Style over substance: The economics of fast fashion

Whether you realise it or not, you make fashion choices every single day. Not only do these decisions affect how people perceive you, but they also shape the planet’s environment and eco-systems, and have a direct impact on the lives of 300 million garment workers around the world.

The clothes, shoes and accessories you put on each morning reflect a rich economic and historical story. With this in mind, a few weeks ago on the Economics Observatory, we published four new articles exploring the cultural, economic and environmental impacts of the fashion industry. It is often said that fashion is cyclical: exploring the economic forced behind these cycles reveals an industry marked by overconsumption and exploitation.

Fashion through the ages

We kicked off our fashion-focused themed week with an article by José Antonio Miranda (University of York) and Alba Rodán (Universidad de Alicante). In their new piece, they examine the history of the fashion industry, charting the sector’s journey from 19th century Parisian boutiques to modern-day ‘fast fashion’ giants.

José and Alba argue that while contemporary globalised fashion business models are a relatively recent phenomenon, it is possible to trace the evolution of the industry through the last couple of centuries. Starting in Paris in the mid-1800s, the sector soon spread outwards, with influential designers and labels popping up in London, New York and Milan. It was in the latter that the sector changed most dramatically. Brands like Armani, Versace and Moschino exploded in popularity from the 1970s onwards, leading to a surge in international commerce and influence. As a result, the value of Italian garment exports rose from €800 million in 1970 to around €20 billion in 1990.

Crucially, this was supported by the emerging success of lower-priced clothing brands. For example, the Benetton group (created in the mid-1960s) launched designs which were accessible to a wider range of consumers. José and Alba argue that Benneton also anticipated some of the strategies that would later be developed modern-day fast fashion retailers, such as flexible production and ultra-low prices.

The growth of the global fashion industry is itself a story of industrialisation. The transition from haute couture (i.e., bespoke tailored items) to ‘ready-to-wear’ clothing is the product of rapid industrial development from the 18th to 21st centuries. Once innovative designs met large-scale manufacturing capabilities, the world of fashion ballooned outwards into the powerhouse we see today.

Fast and furious

The true costs of fast fashion are explored in an article by Elaine Ritch (Glasgow Caledonian University). In her piece, Elaine argues that the benefits of affordable clothing as a means of individual expression are offset by costs not necessarily reflected in the low prices. The fast fashion business model is built on the exploitation of both the environment and human beings, she argues.

For example, the fashion industry is the second biggest polluter after aviation. Not only are the manufacturers of garments heavily dependent on scarce resources, but they also produce items that are made with little expectation for longevity, with clothes often quickly ending up in landfill.

Garment production also comes with a heavy human cost. For example, the draining of the Aral Sea in Uzbekistan—carried out to satisfy the surge in irrigation requirements caused by rising European cotton demand during the 1960s—has had catastrophic consequences for public health. According to Elaine, the destruction of this ecosystem has reduced local air quality, leading to an increase in respiratory disease and cancer diagnoses in the surrounding area.

Similarly, the low prices found in the fast fashion industry rely on the mistreatment of many of the sector’s workers. For Elaine, outsourcing clothing manufacture to reduce production costs can lead to textiles workers being exploited through long working hours, low wages and inhumane working conditions. In some cases, there have even been allegations of modern-day slavery. Keeping high street prices low has meant cutting both corners and costs.

Mounting costs

These ideas are developed further by Xiaoyang Long (Wisconsin School of Business. In her recent article, she notes that the fashion industry is a major drain on natural resources and is one the global economy’s most prolific polluters, accounting for 8-10% of all carbon emissions.

Starting with resource intensity, Xiaoyang argues that making clothes is thirsty work. In fact, producing a simple cotton t-shirt can require the same amount of water needed to satisfy one person’s drinking needs for two and a half years. As a result, the fashion industry uses an estimated 79 trillion litres of water per year. This is equivalent to draining Lake Superior (the third-largest freshwater lake in the world by volume) almost seven times over.

These negative environmental effects are also distributed highly unevenly. In many cases, the bulk of fabric and apparel production occurs in developing countries, away from the Western countries where the end products are purchased. Xiaoyang argues that this means that the resource consumption, air pollution and industrial waste caused by the fashion industry are all concentrated in poorer countries, where there is often less infrastructure in place to deal with the consequences. Insatiable demand in the West leads to irreparable damage further afield.

It's not just production waste that is the problem. Xiaoyang notes that ‘post-consumer apparel waste’ (i.e., garments thrown away by people) is often exported to developing countries, where mountains of cheap fast fashion products have started to overwhelm local second-hand markets. For example, every week Ghana receives 15 million items of second-hand clothing. Almost half of these garments are reported to be unsellable and end up overflowing local landfills or polluting the country’s beaches.

Tales from Dhaka

Also published was a new article by Dina Siddiqi (New York University). In her piece, she explores the evolution of Bangladesh’s garment industry, arguing that the success of the industry’s rapid rise to international dominance has come at the expense of workers’ wellbeing (particularly for women).

Analysing both the role and reputation of women in Bangladesh’s garment industry reveals several lessons about the sector as well as the country’s wider economy and society. For some, female employment is an example of modernisation and empowerment. For others, the industry’s reliance on sweatshops and exploitation is representative of Bangladesh’s dependence on international demand for cheap clothes. What is constant across each narrative is the shocking precarity of the ‘fast fashion’ model of garment production. This vulnerability was laid bare during the Covid-19 pandemic, when large-scale order cancelations by European and American clients led to mass lay-offs and missed wages.

Historically, workers in Bangladesh have also faced a system of political repression. For example, the criminalisation of protests and labour organisations enabled the government and the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) to discredit union activism and undermine labour platforms. For Dina, this ‘repressive and brutal imbalance of power’ clashes with the narrative of development and modernisation.

But change could be afoot. The toppling of the authoritarian Awami regime last summer has paved the way for labour reform in Bangladesh. Although during the immediate aftermath of the uprising many workers were once again stranded without pay, the new regime has since set up a Labour Commission to provide recommendations for new policies. For Dina, the biggest test is yet to come. Policy-makers in Bangladesh must prioritise wage stability and the right to unionise – only then will the growth of the garment industry qualify as a true indicator of economic development and modernisation.

Out of fashion

The rapid growth of the global fashion industry over the past few centuries carries many important lessons. The explosion of production and consumption brings with it with heavy costs, both to the environment and to workers in developing countries like Bangladesh. Ultra-low prices and rapid order delivery—now hallmarks of the modern fashion business model—bear hidden negative costs which policy-makers around the world cannot afford to overlook.

But not all hope is lost. Whether shopping more mindfully from second-hand and rental markets, or repairing, upcycling, and disposing of clothes responsibly, there are some small ways that consumers can blunt some of the negative effects of the garment industry. Regardless of whether you fancy yourself a style icon or not, we can all make consumption choices that contribute to the true cost of this industry.

Behind every t-shirt, coat and pair of jeans is a complex story about industrialisation, globalisation and exploitation. Both consumers and policy-makers would do well to keep this in mind.

Authors: Charlie Meyrick, Hannah Cantekin

Authors' note: This piece was originally posted as a newsletter for the Economics Observatory.