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Citation: Foreign Policy Spring 1999, 114, 52(1)
Author: Newland, Kathleen
Title: Workers of the world, now what?(includes related articles
on labor issues) by Kathleen Newland
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COPYRIGHT 1999 Carnegie Endowment for International Peace
There is an empty seal at the banquet of economic globalization. While
international capital trade, and business feast on o markets, heightened
efficiency, and vanishing barriers in the new global marketplace, labor is
nowhere to be found. Why has labor been left out? The explanation is partly
structural, partly institutional, and entirely political.
At some point in the 1980s, the balance of power shifted markedly against
labor. Some place the defining moment in 1981, when then-U.S. president Ronald
Reagan forced an end to the bitter air traffic controllers' strike. Others
point to the 1985 victory of then-British prime minister Margaret Thatcher
over striking coal miners.
Labor's long downward slide, however, actually began much earlier. The 1970s
saw the rise of manufacturing centers outside the industrialized North.
Multinational corporations began to take advantage of liberalized trade and
capital flows to move production to the most advantageous locations - often
those with lower labor costs. The deep recessions of the 1970s slashed
production. Despite economic recovery in the 1980s and 1990s, the share of
total wages as part of the gross domestic product has fallen in almost every
member country of the Organisation for Economic Cooperation and Development.
The supply-and-demand equation further tilted against labor as the global work
force ballooned from 1.3 billion in 1965 to 2.5 billion in 1995, owing to
rapid population growth in the developing countries and the unprecedented rate
at which women entered the labor market.
In the older manufacturing centers of the industrialized countries,
organized labor found itself on unfamiliar terrain. High unemployment and the
looming threat of plant relocation weakened some of labor's traditional
bargaining chips: The prospect of a union walkout became far less devastating
when substitute workers were so readily available both at home and abroad.
Meanwhile, the majority of new jobs were being generated in the service
sector, where unions were traditionally weak. And in many European countries,
most notably Britain, trade unions took part of the blame for the rigidity
that inhibited quick response to changing conditions and kept national
economies mired in recession - a syndrome that the press christened
"Eurosclerosis."
By the time center-right electoral victories swept much of Europe and North
America in the 1980s, the stage was set for a neoliberal consensus, backed by
real political muscle, that frowned on almost all attempts to constrain the
operation of free markets, whether in goods, services, labor, or commodities.
Most initiatives on behalf of labor - such as the regulation of wages and
benefits, the protection of job security, the enforcement of a minimum age of
employment, or the promotion of safety standards - were seen as unwelcome
distortions of the workings of competitive labor markets.
But the recent financial crises in Asia, Latin America, and Russia and the
political unrest that has come in their wake have challenged the neoliberal
consensus and seriously eroded confidence in global economic restructuring.
Even the so-called Asian tiger economies that embraced restructuring most
ardently have watched its rewards evaporate. The International Labour
Organization (ILO) estimates that 10 million workers were added to the ranks
of the world's unemployed in 1998, in large part due to the Asian economic
meltdown. The consequences of these crises - growing poverty, shredded safety
nets, and a higher cost of living - are borne mostly by ordinary working men
and women.
Clearly, a better balance needs to be struck between pursuing
globalization's benefits and protecting against its hazards. Organized labor
must strive to exert itself more forcefully in that equation. However, it
remains to be seen whether it can overcome the structural and institutional
constraints that have weakened unions in the past two decades. Additional,
less-institutionalized ways of promoting the interests of working people may
need to be developed.
THE BRAVE NEW WORKING WORLD
In recent years, the world of work has changed enormously, but organized
labor has been slow to adapt. Economic globalization has brought about huge
increases in international capital flows, a rapid expansion of cross-border
trade in goods and services, a rise in foreign direct investment, and
explosions in cheap technology, international travel, and communications. And
while labor mobility at both the high and low ends of the job market has
increased as well, it still pales in comparison with the almost frictionless
movement of capital across international borders. At a time when over 22
percent of the world's output is traded internationally, a mere 2 percent of
the world's people live outside their countries of origin. And only some of
them have migrated for employment purposes.
