Vol. XI, Bulletin No. 11                                                  December 1, 2006
Secrets, Lies, and China's Sweatshops

An investigation by Business Week has confirmed what worker rights activists have long known: that sweatshop owners in China commit labor abuses despite codes of conduct that prohibit those abuses and despite widespread on-site monitoring of compliance.

In its November 27 article titled "Secrets, Lies, and Sweatshops," Business Week reports that many factories "have just gotten better at concealing abuses."  The techniques they use, according to the magazine's field research and its review of industry documents, include:
The seven-page article is replete with concrete examples of how factories exporting to Wal-Mart, Nike, Target, and other U.S. retailers violate basic labor standards but still manage to beat various monitoring systems.  In its review of 28 recent industry audits of factories serving U.S. customers, Business Week found that only a few "turned up clean...these facilities were the exceptions."

Advice on How to Cheat on $280,000,000,000 Worth of Exports to U.S.

On-site monitoring of labor conditions in China's factories "has mushroomed into a multibillion-dollar industry," the Business Week investigators, Dexter Roberts and Pete Endgardio, report.  In reaction, "a new breed of Chinese consultants has sprung up to assist companies like Beifa [a Wal-Mart supplier] in evading audits." 

Business Week explains that, in producing $280,000,000,000 worth of goods to ship to the United States this year, China's factories face contradictory pressures:

"American companies continually demand lower prices from their Chinese suppliers, allowing American consumers to enjoy inexpensive clothes, sneakers, and electronics.  But factory managers in China complain in interviews that U.S. price pressures create a powerful incentive to cheat on labor standards that American companies promote as a badge of responsible capitalism."

The Business Week report confirms that labor codes of conduct and auditing procedures of multinational corporations don't clean up sweatshops. Is it any wonder that the public is reacting against globalization? 

The Sick Persistence of Sweatshops

Sweatshops are a symbol of our failure to deal honestly with the ills of globalization.  It's time we get over our gee-whiz attitude view of the wonders of  globilization. Yes, it has many wonders, but they should not blind us to its enduring ills that are in desperate need of treatment.

Over the years, Human Rights for Workers has explored both the ills and the remedies. In fact, these writings of mine may be boring, even depressing, and may chase people away to more entertaining stuff.  But I think I'll keep on exploring, since the big media outlets have not been doing so in a serious manner.

The United States now has a timely opportunity to discuss major reforms  -- and, hopefully, to act on them -- because, at the end of June, the President's strong grip on U.S. trade and investment policy expires.  Far more is at stake than most people realize.  U.S. trade/investment policy has global repercussions -- it largely determines the shape of globalization, for good or ill.

The administration would love to simply extend the "Trade Promotion Authority" legislation that Congress enacted by a narrow margin at three o'clock one morning in July 2002.  Reaching a decision on new trade/investment legislation that is fair will require a concentrated effort in early 2007.  Don't trust the Democratic Party's elite, who bear partial responsibility for how globalization has gone wrong.  Hopefully, some newcomers in the Senate, such as Jim Webb, Democrat of Virginia, will steer the Party, and the country, in a more promising direction.

In any case, as is evident from this issue, Human Rights for Workers will continue to harp on these issues, boring or not.

Milton Friedman's Myopic Legacy
Who are the 100 most influential Americans of all time? The Atlantic magazine posed that question to ten renowned American historians, and in its December issue publishes a ranking of the top 100 compiled from the historians' answers. Abraham Lincoln and George Washington are No. 1 and 2, Richard Nixon and Herman Melville No. 99 and 100.

Glaringly absent from the list is Milton Friedman, the Nobel prize-winning economist who died  last month at the age of 94.  In fact, not a single economist is in the top 100. Nor does any come close, judging from the magazine's analysis of those who made the list and those who nearly made it.  Perhaps the votes reflected the dismal view that one profession has of another. Whatever.

The Atlantic's instructions to the historians defined influence as "a person's impact for good or ill, both on his or her own era and on the way we live now."  In my view, Milton Friedman definitely qualifies to be up there among the top 100, especially because the actual voting was to take into account the impact of a person's ideas. 

News stories printed after Friedman's death eulogized his powerful intellectual influence  on American economic theory and practice, past and present, for good or ill.  If anything, those obituaries underplayed that legacy's mixed impact on the world today and in the future.

For Friedman, Capitalism and Social Responsibility Don't Mix

Take Friedman's ideas on corporate social responsibility.  In his classic book, "Capitalism and Freedom," he set forth his strong views, which are captured in these two sentences:

"Few trends could so thoroughly undermine the very foundations of our free society as the acceptance by corporate officials of a social responsibility other than to make as much money for their stockholders as possible.  This is a fundamentally subversive doctrine."

