Capital, Free Trade and U.S. Hypocrisy


Image from Kheel Center, Cornell University

Nearly 100 years after the infamous Triangle fire, on December 14, 2010, workers producing apparel for the Gap in the Hameen factory outside the capital of Bangladesh, became trapped by a 9th floor fire (Hammadi & Taylor, 2010).  The fire quickly became a conflagration and raged between the workers and the exit.  The workers fled to the fire exits and found locked doors, because management sought to prevent theft.  Left with no recourse, workers either jumped from the top of the building to the ground below or perished from the smoke or flames (Hammadi & Taylor, 2010).  This modern-day Triangle tragedy killed 29 workers and injured more than 100 (Griggs, 2011).

Image from Reuters/Andrew Biraj

The tragedy in Bangladesh serves to highlight the continued exploitation of labor that occurs in the developing world in order to drive down the costs for U.S. corporations.  The problem of exploitation is a complicated one that includes many factors, including the capitalist motives of growth and profit, relaxed or free trade agreements, the appeal of cheap labor and lack of regulatory standards in the developing world, and the need of developing world countries for capital investment to create economic stimulation.  These factors combine to create a vicious cycle that leads to worker exploitation and needless tragedies like the Hameen factory fire and other equally abhorrent labor practices that often impact woman and children the most.

Structural Problem with Capitalism

Hodsen and Sullivan (2008) describe Marx’s view of the structural problem inherent under capitalism:

“The exploitation and misery of workers results directly from the laws of capitalism in which the market system demands that every capitalist buy labor as cheaply as possible in order to produce and sell goods as cheaply as possible and still turn a profit.  If capitalists do not exploit their employees, they will be undercut by other capitalists who do.”  (pg. 8)

Lower costs allow U.S. corporations to return profit to shareholders, compete more effectively, and fund new initiatives to grow their business; in essence, the capitalist incentive system is designed to maximize growth and profit, in direct conflict with workers’ needs for living wages and safe working environments.

The Appeal of Global Labor Differences

            Labor costs vary widely across the globe based on a variety of factors, including the country economy, inflation rate, worker wages, overtime, benefits, and regulatory standards.  Economies without regulatory standards to protect workers, prevent worker exploitation, or protect the environment can be very attractive to corporations that can pass savings on to shareholders in the form of profits or to fuel new growth initiatives.

Free Trade Agreements

            Free trade agreements eliminate trade barriers like tariffs and quotas that historically prevented companies from moving work to countries with lower cost structures.  Advocates of free trade policies, like the WTO and the World Bank argue that free trade promotes economic growth for open economies and a resulting reduction in poverty and inequality.  In the World Bank report on globalization Collier and Dollar (2002) indicate that:

Globalization generally reduces poverty because more integrated economies tend to grow faster and this growth is usually widely diffused. As low-income countries break into global markets for manufactures and services, poor people can move from the vulnerability of grinding rural poverty to better jobs, often in towns or cities.  (p. 1)

Others argue the free trade creates a race to the bottom where industries are more likely to move across borders to countries that have different cost structures and regulatory standards (Hassoun, 2008).  While free trade agreements have opened markets and promoted trade, “these global institutions, however, have been much more reluctant to implement policies that provide protections for workers or for the environment” (Hodson & Sullivan, 2008, p. 203).  By way of example, the Hameen factory fire is indicative of lax safety standards and either poor or poorly enforced labor policies.

A Vicious Cycle

The availability of lower cost labor pools made assessable by free trade agreements have driven the trend by corporations to move work overseas to countries whose economies are in dire need of capital investments and who consequently have created a business-friendly environment.  The government of these countries, like Bangladesh, El Salvador, or Honduras, keep labor costs low to attract needed capital.  For example, El Salvador, a member nation of the International Labor Organization (ILO), one of 5 nations that participate in the Central American Free Trade Agreement (CAFTA),

Image from laurizza

has particularly egregious violations of international labor standards including discrimination against women, the worst forms of child labor and the “violation of the fundamental rights of freedom of association and collective bargaining” (Monterrosa, 2004, p. 46).  Countries with poor economies, high unemployment and free trade agreements make attractive targets for manufacturing investment, particularly when coupled with a pro-business environment that discourages labor unions and lacks effective enforcement of labor laws; the low labor costs are simply too attractive to pass up.  Large infusions of capital for new manufacturing investments can perpetuate pervasive labor problems like exploitation of women and children, low wages and occupational safety issues.