Although capital is subject to very little political control as it travels
in search of the highest return, workers - particularly the unskilled and the
poor - are often prevented from following suit. Even as capital controls have
virtually disappeared and trade barriers have fallen, many countries have
raised barriers to immigration. This trend is particularly manifest in Western
Europe, where a decade of slow growth and high unemployment has prompted
governments to clamp down on the intake of foreign labor. In the European
Union (EU), the commitment to freedom of movement among member states has been
accompanied by stringent measures to defend the external borders against
unauthorized entry.
Immigration restrictions, however, are not the only forces that impede the
mobility of labor. Some social and economic advantages, such as access to
welfare or pension benefits, rights to political participation, or recognition
of professional qualifications, are dependent on residence in a certain
country or community. And workers often have linguistic, sentimental, or other
attachments to their native countries that outweigh the desire to find work
elsewhere. In the EU, for example, only about 2 percent of the population have
taken advantage of their newfound freedom of movement.
Alongside the relative immobility of workers, organized labor's weakened
influence can also be traced to the changing face of the work force in a
globalized economy. Low-end labor in globalized industries such as apparel and
toy manufacturing is younger, more female, more dispersed, and less
enfranchised - all traits that traditional union membership does not have.
High-end workers in the knowledge and technology sectors have generally
remained unconvinced that their interests are served by collective bargaining.
Even more significantly, most of the growth in the job market is taking place
outside the established union base of stable, full-time, blue-colLar
manufacturing work in long-industrialized countries. These new, low-wage,
service-sector jobs are often with small companies in marginally competitive
industries that have high turnover rates, such as food preparation or
janitorial services. Much of the work is part-time, short-term, sporadic,
contractual, or home-based.
In low-income countries, only 15 percent of the work force is in the formal
sector. Although these factors render traditional union outreach strategies
almost useless, most unions have been slow to adopt new strategies or offer
new services. To complicate matters further, these "irregular" workers are
often pitted against unionized labor as employers seek to lower their costs.
Some labor unions also suffer from the perception that they are little more
than special-interest groups whose first priority is to defend the privileges
and status of their members - who account for an ever-smaller portion of the
work force. This view makes it difficult not only for organized labor to
attract and retain members but also to be considered a legitimate
representative of the general interests of workers in the dialogue on economic
restructuring. Unions tend to benefit when they take an expansive view of
their role - seeking to represent not only the concerns of their members but
those of working people in general (or indeed of society at large) against the
special interests of capital. European unions, which are often affiliated with
broad-based political parties, have routinely adopted this stance. When a
union such as Solidarity in Poland or the United Mine Workers in South Africa
stands at the forefront of a popular social struggle, it both enhances the
labor movement's popular esteem and boosts union membership. (Although even
Solidarity's stature declined precipitously when it became identified with
unpopular government policies in postcommunist Poland.)
Such broad social representation, however, is far easier to achieve at the
national level than at the international one. Workers in poorer and
less-developed nations often view unions based in the advanced industrial
countries as defenders of privilege. Their suspicions persist that such
unions' insistence on increased wages, conformity with labor standards, and
environmental safeguards for Third World workers is simply a disguised form of
protectionism, designed to undercut the developing world's main source of
comparative advantage: low labor costs. The proposal that the statute of the
World Trade Organization (WTO) be amended to include a social clause, for
example, has opened a deep rift between industrialized and developing
countries. [See box on page 58.]
The macroeconomic climate has been as inhospitable to unions as the
microeconomy of individual firms. Widespread government deregulation in the
1980s, combined with high levels of government debt in the 1990s, increased
governments' reliance on international financial markets and gave those
markets increased leverage over the economic policies adopted by individual
nations. But global financial markets tend to shy away from precisely the
kinds of policies that unions have traditionally advocated - full employment,
high growth, and a tendency to lower interest rates and increase public
spending when employment rates flag. The threat of capital flight (and the
ensuing currency devaluations and higher inflation) and the desire to attract
international capital to finance deficits and spur economic growth have
prompted even center-left governments to turn a deaf ear to union preferences.
