to use appropriate construction materials. It's cheaper, of course, to buy swamp land than regular land, because, after all, you can't build in swamp land, except that he did.

And all of these things, when they produce this race to the bottom, what they fundamentally do--you know, people are used to thinking this as just money. But what you do is put every worker in that building's life at deadly peril. And it's not a question of if; it's simply a question of how many people will die if we allow these kind of perverse standards to continue.

So the very first thing we need to do is get rid of and completely discredit these so-called--these three indexes that push people to repudiate ILO standards of safety, and we need to substitute a competition in integrity for this competition in laxity that is literally lethal.

In--if any of our viewers who've studied economics, these--what we're talking about is markets for lemons, very poor quality goods, in this case a factory. The literature on lemons typically just talks about it as a loss of money, but when you build a lemon of a building, you kill people. And this isn't the only place. This happens through much of the world where there's significant seismic risk, earthquakes, in other words. They bribe the building inspectors. Often the building codes are very good, but it's cheaper to build a building without appropriate rebar, with thinner concrete, etc., etc., etc. And those buildings collapse. And, of course, the saying among people that study earthquakes is that earthquakes don't kill people; buildings kill people.

DESVARIEUX: Absolutely. Well, thanks for joining us, Bill.

BLACK: Thank you.

DESVARIEUX: Thank you for joining us on The Real News Network.


DISCLAIMER: Please note that transcripts for The Real News Network are typed from a recording of the program. TRNN cannot guarantee their complete accuracy.


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