Vol. VI, Bulletin No. 12.                                                                       November 1, 2001

Cure Inequities, Leading Economist Urges

Joseph E. Stiglitz, Just Awarded a Nobel Prize in Economics,
Says Global Economic System, Including Trade, Needs Reform
The Royal Swedish Academy of Sciences last month awarded the Nobel Prize in Economics to Joseph E. Stiglitz, along with two other U.S. economists, for research and writings during the 1970s laying "the foundation for a general theory of markets with asymmetric information."  But Stiglitz' work in more recent years has laid the foundation for a new kind of economics, a kind that shows how asymmetry of wealth and power affects economic life.

"I believe very strongly that economics can make a very large difference...for the better in our world," Stiglitz said at a press conference on October 10, hours after learning of his award.  His own recent focus, he pointed out, has been on "the disparity between the haves and the have nots," and particularly on the plight of the world's poorest people.  He made clear that he will pursue those concerns in the context of issues facing the global economy today.

"Much of our global economic system is characterized by a lot of inequities," he said. "The global trading regime is one which has been devised mostly by the North for the benefit of the North. It seems to me that one of the very important elements in the agenda going forward has to be to try to redress these inequities."
Diagnosing the Human Dimension of Economic Life

Stiglitz, now a professor of economics at Columbia, has exceptional expertise in every field of economic theory and policy -- microeconomics, macroeconomics, industrial organization, international economics, financial economics, development economics, and labor economics. Since the Nobel committee chose him for his work in just one specific area -- how people handle "imperfect information" in the market -- media coverage, like the Swedish Academy's press release, neglected his many-faceted contributions to highlighting the human (and hence the moral) dimension of modern economic life.

In a talk in Washington last February, he faulted the United States for failing "to exercise moral leadership" in promoting its own democratic ideals in the international economic arena.  Instead, he said, the United States has:

U.S. Treasury Department Seen as Too Dominant

For these and other failings, he blamed the U.S. Treasury Department and the dominant role it has in setting international economic policy.

"We would never be content to delegate domestic economic policy to the Treasury," he said. "In today's world it is equally misguided to delegate international economic policy to the Treasury, or even to the Treasury and State.  A broader range of voices, including those of labor, must be heard."
Stiglitz has been especially critical of International Monetary Fund policies, including million-dollar bailouts that reimbursed "large international banks and other creditors in the U.S., Germany, and Japan."  Such policies, he argues, are the natural result of who controls the IMF. In an interview last year with Progressive magazine, he said:
"Finance ministers and central bank governors have the seats [in IMF decision-making bodies], not labor unions or labor ministers.  Finance ministers and central bank governors are linked to financial communities in their countries, so they push policies that reflect the viewpoints and interests of the financial community and barely hear the voices of those who are the first victims of dictated policies."
Perhaps Stiglitz' most important exposition of his approach to economics is a lengthy address he gave in January 2000 on "Democratic Development as the Fruits of Labor." (See "Breaking the Silence among Economists" and an earlier HRFW article.)  He was ending his three-year tenure as senior vice president and chief economist of the World Bank, and took the occasion to provide a comprehensive analysis of the flawed foundation of many global economic policies.  (The full text is still available on the World Bank Website.) He paid particular attention to "how the plight of workers changes in the course of development" and why worker rights should be a "central focus" of development policy.

How Economic Theories 'Eviscerate the Rights of Workers'

In a subsequent article in the April 17&24, 2000, issue of the New Republic, Stiglitz revealed "how out of-date- -- and how out-of-tune with reality -- the models Washington economists employed were."  In his January address his language was softer. "If one didn't know better," he said, "it might seem as if the fundamental propositions of neoclassical economics were designed to undermine the rights and positions of workers."  Then he went on to illustrate how those propositions did just that. Among the ways they "served to eviscerate the rights and positions of workers":

In his concluding remarks, Stiglitz called for "a shift in the prevailing paradigm," or mindset, a shift granting "stronger worker rights and representation at every level -- from the workplace, to the local, regional, and national level, to the international level."

As I pointed out in a Commonweal article a year ago, Stiglitz' ideas parallel those of Pope John Paul II, who has repeatedly promulgated the moral reasons why "solidarity must become globalized."  A leading Catholic university should consider creating a John Paul II prize for the person who has made an outstanding contribution to globalizing human solidarity.  Joseph E. Stiglitz is superbly worthy of such recognition.

