Labor And Free Trade: Time For A Global New Deal

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The clash between capitalism and communism is over, and the winners have set about making the world a safe and efficient place for business. The reality is plain enough. Nike is making its famously expensive athletic shoes in Indonesia, where its women workers labor long hours for a meager $38 a month. Wal–Mart, K–Mart and Sears, the great American retail icons, are having their shirts made in Bangladesh by culturally passive Islamic women toiling 60 hours a week and making less than $30 a month. The companies sell the shirts in the United States at U.S. prices. The labor cost per shirt is roughly four cents. They assert the need to lower costs in order to remain competitive, but their main competitors are all there in Bangladesh as well, enjoying the same windfall of cheap labor.

At the same time, the major industrialized economies are experiencing an alarming, lingering recession. Trade unions in the United States and Europe protest massive job cuts and the lowering of living standards. Japanese workers face the end of the one certainty that motivated their untiring devotion to sacrifice for the national interest--the lifetime employment system. It is no longer in Sony’s or NEC’s interest to employ expensive Japanese workers when Thai and Malaysian workers will do the same job for much less. The lengthy debate over the North American Free Trade Agreement (NAFTA) exposed similar stories of U.S. companies shifting production to Mexico, making use of highly productive workers kept cheap by the labor policies of a government more interested in keeping investors happy than in ensuring a decent wage for its citizens.

These examples illustrate how a global economy has allowed multinational companies to escape developed countries’ hard–won labor standards. Today these companies choose between workers in developing countries that compete against each other to depress wages to attract foreign investment. The free trade philosophy for creating a prosperous global economy is in practice denying workers their share of the fruits of wealth creation. First World components are assembled by Third World workers who often have no choice but to work under any conditions offered them. Multinational companies have turned back the clock, transferring production to countries with labor conditions that resemble those in the early period of America’s own industrialization.

‘TRICKLE DOWN’ TRADE