Vol. VII, Bulletin No. 9. September 10, 2002
Real Story for Workers Is High Debt, Not the Ups and Downs of Stocks
How America Works and Doesn't Work
You wouldn't know it from the media, but most American families depend on wages and salaries, not on stocks, for their livelihood. In fact, few Americans benefited from the stock market boom in the 1990s, and thus few suffered from the market nosedive in 2001.
True, stock holdings have recently increased to the point that about half of U.S. households own stock in some form (either directly, through shares in a specific company, or indirectly, through a mutual fund or 401(k)-style pension plan). But the gains from stocks are highly concentrated because stock ownership is highly concentrated. The wealthiest 10% of U.S. households received three-fourths of the stock market gains between 1989 and 1998. Two-thirds of U.S. households own either no stock or stocks worth less than $5,000.
The above analysis comes from a new book, "The State of Working America 2002-2003," written by experts of the Economic Policy Institute and published by Cornell University Press. The book is a gold mine of significant facts that you won't find elsewhere. For example:
Should Europe Adopt U.S. Economic Model?
- Two decades of stagnant and falling wages ended in 1995, but: "The median male wage in 2000 was still below its 1979 level even though productivity was 44.5% higher in 2000 than in 1979....The benefits of the faster productivity growth went disproportionately to capital...."
- The distribution of wealth in the United States is highly unequal. "The wealthiest 1% of all households control about 38% of national wealth, while the bottom 80% of households hold only 17%. The ownership of stocks is particularly unequal. The top 1% of stock owners hold almost half (47.7%) of all stocks, by value, while the bottom 80% own just 4.1% of total stock holdings."
- Debt levels have reached historic highs. "By 2001, overall [household] debt was 109% of annual disposable income....As far as the wealth of typical households is concerned, the real story of the 1990s was not the stock market boom, but the debt explosion."
- "The unprecedented levels of household debt suggest caution in evaluating the state of the economy at the turn of the century; much of America's current prosperity is borrowed against the future."
- The average middle-income, two-parent family now works 660 more hours per year than in 1979, due primarily to the growing number of wives working more hours per week and more weeks per year outside the home.
The book's final chapter compares the economic performance of the United Sates to that of 18 other rich, industrialized countries that, like the U.S., belong to the Paris-based Organization for Economic Cooperation and Development (OECD). It examines the validity of the argument that Europe should copy key features of the U.S. economy, including weaker unions, lower minimum wages, less generous social benefits, and lower taxes. After analyzing detailed data on income inequalities, productivity, gender wage gaps, hours worked, poverty, mobility out of poverty, and job creation rates in the 19 OECD countries, the authors conclude with this cautious note of caution, in the book's final sentence: "Those who look exclusively to the United States for solutions will miss a great deal."
In "State of Working America 2002-03" the co-authors, Lawrence Mishel, Jared Bernstein, and Heather Boushey, have provided an unrivaled source of information on how American working families are faring. Those who limit their reading to these HRFW highlights -- and to the media's Labor Day features quoting this book -- will miss a great deal.
Uncut Ethical Corners and China Business
"The vast majority of businessmen and women are honest. They do right by their employees and their shareholders. They do not cut ethical corners...." -- President Bush, July 9, in remarks on corporate responsibility.
