Labor Should Organize Globally

“If a worker in China or India can do the same work as one in the United States, then the laws of economics dictate that they will end up earning similar wages….  That’s good news for overall economic efficiency, for consumers, and for workers in developing countries – but not for workers in developed countries who now face low-cost competition.”

“New World Order:  Labor, Capital, and Ideas in the Power Law Economy”; Erik      Brynjolfsson, Andrew McAfee, and Michael Spence; Foreign Affairs, July-August, 2014

 

Academics have described the world.  The point, however, is to change it.

The world the capitalists have created is irreversibly global.  As they scan the world for the cheapest qualified labor, a global workforce scours the planet for opportunity.  From the perspective of a global capitalist, U.S. workers differ from workers in other parts of the world mainly in their cost.  For manufacturing industries, this means sending the work where labor is cheapest.  For hotel and some other service workers, by contrast, wage competition is local. Hotels catering to the global wealthy can afford to pay above-average wages.  But competition for better-paid jobs will grow fiercer as other wages fall.  No industry or union can indefinitely escape the pressure of low global wages.  Over time, national differences will decline, and wages will tend to equalize in services as well as manufacturing.

Without global solidarity, they will not equalize up.

In my original union, the International Ladies’ Garment Workers Union / ILGWU, for almost a century, organizers “followed the bundle,” as employers ran from Manhattan to Brooklyn to Pennsylvania and New England, and eventually to Los Angeles and Atlanta.  And early generations of internationally-minded, immigrant labor leaders like Sam Gompers, John L. Lewis, Sidney Hillman, David Dubinsky and Jay Lovestone understood Europe as part of their territory.  They were comfortable meeting with unionists – and national Presidents — there.  But for their U.S.-born successors, foreign was foreign.  Organizing stopped at the water’s edge.

U.S. union “demands,” of course, are much less welcomed by most overseas governments than employer dollars.  But mostly, we have simply not imagined a better world, or considered that within the range of business unionism.  With the heroic exception of the 1999 “Battle in Seattle,” we have not demanded that U.S. labor or human rights accompany U.S. job exports.

Today, we are overpowered, when not ignored, by worldly corporate honchos.  And we are in steady decline as nominally American corporations expand even in formerly communist nations like China or Vietnam.

I believe that Unions, like all organizations in our time, must globalize or die.  If global parity is destiny, as the authors quoted above assert, only global solidarity can equalize wages up.

Is global working class cooperation possible?

Most U.S. trade unionists dismiss this out of hand.  But I have seen global solidarity succeed among workers and governments — and it works.

Half a century ago, I was a Peace Corps community organizer in a Panama City squatter community.  My most savvy and committed fellow-organizer was communist (“Partido del Pueblo”) bus driver and union leader Carlos Zorita – “Camacho” to all who knew him.  He read books.  And he had balls.  I was his “Ugly American” friend.  On the massive front bumper of his bus were the words “Realidad Objetiva.”  He understood the sociology of his country and the world.  He was sympathetic to the left-oriented military dictator, Omar Torrijos, who took power eleven days after the election — for the third time in forty years — of pro-fascist coffee plantation owner Arnulfo Arias.  When now-President Torrijos came to our neighborhood to speak with the people, Camacho was the only resident with the nerve to stand next to the General and propose what our “Betterment Committee” had formulated:  residents wanted sewage lines, paved roads and, eventually, title to the land.  Torrijos’ wealthy successor, Ricardo de la Espriella (then in Torrijos’ cabinet) walked our muddy streets with our betterment committee.  Torrijos listened.    Over the next few years, all this was done.  U.S. A.I.D. provided a share of the funding.

It was a win-win for global cooperation, U.S. — and labor — values.

Also accomplished, over the next few years, on a larger playing field:  a shift in control over the Panama Canal from the U.S. to Panama, as negotiated by Torrijos and U.S. President Jimmy Carter. Despite predictions of catastrophe under Latino management, U.S. and global shipping are unharmed. The Canal has been successfully widened.  U.S.-Panama relations are good.

No harm, no foul – no loser.  The doubters were wrong.  All humans are created equal.

When I visited the old neighborhood two years ago, I did not hear complaints of Yankee imperialism.  With paved streets and modern water infrastructure, homeowners had improved the cinder-block houses they had once built and now legally owned.  They had become the struggling middle class, friendly to the U.S.A..