The markets instead favored neoliberal reforms that have only spelled
trouble for labor. Tighter fiscal controls prompted governments to downsize
public-sector payrolls and pensions. Stabilization policies aimed at reducing
inflation and controlling prices in some cases included wage freezes. Liberal
trade policies have led to increased competition, which often means that
inefficient industries must shed labor and, in some cases, may be forced out
of business entirely. In this climate, unions in many countries have had
increasing difficulty delivering tangible results to their members. In the
United States, for example, labor-organizing drives in the 1980s produced
lower gains in wages and benefits and less employment growth than had earlier
unionization efforts.
Perversely, at a time when circumstances cry out for strong union
representation, organized labor makes up a smaller and smaller proportion of
the global labor force. Over the last 10 years, the rate of unionization has
fallen by more than 20 percent in 35 of the 66 countries for which comparable
data are available. The sharpest declines were seen in Argentina, Australia,
Costa Rica, France, Israel, Mexico, New Zealand, Portugal, the United States,
and Venezuela. The former Eastern bloc countries also experienced dramatic
declines due to the end of compulsory membership in officially sanctioned
unions. In most of these countries, independent trade unions have not yet
established themselves. Only Hong Kong (prior to the resumption of Chinese
control in 1997) and the Philippines have seen union membership increase
significantly.
WHO SPEAKS FOR LABOR?
In the debate over economic globalization and its attendant reforms, the
interests of governments, businesses, and financial capital are all well
represented at the institutional level. Powerful international organizations
have arisen to promote the global mobility of capital on the one hand (the
International Monetary Fund) and goods and services on the other (the General
Agreement on Tariffs and Trade and its successor, the WTO).
But it remains unclear who looks out for the workers at the sharp end of
global restructuring. Certainly no international organization actively
promotes the mobility of labor - that responsibility is still considered to be
firmly within the ambit of national sovereignty. The one international
organization charged with promoting the interests of workers, the ILO, has
been all but invisible in the global debate.
Founded in 1919, the ILO today is seen by many as an anachronism, too
closely tied to trade union organizations that are having trouble keeping up
in the new global economy. The ILO's headquarters, which sit like a massive
gray supertanker run aground in the green hills of Geneva, seem a metaphor for
the organization's detachment and inflexibility.
At the time of the ILO's creation, the Bolshevik Revolution still loomed
large in policymakers' minds. Giving labor a role in setting the rules of the
international economic game was seen as the price to be paid for social peace.
The ILO was established accordingly, with a remarkably innovative three-part
structure in which workers and employers were officially represented in the
governing body along with governments themselves. Its primary mechanism for
achieving "social justice" in the world of work was regulatory. The ILO
oversaw the creation of internationally agreed-upon labor standards covering
everything from hours of work and minimum age to the prohibition of forced
labor, and became the primary vehicle for articulating, negotiating, and
supervising these standards.
In the aftermath of World War II, the architects of the new international
economic framework were still reeling from the rise of communism, fascism, and
the devastation of the war itself. Wary that ignoring labor could lead to
further social upheaval and increase the appeal of communism, the framers once
again took steps to ensure that workers' interests were factored into the new
economic equation. At the domestic level, governments drafted economic
compacts, established social safety nets, encouraged the growth of trade
unions, and ensured distribution of the benefits of growth through investment
in public education, housing, and other social infrastructure. The Governing
Body of the ILO sought to reinforce the concept of partnership; in 1944, the
ILO constitution was revised to include a declaration that "labour is not a
commodity."
In recent years, however, the ILO has struggled to find ways to accommodate
labor's changing needs in a globalized economy. It has produced some powerful
analyses of globalization and its discontents but has not found a wide
audience for these findings or translated them into effective action. The
ILO'S emphasis on regulation stands in stark contrast to the mobility and
flexibility that are the hallmarks of globalized production. The organization
relies on moral suasion and voluntary compliance with standards but cannot
really sanction violators. Moreover, the innovative tripartite structure of
1919 is now more a source of impasse than of dynamism: Locked into channels of
representation through employers' organizations and national trade union
confederations, the organization is one step removed from actual unions and
enterprises, not to mention from actual workers.
