Corporate governance and social upgrading in the semi-periphery: the case of the Hungarian garment industry

Szerző: Emese Dobos

In: Tér és Társadalom, 39(2), 30–56.

DOI: https://doi.org/10.17649/TET.39.2.3604

Abstract

The garment manufacturing industry has notoriously fragmented and extensive supply chains. During the 1990s, a significant group of emerging countries have entered the sector through export-oriented industrialization and various international agreements. Much of the early global value chain theory has focused on these countries and, in particular, on the aspect of economic upgrading within national economies and firms. While the global value chain literature now recognizes that buyer governance is ineffective and that achieving social upgrading requires coordinated work by multiple stakeholders. The public opinion however falsely connects sweatshop-like conditions to developing countries and sourcing practices of lower market segment fashion brands, such as fast fashion. However, while the so-called sweatshop scandals have led to both academic and non-profit interest and regulatory attempts by buyer firms to focus mainly on emerging countries, serious labor rights abuses, inadequate working conditions and exploitation are also found in the region’s garment production. Nevertheless, a number of Central and Eastern European countries on the Eastern periphery of the European Union had by then been involved in international production for decades through significant contract work for mainly Western European fashion brands. The region also enjoys a special interest due to reshoring tendencies that underpins the importance of working conditions. One of the main contributions of the research is to examine, through qualitative research methods and expert interviews, whether there has been social upgrading or downgrading since the regime change.

The research examines the example of the Hungarian garment manufacturing sector as a descriptive case for a semi-peripheral economy. The results showed the complexity and the dynamism of the social upgrading concepts as experts gave even opposite perceptions on the issue. The main conclusion of this study is that even if national legislation systematically infringes on workers’ interests, it is the local management, the direct employer, that has the greatest impact on various aspects of social upgrading for garment workers. It is underpinned by the piece rate system that allows employers to not even pay the national minimum wage for garment workers, and as the experts have also reported, employers frequently break Hungarian labor law. After an introduction to global garment value chains, describing the concepts of governance and social upgrading, the paper discusses the role of semi-peripheral countries in these. It then describes the complexity of operationalizing the concept of social upgrading through a descriptive case study of Hungary, synthetizing the empirical findings from the interviews. Finally, it concludes with a summary, an outlook and policy recommendations.