5.

Unmanaged “Free” World Trade

  

By passing NAFTA and establishing the WTO, the Republican Congress and our conservative President Bill Clinton ratcheted class warfare up another notch. Despite their promises, unmanaged free world trade has been a disaster for working Americans.

“Free” international trade means that investors are free to pit workers of the world against each other by putting their money into whatever country has the lowest standards for protecting the environment, and for protecting worker incomes and job conditions.

When investors close a manufacturing plant in the U.S., it hurts not only the workers who lose their jobs; it hurts all workers. It’s not just 5% of our workforce who suffer, it’s 100%. For two basic reasons:

1. The workers who actually lose their jobs in a plant shutdown enter the competitive labor market and adversely affect the wages of others who still have jobs.

2. Other workers in the U.S. who still have jobs now know that their employer’s threat to leave the country is real. If they cause trouble or join a union, they may well be “downsized.”

That is why unmanaged world trade hurts workers even in jobs that can’t be exported from the U.S.: trucking, retail, construction, the service industry, etc. Since conservatives have put so many people out of work, individual non-union workers have lost the power to negotiate for higher wages. If workers collectively try to form a union, they get fired. If they’re already in a union, the union can’t press for higher wages because the corporation might close down the plant and move elsewhere.

So, investors and corporate executives are screwing working Americans both individually and collectively.

Conservative economists and politicians who profess surprise that wages haven’t kept pace with inflation—while the economy and profits soar—have to be lying. Their duplicity and their denial of reality were, in essence, reflected in Business Week’s question when it asked in a headline, “NAFTA: A New Union-Busting Weapon?”:

Since the North American Free Trade Agreement took effect, U.S. employers have routinely threatened during union elections to close plants and move production to Mexico or elsewhere, says a new study commissioned under NAFTA….

   The report, based on union elections from 1993 to 1995, indicated half of the employers threaten to close plants when facing a union vote.…

   When employers lose, 7.5% go ahead and close the plant—triple the level in the pre-NAFTA 1980s.

   “NAFTA created a climate that has emboldened employers,” says Kate Bronfenbrenner, a researcher who headed up the study for the U.S., Canadian and Mexican governments. She agreed to release the report after the Labor Dept. balked.¹

Because of articles like this, the real intent of unmanaged free trade is becoming obvious to everyone. The daily news accounts can’t be covered up, even by conservative journalists. Only an orthodox hypocrite could claim that corporate CEOs didn’t intend to use “free trade” as a cover for being able to “routinely threaten” their own workers. “If you unionize, we’ll abandon you and your community and ‘move production to Mexico or elsewhere.’”

The major intent of unmanaged free trade was never revealed to the American public. Business Week further reported that the U.S. Labor Department sat on the study out of fear the report would fuel skepticism toward expanding NAFTA. No wonder. Think of it:

§         In half of the union drives, working Americans were threatened with job loss—the “job insecurity” that Greenspan is so proud of. Also bear in mind that figure represents only those situations that the researchers found out about.

§         It takes only a few employers, 7.5%, to actually carry out their villainous threats to close down a facility and make “insecure” the entire 100% of working Americans.

§         Given this sledgehammer over the lives of working Americans, is there any possible doubt about how our “emboldened CEOs” have been able to rape their own employees—even in a booming economy?

If you don’t want to admit the validity of this study, consider that Barron’s lays bare all pretenses—when communicating to fellow conservatives—about the strategy and results of unmanaged free world trade. Under the head “Not To Worry: Even If the Jobless Rate Shrinks a Lot, Labor Is in Weak Position to Boost Inflation,” it bragged that

       

The ’Nineties, need we remind you, are a period of insecurity and cost control, a time when workers feel lucky to have a job, let alone one that pays well.

   And consider another reason for believing that labor is in no position to impose “cost-push” inflation on the economy: the rise of Global competition.

   Domestic producers won’t permit labor to raise costs faster than productivity. If this were allowed, plenty of foreign producers could outstrip U.S. companies. 

   If American labor sought inordinate increases, manufacturers could simply move production abroad and employ foreign labor at a far cheaper rate.²

The legitimate benefits of free trade give Republicans and conservative Democrats yet another opportunity to tell an obvious lie—under the guise of a general truth. They sell American voters on the true advantages of free trade, but then insist that it be unmanaged. Unmanaged trade isn’t free—it is ruthlessly controlled by conservative politicians and international corporations.

This means that employers can do whatever they want to employees—in this country or elsewhere—without adhering to any moral standards as to their treatment. What kind of morality allows corporations, through their paid conservatives in Congress, to create a climate in which working Americans feel “lucky just to have a job, let alone one that pays well”?  In addition:

§         The rise of global competition isn’t “another reason” working Americans are in this “period of insecurity.” It’s the main reason!

§         Labor costs—wages—haven’t kept up with productivity for 20 years. It hasn’t been allowed, and because conservative politi cians have sold out working Americans, they won’t allow it in the future.

§         In the view of conservatives, any increase in wages is an “inordinate” increase.

  

For insights into the kind of competition our “moral values” conservatives have forced on working Americans, look at Indonesia. It is no longer considered one of the worst abusers of workers, because it is in the process of becoming a more humane country—very, very slowly.

The Wall Street Journal admitted in a headline that “Indonesia Is Striving To Prosper in Freedom, But Is Still Repressive.” After it described a 24-year-old watch-factory worker who was murdered because she thought she deserved more than a dollar a day and was organizing a strike to get it, the Journal noted that

Average annual incomes [in Indonesia] have spurted to $650 a person—twice what they were a decade ago—as gross national product has expanded at an average clip of 6.8%.³

     

What a jewel corporate America has in Indonesia:

§         Want to get rid of a union threat? Then murder the organizers who are demanding outrageous wage increases—more than a dollar a day.

