Development Channel

Global trade and the supply chains that support it are undergoing a period of profound change. Supply chains face threats including a resurgence of protectionism, climate change, decaying infrastructure, and human rights abuses. The Development Channel’s series on global supply chains highlights experts’ analysis on emerging trends and challenges. This post is from Drusilla Brown, associate professor of economics at Tufts University and director of Tufts International Relations Program.  Auditing workplaces in global supply chains is often rejected both as ineffective in improving conditions and as a superficial attempt to salvage the reputation of global brands. But new research shows auditing improves the lives of workers on its own and is particularly effective when paired with supervisory skills and worker empowerment training. Benefits to workers can be achieved without hurting a company’s bottom line—and may even improve it. Better Work is a joint initiative by the International Labor Organization and the International Finance Corporation that aims to improve work conditions in developing countries by auditing and advising factories. My research colleagues and I were asked to evaluate the program’s effectiveness in seven countries: Cambodia, Haiti, Indonesia, Jordan, Lesotho, Nicaragua, and Vietnam. To do so, we gathered data on firms’ revenue and production, surveyed workers and their managers, and randomly assigned factories to varying amounts of program exposure. While the data varied country-by-country and firm-by-firm, the trend was clear: Better Work factories had more humane labor practices as perceived by workers and were more profitable. Surveys revealed that workers in Indonesia were less concerned with accidents and injuries; workers in Vietnam were less likely to report fatigue, stomach pain, and chemical smells; and in Jordan they were less likely to report headache, fatigue, hunger, thirst, and risk of injuries. Verbal abuse and sexual harassment significantly declined in all three countries and evidence of human trafficking declined in Jordan. Employees in Vietnam also said they work fewer hours and receive their full pay, clocking about three and a half hours less and earning over $7 more per week. We found similar results in Jordan and Indonesia. Businesswise, many firms became more productive as verbal abuse and harassment declined. Following a supervisory skills training program, worker turnover fell and productivity rose an average of 22 percent. Improvements arose from training that encouraged supervisors to take the perspective of workers and employ positive motivational techniques. Factories receiving Better Work services in Vietnam boosted revenue relative to cost an average of 24 percent after four assessment cycles. The services also helped expand business, with international brands placing larger and more regular orders with partners who had improved working conditions. Those factories meeting basic labor standards also prove to be more resilient during financial downturns. In Cambodia, firms that chose compliance after the second assessment were less likely to close than noncompliant factories during the 2008-09 financial crisis. Many firms around the world employ traditional workplace practices that dehumanize workers. “Fast fashion” brands force factories to produce on short notice, getting clothes from design to sales floors in a matter of weeks. Under this stress, supervisors are more likely to verbally harass workers or press them to work excessive overtime. And given the uncertainty of future orders, many don’t devote time or energy to change management practices. Yet the evidence shows that it is possible to improve both workers’ lives and companies’ bottom lines when owners and managers adopt labor management innovations.

