Movements for Social Change in an Integrated Global Economy


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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.

 

 


Why the Service Economy is Good for US


Imag from : psyberartist

Over the course of the last 60 years, the U.S. economy largely become a service economy, with services growing from 52% of jobs in 1950 to nearly 78% of jobs by 2006 (Hodson & Sullivan, 2008).  While many in the mainstream media appear to bemoan the loss of manufacturing jobs and view the loss as an indicator signaling the decline of the U.S. economy, many see the shift to a service economy as normal process of economic maturation.  Additionally, the shift to a service economy has occurred largely during a period of sustained economic growth.  While typical processes of economic maturation are at work, the U.S. shift to a service economy has unique features that are concerning, like manufacturing job loss, outsourcing, and a shrinking middle class.  Additionally, the pervasive use of information technology in the service sector is a unique feature of the economy that may portend additional economic and wage growth. The shift to a service economy likely has lasting implications for the U.S. economy and may have a lasting impact on U.S. economic power on the global stage.

The economic shift from agriculture to manufacturing and eventually to services describes the well-known evolution of a maturing economy.  According to the World Bank, “these two consecutive shifts are called industrialization and post-industrialization”(Soubbotina, 2004, p. 64). These economic shifts occur as a result of gains in per capita income; as individual income grows, the requirement for food reaches a limit and more is spent on material goods and as the demands for goods are met, more income is spent on services (Soubbotina, 2004).  In a sense, per capita income growth resulting in changing patters of consumer spending is a significant driver of the shift to a services economy.  Bureau of Labor Statistics economist Mitra Toosi (2002) found more than 60% of U.S. employment is generated by consumer spending “with consumers increasingly shifting their purchases to a sophisticated array of personal services” (p. 1).

In addition to shifting consumer needs, increased manufacturing productivity and globalization have also influenced the shift to services.  The popular press often decries the loss of manufacturing jobs and the resulting impact on the U.S. economy, frequently laying blame on outsourced manufacturing to developing countries.  However, Collins and Ryan (2007) found technology-driven manufacturing productivity improvements created more job loss than outsourced jobs.  Former Secretary of Labor and Chancellor’s Professor of Public Policy at the University of California at Berkeley, Robert Reich (2009) vividly described the impact of manufacturing technology on a factory floor:

I recently toured a U.S. factory containing two employees and 400 computerized robots. The two live people sat in front of computer screens and instructed the robots. In a few years this factory won’t have a single employee on site, except for an occasional visiting technician who repairs and upgrades the robots. (p. 1)

Of course, globalization plays a minor, albeit increasing role in the loss of U.S. manufacturing jobs as well, because of the advantage achieved because of inexpensive transportation, lower trade barriers, and cheap labor. However, a Congressional Report found that only 20% of manufacturing job loss since 2000 were a result of trade deficits caused by forces of globalization and those losses were likely ameliorated by job gains elsewhere or reclassification of manufacturing jobs into service jobs (Elwell, 2004).

Of more concern to the service sector is the growing divide between rich and poor resulting in a shrinking middle class.  Some might argue that the shift to a service economy itself is the cause of the growing divide, because service sector jobs appear to be split between low-paying service industries and high-paying service industries (Hodson & Sullivan, 2008).   Low-paying service industries include “retail trade, repair services, personal services, entertainment and recreation services” (Hodson & Sullivan, 2008, p. 249).  There is likely a variety of causes for low-wages in some of the specific low-paying occupations in the service sector.  Personal services, entertainment and recreation services all typically utilize discretionary spending, which are often the first services to be cut during tough economic times.  Another potential cause of low wages in some low-paying service sectors is lack of unionization.  Unions have had some success targeting lower-tier jobs, like janitors and hotel workers (Hodson & Sullivan, 2008), but have struggled with corporations like Walmart, that use strong, anti-union, tactics to prevent unions from gaining a toehold into their organization (Greenwald, 2005).  While low-paying service sector jobs clearly have an influence on service wages as a whole, recent Bureau of Labor Statistics data from May of 2011 show that average wages of private service sector jobs are now slightly higher than average wages of manufacturing jobs (U.S. Bureau of Labor Statistics, 2011).  Therefore, service sector wages are not a sufficient cause of the growing gap between rich and poor.