Would they, or other Panamanian workers, objecPuente de las Americast to joining a U.S.- based union, and building strength, with the understanding that a truly International union was the goal?  In my view, no.­­­  U.S. Labor’s isolation and decline reflect no defeat by global capitalism or global working-class anti-imperialism.  We have surrendered to our own fear and ignorance, without a fight.  Afraid to grow, we have begun to die. What is wrong with “workers of the world, unite!”?

For a union with global ambition and imagination, Panama, the crossroads of the world, is an obvious organizing opportunity.

Hotels and casinos could be perfect early targets.  Every U.S. hotel chain has one or several hotels in Panama.  U.S. President Donald Trump owns two hotels, and several other buildings.  Casinos catering to global travelers prosper.  Panama City could be a base for a UNITE HERE VP, on a par with San Francisco or Las Vegas.  And after success in Panama, a truly “International” union could look to Costa Rica Argentina, and Vietnam.  Why would they not?

Victory for UNITE HERE in Panama could mark a turning point for U.S. labor.  We might salvage our long-term future by going global like every other organization.

But UNITE HERE, like other U.S. unions, has no Panama affiliate.  We have not challenged global hotel chains on a global basis.  We are, as the story goes, more sensitive than capitalists to the patriotic sentiments of people in other countries.  But what if the people would actually prefer a U.S. standard of living?  How would we even know?

I believe the barrier to global unions is maintained by our parochial union leaders, each with his or her established (and shrinking) turf.  Most seem unmotivated or baffled by the thought of challenging capital on its limitless turf.

Does this matter?  I would say that if U.S. and Panamanian representatives could work together to turn a squatter neighborhood into a middle-class community, or an imperialist Canal Zone into a highly efficient point of pride for that nation; and if nominally “U.S.” corporations can manage much of Panama’s economy; then U.S. labor must not fear organizing Hyatt, or Trump, or Hilton wherever they roam.

Why should we not look forward to a Mexican President of the UAW, or a Hong Kong Vice President of SEIU?  Are we really concerned about appearing “imperialist?”   Or do we simply know so little about the world that we are afraid to put our toes in the global water?

If we cannot follow, we will not survive.

Is asking U.S. labor to go global like asking a hippopotamus to fly?

Ask any capitalist.  You grow or die.  There is a lot of evidence that today’s U.S. labor movement, after inheriting the fruits of a century of struggle, is dying for lack of respect and innovation.  We must return to pursuing capital, as we did in our glory days, wherever it goes.

Globally.

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Europe Struggles With U.S. Corporate Tax Evaders

Nov. 5, 2014

New European Commission President Jean-Claude Juncker with his principle sponsor, German Chancellor Angela Merkel.  - uk.news.yahoo.com

New European Commission President Jean-Claude Juncker with his principle sponsor, German Chancellor Angela Merkel. – uk.news.yahoo.com

Corporate America’s relentless campaign to evade or reduce taxes has scored an uncertain victory in Europe with the elevation of Jean-Claude Juncker to President of the European Commission (the highest Europe-wide office.[i])

As Prime Minister of tiny Luxembourg for most of the past eighteen years, Juncker made that country a low-tax haven, persuading more than 300 U.S. and other foreign companies to incorporate and declare earnings there for tax purposes. In recent years, some other European countries – notably Ireland and Netherlands — have also hidden special tax breaks for favored companies, and facilitated virtually total tax avoidance through scams to attribute earnings to various Caribbean islands.

But today, that form of capitalism is under increasing attack through much of Europe.   An aroused public wants governments to end corporate evasion of billions of Euros in taxes owed there, as national budgets face budget shortfalls and austerity. An investigation by the Europe-based International Consortium of Investigative Journalists [ii] recently charged that global corporations PepsiCo, Ikea and FedEx had benefitted from preferential deals with the government of Luxembourg, in violation of European Community rules. FedEx, the Consortium explained, had “set up two affiliates to shift earnings from its Mexican, French and Brazilian operations to…Luxembourg largely as tax-free dividends. Luxembourg agreed to tax only 0.25 percent of FedEx’s non-dividend income flowing through this arrangement, leaving the remaining 99.75 percent tax-free.”