An Example: From a Sweatshop in El Salvador to CSU

            Two years after CAFTA was signed into law, Hanes Brands, a U.S. based maker of apparel across numerous brands, including the Champion Brand, announced the acquisition of the textile manufacturing operations of Industrias Duraflex, El Salvador, in order to continue to lower global supply chain costs (HanesBrands, 2007).  Hanes Brands, has been implicated in child labor violations in Bangladesh (Kernaghan, 2006), while in the Dominican Republic, Hanes used “a range of illegal means to thwart workers’ efforts to exercise their associational rights” (Worker Rights Consortium, 2007, p. 3).  A May 2009 report from the Washington Office on Latin America (WOLA) found continued institutional weakness and pervasive impunity in the enforcement of labor rights post-CAFTA in countries like El Salvador and cited numerous labor violations by Hanes Brands (2009).  Companies like Hanes Brands are able to operate largely with impunity in free trade zones, ignoring ILO labor standards and local labor laws while being applauded by the investors for their superior business management.  Meanwhile, Colorado State University, is selling CSU-branded Hanes merchandise to students and helping to support El Salvador’s sweatshop economy.

This shirt is made in El Salvador

How are we to begin to solve the labor problems associated with globalization when we reward the worst abusers with profit?

Fair Trade versus Free Trade

Free trade agreements have done much to advance the cause of trade and little to advance the cause of workers rights.  A move towards fair trade, with a linkage between international trade and basic labor standards, would do much to level the competitive labor field while improving justice (Barry & Reddy, 2005).  Linkage may also have the effect of improving wages and decreasing poverty (Barry & Reddy, 2005).  Upcoming trade agreements with Columbia and Peru are including more provisions for improved labor standards, although still may fall short in funding for enforcement projects (Washington Office on Latin America, 2009).

Improve Educated Consumer Choice

Information on ethical choices for purchased goods should be readily available to U.S. consumers whose current purchasing decisions reward corporations that exploit workers.  While there is information available for those who choose to do the research, it appears to be fragmented and lacks an appropriate framework to make it easy for a consumer to make an ethical decision.  Perhaps, were products labeled as “ethically manufactured” in the same way organic food is labeled “organic”, consumers could make an informed decision.  That knowledge would certainly have prevented my purchase of the CSU-Global apparel.

Conclusion

            The U.S. government, corporations, and consumers are equally culpable in the continued exploitation of workers and specifically the most vulnerable workers, women and children.  There are many factors contributing to the ongoing exploitation of women and children in the developing world.  Major factors include capitalist motives of growth and profit, free trade agreements that do not include provisions to enforce basic labor standards, the appeal of cheap labor and lack of regulatory standards in the developing world, and the need of developing world countries for capital investment to create economic stimulation.  These factors help create a vicious cycle where U.S companies infuse large amounts of capital into developing economies to take advantage of the opportunity of free trade and cheap labor; while the governments of developing countries allow an environment hostile to labor to perpetuate continued exploitation to attract capital investment.  It is the height of hypocrisy that the U.S. government, corporations, and workers, that insist on basic labor standards inside the U.S., have systematically help deny workers in the developing world the same basic rights.

References

Barry, C., & Reddy, S. G. (2005). Just Linkage: International Trade and Labor Standards (pp. 122). New York: Columbia University.

Collier, P., Dollar, D., & World Bank. (2002). Globalization, growth, and poverty : building an inclusive world economy. Washington, DC New York, N.Y.: World Bank; Oxford University Press.

