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Economy

Shoddy Materials And Illegal Construction Caused Bangladesh Factory Collapse

Photo via the AP

The Bangladesh government released results of its investigation into the factory collapse that killed 1,127 and concluded that “extremely” poor quality materials and violations of regulations were to blame, the Associated Press reports:

The report found that building owner Sohel Rana had permission to build a six-story structure and added two floors illegally so he could rent them out to garment factories. Past statements from authorities said the owner had permission for a five-story structure and added three floors illegally.

The report also said the building was not built for industrial use and the weight of the heavy garment factory machinery and their vibrations contributed to the building collapse. Those factors had previously been cited.

The ground on which the building was built was not fit for a multi-story building, the report said.

The investigation committee has recommended that Rana and the owners of the factories be sentenced to life in jail if they are found guilty.

There are more signs of shoddy construction in other Bangladesh factories, though. Cracks were spotted on the walls of another factory in Gazipur, near Dhaka, that is still operating and making clothing, including Wrangler shirts, for North Carolina-based Liz Apparels. Walmart has stopped using the factory because it is on the company’s “red” list after its own audit found cracks. Inspectors for Inditex, owner of Zara, also saw cracks, and Reuters Television found a vertical crack running up a wall that appeared to have been recently plastered over.

Even in the face of these concerns, some major American companies have continued their opposition to signing a broad safety agreement that would upgrade Bangladesh facilities and was signed by six large European retailers. When some shareholders questioned Gap’s refusal at its recent annual meeting, CEO Glenn Murphy voiced his concerns: “In the United States, there’s maybe a bigger legal risk than there is in Europe.” While the company is still in support of a global agreement in theory, the current one does not “make sense” for the company, he said.

Walmart and Target have also declined to sign the agreement, citing similar concerns. American companies Abercrombie & Fitch and PVH, owner of Calvin Klein, Izod, and Tommy Hilfiger have signed on.

While cost has also been raised as a concern for both companies and consumers, upgrades to Bangladesh’s factories could cost consumers as little as 10 cents per garment if all of the costs were passed on.

Economy

E-Commerce Trade Association Opposes Slew of Pro-Consumer Proposals

(Credit: NetChoice.org)

NetChoice, a “trade association of eCommerce businesses and online consumers” representing big tech names including Facebook, Yahoo, eBay, NewsCorp, Reed Elsevier, LivingSocial, and Aol, released a list of what it considers to be “the worst internet laws in America” — but many of the bills it targets would be good for consumers.

NetChoice’s May 2013 iAWFUL (“Internet Advocate’s Watchlist for Ugly Laws”) list rattles off eight types of proposals opposed by the group, many of which appear to be targeted because they may threaten the profit margins of the group’s constituent companies.

Here are three specific instances where the most recent iAWFUL list puts corporate interests before consumer rights or protections:

  1. Accuses California privacy bills of being an “assault on the internet”: While NetChoice points out that some state-level privacy proposals in California have been conflicting, such as one that requires simplified, 100-word privacy policies versus another that requires privacy policies to be more detailed, the group also attacks a bill that merely gives consumers the ability to request what data about them has been given to which third parties and another that updates privacy requirements for mobile apps.
  2. Claims state level data breach notification proposals would lead to “over-notification: NetChoice opposes a number of state-level data breach notification laws that would require companies collecting personal or private information to notify consumers in a timely manner if their information has been accessed without authorization or breached, arguing they would place consumers at “greater privacy risk” because consumers become desensitized to data breach notifications.
  3. Opposes Open Access initiatives that would give the public access to research: NetChoice takes aim at Open Access proposals, including the White House’s, saying they “could logically extend to assert state copyright over other content coming out of the state’s colleges and universities.” But what Open Access initiatives actually do is provide an remedy for freeing research funded by the public from a broken for-profit academic publishing system where all too often academics do research, pay for the privilege of being published in a journal, get edited by other academics pro-bono, and then the research is licensed back to academic institutions at a very high mark up. NetChoice member Reed Elsevier has actively lobbied against these type of proposals in the past, likely because its subsidiary Elsevier is the largest of the for profit academic publishers — reportedly earned over $1 billion in profits in 2011 with a profit margin around 35 percent and 71 percent of their revenue coming from academic customers like university libraries.

