Nowadays, when the economics become more and more developing, the mobility factor causes much of controversy from different scholar and economist in all over the world. Labor which is one of the main factors of production can improve or maintain the trend of economic. The authority of employee is always guaranteed by government and organization. They have to fulfill requirements and welfare of their employee. However, in society, there are cases that these guarantees are people who captive employee immorally and illegal. People who are an inmate, poor and with very limited occupation choice. A significant amount of products is produced under the poor condition and abusing a human being.
Many scholars and economist begin to question the way firms behave with their worker are morally legitimate or not. Robert and Hinde (2011) said that our society needs morality which can decide human behavior and human value. Morality is not followed by rules but from a different context of a human. Although there are no standard or principle, the morality of firms in the developing economic raises lots of controversies. There are multiple cases in the world that worker’s achievement is not relevant to their welfare for organizations. Firms eliminate some cost for improving worker condition in order to save money. In garment market like in Bangladesh, the collapse of the working building show that workers have to work in a poor conditional while clothes sale are extensively and profitable. A big firm such as H, Zara, Tommy Hilfiger and so on keep making much of profits from selling clothes but there is no improvement in the welfare of employee. The worker still has to suffer bad working condition, the decreasing of health and low wage.
This literature review will give readers an overview and the detailed answer to the morally legitimate of firms in producing retail products. The first part a general background of morally legitimate in economics, Adam Smith’s thought about the incentive of individual and society and Bangladesh’s garment factory case. In the second discussion part, there are different opinions of various authors whether firms consider morally legitimate relating to the captive employee in production or not. Some scholars and economists believe that it comes from firm’s incentive and another attractive target. In contrast, some authors claimed that there is some external effect and make firm go with the flow of mainstream. The hypothesis part performs writer opinion and the limitation of this subject for further research.
II. Theoretical framework:
1. General background:
According to some lap experiment and field observation, moral legitimate is described as a part of a model which is the connection between action and behavior (Boulding & Kenneth, 1969). Before formulated appropriate behavior to act, people generate a subconscious reason for acting by coming up with the value which is guiding principle deciding desirable, different target and the root of the human ethical behavior. Human’s values are accumulated through his or her socialization, one’s life and especially during childhood and adolescence. Individual and organizations must consider the moral legitimacy of a problem before having solutions and decision. In the study about the operating of an organization, researchers find out when there is an important decision which requires self-reliance and personal decision, employee intent to perform based on their own personal moral value and diminish the organization’s character (Bagozzi, Richard, Sekerka, Leslie, Hill, Vanessa, Sguera & Francesco,2013). The result of this study implies the individual value in a moral action of worker outweighing the organization’s action in some situations. Therefore, firms should pay more intent on developing ethical cultures from gathering and honoring core value of individual than the compliance on regular rules. The key to establishing the revolution is to evaluate the employees and concerning the moral value inside and outside the firm.
In order to develop a well- organization, and economics in general, moderating the self-interest and enhancing human’s altruistic is one of the most significant actions of firms. Adam Smith implied in “The Theory of Moral Sentiments” that some immoral behavior may be led by some external sources (Kleer & Richard, 2003). The ambitious and role model from upper class may make people in lower class ignoring the moral and chasing money, wealthy and high status. In other hand, people in the upper class with high status can justify these actions of the lower class as common in society, therefore, the model of society with morally legitimate is corrupted. People focus more on self-interest than society interest and eliminate morally legitimate charactoristic in their decision.
In “New York Time” recently, many scholars and economists converse about the protest in Bangladesh where workers stand up for their right oppose some considerable firms in the garment industry (Rachel & Maher, 2017). It started with the collapse of Rana Plaza where most of the employee gathered and worked on the process of completing the product. The incident killed more than 1,100 people in Bangladesh and made much of family losing their primary financial supporters. Moreover, workers in Bangladesh realized that they were not paid enough for what they contributed. Their wage was only 32cent per hour despite the fact that the inflation increased the living cost to 17.5% and their payments just raised double in 2015. As a consequence, worker required more from these big firms and government to have enough support to live. However, firm’s reaction was inappropriate enough to convince people especially their workers that they feel guilty about what they did. In the beginning, their irresponsible caused the massive damage to Bangladesh’ human; then they prohibited the protest by affecting the police to detain innocent people. Finally, when they were asked to compensate for what they did, they just only improved the facilities, but they decided to no raise for workers. The way that these big firm treat their employee is unacceptable and cause controversy from different scholars and economist in the world. From this incident, many scholars and economists start questioning whether firm considers morally or not to their workers.