Only Businessmen Allowed Here: APEC

For a model of an inter-governmental institution open only to representatives of organized business, look no further than the Asia-Pacific Economic Cooperation (APEC) forum, which met last month in Shanghai, China. APEC, an organization of 21 Pacific Rim countries, warmly welcomes the participation of business leaders but not labor leaders.

It is a glaring example of the "prevailing paradigm" that excludes all outside voices except those coming from the upper ranks of the corporate world.

The APEC Business Advisory Council (ABAC), established by APEC in 1995, institutionalizes that exclusive relationship. "ABAC is the official voice of the private sector within APEC," the business organization's Website explains. "[It is] the vehicle for formalizing private sector participation in APEC."

Note the unqualified scope of that mandate. It is not "the official voice of the private business sector" but of the whole private sector. In other words, ABAC has a monopoly to speak for everyone outside the governmental sector.

For years Pacific Rim unions have sought to have their voices heard too. In 1995 they established the Asia Pacific Labor Network (APLN) under the mantle of the International Confederation of Free Trade Unions (ICFTU), in hopes of getting recognition similar to that achieved by business. They have been rebuffed.

At their conference held in Singapore September 24-25, APLN leaders adopted a comprehensive statement on "Achieving Participation of Working People in the APEC Process."  According to an ICFTU statement, most APEC leaders had earlier seemed to agree that unions should be involved in APEC, but no such willingness showed up in the declaration that APEC adopted on "Meeting New Challenges in the New Century," which, interestingly, is available on the U.S. State Department Website as well as the APEC-China Website.

Twenty of 21 APEC's member countries signed the declaration. Taiwan was not present because China vetoed Taiwan's choice of its representative.

Mahathir on the Lessons of Globalization

Prime Minister Mahathir Mohammad of Malaysia, one of eight political leaders who addressed the Shanghai APEC summit, spoke on the pluses and minuses of globalization for East Asia, with emphasis on the minuses. Under the headline "Unite against Foreign Domination," an October 21 report in The Star, Mahathir's home daily, said he "called for Asia to unite against foreign economic domination." It added these direct quotes:

Moreover: "He said he had nothing against the rich but pointed out that Deng Xiao Peng was right in stressing the virtue of legitimately making a profit."
Too bad that the U.S. media almost entirely ignored Mahathir's APEC speech.  (I found a few lines in a CNN.com report.) It would have helped dispel the widespread notion that the critics of globalization's downsides are limited to Westerners seen demonstrating on the streets of Seattle, Ottawa, Genoa, and Davos.
The Fate of Labor Activists in China

For organizing an independent labor union in Hunan province during the 1989 democracy movement in China, and for other labor activism, Li Wangyang, a worker at a cement plant, was convicted of "counterrevolutionary propaganda and incitement" by the Shaoyang People's Court in October 1989. Eleven harsh years in prison left him afflicted with lung, heart, back, and respiratory illnesses.

Hospitalized after his release, Li petitioned the government to pay his medical bills, and when it refused, went on a 22-day hunger strike in February this year. His sister, Li Wanglin, repeatedly intervened with officials, and publicized his plight in a Radio Free Asia interview with Han Dong Fang of the China Labour Bulletin. The government soon cracked down on both of them.

On September 20 the Shaoyang People's Court again imprisoned Li Wangyang, now 51 years old. It sentenced him to 10 years  for "incitement to subvert state power." Earlier, without a  trial, his sister Li Wangling was sent away to a "reeducation through labor" camp for three years. The China Labor Bulletin and China Rights Forum, the magazine of Human Rights in China, are telling the world of their fate and asking for interventions to gain their release.

In a visit to Beijing last May the director general of the UN International Labor Organization, Juan Somavia, handed China's labor minister a list of 24 detained labor activists and asked for their immediate release.  The list has grown since then.  China insists anyone in prison or in labor camps is there only because he or she has "violated laws and regulations," which says something about China's laws and regulations and how they are administered.
Retailers Held Liable for 'Peonage'

Are retailers legally responsible for the illegal practices of the factories that supply them with products?  Yes, under certain circumstances, a U.S. federal judge ruled on October 29.

In a 55-page decision, a U.S. District Judge in the Commonwealth of the Northern Mariana Islands held that both the factories and the retailers could held liable for any use of "peonage" labor in garment factories on the Western Pacific island of Saipan. There, according to a class action complaint filed in 1999, thousands of foreign workers, mostly young women from the People's Republic of China, are forced to pay fees up to $7,000 to get a job and then must work off the debt in an indentured status that has been illegal in the United States since the Civil War.