Economy

More Questions Than Answers From Monthlong Investigation Of West, Texas Fertilizer Explosion

While the Bureau of Alcohol, Tobacco, Firearms and Explosives (AFT) has concluded its excavation of the site where a fertilizer plant exploded in West, Texas, killing 15 and injuring hundreds, it has yet to determine the cause of the accident, officials announced on Thursday evening. Potential causes thus far include criminal activity, a problem with its 120 volt electrical system, or an old golf cart located on the premises. They have ruled out the ignition of anhydrous ammonia or smoking as potential causes.

What is clear is that something started a fire in a seed room in the fertilizer and seed building, and the fire kept burning hotter, increasing the chances that ammonium nitrate at the facility would explode. When debris and equipment from the burning building made impact, it set off a detonation that in turn set off another. In total, about 28 to 34 tons of ammonium nitrate exploded with the power of 15,000 to 20,000 pounds of TNT. Most debris fell within 3,000 feet but some traveled as far as 2.5 miles.

This investigation has taken much longer than is usual: most last three to seven days, but the agency has spent a month looking into the causes and still has yet to determine the exact one. It has also spent nearly $1 million on the investigation in West.

That cost will be added to the estimated $100 million in property damage that the explosion caused, plus federal aid promised by President Obama. Yet because the plant only carried $1 million in liability insurance, many victims may not see their losses covered. Texas overall has the highest rate of workplace fatalities in the country and a high rate of fires and explosions, which come with very high costs: The fires and explosions at Texas’s chemical and industrial plants cost as much in property damages as in all other states combined. Overall, workplace accidents cost the economy around $250 billion a year.

Whether gaps in regulatory oversight might be to blame is also yet to be determined and is at the core of a separate, ongoing investigation by the Chemical Safety Board. What is clear, however, is that the plant hadn’t been inspected by the Occupational Safety and Health Administration since 1985, and it also slipped by six other regulatory agencies.

Economy

Walmart And Gap Refuse To Sign Broad Safety Agreement In Bangladesh

After six major European retailers announced on Monday and Tuesday that they would sign onto a broad safety upgrade agreement in Bangladesh, American companies Walmart and Gap announced that they would not sign on. Gap has been the most outspoken about its opposition, reports the New York Times:

By far, Gap has been the most vocal company opposed to the plan, expressing concerns that overzealous American lawyers could seize on the agreement to sue American companies on behalf of aggrieved factory workers in Bangladesh — perhaps in the event of a factory fire. Gap said it supported much of the plan, but it proposed changes that would greatly limit any legal liability for a company that violated the plan.

Walmart cited “requirements, including governance and dispute resolution mechanisms” in the agreement as its reason not to sign on, saying they are “appropriately left to retailers, suppliers and government, and are unnecessary to achieve fire and safety goals.”

The company plans to instead use its own safety plan. It began its own factory inspections of 279 Bangladesh facilities this year after the fire in November that killed 110 and it will release the names and inspection information as well as provide fire safety training for every worker in the factories that produce its goods. The inspection results will be posted on June 1.

Labor groups criticized Walmart’s plan, which is voluntary. The broader plan signed by the other companies is legally binding. Labor groups characterized Walmart’s proposal as merely aspirational.

Meanwhile, documents provided to the New York Times show that Walmart sourced clothing from the collapsed factory that killed 1,127:

The Bangladesh Center for Worker Solidarity has provided The New York Times with photos of several documents not disputed by Wal-Mart that were recovered in the building’s rubble, showing that a Wal-Mart contractor from Canada had produced jeans last year at the Ether Tex factory, which had been situated on the fifth floor of the collapsed Rana Plaza building.

The only American company to sign onto the agreement thus far is PVH, owner of Calvin Klein, Tommy Hilfiger, and Izod. A handful of smaller European companies also signed on Tuesday: Benetton, Marks & Spencer, and El Corte Inglés.

Economy

Six Major Retailers Sign Factory Safety Upgrade Plan In Bangladesh

Credit: The Associated Press

After H&M, the largest purchaser of garments in Bangladesh, announced on Monday that it would sign a fire and safety upgrade plan in the country, four other retailers have similarly signed on: Spanish retailer Inditex, owner of Zara, Dutch retailer C&A, and British retailers Primark and Tesco. Europe accounts for 60 percent of the country’s clothing exports. American company PVH, which owns Calvin Klein, Tommy Hilfiger, and Izod, also signed onto the deal, a more expansive version of one it had already signed, and pledged to contribute $2.5 million to underwrite factory safety improvements.