Shortly before Junker’s appointment[iii], however, European Competition Commissioner, Joaquín Almunia, from Spain, began an investigation of Luxembourg tax breaks given to a unit of Italian auto manufacturer, Fiat; and initiated investigations of unusual Irish tax arrangements for Apple, and Dutch incentives for Starbucks. French and German politicians have recently called on Google to pay more taxes in Europe, where Google’s search engine has a more than 80 percent market share.  And Britain has proposed a new 25 percent tax on the local profits of international companies.[iv]

As the motive for the tentative rebellion, much of Europe has yet to recover from the effects of enforced austerity, huge budget cuts and mass unemployment that followed the 2008 economic crisis. In the years following that crisis, Juncker presided over the Eurogroup of ministers who made critical decisions imposing austerity on countries like Greece and Spain, often at the behest of Germany.”[v] Now people are asking why, with budgets in crisis, wealthy corporations are given a bye on potentially billions of dollars in taxes. Under pressure, even Luxembourg has pledged to sign on to an expanded program that would share data on wealthy Europeans who have used Luxembourg to hide their money.

As the new Commission chief, Juncker denies that he was ever part of the problem. “I have never given illegal tax instructions,” he told the European Parliament. “Don’t depict me as a friend of big capital.”[vi] He has promised to do his utmost to make the system watertight, closing loopholes for profits from unethical tax avoidance. What we want to see,” he says, “are fairer rules between the different European member states.”

Whether corresponding action is taken, of course, remains to be seen, and depends heavily on the position taken by German Chancellor Angela Merkel.

In much of the U.S., by contrast, government and taxes are resented as much as tax-dodging global corporations. President Obama wins little credit for denying – for six years and counting — tax incentives to U.S. global corporations for “repatriating” $1.7 trillion in accumulated earnings attributed – accurately or not – to overseas locations like Luxembourg or the Caribbean. Corporations reporting massive financial assets overseas have not budged either. They remember 2004, when (as reported earlier on this blog) President George W. Bush permitted “repatriation” of more than $300 billion in alleged overseas earnings at a derisory 5.25%, rather than the nominal 35% corporate rate. While the Bush deal had supposedly included corporate commitments to invest the newly available wealth in U.S. job creation, most was simply paid to happy stockholders, no strings attached.

The increasingly isolated Obama Administration has now also squashed, through new regulations, the hopes of U.S. companies of bringing home “overseas” profits tax-free by “inverting” corporate headquarters (for-tax-purposes-only) to another country[vii].

It seems likely that the Administration standoff with Apple and its peers will last until a new Administration takes office. But it could ultimately require a Presidential veto to block the massive gift to the richest. Congress would be open to acting now. Outgoing Senate President Harry Reid has publicly suggested a 9.5% repatriation tax[viii], and Republican Ron Paul would offer 5%[ix]. And, at the end of a 2014 hearing highlighting Apple, Inc.’s phony attribution of taxable earnings to a variety of overseas tax havens, Permanent Investigations Committee Chair Carl Levin gushed about what a great company Apple was, and how he loved his I-Phone. No legislation resulted from the hearing.

Republicans, and some Democrats, in fact, would like to go still farther toward global corporate independence, supporting a shift away from taxing overseas earnings of global companies altogether, and toward a “territorial tax,” in which virtually stateless corporations would pay taxes country-by-country, presumably wherever their lawyers could pretend they had earned the money.[x]

A key missing element in this kind of “reform” is any demand for honest proof as to where the wealth is created.

Evidence of false attribution of earnings, including to tiny buildings on Caribbean islands, is, in fact so abundant, and so obvious to any who care to investigate, that conversations about earnings “for tax purposes” can be fairly compared Alice’s conversations with Humpty Dumpty in “Through the Looking Glass”:

When I use a word,” Humpty Dumpty said, in a rather a scornful tone, “it means just what I choose it to mean-neither more nor less.”
“The question is,” said Alice, “whether you can make words mean so many different things.”
“The question is,” said Humpty Dumpty, “which is to be master, that’s all.”

As for the question, “which is to be master?” in our 21st-century world — whether elected governments or for-profit corporations – a key test will be the willingness of governments to call bald-faced corporate lies by their name, and to collect fair taxes, reflecting facts on the ground. If semi-socialist European opinion will step into the breach on the tax issue, compel Juncker (and Angela Merkel) to change direction and move toward transparent and fair corporate taxation, the possibility of a positive answer will remain on the table.

– November, 2014

[i] In the Eye of a European Political Storm Stands a Quiet Enigma, JAMES KANTER, NY Times, JUNE 26, 2014

[ii] “Luxembourg Leaks:  Global Companies’ Secrets Exposed:  Leaked Documents Expose Companies’ Secret Tax Deals in Luxembourg,” http://www.icij.org/project/luxembourg-leaks/leaked-documents-expose-global-companies-secret-tax-deals-luxembourg

[iii] The Commissioner is actually nominated by European Union Prime Ministers, and then voted on by the E.U. Parliament – but the great powers – Gemany first – get their way.

