Kader Fire, Outsourcing, and the Race to the Bottom

Introduction: A Systemic Indictment of Free Markets

When Greider writes that "the Kader fire was ordained and organized by the free market itself," he is referring to the fact that the problems contributing to the fire are, in his view, systemic in nature. He does not accept the proposition that individual actions and oversights caused the fire. Rather, he argues that the reason these oversights occurred in the first place was due to deeper, structural problems embedded in the global economic system.

Outsourcing, Comparative Advantage, and the Kader Factory

The Kader factory fire occurred in a toy factory that was producing goods mainly for export to Western nations. This is part of a practice known as outsourcing, wherein a company designs a product and markets it but hires a third party to handle production. The underlying logic of this system rests on comparative advantage, the economic principle that nations benefit by specializing in and trading goods for which they hold a relative cost or efficiency edge.

Thailand is a country with a large labor supply and relatively few well-paying jobs, which keeps the cost of labor low. This low cost makes Thai factories attractive to Western firms that can source production there more cheaply than at home. The Kader factory existed precisely because of this dynamic.

The Race to the Bottom and Incentives to Cut Costs

This outsourcing system is commonplace in the world today. Greider's central argument is that it effectively encourages what is known as a race to the bottom, in which countries and companies compete globally for manufacturing contracts with low cost as their primary — and often only — competitive advantage. In order to compete, companies like Kader have strong incentives to minimize costs wherever possible.

This cost-cutting does include wages and benefits, but it also extends to safety measures. Many business leaders regard safety infrastructure as an expendable expense. At Kader, for example, emergency exits had been planned but were never built. Workers were locked inside the facility, and there did not appear to be functioning alarms or sprinklers — features that would have cost the company more money to install and maintain.

Corporate Complicity and the 'Don't Ask, Don't Tell' Approach

Greider's point is that these issues are not strictly the result of poor choices by Kader's management alone. Thousands of companies around the world operate using the same business practices, competing with one another for the same contracts. The incentives to exploit workers and permit unsafe conditions are significant, because doing so is a direct means of generating profit for the factory owner. The owner may have made poor decisions, Greider argues, but did so in the same way that thousands of counterparts do worldwide — because failing to cut costs risks losing contracts to cheaper suppliers.

Western companies that subcontract to firms like Kader frequently adopt a "don't ask, don't tell" posture toward safety violations. They do not investigate conditions at their subcontractors' facilities, leaving those subcontractors with only a single incentive: money. This willful ignorance on the part of multinational corporations forms a critical layer of the systemic failure Greider describes.