"When the labor is tied to a debt owed to the employer and the employer physically coerces the worker to labor until the debt is paid,...a condition of peonage results, and this is the essence of plaintiffs' allegations," the court stated.
Defendants include The Gap, Target, JC Penney, Levi Strauss, and other retailers, as well as dozens of foreign owners, including state-owned enterprises in China. The ruling rejected a motion to dismiss the case (retailers claimed they could not be legally responsible for the actions of factory owners). "The Saipan workers are going to get their day in court," Al Meyerhoff, a lead attorney for the plaintiffs, said.

Memo to President's Trade Representative

To:      Ambassador Robert B. Zoellick, United States Trade Representative
From:  Bob Senser, Editor, Human Rights for Workers
Re:      Priorities for your World Trade Organization Negotiations

As you prepare for the Ministerial meeting of the World Trade Organization in Doha, Qatar, November 9 to 13, I hope that you have time to check a new poll on foreign policy priorities.  I realize that poll results should not automatically dictate policy. Still, since you will be representing American interests at Doha, I think you should be up to date on how the American people view the interests of the United States.

The poll, sponsored by the Pew Research Center and the Council on Foreign Relations, probed public opinion on the importance of a wide range of world issues, including defense policy, terrorism, cooperation with allies, and the Middle East. The basic question asked was: "As I read a list of possible long-range foreign policy goals which the United States might have, tell me how much priority you think that each should be given....top priority, some priority, or none at all?"

Although the list of possible foreign policy goals did not include your goal of free trade by name, it did cover two issues related to the direction of U.S. global trade and investment policies.  Here are the findings on those two issues from the poll taken in October:

ICFTU Conference in Qatar on 'Making Globalization Work for People'

Mr. Ambassador, I would commend much else to your attention, such as the revealing new research work done on globalization by the Economic Policy Institute, particularly a new study on how the present system of free trade fuels global inequality.

Above all, I hope you accept the invitation offered by the International Confederation of Free Trade Unions to speak at the ICFTU conference in Qatar on "Making Globalization Work for People."  Mike Moore, WTO director general, will address the conference on November 8, and so will Bill Jordan, ICFTU general secretary.

Diary: Sunny Skies, Sunny Thoughts

I was careful to put my reporter's notebook into suitcoat pocket. Two knowledgeable people were speaking on "Are Labor Rights and Trade Liberalization Compatible?" at the October luncheon of the Washington, D.C., chapter of the Industrial Relations Research Association. I felt sure I'd pick up some good quotes from their discussion. But I never made it to DC.

In a parking lot halfway down to Washington, I looked for my wallet to retrieve a Metro fare card, and discovered that I had no wallet. My pockets were heavy with stuff.  Cell phone. Keys. Pens. Notebook. Day-Timer. But no wallet. Hence no fare card, no credit card, and no money except a few quarters. What to do?  Return home to pick up the wallet?  Not enough time.

One of the advantages of being on my own is that I can't get fired for goofing up. I don't even have to feel embarrassed about it. Of course, I had missed the opportunity that the monthly luncheon affords to chat with some friends, but November would be along soon.

After my old Olds got me back home, I changed clothes and went out for a leisurely walk. The October days have been awesome, with the autumn sun turning red leaves redder, the yellow leaves yellower. More than ever, I am conscious of the infinite diversity of nature -- the many different kinds of trees, bushes, birds, animals, clouds. Hopkins said it much more profoundly in Pied Beauty:  "Glory be to God for dappled things -- For skies of couple-coulour as a brinded cow...." I meditate on the larger meaning of all this, even for the global economy. (Yes, there is a connection, but I won't get into that now.)

Luckily, sometimes I have company on my walks, especially on days that my wife is babysits our granddaughter. When the weather meets her specifications, Dzung puts Han Mai into a stroller, and the three of us sally forth to enjoy the world together.  One evening last month, there were five of us, counting Han's parents, strolling around Reston's Town Center, where some merchants were dispensing Trick or Treat candies.

We had a camera along to record that adventure. For some highlights, check our son Thuy's Website at http://members.home.net/senserfamily/mai/mai07.html. As Thuy reminds me, click on the smaller pictures there to enlarge them right before your eyes.  Nature has its wonders, but so does technology.

Human Rights for Workers: Bulletin No. VI-12, November 1, 2001
http://www.senser.com
Robert A. Senser, editor
Copyright 2001
robert@senser.com. (Send e-mail)

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