[iv] British Government Proposes a ‘Google Tax’, NY Times, December 3, 2014By Mark Scott and Stephen Castle

[v] Kanter,ibid

 

[vi] “Juncker calls for tax harmonization”, Associated Press November 12

[vii]New Rules Make Inversions Less Lucrative, Experts Say,” David Gelles, NY Times, September 23, 2014

[viii] “Positively un-American tax dodges”, by Allan Sloan , @FortuneMagazine , July 7, 2014”

[ix]Apple CEO Tim Cook defends tax practices at Hill hearing”, Hayley Tsukayama,Washington Post, 05/21/2013

[x] Jia Lynn Yang and Suzy Khimm, Washington Post, November 29, 2012| Updated: Saturday, December 1

“American Nations” – Review

(review by Carl Proper)

 

“American Nations: A History Of The Eleven Rival Regional Cultures Of North America”

by Colin Woodward

Viking Penguin, New York, 2011

 

As the U.S. approaches another election, with a polity seemingly more divided than at any time in living memory, a re-read of a book analyzing our divisions, written shortly before our last Presidential election, seems in order.

Colin Woodard’s “American Nations: A History of The Eleven Rival Regional Cultures of North America” offers a thought-provoking analysis for political or union organizers, with an antidote for such overly broad characterizations as “Southern” or “American” culture. Woodard argues, instead, that several very different European cultures, brought centuries ago to the New World, are still with us in updated form. Spanish conquistadors, British Puritans, French explorers, Barbados planters, Dutch mercantilists, Scottish and Irish workers and farmers, German pacifists, or the second sons of British nobles created the molds into which their successors still fit.

A key question this analysis might suggest for organized Labor, including advocates for a Second “Operation Dixie”[1] is to what extent can a single strategy for organizing “the (entire) South” address differing regional issues? Should we not distinguish between border areas like Tennessee, Kentucky or West Virginia, which may be more open than the Deep South to appeals to individual liberty (against capitalist exploitation – but potentially for “right to work”?) Could we not appreciate that most residents of “Tidewater” regions (such as eastern Virginia or North Carolina) suspect that “all men are created (well, sort of) equal?” Should we not ask whether residents of states that waffled as to whether to secede from the Union in the 1860’s are more amenable to union rights today than the unrepentant former slave economies of the Deep South? And could a focus on building union power in border regions help tip the national balance in a more labor-friendly direction?

Woodard’s central argument is that the founding cultures of each “nation” are the heart of our regional cultures today. Generation after generation of global and internal migrants, he insists, have learned to fit in with their new neighbors by adapting the local culture, much as the families of New England Yankees or Deep Southerners (or their descendants) eventually do today.

 

Though the first, widely separatedAmerican Nations 4 elements of the American patchwork (in the 15-1600’s), had grown more physically close by the time of the American Revolution, Woodard notes, they still saw themselves as distinct nations. Even after two terms as President of the United States, for example, Thomas Jefferson still meant “Virginia” when he spoke of his “country.” Woodard sees somewhat larger regional nations today, sharing common founding myths, like Jamestown, Plymouth or The Alamo. We have not, he would persuade us, fully abandoned or blended our Western, Midlands or New Netherland value sets. We just agree to understand the same terms differently.

The vision Woodard presents of the U.S.A. is of a federation more akin to the European Union or the British Isles than to a unitary state. (Interestingly, a similar vision of the distinct “nations” now constituting today’s Spain is explicit in the program of Spain’s new left “Podemos” Party.)[2]

The history of “American Nations,” in brief, describes how:

  • New England’s communal, missionary Puritans, who relied on local government and universal (religious) education to enforce moral norms, became today’s secular, communal, pro-government and pro-education missionaries; successfully evangelizing their culture to Maritime Canada and the west coast – and sticking to their commitment to build a more perfect society here on Earth.
  • “Tidewater” Virginia, Maryland and eastern North Carolina, where “gentlemen” like Washington, Jefferson and their descendants defended their personal liberty to rule over both poor whites and blacks — whom they recognized, at least, as fellow humans, akin to the British rural and working classes.
  • Deep South “slave lords,” after relocating to the mainland from brutal Caribbean plantations, also understood – and still understand — “liberty” as the right of the few, but further perceived abject servitude as natural for an inherently inferior majority. In slavery days, the punishment of “being sold down the river” from Tidewater to the Deep South, was understood as a probable death sentence.
  • The “Borderland / Greater Appalachian” descendants of hardscrabble Scots-Irish “hands” who escaped subjugation in the Deep South by pioneering in vast and lawless forests to the West – now running from Western North Carolina, Kentucky and Tennessee to East Texas. Woodard argues that Borderlanders tend to value individual (non-communal) liberty for all. They remain undecided as to whom they resent more, Deep South slave lords or self-righteous Yankees.
  • “New Netherlands” (New York City and areas of expansion to the west), founded by mercantile investors from the European nation most tolerant of immigrants and outsiders, remains the U.S.’ polyglot financial capital today.
  • “Midland” Pennsylvania and New Jersey, and their German-led westward expansion, are our most egalitarian (sometimes pacifist) region, but distrustful of government power and government solutions.
  • The “Far West,” (Idaho to Kansas) a region of prairie heat, drought, storms and depleted land, the last settled and least naturally hospitable region, remains internally colonized by giant corporations – first the railroads, and then extraction industries – based outside their “nation.”
  • The “Left Coast,” originally colonized by prospectors and pioneers, and then by New England cultural “missionaries” who founded universities wherever they went, retains its (more laid-back) alliance with northeastern liberals today, but adding a greater environmental appreciation.
  • “El Norte,” a socially unified region on both sides of the U.S.-Mexican border, with relationships and bodies continuously crossing that line in the sand, has more in common internally than with Southern Mexico or the rest of the U.S. – and may, one day, delete that border altogether.
  • Our most liberal nation, “New France,” divided between French eastern Canada, northeastern New England and the Louisiana destination of exiled Arcadians. New France is more open than the rest of us to reconciliation with the civilization that preceded white, black and yellow Americans to our hemisphere.
  • First Nation – some in internal southwestern exile, but also a large, self-governing, region of Canada, defending their sustainable traditions locally and advocating for them globally. In alliance with New France, a potentially dominant force above the U.S. border.

What might this vision imply for future efforts to organize? The UAW may have found a better opening for southward expansion in “Greater Appalachian” Chattanooga, Tennessee than is likely to be found in most Deep South areas, where anti-Labor and anti-Yankee sentiment is more deep-rooted. The VW (and UAW?) location, once divided in its Civil War sympathies, still harbors mixed attitudes today. Possibly, a labor-management, “Works Council,” (and — unavoidably) “right to work” approach to organizing will succeed more readily here than universal unionization. If Woodard has anything to teach us, it is that a “one size fits all” approach risks stimulating unnecessary obstacles in libertarian land.

Another question for consideration: do we risk uniting our opposition by working from an ahistorical label like “Dixie” when we know that Kentucky, West Virginia and parts of Tennessee fought for the union, some “Southern” states seceded only reluctantly, and many there hated the slave lords and resent today’s corporate lords as much as the people of New Hampshire? Recognizing more subtle regional distinctions, why not pursue a Border State and Tidewater alliance, pursue only targets of real opportunity in the Deep South, and seek to isolate the hard core?

 

As for Woodard, he sees a political struggle between long-term alliances over the last century, led by New England and the Deep South. His vision of unchanging cultures, however, is fundamentally pessimistic, and leaves him with little reform to recommend at the end of his history. He offers no suggestion as to what might break libertarian Borderlanders away from the Deep South, tie a growing El Norte more closely to the Left Coast, or New France to New England – other than possible secessions from Mexico or Canada.

Woodard is certainly open to charges of stereotyping rich regional cultures – but his stereotypes have history and extensive analysis behind them, avoid monolithic characterizations like “the South,” and culture-free assumptions that state political borders define attitudes. He also avoids the largest stereotype — “one nation, under God, with liberty and justice for all.”

 


 

[1] See, for example, Douglas Williams and Cato Unicensis, “A Call for a Second Operation Dixie?” in Democratic Left (Labor Day 2014) and on this blog.

[2] “Spain is a nation of nations. The Right does not understand this. For us, therefore, the only way to reinvent Spain is through a form of federalism. And from that federalist basis, from a new form of regional integration, we can begin rebuilding Europe.” – Sebastiaan Faber, September 9, 2014, The Volunteer

 

Wal-Mart, Amazon and the Swiss Social Wage

 

Carl Proper

January 20, 2014

“47 percent of U.S. jobs are ‘at risk’ of being automated in the next 20 years,” say Oxford University Professors Carl Frey and Michael Osborne, including most workers in transportation and logistics occupations, together with the bulk of office and administrative support workers, and labour in production occupations.[i]

“The opportunity is massive,” adds Andrew McAfee, a principal research scientist at the M.I.T. Center for Digital Business. “There are still people who walk around in factories and pick things up in distribution centers and work in the back rooms of grocery stores.”[ii]  

One U.S. CEO, Amazon head Jeff Bezos, is doing his best to seize the “opportunity.”  Reaching outside his highly automated “fulfillment centers” – where the remaining human workforce complains of being treated like robots themselves[iii] – Bezos proposes to replace UPS delivery people  with a fleet of mini-drone helicopters to drop packages on your doorstep, largely untouched by human hands.