Rather, government policy is a more likely culprit.  For decades, the U.S. Government has consistently chipped away at the social safety nets put in place by FDR and later by Lyndon Johnson.  In 1996, Clinton passed the Personal Responsibility and Work Opportunity Reconciliation Act, forcing millions of former welfare recipients into the workforce (Wolf, 2006).  Moreover, the taxation policies of the last 30 years have favored the wealthy and placed additional tax burdens on poor and middle-class workers.  Reich (2011) describes the shift in tax policy:

It halved the top income tax rate from the range of 70 to 90 percent … to 28 to 35 percent; allowed many of the nation’s rich to treat their income as capital gains subject to no more than 15 percent tax; and shrunk inheritance taxes that affected only the top-most 1.5 percent of earners. Yet at the same time, America boosted sales and payroll taxes, both of which took a bigger chunk out of the pay the middle class and the poor. (p. 1)

Accordingly, government policies have had a much higher impact on the gap between rich and poor than low-paying service sector jobs.  However, it is important to note, that even with the current challenges in the U.S. service sector, there are bright spots as well.

For example, many of the new service sector jobs are based on what we might call the knowledge economy, a specific class of jobs in the service economy whose value is rooted in information and oftentimes makes use of information technology to innovate.  Bell (1976) describes the post-industrial importance of information in a services economy by indicating, “what counts is not raw muscle power, or energy, but information” (p. 127).  The World Bank considers technological innovation in the knowledge economy as the primary source of productivity, competitive advantage, and the resulting economic growth in the service sector(Soubbotina, 2004).  As a result of both the opportunity space that low productivity inherent in services provides (Hodson & Sullivan, 2008) and continued technological innovation, the services economy is likely to be a continued source of economic growth.

Because of the continued technological innovation and progress, the United States remains a force to be reckoned with on the world stage, although there are signs that U.S. economic standing is weakening.  Recently, Standard and Poor’s, issued negative outlook because of the government’s failure to deal with the national debt in a productive way.  Additionally, some worry that China’s economic rise means a decline in U.S. economic standing.  However, a 2007 Congressional Report found that China’s meteoric economic ascendency will likely have little negative impact on U.S. economic power and may actually grow the U.S. economy (Elwell, Labonte, & Morrison, 2008).

In conclusion, the growth of the service sector has been a boon to U.S. economic growth and the trend will likely continue.  There is little evidence to suggest the service sector is the cause for the growing gap between rich and poor, nor has the service economy negatively influenced U.S. economic standing in the world.  Rather, the continued innovation prevalent in the service sector will likely be a continued source of U.S. economic growth.  Of course, there are significant economic challenges facing the United States, largely wrought by government policy, including a taxation policy that favors the wealthy and a national debt that is affecting U.S. economic power abroad.

References

 Bell, D. (1976). The coming of post-industrial society: a venture in social forecasting. New York: Basic Books.

Collins, D., T. , & Ryan, M. H. (2007). The strategic implications of technology on job loss. Academy of Strategic Management Journal, 6, 27.

Elwell, C. K. (2004). Deindustrialization of the U.S. Economy: The Roles of Trade, Productivity, and Recession. (RL32350). Washington DC: Congressional Research Service Retrieved from http://www.policyarchive.org/handle/10207/bitstreams/2016.pdf.

Elwell, C. K., Labonte, M., & Morrison, W. M. (2008). Is China a threat to the U.S. economy? New York: Nova Science Publishers.

Greenwald, R. (Writer). (2005). Wal-Mart: The High Cost of Low Price [Video]. In B. N. Films (Producer). United States.

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

Reich, R. (2011). The Truth About The American Economy. Huffington Post  Retrieved 24 June, 2011, from http://www.huffingtonpost.com/robert-reich/the-truth-about-the-ameri_b_869033.html

Reich, R. B. (2009). Manufacturing jobs are never coming back. Forbes. Retrieved from Forbes.com website: http://www.forbes.com/2009/05/28/robert-reich-manufacturing-business-economy.html

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

Toossi, M. (2002). Consumer spending: an engine for U.S. job growth. Monthly Labor Review, Novermber 22, 22.

U.S. Bureau of Labor Statistics. (2011). B-2.  Average hours and earnings of production and nonsupervisory employees(1) on private nonfarm payrolls by major industry sector,

1965 to date. In empsit.ceseeb2.txt (Ed.). Washington DC: Bureau of Labor Statistics.

Wolf, R. (2006, 17 July, 2006). How welfare reform changed America, USA Today, p. 1. Retrieved from http://www.usatoday.com/news/nation/2006-07-17-welfare-reform-cover_x.htm


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