Structural Adjustment programs1 of the IMF and World Bank have led to a race to the bottom, where standards of living are continuously reduced. Labor, as one example of this, gets cheaper and cheaper which benefits the multinational companies, but not the workers themselves. Various international trade agreements that large corporations are able to strongly lobby favorable conditions in, are often designed in part to make resources (including work forces) cheaper.
As some corporations and industries become increasingly globalized, they effect more and more people. Take for example the situation in Massachusetts2 — they were trying to put laws in place to prevent or restrict corporations doing business with regimes that violate certain rights of people in some way — they were pressured by a coalition of 600 major corporations in that State, saying that this is unconstitutional. The judges agreed3.
Famous brands like Nike4, , and many others all do this. In some respect it is a cycle of competition driving each other to such measures to keep up and to maximize profits. Nike, for example use cheap labor in South East Asia, where they can get away from the tighter enforcement and regulations of USA and Europe5. In fact, they have been exposed for using child labor
6, as well.
The apparel industry has often been strongly criticized for the use of sweat shop-like conditions8 in its east Asian factories. In May 1998, for example, a panel of experts on international law condemned the violation of workers rights in the garments and sportswear industries9; twelve witnesses from ten developing countries had testified on actual working conditions in the industry, pointing out seven leading transnationals: sportswear manufacturers Nike10 and Addidas, clothing traders H&M, Levi Strauss, C&A and Walt Disney, and the world’s biggest mail order company, Otto-Verstand.
Harsh labor conditions in the toy industry for people in third world countries such as China
11 have also led to much criticism, showing hidden costs to popular toys such as those based on Harry Potter, Star Wars, Pokemon, Barbie, etc.
It is interesting to note that while globalization has led to the opening up of borders for increased trade the same is not true for people12. Yet, people all over the world seem be losing their national identity13 due to the current model of globalization. The introduction of flexibility, while good for businesses, can hurt workers14, as the International Labor Organization (ILO) has shown.
The famous McLibel15 action against McDonald’s came about because of various abuses of its power and threats of legal action for any criticism about them. While individuals have tried to present some facts about various aspects of the way McDonald’s do business, some media companies have been prevented them doing so. These media corporations themselves are worried about publishing and broadcasting certain information that could lead to threats of legal action and other forms of corporate punishment even when the claims are fair and justified. (See the McLibel16 site for lots more information about McDonald’s and other multinational corporations abusing their power.)
Human Rights Watch have criticized the labor situation in the United States. In general, the USA provides a better standard of living, opportunities etc. than most countries. However, that does not mean that it is free from problems as well. The following quote summarizes it quite well:
They go on to show that while the US has many provisions in its laws to protect workers, there are many aspects of the laws which undermine such rights and that there is often very little done to uphold fundamental rights to the freedom of associations etc.
When the going gets tough, the tough get going—elsewhere.
A meeting in Oslo suggests that the current model of the Markets and Globalization may not be the way to go18. This is because when it comes to a country trying to impose some environmental or societal considerations and legislation on multinational corporations, they just move to a country where the rules and regulations aren't as strict.
One reason that this situation arises is because of the flawed structural adjustment19 programs which force developing nations to continuously cut back in order to export more at a cheaper rate and race to the bottom.
Take the following as examples (by no means exhaustive!):
Coca Cola in Zambia20.They have closed their operations there due to disagreements about tax exemptions.
Another example is how the tobacco industry is now moving on to Asia21 as sales in USA and Europe decline and the US settlements do nothing22 to prevent this. India23 is one example where there is tremendous increase in smoking, and smoking related illnesses and death. (This link24 also provides some information and statistics about this issue.)
Nike, as mentioned above, as well as many other retail companies, use cheap labor in South East Asia, where they can get away from the tighter enforcement and regulations of USA and Europe.
Phillips-Van-Huesen have been criticized25 for closing a factory in Guatemala because the workers tried to form a union to protect their basic rights. A report by three human rights organizations revealed the details. It reveals how the company closed a factory in order to destroy the union and profit from lower wages by sweatshop contractors in Guatemala. You can see the full report at the Americas.org web site linked to from here26.
In April 2002, as Alternet.org reports27, Levi Strauss & Company, a brand practically synonymous with the U.S.A., decided to shutter virtually all domestic production and shift its manufacturing overseas. Earlier, in 1992, the Washington Post had exposed Levi’s exploitation of Chinese prison labor to make jeans and throughout the 90s, various apparel companies had been accused of various forms of exploitation and sweatshop labor in poorer countries. Levis tried to introduce a code of standards, but it seems that Levis too has been feeling the competition pressure and in order to maximize profits and reduce costs, now also feels compelled to join the herd, so to speak, and go for cheaper labor costs.