Why exploit workers, Bezos appears to believe, if you can just do without them?

There is a lot of evidence that this may indeed be our future.[iv]

Do organized labor or American workers believe this is the future?   Or are we too preoccupied with the threats of the present to develop a vision for a radically different economy?  And if we do envision the massive substitution of robots for human workers, for better or worse, do we have a strategy to cope with this world?

In the early 20th century, when the labor power we once took for granted was built, millions of workers were inspired by a vision of a vastly different, socialist future, where workers would not just live better, but would rule.   I believe that progressive thinkers and activists today should also sometimes lift our eyes from the daily struggle, so as to imagine and work toward a world where mere survival no longer compels us to sell our labor to the owners of capital.  Let the robots work for US.

Is this a crazy dream?  A number of Swiss citizens, enough of them to raise the question politically, don’t think so.  This winter, the Swiss will vote in a referendum whether the government should send every adult an equal monthly “paycheck” of about $2,800, whether they are employed or not.   They believe most people would continue to work, but work more freely, under this new regime.  It is an idea other Europeans, and some Americans are considering as well – mostly libertarians up to now, and most, unfortunately, involving a much lower “social wage.”

Maybe Amazon’s robot vision is the future.  And if so, as a working class, how long will we continue to seek work from employers who no longer need us, but still want our consumer dollars?  Why not, instead, prepare to let robots do the work, and demand a “social wage,” just for breathing?  Couldn’t we find better use for our time NOT laboring for The Man, but pursuing superior education for ourselves and our children, working for causes that matter to us, or selling mental or physical products from our own 2-D or 3-D printers — individually or cooperatively produced?

In today’s world of everyday struggle, American workers and organized labor are responding courageously to the brutal destruction of a formerly middle class living standard — fighting for a living minimum wage, sending demands for justice with one-day strikes, and pushing the political system to restore rights taken away at the workplace.  In these struggles, the message of organized labor and the Occupy movement continues and will grow.

Capitalism, however, evolves rapidly.  So must we.  Tomorrow’s struggles are likely to be very different from today’s, and in a growing number of places, tomorrow is already here.

But, before trying to build a highway to the future, let’s retrace the road that got us here.  What way is history moving?  And what are the realities beneath our ground?

..

Back in 1960, as Harold Meyerson writes, “America’s three largest employers were high-wage unionized manufacturers or utilities: General Motors, AT&T, and Ford.”[v]  They paid their production workers a living wage, also providing “Cadillac” health insurance and a defined benefit pension.

Families supported by these jobs had little need for the extensive government benefits provided today, except for Social Security as an addition to their union pensions.  By 1965, President Lyndon Johnson and many others even saw the potential for ending poverty in America, as we launched Medicare and Medicaid, Civil Rights reform and a variety of anti-poverty programs.

But by then, other global powers, whose economies had been crushed by World War II, had largely rebuilt, returned to  competition, and begun producing quality products while paying lower wages.  The world had changed radically beneath American Labor’s feet – and we reacted slowly and inadequately to the challenge.  New “Asian tigers” and Latin American sweatshop “opportunities” entered the global economy.  U.S. manufacturers were pushed back, and a “Rust Belt” grew.  Unable or unwilling to compete on quality or service, they turned to a neoliberal, global sweatshop strategy of their own.  As they broke unions, and sent the formerly best-paying jobs to low-wage regions or countries, a new economic model developed, based on contingent and low-wage employment, and on the spread of poverty, even for the employed, even here.   For the most part, we did not envision the new world that was coming.

U.S. retailers like Wal-Mart, increasingly selling goods made elsewhere, displaced manufacturers as the dominant employers. [vi]

Having come of age in the South during organized labor’s decline, Wal-Mart founder Sam Walton felt free from the start to pay his service employees the minimum wage, and sometimes less, even as he – at first –  promoted “made in USA” production.  Eventually, as Walton and his corporate descendants added innovative logistics to low-cost sales, Wal-Mart acquired unprecedented market power.  With their huge volume, they demoted manufacturers to lowly “supplier” status, and demanded they shift production to overseas where workers were paid virtually nothing by U.S. standards.  Their growing masses of U.S. warehouse and sales employees were eventually granted a substandard, though legal wage, and nominal, though substandard benefits.  As for the displaced U.S. manufacturing workers, we never developed an effective global response to that knockout punch.