Griggs, A. (2011, March 24). Triangle’s Fire Still Burns. Labor Notes. Retrieved May 29, 2011, from labornotes.org/2011/03/triangle’s-fire-still-burns

Hammadi, S., & Taylor, M. (2010, December 14).  Workers jump to their deaths as fire engulfs factory making clothes for Gap | World news | guardian.co.uk .  Latest news, comment and reviews from the Guardian | guardian.co.uk . Retrieved May 29, 2011, from http://www.guardian.co.uk/world/2010/dec/14/bangladesh-clothes-factory-workers-jump-to-death

HanesBrands. (2007, September 6). Hanesbrands Inc : Hanesbrands Inc. Acquires Textile Plant in El Salvador Capping Successful First Year as an Independent Company. Stock Market Quotes and Financial News | 4-Traders. Retrieved May 30, 2011, from http://www.4-traders.com/HANESBRANDS-INC-31267/news/HANESBRANDS-INC-Hanesbrands-Inc-Acquires-Textile-Plant-in-El-Salvador-Capping-Successful-First-Year–411680/

Hassoun, N. (2008). Free trade, poverty and the environment. Public Affairs Quarterly, 22(4), 353 – 380.

Hodson, R., & Sullivan, T. A. (2008). The social organization of work (4th ed.). Belmont, CA: Wadsworth.

Kernaghan, C. (2006, October 24). Child Labor Is Back: Children Again Sewing Clothing for Wal-Mart, Hanes and Other U.S. Companies. Common Dreams. Retrieved May 29, 2011, from http://www.commondreams.org/news2006/1024-01.htm

Mcclear, S. (2005, March 1). ZCommunications | Race to Bottom for Garment Workers by Sheila Mcclear | ZMagazine Article. Z Communications. Retrieved May 29, 2011, from http://www.zcommunications.org/race-to-bottom-for-garment-workers-by-sheila-mcclear

Monterrosa, A. l. E. n. C. (2004). LEGAL, POLITICAL AND PRACTICAL OBSTACLES TO THE ENFORCEMENT OF LABOR LAWS IN EL SALVADOR Fundamental Labor Rights in Central America, Latin America and the Caribbean (pp. 51). Washington DC: International Labor Rights Fund.

Washington Office on Latin America. (2009). DR-CAFTA and Worker’s Rights: Moving from Paper to Practice (pp. 28). Washington DC: WOLA.

Worker Rights Consortium. (2007). WRC ASSESSMENT re TOS DOMINICANA (DOMINICAN REPUBLIC)

FINDINGS AND RECOMMENDATIONS. Washington DC: Workers Rights Consortium.

 

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Movements for Social Change in an Integrated Global Economy


Image by jaybergesen

Income inequality between the rich and the poor continues to be a significant concern in the United States, prompting national headlines and serious political debate regarding governmental policy.  Historically, economies based on capitalism tend to have a pro-business stance, implementing pro-business policies to spur economic growth (Zinn, 2010).  The typical role of the labor union has been to help improve economic equality between workers and the companies that employ them; however, unions have also helped their members pursue political action and influence the electoral process to achieve their aims as well (Hodson & Sullivan, 2008).  Beyond unions, non-governmental organizations also pursue political action to address broad social issues like income inequality.   Increasingly, both unions and NGOs are spanning national boundaries to deal with inequality issues that effect workers due to the increased influence of multinational corporations and the issues that arise from the globalization of work and trade.  As NGOs and unions grow beyond national boundaries, what advantages or disadvantages are at play, that influences their effectiveness?  How beneficial are NGO programs that attempt to deal with income inequality issues?

The rise of large multinational corporations has resulted in a situation where, “two hundred of that largest corporations control over 80 percent of the assets of the Western world” (Hodson & Sullivan, 2008, p. 388).  Multinationals have tremendous influence in both their home countries and the less developed countries where many plants are located.  Additionally, multinationals have a single duty or aim, which is “simply to maximize financial returns for investors” (Bibby, 2004, p. 16).  Their nearly singular focus on maximizing financial returns has led work being exported to countries that have lower labor costs and in many cases do not afford the same legal protections for workers as developed countries.  For example, child labor produces goods in sweatshops located in developing countries; goods that make their way into the supply chains of major multinational retailers (McDougall, 2008).  In addition, when work moves to developing countries, there is an impact on the workers in developed countries that lose their jobs to lower cost labor pools; namely costs that are transferred to the public sector like unemployment or retraining for workers (Bibby, 2004).