Question: how does corporate ethics affect the tens of millions of working men and women in China who are de facto members of the U.S. labor force? Answer: see these recent newspaper reports:1) "Worked Till They Drop, Few protections for China's new laborers," by Philip P. Pan, Washington Post, May 13, 2002Worker Rights Rules Could Help 3rd World
2) "Chinese Workers Rights Stop at Courtroom Door," by Philip P. Pan, Washington Post, June 28, 2002
3) "Migrants to Chinese Boom Town Find Hard Lives," by Elisabeth Rosenthal, New York Times, July 2, 2002
4) "Frequent Cover-Ups Mask Serious Dangers of Chinese Mines," by Erik Eckholm, New York Times, July 2, 2002
5) "China's Economic Engine: Sweatshops demoralize the young," by Julie Chao, Cox Washington Bureau, July 7, 2002
6) "China's Economic Engine: Worker frustration rises in China," by Julie Chao, Cox Washington Bureau, July 7, 2002
7) "Industrial Accidents Plague China," by Audra Ang, Associated Press, July 9, 2002
8) "Poisoned Back Into Poverty: As China embraces capitalism, hazards to workers rise," by Philip P. Pan, Washington Post, August 4, 2002
It's to the interest of China and other developing countries to get together in supporting enforceable international regulations protecting their workers. The reason is suggested by the title of the Foreign Affairs article that lays out the self-interest argument: "From North-South to South-South: The True Face of Global Competition."
The governments and trade unions of the "South" (the world's poorer countries) "have to face the fact they are competing among themselves -- and that they are themselves partially responsible for the decline in wages and labor standards" among their own workers. So say the article's co-authors, Robert J.S. Ross and Anita Chan. Ross is author of a forthcoming book, "Hearts Starve: The New Sweatshops in Global Context." Chan's studies include the book "China's Workers Under Assault."
In documenting their case from their own extensive research, Ross and Chan cite the increasing competition between China and Mexico in the global labor market. Both countries have gained millions of new jobs in their export industries. "Contrary to general wisdom, however, more jobs have not meant higher wages or rising labor standards," either in Mexico or in China, for the millions of low-skill workers in export industries. In fact, they point out, wages have fallen, and working conditions have worsened, "as a result of intensified competition to attract factories that sell to the North's markets."
China a 'Key Player' in South vs. South Labor Competition
"This race to the bottom affects people elsewhere in the developing world who hold jobs in [export] sectors," Ross and Chan write. "Without regulations to protect labor, akin to rules that protect investors, poor-country workers will not share in the benefits of a growth in world trade. For that reason, labor standards ought to be as much a South-South issue as a North-South issue." Only through some kind of international regime to enforce minimum labor standards can poorer countries "prevent Northern corporations and intermediate suppliers from playing them off against each other."
China has become "a key player in the South-South competition," and so, according to the authors, "the scenario will only worsen" unless China can somehow become convinced "to form or join a Southern consensus" to establish a sanction-based international system supporting core worker rights.
Ross and Chan are skeptical about the UN Global Compact that Secretary-General Kofi Annan launched in 1999 to encourage multinational corporations to promote good human rights, labor rights, and environmental practices. But multiple pressures are needed to make progress of the magnitude that Ross and Chan propose. And it is doubtful that the Beijing government will move forward except in tandem with the multinational corporations doing business in China.
So far, unfortunately, the scandals that are shaking up U.S. corporations have had no significant repercussions on corporate practices in the international labor market. It's a good sign, however, that some corporate leaders realize that it is to the interest of business to help find solutions to global environmental problems. They have formed the World Business Council for Sustainable Development, a coalition of 160 international companies "united by a shared commitment to sustainable development via the three pillars of economic growth, ecological balance, and social progress." Last month, during the UN World Summit on Sustainable Development in Johannesburg, South Africa, the Council put aside its differences with an environmental NGO, Greenpeace, to issue a joint statement demanding that governments "come together around one global framework to deal with the risks of climate change."
According to a Wall Street Journal report, Bjorn Stigson, president of the business council, explained that such a global framework is needed so that companies in countries that mandate reductions in emissions of greenhouse gases such as carbon dioxide, aren't penalized by having to compete in markets with countries that don't. "For us, it is not good if we end up with a situation where there are different frameworks in different countries," he said. "Otherwise, you might end up with a playing field that is not level."
Today much of international trade -- perhaps a half or more -- is intrafirm, that is, between units of the same global corporation. This means that the leaders of big business can, and do, shape global policies and practices, including the treatment of many millions of workers now in the global labor force. It is time to exercise the social and moral responsibility that comes with that vast power.