But there was a weakness in the new Wal-Mart economy.   Without a living wage, U.S. workers as a whole were unable to purchase their own output. Government subsidies were required.  Even Republicans like President Nixon or economist Milton Friedman saw the need to supplement a living standard base on poverty wages and no (or inadequate) health insurance.  They displayed political caution in moving only gradually toward their long-term vision of a uniform global wage level, even in the U.S., but far below previous American standards.   Indeed, as Jaron Lanier points out in his recent book, “Who Owns the Future?,”[vii] over time Wal-Mart’s low-wage strategy cost competitors and suppliers hundreds of thousands of jobs, thus gradually impoverishing its own customer base.” [viii]   That is, to the extent dominant, pattern-setting employers, like Wal-Mart or McDonald’s, paid their employees less than the full value of their work, they depressed the whole economy and their own sales as well.   Sophisticated conservatives soon recognized the need to prop up the market for Wal-Mart and other retailers’ products, by expanding public income and benefit subsidies.  (Less savvy reactionaries, like the Tea Party, are radically opposed to the corporate conservatives’ strategy.)

To address capitalism’s need for income subsidies, and facilitate the shift to a neoliberal economy, President Nixon proposed a “negative income tax,” essentially a federal supplement for low wages, as well as a version of national health insurance to lift this burden from employers’ backs.  The insurance proposal was deemed not quite good enough by the AFL-CIO in that day, and so failed in Congress, but the tax supplement – an “Earned Income Tax Credit” (EITC) became law in 1975, and was significantly improved in the 1990’s.  Eventually, food stamps and other government supplements and protections were added.  National health insurance, with mixed support from labor and major employers, and opposition from a mostly Southern-based ideological right, is only now taking effect.

Wal-Mart was the new corporate model.  While avoiding the living wage that had been standard in an earlier generation, they directly and indirectly employed many humans – often on a part-time basis.  And, like fellow mass-market retailer McDonald’s, they encouraged their employees to take advantage of government benefits for the underpaid, or occasionally unemployed.

Confronting these low-wage, goods-supplying behemoths, Unions like SEIU and UFCW are now organizing (dues-free) workers who demand  a return to much higher minimum wages, and to employer-paid benefits adequate to cover their actual needs without federal wage and benefit support.

Right-wing economists, like Gregory Mankiw[ix] , the chairman of the Council of Economic Advisers under President George W. Bush, while recognizing the need to put money in consumers’ pockets, generally prefer expanding the EITC, rather than raising the minimum wage.  This “negative income tax” distributes the cost of wage supplements to the whole population, whereas the cost of a higher minimum wage would fall directly on the offending employers.  While many conservatives, including defeated Presidential candidate Mitt Romney, grumble at the unfair “tax” on employers represented by either the EITC or the minimum wage, they mostly lobby to have the tax fall, like Shakespeare’s “gentle rain from heaven…on the just, and on the unjust”. 

Orrganized labor should not fail to recognize what even informed reactionaries implicitly acknowledge:  if the workforce is paid — whether by their employers or by the government — too much less than the actual value of their work, corporate profits will not be REALIZED in the marketplace, and the economy will suffer

But while labor struggles to return responsibility for workers’ full compensation back to their employers, a whole new front is opening up: a future for which we must prepare.

Amazon is the new model of online, speedy and low-priced retail.  Starting a business in the internet  / smart technology age, a world in which the demands of organized labor can often be ignored, CEO Bezos often faces charges of overworking his employees, and of warehouse conditions more congenial to robots than to humans requiring warmth, air and occasional rest — but he has a solution for that.

While sweaty masses of humans swarm throughout Wal-Mart stores, warehouses and the global production facilities they control, Amazon’s massive “fulfillment centers” (where orders, not people, are “fulfilled,” or shipped) are increasingly human-free – and heli-drones are on the way.  Bezos’ automation-based cost control appears fiscally superior to Wal-Mart’s.  His stated goal, which Wal-Mart has surely noted, is to become the world’s ONLY retailer – and perhaps the first retailer to employ only bean-counters and robot-installers / controllers / repair-folks – with no need for anyone to turn the lights on or off during the course of the twenty-four hour shipping day.

Other employers may not be far behind.