Emerging Voices highlights new research, thinking, and approaches to development challenges from contributing scholars and practitioners. This post is from Niklas Kossow, communications officer for the European Union FP7 ANTICORRP project and the European Research Centre for Anti-Corruption and State-Building.  In this post, he considers the challenge of designing evidence-based reforms and measuring success in global development, and describes a new approach to objective measurement in the field of anticorruption and good governance: the Index of Public Integrity. In September 2015, the United Nations General Assembly passed the sustainable development goals (SDGs) that will define the direction of global development for years to come. Among the seventeen goals that aim to end poverty, reduce inequality, and ensure quality education and healthcare, is Goal 16—a commitment to encouraging good governance. To achieve this, Goal 16 sets twelve specific targets, including promoting the rule of law, ensuring inclusive decision-making, and fighting corruption and bribery. Good governance as a UN goal would have been a surprise just a few years ago, but its addition to the development agenda reflects the increasing recognition that it affects economic growth, a functioning civil service, and development outcomes, such as better healthcare. In a corrupt system, development aid rarely ends up with those who need it the most. But measuring good governance—and especially corruption—is difficult, for the SDGs and more broadly. Existing indices, such as Transparency International’s Corruption Perception Index (CPI) and the World Bank’s Control of Corruption indicator (CoC), are perceptions-based surveys that ask experts and citizens to estimate how much corruption exists in a specific country. Though they have successfully raised awareness of corruption as a global problem and informed the policy debate, they are deeply flawed as corruption measures. As indices that aggregate expert opinions into a single country score, the individual factors experts use to make their judgements about corruption levels are hard to identify. And because these factors are unclear, policymakers are given little guidance as to how to better control corruption and ultimately, improve governance. Additionally, these types of assessments are highly subjective and influenced by recent events. Countries can end up with worse CPI scores after a major corruption scandal is uncovered, or the government begins fighting graft, even though these likely signal a country is getting better at controlling corruption, not worse. With these shortcomings in mind, the European Research Centre for Anti-Corruption and State-Building (ERCAS) developed a new way to measure corruption: the Index of Public Integrity (IPI). Developed as part of a five-year anticorruption research project funded by the European Commission, and focused on building objective and actionable data, the IPI uses the following six indicators that have proven crucial in fighting corruption: Administrative burden: measures the time and number of procedures it takes to start a business and the time and effort it takes to pay taxes; Trade openness: measures the number of documents and the time required to complete import and export procedures; Budget transparency: assesses the transparency of an executive’s budget proposal and how easily available it is to citizens; e-citizenship: looks at the number of internet users, broadband subscriptions, and Facebook users in each country; Freedom of the press: measures press freedom based on country scores in Freedom House’s annual Freedom of the Press report. Empirical research, led by Prof. Alina Mungiu-Pippidi of the Hertie School of Governance, has shown that these six institutional features can either enable or constrain corruption. High administrative burdens, trade barriers, and a lack of budget transparency reflect the “supply side,” giving public officials the opportunity to tap state budgets and extort money from citizens. Judicial independence, freedom of the press, and e-citizenship can affect the “demand side”—constraining corruption by empowering oversight of independent institutions and citizens, and bringing corrupt officials to account. This new set of indicators also helps policymakers identify areas where countries are performing badly, and where specific reform efforts are needed. For example, the IPI shows that Chile is doing fairly well overall—ranked 26 out of 105 countries globally, and second among its Latin America and Caribbean neighbors. Yet it lags on budget transparency, coming in at 83 out of 105. And Slovakia, ranked 33 out of 105, falls down on judicial independence—coming in at 92 out of 105. The IPI’s nuance gives governments willing to tackle corruption a roadmap to do so. It can more accurately show what progress countries have made, and whether certain policies helped or failed. For development professionals, these more actionable, objective metrics can help the international community design better policies to meet the SDGs’ targets and goals.

Philippines’ Duterte Tries to Take Down Critic Philippine President Rodrigo Duterte brooks no dissent. His latest backlash is against one of his most outspoken critics, Senator Leila de Lima. After she opened an inquiry into Duterte’s role in killings while he was a mayor, and urged the international community to investigate the over 1,500 alleged extrajudicial killings during his first four months in office, the president’s Senate allies ejected her as chair of the Justice Committee. The government is now accusing her of drug trafficking, bribery, and graft. If the case moves forward, De Lima could face up to thirty years in prison—effectively silencing Duterte’s opposition. Can Mercantilist China Lead on Global Trade? With the Trans-Pacific Partnership (TPP) dead, the Regional Comprehensive Economic Partnership will lead the agenda at the Asia Pacific Economic Cooperation (APEC) summit in Peru this weekend. The China-led alternative includes ten Southeast Asian countries as well as Japan, India, South Korea, Australia, and New Zealand, roughly 28 percent of world gross domestic product. As trade deals go it is limited—focusing mainly on lowering tariffs. And one of the countries with the highest barriers is China itself, which levies taxes on everything from imported toys to computers, alongside strong “buy-national” policies, and favored financing for its own companies. Those looking for strong leadership against rising protectionism will likely be disappointed. Future of the FCPA in Question In 2016 the United States used the Foreign Corrupt Practices Act (FCPA) to bring civil or criminal penalties against a record twenty-three companies, slapping them with fines totaling over $1 billion. The latest came this week as J.P. Morgan Chase agreed to pay U.S. authorities $264 million for a “systematic bribing scheme” involving hiring the children of China’s elite to win business. These ramped-up U.S. anticorruption efforts of the past decade are now in question, and anticorruption scholars differ on the future. Harvard’s Matthew Stephenson expects the end of FCPA and the fledgling Kleptocracy Asset Recovery Initiative as we know them. Others are cautiously optimistic, assuming companies’ self-reported cases, which make up half of FCPA actions, to continue. U.S. multilateral leadership, through the OECD, the United Nations, the G20, and other international anticorruption forums, is also at stake.