Sexual Harassment and Imported Software
A sexual harassment lawsuit filed by an American woman against her employer, an Indian software company with offices in the United States, is bringing to the fore a major issue of corporate globalization: the gap in the same company between how it legally must treat female employees in the United States and how it is required to treat them abroad.
Last December Reka Maximovitch, a former employee in California of Infosys Technologies of India, filed a lawsuit charging the company and her boss, Phaneesh Murthy, with sexual harassment and wrongful termination. Infosys, based in Bangalore, is one of the largest Indian companies exporting software to the U.S. It has 11 offices in the U.S., and last year derived more than two-thirds of its $540 million revenue from U.S. customers.
"The issue of sexual harassment has largely been swept under the carpet in India," the New York Times said in its September 6 article on the lawsuit. It also pointed out that the litigation has "sent Indian software companies [with more than 50,000 Indian employees in the U.S.] scurrying to make sure their policies comply with United States law."
But what about the U.S. corporate customers of Infosys and other Indian software companies? Are they scurrying to make sure that their contractual partners are free of sexual harassment in India itself? The lawsuit deals only with employees in America, not with the Infosys female employees in India. Nor does it affect the many other Indian women who help produce the $5 billion worth of goods and services that India exports each year to the United States. How long will their plight, and American complicity in it, remain swept under the carpet?
Ways To Save Globalization from Itself
"Sweat the sweatshops -- but sweat other problems more." That's the advice of a journalist, Tina Rosenberg, in an August New York Times Magazine article titled "The Free-Trade Fix." A blurb above the title summarizes her theme: "So far, globalization has failed the world's poor. But it's not trade that has hurt them. It's a fixed system."
As a correspondent in Latin America, Rosenberg learned first hand how the system hurts the poor. And she has studied the system's own laws, its networks of trade and investment agreements, as well as the new U.S. law on Presidential "trade promotion authority." As a result, she finds that the system is purposely designed to "benefit powerful nations and powerful interests within those nations." Even in the U.S., she writes, "the gains [of globalization] go disproportionately to the wealthy and to big business."
But "it's not too late for globalization to work," Rosenberg writes. So she has developed a series of new rules to "save globalization from itself." The advice on sweatshops is one of those rules. She explains that if today she were to picket globalization, "I would protest other inequities." Quite correctly, she realizes that sweatshops don't exist in isolation but are a natural part of a larger system of inequities.
She examines those inequities, their causes, and their cures. One of her succinct proposals: "Get rid of lobbyists." Business lobbyists, with their heavy pressures on trade ministers and their intense activities before, during, and after trade negotiations, have "soiled [globalization] with the footprints of special interests."
Here she singles out the stringent international rules protecting intellectual property (medicines, software, trademarks, etc.), and calls them "the most egregious example of a special interest provision" in trade law. "They were rammed into the WTO by Washington in response to the industry groups who control United States trade policy on the subject." According to a World Bank estimate that she cites, "the intellectual property rules will result in a transfer of $40 billion a year from poor countries to corporations in the developed world."
Rosenberg is also hard on agribusiness lobbyists. She shows how their influence on the U.S. Congress and on the trade agreements it rubber stamps have harmed farm families not only in the U.S. but in countries like Mexico.
Fresh Air Coming to the Stuffy WTO? Maybe
On September 1 a top governmental leader from an Asian developing country became head of a powerful intergovernmental agency, the World Trade Organization. He is Supachai Panitchpakdi, former deputy prime minister and commerce minister of Thailand. As theWTO's new director general, its first from the developing world, will he modify its conventional approach to globalized trade and investment? There are signs that he will try.
