In Bangladesh, Retailers' Good Intentions Alone Won't Beat The Cheats

It's the end of the shortened Labor Day week in the U.S., and while protests over retail wages are getting more attention than they have in years, a much more disturbing story is what has happened in the months since the April apparel factory collapse in Bangladesh that killed 1,129 workers.

Is there a connection between those two things? Yes, and its one that reflects pretty well on both big U.S. retailers and U.S retail workers.

True, the retail workers—especially those from fast-food restaurants—have been staging what would be called wildcat strikes if they were unionized. That's disruptive, and so is picketing, but that's how any protest gets attention. On the other hand, the strikes and demonstrations have been remarkably civil on both sides. That may change as the crowds get bigger, but it's a reminder of how a fight over wages doesn't have to turn into a literal brawl.

Then there's Bangladesh. This week's story from the New York Times about apparel factory owners who have found ways to dodge, cheat and work around safety inspections is a different kind of reminder, about what happens when good intentions collide with a a much darker reality.

Some retailers are clearly serious about wanting to improve those conditions and stop the cheating. They have an economic incentive—factories that fail safety inspections also tend to produce shoddy merchandise, while underaged workers and terrible working conditions make for very bad publicity. And Nike, for example, is finding ways to outflank the cheaters by doing more extensive inspections and insisting on talking with worker representatives—and trusting just about nothing that factory owners tell it.

That's because Nike has been accused of making its shoes in overseas sweatshops for decades. It has lots of experience—and lots of money wasted on useless inspections—and it's not willing to be played any longer.

But retailers who are newcomers to the factory-inspection game are at the other end of the experience curve. They may still believe in the good faith of the factory owners, the suppliers who sell merchandise that may or may not be made in factories that have passed inspections, and the large inspection companies that collect money for useless checklist "audits" and go-through-the-motions inspections.

That faith is wildly misplaced. As the Times documented, all three of those groups—owners, suppliers and inspectors—cheat or turn a blind eye to cheating. Meanwhile, workers are beaten on the job, sometimes riot in factories when pushed past their limits, and continue to die in factory fires and collapses.

It's hard to think of Walmart, Gap and other big chains as naive. But they're only slowly starting to tighten their standards as they realize that they're being cheated and that it's going to cost more than they expected to avoid another Rana Plaza disaster.

Will they go the Nike route and play hardball with the inspection cheaters? Very possibly—if not from higher motives, then just because they hate being ripped off where newspapers can report it.

This week Walmart announced it's lending $50 million for factory improvements in Bangladesh. Walmart probably never expects to see that money paid back, but it should expect to get what it's paying for.

That's a core value for American retailers—and it may be the best hope for driving progress in cleaning up the factory mess in Bangladesh.