Even baby foods have an impact on poorer countries. Multinational companies, such as Nestle, that create breast milk substitutes promote their use very heavily in many developing countries, as a replacement for breast feeding altogether. This is shown to have negative health effects on babies. UNICEF in their 1995 State of the World’s Children report describe how millions of children needlessly died due to not being exclusively breast-fed for the first six months. UNICEF, the World Health Organisation and others came up with a code of conduct to ensure responsible advertising and promotion of substitute products. 118 governments accepted. Only the United States didn't. However, John Madeley described the reaction that Nestle and others had, as a result:
(See for example, the International Baby Food Action Network28 for more on this issue.)
Even in Germany, United States etc, the government is at the whim of the larger more powerful corporations as this quote provides an example of:
Some of the tax fiddling and avoidance that some large corporations are able to legally perform are at enormous costs to the public, as shown in the corporate evasion30 section on this web site.
And it is difficult for whichever political party may be in power, to try and make a change, due to this very threat of moving on. Hence, whether it is industrialized countries, or developing countries, a convergence to similar policies is apparent. (And, hence, for example, criticism that UK’s New Labor of Tony Blair being just the same as the Old Tories of Margaret Thatcher, or the similarities between Al Gore and George Bush policies with the only real difference being how to carry them out!) John Bunzl of the The Simultaneous Policy Organization31, or Simpol, highlights this well:
For more on this perspective, see this site’s section on criticisms33 of free trade and its effects on political parties.
The Seattle WTO Ministerial Conference in 1999, most remembered for the enormous protest, raised another interesting perspective.
Seattle saw President Clinton and others suggest that the WTO include core labor rights and sanctions and so forth if these were violated. At first glance, this seemed like a remarkably enlightened suggestion, especially for all those activists who have been campaigning on these things for years. However, a question of why the US would want to do such a thing is natural, given that past records on economics and trade do not suggest that there are many humanitarian concerns!
In fact, many in the developing countries saw this as reeking of protectionism and that it would be too costly for the poorer nations to be able to afford such dramatic changes given the poverty and dependency they are in. It would also make it look as though the poor countries are the culprits and not hold any accountability to the foreign multinationals who demand these conditions before investing in that nation. As we see in the structural adjustment34 section on this site, the conditions are such that capital can pick up and go elsewhere if there are such conditions.
While in the mainstream media’s eyes the developing countries were looked at negatively for their incomprehensible reaction, a number of commentators in developed and developing countries did raise better perspectives, and a couple are quoted here as an example:
And from the South Centre:
But there are also deeper issues at hand as well.
In an Economist article, Globalisation and its critics37, September 27 2001, the following is offered in discussion of the issue of quest for profits, regulation, fair wages, etc:
What is wrong with this? The answer depends on how you look at it. From one perspective, the economist is right; if we do manage to get fair wages for the exploited, then we risk affecting everyone due to passing on these extra costs to consumers. But, does that suggest we should therefore resign ourselves to continue this exploitation? After all, it does pay those people, even if it is a small amount.
Well, in short, NO! Yet, that is what the Economist and possibly extreme versions of the liberalism ideology seem to hint (although it may be politically incorrect to actually ever say it explicitly).
So how can this seemingly be right and seemingly be wrong? Well, it is the range of discourse within which a point is made that affects how you view this. That is, the assumptions, etc affect perspectives:
If we talk about these wages within the confines of the current implementation of the globalization system, this is perhaps how it has to be.
However, let’s just take a tiny step outside and just ask some simple questions such as: why do these corporations have to go outside their own region? why should the poor produce sneakers or other products mostly for export? What good is that going to do them to earn so little money? What good is that money going to do when there is not much else to buy? And so on. We start hitting a major difference in perspective that is at the heart of this.
That is, when we start asking things like why the poor don’t create their own industries, rather than be an extension of multinational’s, then we start to hit a key issue. For example:
The poor countries ideally have to build their own industries, with their own internal markets etc.
With that, they will have their own distribution networks. Right now, they are a source of cheap resources (such as all those cash crops, the export-oriented economies—or mostly resource export-oriented, etc). With poorer nations selling resources and commodities elsewhere such as to wealthy nations, while buying from them the finished products made from those resources and commodities means the poor pay more than what they got! If products can be easily produced within the same region, it leads to better growth in those regions due to multiplying and circulation of wealth. It is worth quoting J.W Smith, again, on what was mentioned on this site’s structural adjustment page:
A multiplier effect of their money would be created as it circulates around their economy, not around someone else’s (i.e. the TNCs, and other countries)
Wealth in the poor country would be created more rapidly.
Much of the production and distribution we now see are wasteful of resources, capital and labor in this way because they are largely owned by foreign investors, or influenced heavily by foreign actors. Poorer countries are dependent on export-oriented economies, and much of the production flows to the wealthier regions. (And the effort that goes into maintaining these disparities and keeping real competition from the poor countries at bay is also wasteful.)
Addressing this could eliminate much in terms of environmental degradation from distribution (although perhaps be offset by new local (national or regional) industries, which must be countered with alternative/sustainable/less wasteful use of resources, etc.)
Free—but somewhat managed—trade between like nations, within regions etc would be beneficial to all involved. Free trade in its current form between unequal nations is itself unequal and continues inequality as a result.