As the New York Times reports, “The agreement calls for independent, rigorous factory safety inspections with public accountability and mandatory repairs and renovations underwritten by Western retailers. It also enhances the roles played by workers and unions to ensure factory safety.” It will last for five years.

But even as large European retailers signed on, major companies in the U.S. stayed on the sidelines. Gap said it was ready to sign the agreement “today” but first wanted a change in how disputes are resolved. Walmart stayed silent on the agreement but called on the country to shut a factory and examine another after its inspections found “structural concerns.”

The country also announced on Monday that it would raise the minimum wage in the garment industry within three months and allow workers to form a union without first getting permission from factory owners.

The death toll from the Rana Plaza factory collapse has reached 1,127, and rescue crews have now stopped searching the rubble for survivors.

Update

Carrefour, a major French retailer, has joined the other companies in signing the agreement.

Economy

Workplace Accidents Cost The Economy Billions Of Dollars Each Year

The fertilizer plant explosion in West, Texas that killed 15, injured hundreds, and caused property damages that could reach $100 million has some talking about the need for increased workplace safety regulations to prevent future disasters. The facility hadn’t been inspected by the Occupational Safety and Health Administration since 1985 and slipped by six other regulatory agencies.

But as the New York Times reported, lawmakers in Texas worry that new regulations would be too costly and endanger the state’s high ratings for a business friendly environment:

Asked about the disaster, [Gov. Rick] Perry responded that more government intervention and increased spending on safety inspections would not have prevented what has become one of the nation’s worst industrial accidents in decades.

“Through their elected officials,” he said, Texans “clearly send the message of their comfort with the amount of oversight.” […]

Even in West, last month’s devastating blast did little to shake local skepticism of government regulations. Tommy Muska, the mayor, echoed Governor Perry in the view that tougher zoning or fire safety rules would not have saved his town. “Monday morning quarterbacking,” he said. […]

Texas has always prided itself on its free-market posture. It is the only state that does not require companies to contribute to workers’ compensation coverage. It boasts the largest city in the country, Houston, with no zoning laws. It does not have a state fire code, and it prohibits smaller counties from having such codes. Some Texas counties even cite the lack of local fire codes as a reason for companies to move there.

Meanwhile, Texas ranks at the top of the country for the number of workplace fatalities, experiencing more than 400 every year over the last decade. It also has a high rate of fires and explosions: over 1,300 chemical and industrial plants have caught fire or exploded.

These accidents come with a huge cost: the fires and explosions at Texas’s chemical and industrial plants cost as much in property damage as those in all other states combined from 2007 to 2012. Texas experiences more than three times the number of accidents and four times the number of injuries and deaths as the second-ranking state in the country, Illinois, resulting in 300 times the property damage costs.

The cost of workplace accidents doesn’t just impact Texas, though. They cost the U.S. economy billions of dollars a year. A study conducted by the Department of Health and Human Services, Centers for Disease Control and Prevention, and the National Institute for Occupational Safety and Health found that between 1992 and 2002, 64,333 workers died from workplace injuries, which cost society a total of $53 billion, or an average of $831,000 per death. Another study by J. Paul Leigh for the Milbank Quarterly found that in just 2007 alone, there were 5,600 fatal workplace injuries and 8,559,000 nonfatal ones, while there were 53,000 fatal illnesses and 427,000 nonfatal illnesses. These cost society a total sum of $250 billion due to medical and indirect expenses.

The lack of safety regulations can also cost businesses directly. They spend $170 billion a year on costs associated with injuries and illnesses sustained on the job, including more than $40 billion a year in worker’s compensation benefits. A report from the American Society of Safety Engineers found that having inadequate safety, health, and environmental protocols can cost a company in benefit claims, liability damages, litigation expenses, and the potential to lose bids and government contracts. It also notes that “having a solid safety and health management program with senior management commitment will improve productivity and employee morale.”