To more effectively deal with issues raised by multinationals operating in an integrated global economy, there are a growing number of international labor organizations including UNI Global Union, a global union that represents 900 trade unions and 20 million workers (“UNI Global Union,” 2011).  There are several advantages in using a global, federated approach to labor unions, namely a larger pool of workers that provide the basis for union influence, greater coordination on issues that span national boundaries and the resulting ability to influence the policy and business decisions of large multinationals.  The most significant disadvantage to a global, federated approach to unions is the increased scope and complexity of problem that arises from the requirement to represent a large diverse constituency with diverse needs.  For instance, in the case of outsourced jobs, the recipients of new jobs may not appreciate interference, while the workers whose jobs are moved may desire intervention.  Therefore, global unions are required to focus on larger policy issues like poverty, equality, and exploitation; and do so by negotiating principle-based, framework agreements (“UNI Global Union,” 2011).

In their focus on policy issues, global unions are much like NGOs that focus on income inequality, although NGOs like results.org, United for a Fair Economy (UFE), and inequality.org tend to focus on programs that seek to enable and build grassroots movements, educate people on inequality issues and advocate policy positions, particularly on issues of taxation.  As an example, UFE has a projects that advocate for the reintroduction of the estate tax as a mechanism to continue funding of programs to benefit the poor (“Estate and Federal Taxes | United for a Fair Economy,” 2011).  Should UFE advocate a successful policy change and influence estate tax legislation to garner additional tax revenues to continue or grow funding for government benefits programs, there could be a positive impact on low-wage workers, providing supplement benefits that help those workers survive; however, it is a significant causal chain between UFE influence and benefits being provided to workers.

Global labor unions and income inequality NGOs are needed organizations that serve to fill the representation gap left by pro-business governments and large multinationals that operate strictly on the profit motive.  Both seek to educate people and advocate for change to address a growing income gap, while global labor unions actively seek to negotiate fundamental workers rights with large multinationals.  However, neither is well suited to address individual or regional workers issues.  As a result, many organizations seek to operate on the principles of federation and collaboration, or as representatives of UNI Global Union suggest, “Act locally, organize globally” (Bibby, 2004, p. 25).

 

 

References

Bibby, A. (2004). The Global Mobiity Revolution. In U. N. International (Ed.), (pp. 25).

. Estate and Federal Taxes | United for a Fair Economy. (2011)  Retrieved 22 May, 2011, from http://faireconomy.org/estatetax

Hodson, R., & Sullivan, T. A. (2008). The social organization of work (4th ed.). Belmont, CA: Wadsworth.

McDougall, D. (2008). Child sweatshop shame threates Gap’s ethical image. The Observer. Retrieved from guardian.co.uk website: http://www.guardian.co.uk/business/2007/oct/28/ethicalbusiness.india

. UNI Global Union. (2011, 20 May 2011)  Retrieved 22 May, 2011, from http://www.uniglobalunion.org/Apps/iportal.nsf/pages/homepageEn

Zinn, H. (2010). The Twentieth Century : a people’s history. New York, NY: MJF Books.

 

 


Globalization and Multi-National Corporations: The Erosion of Democracy


Image: Steve Kaiser

Globalization is the increasing integration and management of the world economy as a whole and governed by institutions like the International Monetary Fund, the World Bank and the World Trade Organization.  The goal of these organizations is ostensibly to open new markets and promote the economic growth of all member nations, however critics argue that these organizations purpose is more insidious; that they seek to exploit least developed countries for the sake of multi-national corporations and the continued growth of developed economies.  Additionally, there is concern over loss of national sovereignty because of participation in the WTO, as its agreements and decisions are binding for member nations; this is especially challenging in democratic nations, where individual freedom and liberty are considered a god given right.  The effects of globalization and the boundless power of multi-national corporations can be considered to attempt to regulate flows of labor and to erode the ability of democratic national institutions to self-govern.