Supachai, 56, an economist, is no radical. Yet he has publicly advocated that the WTO address major challenges with institutional reforms. Among the challenges he cites is the muscular role that multinational corporations play in the global economy and within the WTO itself. In an address this spring to an international conference in Bangkok, for example, he pointed out that although countries are being integrated into the world trading system under a set of rules, multinational corporations are not -- "they have their own rules, i.e., the rules of the market." He went on to explain why this constitutes a major challenge:"Many multinationals are far larger than some [national] economies. This size factor should not be threatening if multinationals would actually learn how to behave in a way that they also become part of the process that will serve our development goals. But many a time, we have seen conflicts arising because of a lack of understanding, the lack of transparency, and the inconsistencies between the policies of multinationals and the policies of host countries."The solution, Supachai argued, is that the WTO adopt "certain rules of conduct for multinationals" in the area of trade. In response to a question, he cited the WTO's enforcement of intellectual property rules as an example of pressure coming from multinationals -- "pressure...that we have to try to prevent." Supachai has long held that the WTO trans-border protection of patents, trademarks, and copyrights must not be "monopolistic" but balanced, "taking into account the interests of the right holders and the public at large." (He gave a comprehensive analysis of property rights enforcement issues at an international conference in 1998, but it's gone from the Thai Website.)
In June Stuart Harbinson, Hong Kong's Ambassador to the WTO in Geneva and long a top player in world trade politics, was appointed chief of staff to Director General Supachai. Some Third World NGOs, such as Focus on the Global South, are uneasy with Harbinson's new role. Could it be his job to serve as a check on Supachai's plans? Naw. How could anyone entertain such an idea?
Americans Warming Up to Unions
Two new polls have found that support for labor unions is increasing in the United States. In a survey conducted by Peter D. Hart Research Associates, about 50% of workers who don't belong to a union said that they would join one if they could. That's the highest level recorded by Hart surveys during the past two decades. In another poll, this one by the Employment Law Alliance of San Francisco, 58% of 1,000 Americans said they support labor organizing drives in more companies to ensure that workers get better protection.
Stephen Hirschfeld, chief executive of the Employment Law Alliance, an association of large law firms that represent management, said that its poll showed a "high level of mistrust, anxiety, and frustration...that can be felt in every assembly line and cubicle throughout America." He called this "a major change in people's perceptions"
and a warning to business. "Most companies," he said, "don't want their workers organized, and the reality is that they better come up with some solutions."
The AFL-CIO has upgraded its Website to provide advice on "How to Form a Union Where You Work." It includes links to the Websites of the AFL-CIO's national unions and its state and local councils. It warns workers, that despite federal and state laws protecting the right to organize, many employers strongly resist employees' efforts to gain a voice at work through unionization. "So, before you start talking union where you work, get in touch with a union that will help you organize."
Diary: Antidotes to Pessimism
After looking at my Website for the first time, a co-worker once told me that the personal image I projected on his computer screen was different from the person he had come to know over a period of two or three years. "How's that?" I wondered. "Frankly, your Website is depressing," he said. "Personally, you're optimistic and cheerful."
I thought of that conversation while doing the above summary of Tina Rosenberg's article in the New York Times Magazine. Her long article is a fact-packed indictment of how the world economy is rigged against poor countries and poor people. I covered only a few highlights of the flaws -- the evils -- that she described and denounced.
Her article could be read as hopelessly pessimistic. But that would be a misreading. Actually, her outlook is optimistic, even idealistic. Yes, she doesn't hide or put a gloss on the depressing facts of international life. Yet she clearly has faith that reform is possible, or else she wouldn't have devoted most of her article to practical rules on how to turn things around.
Evil triumphs because good men and women do nothing. Tina Rosenberg obviously is someone who believes there are enough good people around who can and will act to make a difference -- good people at all levels of society, even at the top levels of corporate and government bureaucracies reeking of self-serving corruption. But will those people grasp the complex issues involved? It is relatively easy to see how a good person responds to immediate horrors like those of September 11, much harder to see how to respond to the everyday and more distant horrors of globalization. Work like Tina Rosenberg 's makes it easier.
Human Rights for Workers: Bulletin No. VII-9, September 10, 2002
Robert A. Senser, editor
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