The Dallas Morning News has reported that West Fertilizer Co. only had $1 million in liability insurance, and Texas doesn’t require such facilities to have insurance that could cover the potential damage they might cause. That could mean that the costs of this disaster will be borne by those whose property was damaged, as they can expect little from the company itself. President Obama has also authorized federal aid to help the community recover. The costs of the explosion are already affecting more than the company itself.

Economy

Victims In Texas Fertilizer Plant Explosion May Still Have To Pay Property Taxes

(Credit: Rod Aydelotte/Waco Tribune)

West, Texas continues to be rocked by the aftermath of the fertilizer plant explosion last month. Victims are now discovering they may still have to pay property taxes on their destroyed homes. While these homeowners can file protests until the end of May, the law requires property values to be determined on January 1 of the tax year. Local governments are allowed to reappraise homes after natural disasters, but the fertilizer plant explosion was very much a man-made calamity.

Even the mayor, Tommy Muska, has filed to protest the property value of his home, which is so badly damaged from the blast that it may cost $300,000 to repair. However, the mayor noted, granting victims relief is a “double-edged sword,” as the town will flounder from the millions of lost tax dollars. The magnitude of the explosion, which claimed 15 lives and injured 160 others, also devastated a huge chunk of West’s much-needed revenue for many years to come:

Hahn estimated that West lost at least $29 million in taxable value as a result of the blast, not counting damage to nontaxable property such as schools, water tanks and infrastructure.

That amount represents more than one-fifth of West’s tax base of $140.4 million, according to preliminary values. Hahn said losing that much revenue this year would hobble the finances of the city and West Independent School District when they need the money the most.

Whatever the appraisal district decides, either the victims or the town will take a debilitating hit. Victims cannot count on West Fertilizer Co. for compensation, either. The plant was only insured for $1 million of damages, a negligible sum that does not even begin to cover the actual losses. Property damage alone is projected to reach $100 million. Even so, the company was not required to carry any liability insurance at all. Many states, including Texas, do not impose any legal requirements for companies to have liability insurance. This latest revelation is just one of the myriad regulatory failures that led to the deadly explosion.

On Friday, the Texas Department of Public Safety and the Texas Rangers launched a criminal investigation into the explosion. Some victims are also pursuing civil lawsuits against the company.

Economy

13 Workers Died On The Job Each Day In 2011

A new AFL-CIO analysis of data from the Bureau of Labor Statistics reports that 4,693 workers were killed on the job in 2011, an average of 13 workers every day. That’s more than the number of pedestrians struck and killed by cars every year and more than the lives lost during the entire Iraq War. This is the third year that the fatality rate for workers has been unchanged after years of decline.

Another estimated 50,000 died from diseases contracted on the job. Overall, workers reported 6.8 million job-related injuries and illnesses.

The report also notes that the cost of injuries and illnesses that occur on the job is huge. One study put the figure at $250 billion annually due to medical costs and the loss in productivity, more than the cost of cancer.

These numbers come after a fertilizer plant in West, Texas exploded, killing 15 and injuring hundreds. The plant hadn’t been inspected by the Occupational Safety and Health Administration (OSHA), the agency tasked with ensuring workplace safety, since 1985. In fact, the Government Accountability Office recently found that the average workplace only gets a visit from OSHA inspectors every 99 years.

That number may get even worse, as OSHA can expect a big cut from sequestration. It will have to slash its budget by 8.2 percent, which could mean 1,200 fewer workplace inspections. Meanwhile, Republican budgets have sought to reduce its budget by $99 million and cut other workplace protection agencies.

Economy

Bangladesh Factory Upgrades Could Cost Consumers As Little As 10 Cents Per Garment

Credit: The Associated Press

The factory collapse in Bangladesh has now claimed upward of 700 lives, making it the worst industrial disaster in Bangladesh and the most deadly one in the history of the garment industry. As has been widely reported, workers were hesitant to enter the building on the day of the collapse due to visible cracks in the building.

Since the disaster, many have urged large retail corporations to upgrade the working conditions in the factories from which they source their products. Three hundred large companies had previously refused to sign a pledge to do so before the collapse, citing costs. The need for low prices and fast production is driven in large part by American demand for cheap clothing. So how much would clothing prices rise for the average consumer if all of the costs of upgrading Bangladesh factories were passed on to them?