In today's complex environment, it may be unrealistic to expect the ILO - or
any one institution - to represent the concerns of everyone from blue-collar
industrial workers to civil servants to street vendors. Some of the newer
voices speaking up for workers are alliances between multiple institutions:
umbrella groups that encompass labor unions, progressive governments,
international organizations, activist lawyers, and a wide range of
nongovernmental organizations (NGOs), including churches, foundations,
academic institutions, human rights advocates, media organizations, consumer
groups, issue-specific campaigners, and even some businesses. [See box on
pages 60-61.] Although such activism is by its very nature ad hoc and limited
in scope, these flexible, issue-based coalitions have nonetheless shown
enormous promise in articulating and advancing the interests of workers whom
unions have not reached.
Aided largely by some of the same forces driving economic globalization,
particularly the revolution in information technology, these transnational
networks have the potential for enormous reach and impact. Consumer pressure,
for example, persuaded the American Apparel Manufacturers Association, whose
members represent 85 percent of the $100 billion worth of wholesale clothing
manufactured annually in the United States, to devise a strict but voluntary
code of conduct requiring that their factories and suppliers will neither use
child labor nor subject their adult workers to sweatshop conditions.
Moreover, despite its long-standing resistance to forming alliances with
such coalitions (some members of the Governing Body and the ILO bureaucracy
argue that the NGOs and some of the other parties involved suffer from a
democratic deficit and cannot truly claim to represent anyone but themselves),
the ILO has recently displayed a greater openness to coalition building. The
International Program on the Elimination of Child Labor, which has made
progress toward minimizing child labor in industries such as soccer ball
manufacturing in Pakistan, is ILO-based but involves many other international
organizations, businesses, and NGOs and receives support from several
governments. The ILO's cautious embrace of these new alliances signals an
important movement in the right direction. But until it is seen to be dynamic
and inclusive, the organization will not be treated as a full partner by
financial institutions as they shape the new international economic framework.
IS THE PENDULUM SWINGING?
Although the late 1990s offer no lesson as dramatic as that of the Bolshevik
Revolution, there are some warning signs that point to the urgency of
addressing labor's needs. Political and social turmoil has followed in the
wake of financial crises in East Asia and Russia; economic reform efforts have
been rolled back in Zambia and Venezuela; attempts at economic restructuring
threaten political stability in Brazil and Mexico. Workers worldwide have been
slow to reap globalization's rewards and have instead watched it shrink their
social safety nets, squeeze wages, erode working conditions, and degrade
public services. Kofi Annan, the UN secretary-general, bluntly laid out the
consequences of turning a blind eye to these developments, warning that unless
businesses worldwide strive to uphold labor standards and adopt codes of
conduct, "we may find it increasingly difficult to make a persuasive case for
the open global market."
Governments find themselves trying to navigate between the financial markets
- which will punish them if they do not cut wages, public spending, and
measures to guarantee job protection - and their own citizens, who will punish
them if they do. This dilemma, however, may not be quite as intractable as it
first appears. Citizens may actually tolerate harsh economic reforms if they
feel that their interests have been taken into account in devising them, and
if the reforms themselves are perceived as fair and effective. Stringent
reform programs with severe social consequences have nonetheless enjoyed
strong public support in Argentina (the Cavallo Plan), Brazil (the Cardoso
Plan), Peru (Fujimori's economic program), and Poland (the Balcerowicz plan).
A strong labor movement can play an important role in building that kind of
public confidence and can provide channels through which conflict over reforms
can be addressed. There are encouraging signs that the pendulum that brought
the labor movement low in the 1980s may be starting to swing in the opposite
direction. In industrialized countries such as Britain, Canada, France,
Germany, and Italy, center-left governments with labor roots have replaced
center-right governments. If not entirely at one with organized labor, these
new governments seem to recognize that those left behind by globalization pose
a threat to open markets and liberal institutions; at the very least, they are
not openly hostile to labor's interests.