Recent research has focused on the moral decision of subject in the market when this option harm and damage on the third parties (Armin & Nora, 2013). In the experience, people who are participated decide either saving a mouse life or receiving money. The agent creates the experiment divides all subject become three markets: individual market, bilateral trading market, and multilateral trading market. Much of participant is willing to kill a mouse and earn 20 dollars. The difference from the individual market, the multilateral trading market which is included lots of members has an intent on not caring the morally legitimate behavior and just focus on trading and negotiate. Thus, the less they care about moral behavior, the more they make money. Oskar and Engdahl (2008) claimed that money can motive crime and reduce some moral problem to the technical one. Money can be compared with the representation of success and high reputation, so that, when people determine any decision related with money, they regularly consider to have less “emotional support”. Oskar & Engdahl (2008) also pointed out that if the value of is attractive enough, the choice including moral can be simplify to a purely technical problem. When firms are seeking profit for their own benefit, this activity can consider as immoral and harmful for society (Bhattacharjee, Amit, Dana, Jason, Baron & Jonathan, 2017). There are always existed some conflicts between profit and the value of society since firms do not only produce product but also influence on environment, relationship about benefits with other firms and employ people. It is impossible that they can achieve all these elements, therefore, they rather chose to damage the value of society than profit. Furthermore, authors demonstrated that organization do more immoral activities when they are labeled their “for- profit” than “non-profit”. Firm’s motive and incentive influence on their decision and especially when profit have all huge impact on the improvement and development of any organizations.
Because always looking for profit and money, firms which are in high-ups class have a myopic viewpoint leading to willfully blind. They can not be able to aware of the difficulty that their employee getting through without experience. As a result, these lacking cause an extremely damage to their workers and themselves later. The incident in Bangladesh is an example of a bad working condition that firms reduce the payoff in a production process, they are willing to eliminate the human element in the process (Rachel & Maher, 2017). Three and a half year after the incident in Bangladesh, reporters conclude that these building which belongs to some biggest name in retail skip some step on annual renovations (Dominic, 2016). The statistics which has been recorded are remarkable high with 62% lacking viable exist, 62% failing at installing proper fire alarm system and 47% having major, unconstructed structural problems. In fact, nowadays, there are still exist much of factories which are not following the renovations rules and missing some requirements. There are two elements that cause the lack of progress: the pressure of firm on factory’s management to performing the process and the lacking money supply to these factories for renovations. The number which was predicted to use for renovations is around 400,000 to 500,000 dollars in average, however, firms do not provide enough money to guarantee the safety working condition for workers after all. Firms focus on their self-interest more than the other interest, especially in this case is workers interest to live and support their family.
In the 1970s, Immanuel Wallerstein has created Word system theory based on the earlier Marxist theories (Chirot & Daniel, 2015). This theory established the grand order of the world in the world of the capitalist system becoming “core” and “peripheral” countries. World system theory declares that the success of core capitalist societies is from taking benefit from peripheral ones. Organizations which belong to “core” countries have to go along with the development of the same trend of the world. If they stop taking advantage from “peripheral” countries, firms in particular and economics, in general, can be slow down and be in a trough. Following the flow of the rise of GDP, organizations in “core” capitalist system are in the position of individual impotence which causes them ignoring morally aware. Furthermore, based on the supply chain system of capitalist specific in the retail market, there is some convention which separates the source of profit and the labor standard (Scheper & Christian, 2017). In the process of the supply chain, firms concern with the ability to provide product to fulfill the need of consumers and labor only response with the demand from organizations. Buyers can not require a fundamental ethic demand toward companies while they are the one who keeps purchasing and requiring clothes from these companies. In the age of supply chain capitalist, big firms and companies are not focusing on the question “if” anymore but “how” to be optimized to generate profit. Human right and labor standard are an important social dimension in this model of the capitalist. In an economic perspective, despite becoming more ethical, the organization actually are locked by normative and political scrutiny which oppose with optimizing the benefit in the price competitive market.