The WTO’s stated goal “is to help producers of goods and services, exporters, and importers conduct their business” (World Trade Organization, 2011b).  To do this, the WTO seeks to encourage free and open trade and has developed a set of basic principles and agreements to govern the trade of goods, services, and intellectual property (World Trade Organization, 2011a).  However, free trade has not worked equally for citizens of WTO member nations.  While free trade agreements have opened markets and promoted trade, “these global institutions, however, have been much more reluctant to implement policies that provide protections for workers or for the environment” (Hodson & Sullivan, 2008, p. 203).  Additionally, critics point to corporate abuses by large, powerful, multi-nationals under the guise of WTO agreements, such as Monsanto’s attempt to own the intellectual property for seed genetics and Bechtel’s attempt to privatize and profit from Bolivian water rights in an action directed by the World Bank and the Bolivian government (Achbar & Abbott, 2003).  The WTO could be considered a more legitimate organization should it adopt a stance that considers the entirety of the system, including people, rather than singular focus on helping business prosper.

The distinct focus on helping businesses has led the WTO into discussions on immigration as part of the General Agreement on Trade Services, or GATS, whose goal it is to eliminate barriers erected by local or national governments to service providers entering their markets.  Under that definition, the U.S. H1-B Visa limit could be construed as an unfair trade barrier and that was the stance taken by the Indian government (Anderson, 2005).  To what extent is the WTO an organization that can legitimately dictate U.S. immigration law to regulate the flow of labor across national borders?

Legitimacy is at the heart of the multi-national corporation and globalization debate. To what extent should an organization whose stated goal is to help producers conduct business, be allowed to govern?  According to Pascal Lamy, Director general of the WTO, the goal of the WTO is and should be global governance, because five years at the WTO has taught him that “when it comes to international action, States are often incoherent” (2011).  Lamy believes that in order to address global challenges, “pragmatic solutions need to be found now to enhance global governance and better address the problems that our world is facing” (2011) and outlines an EU like structure for global governance.  Given the protests in Seattle and around the world, it appears that many do not agree.  In a show of solidarity against the WTO, people from all walks of life protested; citizens concerned with loss of rights, workers concerned with fair trade, environmentalists protesting corporate abuses, and citizens of developing countries, all disenfranchised by the closed door proceedings of the WTO (Friedberg & Rowley, 2000).  It appears that many do not wish to be governed by an organization that lacks accountability to the people it purports to govern.

The trend towards globalization is characterized by the regulation and management of the world economy as a single, coherent, integrated system; and over the course of the last 50 years, much progress has been made to create institutions to govern the global economy.  Large multi-national corporations are the primary beneficiaries of a globalized economy, given the power their size, amount of capital, and market control provides.  The combined coercive power of the global trade and finance institutions and large multinational corporations over nations and individuals has eroded national sovereignty and alienated citizenry, because of their avowed loyalty is to profit rather than people.  In the United States, the government derives “their just powers from the consent of the governed” (United States, 1776), contrary to what DG Lamy and multi-national corporate shareholders may believe.

References

 Achbar, M., & Abbott, J. (Writers). (2003). The Corporation [Film]. In Big Picture Media Corporation (Producer). Canada.

Anderson, S. (2005). U.S. Immigration Policy on the Table at the WTO. Global Politician, 1. Retrieved from Global Politician website: http://www.globalpolitician.com/21446-immigration

Friedberg, J., & Rowley, R. (Writers). (2000). This Is What Democracy Looks Like [Video]. In Big Noise Films & Independent Media Center (Producer).

Hodson, R., & Sullivan, T. A. (2008). The social organization of work (4th ed.). Belmont, CA: Wadsworth.

Lamy, P. (2011, 19 February 2011). [Pragmatic solutions need to be found now to enhance global governance].

Soubbotina, T. P. (2004). Beyond economic growth : an introduction to sustainable development (2nd ed.). Washington, D.C.: World Bank.

United States. (1776). In Congress, July 4, 1776, a declaration by the representatives of the United States of America, in General Congress assembled. Philadelphia: Printed by John Dunlap.

World Trade Organization. (2011a). The case for open trade  Retrieved June 24, 2011, from http://www.wto.org/english/thewto_e/whatis_e/tif_e/fact3_e.htm

World Trade Organization. (2011b). What is the WTO?  Retrieved June 24, 2011, from http://www.wto.org/english/thewto_e/whatis_e/whatis_e.htm