How Fast Fashion Responded to the Rana Plaza Collapse

When the Rana Plaza collapsed on April 24, 2013, more than 1,100 workers were killed and 2,500 were injured.

Yes, the world was horrified. More precisely though, in a recent paper, two scholars asked how demand and supply responded.

The Rana Plaza Collapse

The Rana Plaza always had problems. Built during 1976 on swampy land, it was not quite stable. In addition, it was supposed to have been a 5 story building composed of shops and offices. Instead, they built 8 stories with clothing manufacturers occupying the top three floors. Labor intensive, those floors constantly vibrated from the sewing machines and the generators that had to kick in during electrical outages.

So, on April 23rd, 2013, when the occupants noticed massive cracks, they evacuated the building. However, the next morning at 8:57 a.m., after they had called everyone back, the building collapsed. Some say people returned because of the deadlines. Supplying the leggings, shirts, and trousers that fast fashion firms like Zara needed, they were concerned with quick turnover.

The Rana Plaza Response

Scholars have asked how the market responded to so horrific a tragedy. Looking at demand and supply in France, they observed that consumers minimally reacted. Shopping at Zara or Carrefour, they did not avoid “Made in Bangladesh” labels.  However, the manufacturers that had been using Rana switched to other countries. Moving to more nearby places, they sourced items in Morocco, Poland, Portugal, and Turkey.

Our Bottom Line: Tradeoffs

Rather than governments, NGO (non-governmental organizations) like labor unions and the ILO (the International Labor Organization) tried to initiate changes after the collapse. At first, hoping to secure compensation for the victims, they even collected labels from the wreakage to identify Rana’s clients. From there, they sought elevated wages and working conditions. Like Nike during the 1990s, they wanted the retailers to take some responsibility for the manuafcturing environment.

In a list of 29 companies, these were the top 10:

As you might expect, though, the NGOs did not want to stimulate a jobs exodus from Bangladesh with costly demands. Because of its participation in the global fast fashion supply chain, more children were attending school and more women had jobs. The country had moved up to lower middle income status.

So, you can see the tradeoffs between safety and affluence.

As for the switch to other countries, the reason appears not to have been higher costs. Instead it was the reputational boost they would get from places with a more secure work environment and  regulatory rigor. Perhaps, through more data and future papers, we can see if Bangladesh was willing to make the tradeoffs that would retain its clothing manufacturing.

My sources and more: Thanks to my go-to podcast for trade issues–Trade Talks-– for the Rana Plaza update. They then had the ideal link to this paper. (We should note that the owner of Rana Plaza did get a 3-year jail sentence in 2017 for corruption–not the collapse.)

Please note that this post was slightly edited after it was published. When its image disappeared, I eliminated the accompanying text.