ONLY last week, Raghuram Rajan, the Chief of the Reserve Bank of India blasted US measures on its global dollar supply and complained that the emerging economies like India often go into a “tailspin” when this happens as a country like India has to then resort to rapidly building up its foreign exchange reserves to keep its rupee stable. Ben Bernanke, Chairperson of the Federal Reserve, hit back by saying that the US had always been a part of a global system and that American policy makers had always not turned Nelson's eye to the emerging economies and believed that recovery of US economy would help the emerging markets as well. Well, in reality, the grand does have a tendency to turn a Nelson's eye to the small.
Walmart is big. Starting from multiple products, it has also diversified into providing financial services. A Walmart-2-Walmart cash transfer scheme has already been initiated where Walmart consumers would be able to transfer money to other parts of the country/world with ease. Walmart just doesn't stop growing. So, when it floods a factory with orders, the smaller runs of even a higher value added product do not make economic sense. Will then Bangladesh continue doing only basic products in gigantic quantities or will it also attempt higher value added smaller quantities and take a leap of faith?
How can one even compete with this idolatry of giantism? The same applies when it boils down to production lines. In a country where we have mostly smaller factories, bigger factories do get awarded with big orders from brands, and after accepting large orders often subcontract to smaller ones. The existence of the 'small' therefore continues in shared buildings and, in many cases, in relatively unsafe units. It is also impossible to relocate the small ones overnight and, therefore, the only other option would be for the big to take responsibility of the safety and survival of the small.
The World Bank recently predicted that the bigger garment factories will absorb the smaller ones. That may very well be the case, but perhaps in another format. In order for the bigger ones to absorb the small factories' capacities, they would have to expand their own production capacity, which, at this point of time, is not feasible. This is certainly not the time to invest in garments. This is the time to smartly diversify and walk away. With disasters and turmoil hitting the country, it would be naïve to assume that the brands are not looking for alternative markets. They are. India, Ethiopia, Vietnam and even Myanmar are just the right destinations on their sourcing map. In about five years, they will be ready to shift. How will Bangladesh hold on to the production monopoly? With weaker infrastructure, how would we ever grow big and correct in such a short time? Or do we want to be small and smarter?
For decades, the world has idolised the big. Yet in many cases, large units break up small units. While Germany became big through unification, the German-speaking Swiss and the German-speaking Austrians who did not join did as well economically. While most of us were brought up worshiping the concept of economies of scale and while, till date, most of us believe that big companies are inescapably necessary. We also often forget that Mr. Sloan of General Motors structured the gigantic firm in such a manner that it became a federation of reasonably sized firms. As a result of his decision, the well-coordinated assembly became a federation of lively, semi-autonomous units, complete with individual drive, target and sense of achievement. While most of us need the orderliness of large-scale, we also need to realise that we also need the freedom and the manageability of the small. This duality of scale will always exist and it is only up to us to pick and choose sides.
With the requirement of compliance guidelines, many factories in small and shared buildings will go out of business. Exporters who want to remain as important players in this business would obviously have to invest in developing capacities. The rest can play a smart game and pack up. Ideally, the big would become bigger and the small would cease. Large capital-intensive projects would turn out to be more preferred than the labour-intensive ones. Many of us will be opting for machines that will reduce dependence on man and will bring our labour costs down. Production by the masses will be replaced by mass production. This will soon become the economic reality of our times. Labour will eventually be put in the weakest bargaining position and we will be bypassing the very people for whom development is needed.
I sound terribly old fashioned today. That is because I just watched a friend withdraw from a small factory where 400 workers worked and produced fifty thousand pieces of garments for him monthly. The factory was in a shared building where the boiler and the generator were on the same floor, and in spite of having two exits the second one had a rusty cast iron staircase, which looked threatening. Could that factory have been saved or remedied? Perhaps another safer staircase could have been built, perhaps the multiple factories in the same building could have shared their resources and perhaps the fire equipment could have been installed, perhaps the workers could have been trained…But these are possibilities that the bigger manufacturers need to consider and approach the brands. While most of the key vendors to the brands are busy facing audits and structural examination, how many of us are willing to think about the smaller factories that are facing closure? If only each leading exporter mentors and monitors at least 5 to 10 tier 3 factories, then the negative image of subcontracting will come to an end. While brands assess their own direct suppliers, the leading suppliers must also take responsibility for indirect sourcing and propose remediation in an absolutely transparent dialogue with the brands.
The little boy in the picture holding the small ball in his hand has a big dream to achieve the heights of his sports hero some day. Size has not compromised his dreams. He is also a child of one of the workers working at one of the smaller, yet safer factories in Khilkhet. While audits and assessments continue, maybe an alternative platform needs to be launched from the manufacturers' side to help these smaller ones survive, so that this little one still has a school to go to…next year.
Gandhi disparagingly spoke about “dreaming of systems so perfect that no-one will need to be good.” Let's join our hands together and pledge to achieve that space of transparency and virtue that will make us grieve for our workers on April 24 of this year, and which will also show the way for us to be the very best that we can be.
The writer is Managing Director, Mohammadi Group.