Furthermore, the freeing up of labor in wealthy countries through elimination of wasted distribution and wasted capital, combined with efficient job-destroying technologies that we have today, means there would be more unemployment—but that should be used to society’s advantage: we should share remaining productive jobs—that would reduce the workweek for all. This is detailed much more in this web site’s section behind consumption and consumerism39.
Of course, other issues will arise and the above glosses over numerous other issues (which links below will address in more detail, or point to sources with much more detail.) Local populations will have to continue to demand fairness and just actions from the new capitalists in the poor countries—such as demanding wages are fair, that environmental and other social standards and concerns are observed and respected, there is no concentration of ownership in land, technology, money and so on, like there currently is in the global sense (which also needs to be addressed).
Some might fear these suggestions, thinking they are communist or something, but they are not. These are all capitalist theories. There is nothing anti-capitalist about this. Instead, it is addressing a key issue of enhancing rights (economic rights) to all. Of course, this is not saying that there should be no international trade whatsoever, but that at least for the development of the current third world, the international setting should be something along the lines of the first world assisting by trading tools that help create industry (what some call tools of production) in those countries. Adam Smith, Henry George and others have all pointed to aspects of this. Of course, politics has meant that some of these theories have been distorted from original intent, or there may even be problems within the original theories. J.W. Smith for example, highlights well that philosophically much of this is possible:
(J.W. Smith quote above, describes in detail over 800 years of history of plunder by trade that is mentioned above, and how at the world level, the subtle monopolization of land, technology, capital etc have all come about, including the waste of wars and other factors to maintain such systems. Furthermore, he provides details on how society has unwittingly supported what has amounted to plunder of the poorer regions of the world.)
(For more about the waste aspect, also see the latter parts of this site’s section on behind consumption and consumerism41, especially the page on waste.)
So, one might naturally ask, if it is this simple why haven’t the poor done this? There is in some respects, a simple answer but one that demands a lot of explanation! The simple answer to this can be found in in things like politics, greed, dominance-politics, etc. For example, international economic institutions like the World Bank and IMF, with the influence of economically and politically powerful nations, have been able to push through policies, which are known to be destructive (as even admitted by former Chief Economist of the World Bank and Nobel prize winner. (See this web site’s section on Structural Adjustment Policies42 or SAPs, for more including links to article from Joseph Stiglitz (that former Chief Economist) and others on how SAPs creates poverty and destroys any real chance of developing one’s own nation.)
In fact, instead, things like SAPs open up poor countries economy for Foreign Direct Investment, for constructive engagement etc. But these are often constructive for the multinationals, not always for the host country, because there is investment to create sweatshops, constructive engagement to extract resources, and so on. There is little constructive investment in helping these countries build their own industries. So, such investments might look like they create jobs in the poor countries, but compared to the real potential of what the poor countries could achieve, this is very little, and much potential for poverty alleviation instead is lost. And while some mainstream commentators may not like to talk about it, the effects of colonialism etc are still felt—the same countries are still poor; their resources are still plundered away (instead of through force it is now largely through unequal trade). (See also this site’s section on corporations and human rights43 for more on this issue of constructive engagement.)
Furthermore, the above argument from the Economist lends well to corporations who do not actually wish to engage in competition that will threaten their current success:
Because people everywhere are pretty much equally productive, then factors like access to industry, technology, education etc can enhance that productivity.
Structural Adjustment is almost an assault on such things, and the poor are not only poorly paid for the work they already do, but are denied technology, industry, education, health etc, to build their own industries and economies.
Furthermore, you get companies closing off in the first world and establishing in the third world, where they can say they are being constructive because they bring technology, know-how etc. However, this is a con; it is not to really and effectively help the poor build their own industries, their own buying power, and their own wealth. Instead, it is a way for companies to reduce costs but with social effects on all sides—the workers of the wealthy country lose out, while workers of the poor get exploited. Because on both sides then ordinary people lose out, and the poor cannot build their own industries etc, as a result, the threat of real competition leads to what J.W. Smith describes aptly as capital destroying capital44.
In fact, Adam Smith, who criticizes both big government and concentrated big corporations in his 1776 classic The Wealth of Nations, what some regard as the free trade/capitalism bible, is worth quoting here:
There are numerous other political factors, and geopolitical/military factors as well, related to the historic struggle and control for resources, and the wars that have revolved around that to maintain such disparities. (The poverty45 section on this web site introduces many of these angles, with many links to other sites and sources.)
The Economist article doesn’t really consider political aspects in this, and instead uses only some aspects of these capitalist theories, which, contrary to what seems to be popular belief, are not magical or natural forces without alternatives! Regardless of whether or not the theories themselves are sound, or not, or partially, (which is a huge topic unto itself!), they are heavily manipulated by political interests as has always happened throughout history. Hence, while in theory there may be many good points, in reality politics (power play) leads to supporting only those aspects of those theories that fit one’s interests and so rhetoric and reality are far apart.
(See also, for example, this link46, to an interview with Noam Chomsky who discusses labor issues with regards to NAFTA.)