The garment which is one of the fastest growing industries supports much of the GDP and the development of Bangladesh (Alam, Md Samsul, Selvanathan, Selvanathan & Saroja, 2017). The intervention of big firm in the economics of Bangladesh generate lots of work option for people and give them income in order to live. Moreover, the export in Bangladesh has expanded and the garment contributes 82% (valued at 25491 million dollars) for Bangladesh’s income. Cheap labor in Bangladesh is a comparative advantage to sustain and maintain the garment export growth. They have the lowest minimum wages (68 dollars) comparing with other countries such as Pakistan (121 dollars), Vietnam (132 dollars), India (158 dollars) and lots other higher minimum wages countries. Bangladesh seeks much of big firm to contribute to its GDP and these companies provide some encouragement for poorer countries to evolve.
These helpful actions from firm may be the morally legitimate action toward the worker in Bangladesh. Firm’s intention may not be immoral when there are much of limitations and rules in the world that they need to follow. However, in the retail industries, especially garment market, when clothes are a fast fashion trend and people change their preference rapidly, big companies (such as H, Zara and so on) are using cheap labor resources to bring to completion their needs. The investment in Bangladesh would not be morally legitimate actions at all. All the conclusion comeback to these first theories in the beginning of the discussion: Firms have no or little care about the morality of a captive employee.
The morally legitimate of firms is influenced by internal and external elements which can decide the level of that. It is true that companies may be affected by the grand order in capitalist and the common trend in worldwide when they attempt to optimize their profit. In the fast fashion market like the garment, cheap labor is a critical factor for firms in the progress of production. With the high demand for clothes and the change in fashion trend, companies have to waste much of capital already and unavoidable to reduce the labor factor. These outsource features impact on the decision of companies which relate to the morality of labor.
However, labor treated badly, disrespected and unaccepted by big firms. The companies exclude ethical values to gain benefits from the market. Organizations are looking for self-interest and chasing for their targets such as money, profit or higher society standard. Cutting-off the labor wage is just a short-term visual of firms when they are not looking for the long-term track. Labor is one of four dimensions of production, therefore, to developing in the future, firms should expand of four components. The morally legitimate in using labor is the key to firm growth to compare with the increasing of economics. Concentrating on the improve the welfare of labor and providing the fully functional working condition is what firms have to do. The case in Bangladesh shows the immoral action of firms causing them much of money to rebuild and compensate for the damage what they did from the beginning.
With these external listed before, firms may be trapped in the situation which cannot decide their own action. The world theory system and the rule of the supply chain may control the trend of economic too heavy which can be difficult for firms to react back. The morally legitimate which is included in the decision may be eliminated. Therefore, there must be some solutions that firms can act the morally legitimate toward labor in the future without the world standards, rules and a common trend that most of the “core” capitalist countries are coming after. It is important to examine the morally legitimate in the supply chain when the world is running by the same model.
The research survey the morally legitimate of firms in retail industry when producing products. Scholars and economists examine different hypothesis and come up with their arguments. Some authors have claimed that firm captive employees without considering morally legitimate behavior. It is the internal problem when self-interest and maximizing profit outweigh the working condition. In Bangladesh case, they cut down money for constructing and innovating the working building. As a consequence, people die and firms are asked about their reason for the morally legitimate specter. Companies have little or no concern about the morally legitimate and welfare of labor. On the other hand, some researchers have noticed that it is just an external effect when firms can not control and give the morally legitimate decision. When economics still follows the same model of world system theory in a capitalist, companies have to catch up with that trend and have limited options for the morally legitimate choice. These companies still have morally legitimate when they are the part of the growth in Bangladesh and provide jobs for out of work people. However, despite some miner helpful, firm sill serve their need and their self-incentive. A captive cheap employee with some limited option in economic, in general, and in garment market, in particular, is an immorally legitimate behavior. Some external effect may change some moral level of the firm which needs to do more research in the future.