According to an estimate provided by the Worker Rights Consortium, it could be as little as 10 cents per article of clothing. The group comes to this figure by estimating that building renovation, safety equipment installation, and other related costs would come to about $3 billion, which is says is a high estimate that assumes virtually all factory buildings need major renovations, as some may not. Spreading that cost over five years, it comes to $600 million each year, and tacking 10 cents on to each of the roughly 7 billion garments exported from the country each year would easily cover that cost. After the initial investment in renovations, the group says the costs of maintenance will drop significantly.

Even without these large-scale renovations, there are precautions that could be taken immediately that would cost little. As Kimberly Ann Elliott, a senior fellow at the Center for Global Development and an expert in international trade policy, told Dylan Matthews of Wonkblog, factories could install fire extinguishers, unlock doors, and take other measures that don’t add much to costs but improve workers’ safety.

But it may not be as simple as companies investing more in building renovations and fire extinguishers. As Pietra Rivoli, a professor of international business at Georgetown University’s McDonough School of Business, told ThinkProgress, one of the biggest barriers to safe working conditions is a political infrastructure in Bangladesh that can properly monitor workers and their employers. “In the U.S. we have things like building codes and occupancy permits,” she pointed out. “What’s missing in Bangladesh is that local political infrastructure.” There is also a problem with widespread political corruption. It may therefore be difficult for large corporations to substitute for regulatory bodies.

The response from many large retailers so far has been to pull production from the country altogether. The Walt Disney Company has already announced that it will end production in Bangladesh, and other retailers may follow suit. That could devastate the country’s economy and make life even more difficult for its garment workers. Other Western retailers have indicated that they will instead invest in operations in Bangladesh and look at new plans for factory safety, but so far most of the money pledged will be for relief efforts and few have committed to upgrading factories or tougher inspections.

Climate Progress

New Study: The Economic Benefits of EPA Regulations Massively Outweigh The Costs

From the 2012 Presidential campaign onwards, Republicans have railed against the regulations of the Environmental Protection Agency (EPA) as “job-killing,” as a threat to freedom, and as a drag on economic growth. The claim has never comported with evidence, but like a zombie it just refuses to die.

The latest effort to kill it comes via a new study from the White House’s Office of Management and Budget, which found that the benefits EPA regulations bring to the economy far outweigh the costs.

The way this works is pretty straight-forward. Environmental regulations do impose compliance costs on businesses, and can raise prices, which hurt economic growth. But they also create jobs by requiring pollution clean-up and prevention efforts. And perhaps even more importantly, they save the economy billions by avoiding pollution’s deleterious health effects. Particles from smoke stacks, for example, are implicated in respiratory diseases, heart attacks, infections and a host of other ailments, all of which require billions in health care costs per year to treat. Preventing those particles from going into the air means healthier and more productive citizens, who can go spend that money on something other than making themselves well again. Another example is carbon emissions, which will impose costs on the economy in the form of future disruption to food supplies, destruction from extreme weather, and other upheavals if they’re not curbed. Researchers generally put those costs at around $20 to $25 per ton of carbon, but estimates vary widely. Other regulations are actually aimed at reducing red tape, improving communication between agencies, and facilitating the flow of information.

The OMB study looked at a range of regulations across the economy, and found their benefits outweighed their costs across the board. The blue and red bars below represent the range of estimates for what the respective costs and benefits of regulations were. In very few instances was even the very upper limit of cost estimates equal to the very lower limit of benefit estimates.

Source: Office of Management and Budget

But no where was the effect greater than with EPA regulations themselves. Over the last decade, they imposed as much as $45 billion in costs on the economy, but they also drove as much as $640 billion in benefits:

The OMB found that a decade’s worth of major federal rules had produced annual benefits to the U.S. economy of between $193 billion and $800 billion and impose aggregate costs of $57 billion to $84 billion. “These ranges are reported in 2001 dollars and reflect the uncertain benefits and costs of each rule,” the report noted.

Rules from the EPA added significantly to both sides of the ledger. “It should be clear that the rules with the highest benefits and the highest costs, by far, come from the Environmental Protection Agency and in particular its Office of Air and Radiation,” the OMB study said. EPA regulations accounted for between 58% and 80% of the benefits the study found as well as 44% to 54% of the costs. Air regulations accounted for nearly 99% of EPA rule benefits, according to the report.

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