Based on that principle,  Friedman opposed corporate donations to universities and charitable causes as "an inappropriate use of corporate funds in a free-enterprise society."  In his belief, stockholders have the right to all earnings from their investments, with not a cent diverted by the corporation to any cause, however noble.  Yet  corporations today ignore that counsel, and generate public good will by generous gifts, some of them socially responsible, to reconstruction projects after disasters like Hurricane Katrina and the Pacilfic tsunami, for example.

Friedmanism Very Much at Home on Global Level 

By and large, however, under Friedman's principle, and under the existing form of globalization, multinational corporations are free to act as they please without regard to any social responsibility.  The institutions (e.g., the World Trade Organization) and rules of globalization (e.g., the Uruguay Round agreement) simply do not require multinational corporations to respect any social responsibility in their global operations.  And most mainstream economists support this non-responsible position. Dissents are growing, but routinely ignored by global policymakers.

It would take a community of saints among corporate leaders to resist the temptations offered by a super-competitive global environment that encourages greed, both in principle and in practice. That, however, doesn't let corporations off the hook, as the next article insists.  

(Coming soon:  my article on Corporate Social Responsibility in the Winter 2007 (January) issue of Dissent magazine.)

Corporate Shared Responsibilities
Urging a multinational like Nike to be socially responsible in its global labor and environmental policies sends an erroneous message.  It's too narrow in its focus.  It is really asking a multinational corporation to assume an individual responsibility in a global environment that requires shared responsibility.

Confused?  Well, the above paragraph is my best shot at summarizing the insights contained in a speech that Professor John G. Ruggie of Harvard gave last month in Montreal at an unusual event -- a "national roundtable" on the social responsibilities of Canada's extractive industries in developing countries.

Ruggie, a political scientist, spoke at the roundtable in his capacity as the UN secretary general's special representative for business and human rights.  He has a mandate to present a comprehensive report to the UN Human Rights Council next year on the human rights responsibilities of multinational corporations. Among the issues he will have to address is the shameful human rights record of the Western mining, oil, and gas companies in the developing world.

Spotlighting the Aberrant Behavior of Extractive Industries

One of Ruggie's findings thus far is that of the 65 recent cases of the worst human rights abuses by multinationals, two-thirds were in the extractive sectors, and of these almost all happened in developing countries that scored low in governance and rule of law indicators.  He calls this "a negative symbiosis between governance and the worst corporate human rights abuses." 

That doesn't excuse bad corporate behavior, he insists, "but even good companies can get into serious trouble in weak governance zones."  Yet to put the blame solely on the individual corporations "is an incomplete framing of the problem at hand."  Why?  "Because the permissive environment that allows individual blameworthy actions is created by the failure of an overall institutional system, and this systemic failure cannot be fixed with a... model of individual responsibility alone."

What is called for, Ruggie says, is a shared responsibility in which government must play a key role.  In explaining that concept  he draws on the thinking of the late Iris Marion Young, a University of Chicago moral philosopher and strong advocate of social justice.  Shared responsibility is an added layer of responsibility made necessary, in Young's words, "because the injustices that call for redress are the product of the mediated actions of many, and thus because they can be rectified only through collective action."

In other words, Ruggie explains, "the systemic problem is not caused by individual actors alone, nor can it be solved by measures aimed only at them."  The need for shared responsibility doesn't excuse bad corporate behavior, he emphasizes, and appropriate means need to be devised to deal with it, but:

"Even good companies can get into serious trouble in weak governance zones, whether by close association with bad governments or by trying to perform surrogate governmental functions under pressure from surrounding communities and international NGOs.  In short, the individual responsibility model by itself does not take us far enough; a second layer of shared responsibility needs to be added to the mix.

"The same is true when we move beyond the national level.  Indeed, the entire international community can be described as a weak governance zone. 

"Markets and transnational corporate networks treat the globe as a single space of transaction flows.  In contrast, governance remains anchored in territorially fixed places, with a relatively thin overlay of international law and institutions operating among them, unable on their own to redress human rights abuses, whether corporate or otherwise."

Globalization Leaves Empty Space for Lawlessness

In other words, from the standpoint of law and order, that "single space of transaction flows" contains a vacuum than needs to be filled lest lawlessness grow even further. (For some insights on how the global mining industry's system works, see a report by a Canadian NGO, Mining Watch.)