The Labour government of British prime minister Tony Blair, for example,
recently unveiled the Fairness at Work Bill, despite complaints from the
business sector that the legislation mandates "onerous," European-style worker
protection. The legislation, which reverses many of the tough antiunion
measures implemented by Thatcher, compels firms to formally recognize unions
if they meet specific membership criteria. German finance minister Heiner
Flassbeck has argued that if the EU is to remain competitive in a global
marketplace, it must resist the temptation to cut wages, lest European
governments run the risk of dampening demand. In the United States, President
Bill Clinton's 1999 State of the Union address included a promise to work with
the ILO to promote compliance with international labor standards. Clinton
pledged to increase the U.S. contribution to the organization's child labor
program from $3 million to $30 million.
Such initiatives notwithstanding, if labor hopes to experience a true
renaissance in the brave new world of globalization, it cannot model itself on
its past. In the next century, unions will not work alone but rather with
allies in human rights organizations and civil society, with progressively
minded politicians, with international organizations, and with companies that
have learned that they can benefit from a socially responsible labor policy.
Unions cannot respond to the challenges of globalization with little more
than attempts to hold it back. Increased international competition and
pressure to keep costs low are facts of life, but they need not lead to lower
wages and fewer social benefits. Investment in skills, infrastructure,
research and development, and better management can yield higher productivity
and, in turn, justifiably higher wages. Increasingly, organized labor's role
must be to forge - and in some cases to lead - alliances that empower workers
to take advantage of flexible labor markets, ensure labor is not exploited in
the name of greater production efficiency, and bring previously unrepresented
workers into the social compact. Labor will find willing partners in
government, civil society, and the private sector if it fills that role and
will finally be able to claim its seat at the banquet table.
WANT TO KNOW MORE?
The International Labour Organization (ILO) has published a number of
thoughtful studies on the impact of globalization on labor. Its World
Employment Report 1998-99 (Geneva: International Labour Office, 1998) gives an
up-to-date overview of employment trends and focuses on training as a key to
productivity, inclusion, and employability. Likewise, the ILO's World Labour
Report 1997-98: Industrial relations, democracy, and social stability (Geneva:
International Labour Office, 1997) critically reviews trends in unionization,
new challenges to trade unions, and the potential for new partnerships. Both
publications contain useful statistical tables. The ILO Web site provides
access to a wealth of documents on labor standards, social labeling, and other
subjects, as well as information about the organization itself. Selected
articles from the International Labour Review, such as Eddy Lee's
"Globalization and labour standards: A review of issues" (vol. 136, no. 2,
1997), are available on the ILO site.
The World Bank's Worm Development Report 1995: Workers in an Integrating
Worm (New York: Oxford University Press, 1995) gives a rosy, precrisis view of
how globalization affects labor. Some of the report's claims ring a bit hollow
in the aftermath of meltdowns suffered by its model students in East Asia, but
there is much useful - if now a little dated - information.
Richard Freeman has written extensively about labor issues in general and
labor unions in particular. See his articles "The Impact of Unionization on
Wages and Working Conditions" (Journal of Labor Economics, January 1990),
coauthored with Morris Kleiner, and "Are Your Wages Set in Beijing?" (Journal
of Economic Perspectives, Summer 1995). David Blanchflower and Freeman's
"Unionism in the United States and Other Advanced OECD Countries" (Industrial
Relations, Winter 1992) is also worth reviewing.
Brian Langille's "Eight ways to think about international labour standards"
(Journal of World Trade, August 1997) provides a guide to some of the
controversies surrounding the link between labor rights and international
trade.
For links to relevant Web sites, as well as a comprehensive index of related
FOREIGN POLICY articles, access www.foreignpolicy.com.
RELATED ARTICLE: Labor Pains
The United States and France rarely agree on anything. But the governments
of both countries found themselves on common ground in late 1996 when they
proposed that the newly formed World Trade Organization (WTO) incorporate a
social clause to link labor standards with trade liberalization. The two
countries sought to prevent international-trade competition from becoming a
race to the bottom in terms of wages and labor conditions by making violation
of agreed-upon labor standards grounds for invoking trade sanctions.