§         If murder is too gross for you, the Journal also noted that, “bribes and connections can help corporations clamp down on labor activists.”

§         Still, despite its poor record in its treatment of workers, one must admit, wages have gone up in Indonesia, just as our conservative politicians have promised. They have spurted to $650 a year.   And, damn, that’s twice as much as they made ten years ago. At that rate, they’ll catch up to working Americans’ wages in, say, another two centuries.

When you review the above article (readers who insist on believing that the Indonesians are still better off, despite deplorable working conditions, should go to their library and read the entire article), remember—American corporate executives

• know these conditions exist,
• actively seek out countries in which these conditions, or worse conditions, exist,
• preach to working Americans that they must compete with workers under these deplorable conditions. And, worst of all, they
• demand unbelievably high incomes for themselves for their own roles in instigating this immoral process.

For a better example of conservative hypocrisy when it comes to free trade, look to this country. One of America’s most conservative groups betrayed its feelings about foreigners who compete with them and who threaten to lower their own standards of living. According to The Wall Street Journal, “Medical Groups Propose Restrictions on Foreign Doctors to Stem Oversupply”:

The U.S. is creating a doctor glut that should be fixed in part by making it harder for foreign physicians to gain advanced training in this country, according to a panel of medical experts.…

   “We’re on the threshold of a gross oversupply of physicians,” said Jordan Cohen, president of the Association of American Medical Colleges.⁴

Doctors, traditionally a very conservative group, overwhelmingly support the principle of free world trade in the abstract. But not, of course, for themselves:

§         Interns shouldn’t have to face a “doctor glut” when they graduate. After all, their parents spent a bundle on their education and, unlike persons in chicken-processing plants, they had to work hard to get their degrees.

§         It’s especially bad if the glut is caused by “foreign physicians,” who are used to a lower standard of living and would be glad to work in this country for much less.

§         And what’s this about physician “oversupply”? Isn’t one of our biggest looming problems the large number of aging baby boomers who will require medical care? According to free market theory, shouldn’t we reduce costs by allowing the market to glut itself with foreign doctors if that’s what “the free market” wants to do?

Count on it: If the jobs of CEOs, bankers, economists, etc. could be done by qualified foreigners who would work for one-tenth of the money—just like our doctors—their cherished theory of unmanaged free trade would die in a heartbeat.

If free trade is to function as intended, it must be managed so that investment goes to those parts of the world that have the best economic advantages and that respect workers as human beings with fundamental rights.

In other words, investments should be made in those parts of the world that

§         have the best access to raw materials (despite the protestations of Republicans and conservative Democrats, human beings are not “raw material”),

§         have the best location in the distribution chain,

§         have developed the best technology,

§         have trained the best managers and workers, and finally,

§         offer the best product at the lowest price.

The free market should not reward those immoral competitors who would compete purely on the basis of their willingness to treat their workers the most brutally. As it’s now designed, that’s exactly what it’s been doing since its inception, and it’s continuing today. Under the head, “In the Wake of Nafta, A Family Firm Sees Business Go South,” The Wall Street Journal reported that the exodus of industry from the U.S. was continuing unabated into 1999:

Nafta removed quotas limiting how much clothing could come into the U.S. from Mexico. (The rest of the world, except for Canada, is still subject to quotas.) The accord also has lowered tariff rates more than 50%.

   The result is that many designers have been shifting the bulk of their sewing to Mexico, where labor costs are about one-seventh of what they are in the U.S….

   “It’s obvious: You either go to Mexico—or you die,” says Mr. Mehserjian’s brother Harry.⁵

All these jobs going from the U.S. to Mexico should at least be good for Mexicans, right? Well, it depends upon which end of the Mexican society you look at. As of early 1999, workers don’t seem to have fared very well. In a separate article, the Journal asked the question, “Is the Mexican Model Worth the Pain?” and answered it this way:

Mexico is coming off one of its best years in a decade. The economy grew at a rate of 4.8% last year, adding 100,000 new manufacturing jobs. Production of television sets, auto parts and clothing set records….

   Yet, according to a new study by the United Nations Development Program, while just one of seven Mexicans lived in dire poverty before the crisis [peso devaluation], two years later the proportion was one in five. Adding those a rung up—workers living in “moderate” poverty, with daily incomes of $3—almost two-thirds of the citizenry is considered “poor” today. Fewer than half fit that description before the crisis.⁶

Despite articles like these, economists still claimed to be “puzzled” about why wages were continuing to stagnate in 1999. In another of its periodic denial-of-class-warfare attempts, the Journal again reported that the “Job Market Stays Tight, Fed Finds; More Bonuses Paid, but Few Workers See Big Raises in Wages”:

…despite labor shortages, companies overall still aren’t feeling pressure to raise salaries significantly to attract and retain workers, a fact that continues to perplex economists. “It is a puzzle, and I’m not sure that any of us has satisfactory answers,” said Stephen D. Silfer, chief U.S. economist with Lehman Brothers….

    “Businesses are behaving differently today than at any other time in my career,” said Mr. Silfer. “This is making [economists] think about this new world and how it’s operating.”⁷

Again, what the hell is the “puzzle” about all this? Conservatives have totally and deliberately destroyed American workers’ power to negotiate. No contest. That’s it. Period. For god’s sake, they should quit being hypocrites about being so “perplexed” at their extreme good fortune.

And if most professional and highly skilled people in the U.S. are not all that concerned about what’s happened to working-class Americans—and even think that conservative economics might be a good thing—they had better watch out. As we’ll see in the next chapter, they might be next to join in the fun of unmanaged free trade.