At first reading, Professor Ruggie's point may sound too abstract to be relevant.  But read it again. Corporate and political leaders first need to understand exactly what globalization is in order to deal with it wisely and justly -- or sustainably, to use the current catchword.  As a matter of fact, globalization is something new -- a "sweeping, radical transformation" of the world beyond the transaction flows that characterize economic interdependence.

"Global Public Policy," by Wolfgang Reinicke, a political scientist and economist who directs the Global Public Policy Institute, distinguishes globalization from mere economic interdependence. Reinicke throws much light on the new kind of world that is evolving around us. I reviewed the book for the U.S. Bureau of Labor Statistics' Monthly Labor Review in 1999.

Is Adam Smith a Theologian in Disguise?

I'm looking forward to reading "Adam's Fallacy: a Guide to Economic Theology," recently published by Harvard University Press. Its author,  Duncan K. Foley, professor of economics at the New School for Social Research, says he wrote it "to give people more confidence in their own moral judgment" about economic policies.

The "Adam" in Foley's title is Adam Smith, an 18th-century Scotsman, widely hailed as the founding father of modern economics because of his classic volume, "The Wealth of Nations."  In Foley's title, "fallacy" has two dimensions:

"The moral fallacy of Smith's position is that it urges us to accept direct and concrete evil in order that indirect and abstract good may come of it.  The logical fallacy is that neither Smith nor any of his successors has been able to demonstrate rigorously and robustly how private selfishness turns into public altruism."

As for using the word "theology" in the title and in the book, Foley seeks to highlight that "at its most abstract and interesting level, economics is a speculative philosophical discourse, not a deductive or inductive science."  His key point is that, in the typical economics course, the economic sphere of life is deemed to be a completely separate realm, one "in which the pursuit of self-interest is guided by objective laws to a social beneficent outcome," different from all the rest of social life, "in which the pursuit of self-interest is morally problematic and has to be weighed against other ends.

'Economics Serves To Justify the Ways of the Market to Mankind' 

In an interview with Peter Steinfels, the "Beliefs" columnist of the New York Times, Foley explained: "Economics functions in a theological role in our society to justify the ways of the market to men," adding that economists are "becoming priestly figures, with arcane knowledge" and special powers.

I swiped the above quotes from Steinfel's November 25 column and from a reader's comments on Amazon.com.  Now to buy the book, because, among other reasons, it might be a good source for advice to Congressional leaders reviewing present U.S. trade and investment policies.

Clearly Congress should, at the very least, heed this warning:  don't be awed by the priestly aura and arcane knowledge of economists.  Especially not the economic theologians who, in Democratic and Republican administrations, inflicted the irresponsible doctrines of Adam Smith and Milton Friedman on the people of Mexico and the United States through the North American Free Trade Agreement.. (For insights on what's wrong with NAFTA, see recent testimony by the AFL-CIO's Thea Lee.)
*   *   *
The Smith/Friedman school among Democratic Party economists are mobilizing their intellectual forces at the Brookings Institition in the Hamilton Project, founded by Robert Rubin, of U.S. Treasury and Wall Street fame, who sold Rubinomics to a gullible Clinton Administration.  A group of other economists are assembling at the Economic Policy Institute (EPI) to formulate a plan of their own on how to address today's social challenges.  The two sides are part of a war of ideas from which no one can cut and run.

Seeking Global Justice Through the Courts

Because of alleged complicity in a murder in Colombia, Nestle, the world's largest food and beverage company, is the latest target of litigation initiated by the Washington, D.C.-based International Labor Rights Fund against multinational companies under two U.S. human rights laws, the Alien Tort Statute and the Torture Victims Protection Act.

Colombia is one of the most dangerous places in the world for trade unionists.  Seventy of them, leaders and ordinary members, were murdered last year and 53 in the first 12 months of 2006, all as a direct result of their union work. (See the latest trade union report of the International Confederation of Free Trade Unions and a later one by its successor organization, the International Trade Union Confederation.)

In the Nestle case, the company is being sued in U.S. District Court in Miami for alleged complicity in the murder of a Colombia trade union leader by paramilitary forces with which Nestle has had a long-standing relationship.  In the suit, the victim's wife, Gladys Francisca Mendoza Mejia, charges that her husband was killed in retaliation for his discovery and exposure of Nestle's use of expired milk in its popular Milo brand drink.

There is no one way to work for justice in the global economy.  This kind of innovative human rights litigation, spearheaded by Terry Collingsworth of the Labor Rights Fund, is under attack by organized business and the Bush Administration, so far unsuccessfully.

Human Rights for Workers: Bulletin No. XI-11    December 1,. 2006
http://www.senser.com
Robert A. Senser, editor
Copyright 2006
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