Domestic concerns buttressed their determination to provide a disincentive
for labor exploitation. Both France and the United States were feeling the
sting of a globalization backlash at home. The White House had faced staunch
opposition, primarily from unions, when it pushed for ratification of the
North American Free Trade Agreement in 1993, and again throughout 1995 and
1996 when it campaigned (unsuccessfully) to gain renewal of fast-track
negotiating authority for new trade agreements. A period of labor unrest in
1995 brought Paris to a standstill for weeks as the constraints of a
low-inflation policy continued to inhibit employment growth.
But the prospect of international labor standards with teeth did not sit
well with Asia's emerging economies or with many other developing-country
exporters. In response to the efforts of the United States and France, the
Association of South 'East Asian Nations issued a statement saying that its
members would oppose the social clause and other issues "which were not
trade-related" at the December 1996 WTO ministerial conference in Singapore.
Newly industrializing countries viewed the clause as a nontariff barrier to
free trade that would deny them the opportunity to benefit from their
comparative advantage of cheap labor.
Reflecting this opposition, the Final Declaration of the Singapore meeting
declared a renewed "commitment to the observance of internationally recognized
core labour standards" but insisted that "the International Labour
Organization [is] the competent body to set and deal with these standards" -
not the WTO. By passing the protection of labor's interests from an
organization expected to be strong to one known to be weak, the ministers took
another step to marginalize labor in the planning for a new global economic
architecture.
K.N.
RELATED ARTICLE: Unions Plus
The past 10 years have seen a resurgence of creative actions to defend the
rights of the traditionally powerless: sweatshop employees, informal-sector
workers, child laborers, and immigrant workers. These initiatives range from
the campaign against harsh conditions and low wages in the overseas factories
that produce Nike shoes, to the drive for self-regulation in the form of
voluntary codes of conduct by apparel makers, to the massive lobbying effort
by immigrant workers that led to the adoption of a tough wage enforcement law
in New York State in 1997. The driving force behind these campaigns has been a
diverse coalition composed of organized labor, nonunion workers, activist
lawyers, human rights groups, foundations, academics, and even celebrities.
By relying on a combination of legal action, media exposure of abuses,
consumer boycotts, legislation, and negotiation, these coalitions have
demonstrated a power far beyond what unions alone were able to achieve in the
1980s and 1990s with more traditional tactics. In today's labor-abundant
world, conventional strikes pose much less of a threat to mobile industries,
but advocates have learned to apply pressure elsewhere.
One particularly noteworthy effort began in January 1999, when apparel
workers on Saipan - part of the Northern Marianas Islands, a U.S. commonwealth
in the South Pacific - filed a massive lawsuit against 18 prominent American
clothing manufacturers and retailers, charging them with conspiracy to hold
workers in involuntary servitude in sweatshop conditions. The action seeks
more than $1 billion in damages on behalf of as many as 50,000 workers. It
alleges that many of the predominantly young immigrant women employed in the
garment factories are forced to work 12 hours a day, seven days a week, and
sometimes are denied pay if they fall behind on production quotas.
The lawsuit, still outstanding at the time this magazine went to press, is
unusual not only in its size and scope but also in the number and kind of
plaintiffs involved. The plaintiffs include nonunion apparel workers; the U.S.
Union of Needletrades, Industrial, and Textile Employees; human rights
organizations such as Global Exchange and Sweatshop Watch; and a group of
private law firms. Reports from the U.S. Labor and Interior Departments form
part of the brief. The apparel firms are not only charged with violating wage
and hours laws but also with violating international human rights law, local
Marianas laws, U.S. anti-racketeering laws, and their own voluntary codes of
conduct.
The apparel companies targeted by the lawsuit have more to lose than just
money. The Marianas case is another in a series of public-relations blows to
an industry eager to shed the image of its factories as sweatshops - an image
that consumers increasingly do not tolerate. More creative and broader-based
actions appear to be putting some muscle back into demands for workers'
rights, and unions are finding that the scope for solidarity goes beyond the
labor movement alone.
K.N.
KATHLEEN NEWLAND is a senior associate at the Carnegie Endowment for
International Peace and codirector its International Migration Policy Program.
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