Alessandra Mezzadri explains how productivity barely covers anything in fast fashion prices.
In April this year, the UK multi-channel retail brand Missguided advertised the sale of a £1 bikini. It was advertised as a one-off special deal to celebrate ten years of empowering women to look and feel good “without breaking the bank”. The publicity stunt backfired spectacularly. While many customers bought the product – the retailer sold 1,000 pieces a day – at the same time, many journalists, and other influencers, including a rising group of ethical fashionistas, condemned the saleas morally reprehensible, socially unacceptable and environmentally destructive. All true, clearly.
Specifically, the sale of a bikini for this kind of price is bad news for garment workers. The economies of scale needed for such a price to incorporate a fair wage would probably require a market tens of times the size of our planet’s population. On the other hand, according to a 2016 McKinsey study, worldwide we already produce 100 billion garments a year, for a human race of only seven billion people.
“The economies of scale needed for such a price to incorporate a fair wage would probably require a market tens of times the size of our planet’s population.”
The “economic bulimia” on which the fast fashion model is currently based escalated in the early 2000. The same study highlights that garment production doubled between 2000 and 2014. Over the same period, the industry also started deploying highly-polluting disposal practices, based on widely criticised stock destruction.
This worldwide exponential rise in the production, sales and destruction of garments is the context in which the case of the £1 bikini must be understood. And Missguided is hardly alone in deploying questionable pricing practices. Companies like Primark, for instance, base their entire core business model on the massive sale of items for incredibly low prices – swimsuitsare routinely sold for a fiver. This is to say that the whole fast fashion model – and particularly its lower echelons – is greatly problematic. Prices represent a key part of this problem, despite the attempt by high street retailers to argue otherwise.
Prices matter, no doubt. According to numerous mainstream economic analyses, they reflect the value of things or inputs, at least in relative terms, as well as productivity across sectors. In the recent book Why are prices so damn high?Eric Helland and Alex Tabarrok explain the simultaneous rise of prices of key services like education and health and fall of prices of manufactured goods like electronics, clothes or cars.
Services, so the story goes, are delivered in labour-intensive ways in which productivity cannot increase much. Instead, the production of consumer goods, based on more or less labour-intensive product cycles, can always benefit from productivity increases. Hence, the rise or fall in the price of services and goods is the consequence of stagnant or rising productivity; what in economics is known as the Baumol’s cost disease.
According to the authors, this is hardly a disease; rather, it is good news, as changes in relative prices are the result of growth. And given that we spend our budget on a number of things, we can still afford an expensive education and healthcare because we pay increasingly little for all the rest. Helland and Tabarrok positively conclude “we can have our healthcare and our smartphones, too”.
As a long-term observer of processes of global outsourcing, I am genuinely surprised by explanations of falling manufacturing prices that merely stress productivity.
First, prices are nota proxy for productivity, an issue arguably already affecting Baumol’s original theorisation. Productivity increases are only one possible explanation behind falls in prices. This explanation only works assuming that everything is produced within an economic system where labour and capital are rewarded at the same rate and/or where everything is produced with the same technology. Therefore, it excludes, at the very start, the possibility for different levels of development among economic actors or, indeed, countries.
“Economics should catch up with common knowledge.”
Secondly, the majority of highly developed economies hardly produce manufactured goods any longer. Any millennial knows her laptop and phone were produced in China or his clothes were made in Bangladesh. Economics should catch up with common knowledge.
Once we acknowledge the unevenness in the economic development across the planet, and the complex international division of labour delivering our goods and services, productivity becomes a far less compelling explanation for rising or falling prices.
Arguably, this new starting point provides a different explanation of what prices really indicate altogether. In this light, prices can hardly be understood as reflecting the value of things or their productivity. Instead, they provide signals of what and who is valued during a specific phase of economic development. Moreover, they provide key insights into the distribution of resources, and therefore, on inequalities.
Going back to our £1 bikini, its price – or indeed the price of many routinely produced and sold swimwear, T-shirt or jeans – is hardly a reflection of the increases in productivity in the garment industry. This remains mostly a highly labour-intensive industry, characterised by low mechanisation and automation and where workers still have an extremely long working day as well as poor working conditions and little remuneration.
Workers are often not paid living wages, despite the proliferation of corporate-led initiatives. The low costs of labour, coupled with differences in exchange rates and global competition – rather than productivity – has a direct impact on sectoral prices.
In short, unacceptably low prices merely indicate unacceptable business models, based on unacceptable levels of exploitation. No productivity increase will cure this disease. Just like no productivity increase will cure the massive hike in the price of our education and health services, mostly due to the neoliberal colonisation of these sectors and the rise of what the anthropologist, David Graeber. has rightly defined as bullshit jobs.
Many years of studying the world of the sweatshop has taught me that it is a powerful lens on working conditions and inequalities worldwide. It is also a useful vantage point from where to call out the poverty of many economic theories and better understand contemporary economic “diseases” and their possible “cure”
As recently argued by Kate Raworth in her book Doughnut Economics, we need theories to serve our purpose, not vice-versa. And our purpose should be a world of greater economic justice, whether in the form of prices truly reflecting the value of labour and able to sustain fair wages, or more affordable access to key services for all. For once, “sweatshop economics” can cure the cost disease by calling its bluff.