Google,over the last half-year… has quietly acquired seven technology companies in an effort to create a new generation of robots.  The engineer heading the effort is Andy Rubin, the man who built Google’s Android software into the world’s dominant force in smartphones.” [x]

Even as SEIU organizes McDonald’s service workers to demand a living wage, McDonald’s is installingMcD robot clerk 7,000 new touch-screen kiosks in its European stores.  In the foreseeable future, little human contact will be required to order burgers and fries.[xi]

 

 

 

McDonald’s shows off a touch-screen kiosk for ordering meals, installed in France in 2009.  (Credit: McDonald’s Europe)

In effect, Jeff Bezos and technology leaders like Google engineer Andy Rubin, foresee a future in which most of today’s retail / production workforce are “dead men (and women) walking.”

Our labor will not be needed, the Amazon/Google coterie believes:  there’s a robot for that.

While past technological revolutions led to new jobs, as they destroyed the old, there is no assurance this pattern will be repeated.  We can no more close our eyes to a future that is evident to technology gurus, than we can ignore the realities and predictions of global climate change, or the evidence of evolution.  Science and technology are changing, and will continue to radically change our world, and we must adapt or die.  We must shed any illusions that tomorrow’s economy will look like today’s.

The new Amazon economy presents a conundrum to organized Labor.  We have always depended for our power on leverage gained from capital needing our LABOR.  Perhaps, we may say, the recent growth of unemployment and long-term unemployment is only cyclical, and millions of new jobs will appear in a robot economy.  But perhaps we are witnessing, instead, the beginning of a very different world economic order, based on extreme automation of production, delivery and most repetitive services – and on corporate employment for only a minority of the adult population.

How then will the rest of us live?  And how will representatives of the newly unemployed or self-employed obtain leverage to make demands and negotiate terms of living, rather than just working?

 

The “Swiss solution” is one possible aspect strategy for an automated future.

Some economists, libertarians and conservatives – and perhaps the liberal Swiss and other Europeans – now believe we must simplify the subsidy of consumption, replacing multiple government programs, and the bureaucracies that administer them, with a single check, while allowing the replacement of workers with robots and other automated equipment.  Libertarians and conservatives, unsurprisingly, tend to favor a much lower social wage than the Swiss referendum will suggest.

As we know, conservatives love vouchers and hate government programs.  There will, as always, be a lot to argue about, social wage or no.  But they are looking in an interesting direction.

The Swiss referendum question combines the virtue of simplicity with an initially adequate social wage:  a flat monthly amount for all, enough to live on, but low enough to encourage most people to seek additional income from other sources.  It assumes that most people will continue to work, but perhaps not full time, and not necessarily for corporate employers — and to pay taxes.  Almost certainly, if such a step is to be considered in the U.S., we would expect it to phase in gradually, probably by shifting costs from existing programs — expanding the EITC, for example — and taxing the production of robots.  A generation of political conflict could be part of the package.

The question of how millions of displaced workers might use more free time also requires exploration.  Utopian writers have thought about this possibility for more than one hundred years.  But the rise of robotic technology and the decline of sustaining employment in advanced economies urgently raises the issue again in our time.   We should not wait for millions of jobs to disappear one industry at a time before developing a response that recognizes the inevitable (or probable) and leverages the possible.  How can we respond as a class, and globally – rather than be played off one more time, against each other?

If the Swiss should respond positively to the referendum, we will have an extraordinary learning opportunity, but the question is on our table regardless.

The opportunities and dangers are global and serious.  What is our plan?


[ii] ibid

[iii] As an Amazon employee in a recent strike in Germany  explains, “the workers are treated more as robots than human”  Alison Kilkenny, “Hundreds of German Workers at Amazon Walk Off the Job,” The Nation, December 16, 2013

[iv] See some suggested sources below.

[v] Harold Meyerson, “the Forty Year Slump”, American Prospect, Sep-Oct 2013

[vi] See Harold Meyerson, op cit,   “In 2013, America’s three largest private-sector employers are all low-wage retailers: Wal-Mart, Yum! Brands (which owns Taco Bell, Pizza Hut, and Kentucky Fried Chicken) and McDonald’s.”

[vii] Jaron Lanier, Who Owns the Future?, Simon and Shuster, 2013

[viii] Cited in “Will Digital Networks Ruin Us?” Joe Nocera, NY Times, JAN. 6, 2014

[ix] N. Gregory Mankiw,  Help the Working Poor, But Share the Burden, New York Times, January 4, 2014

[x] “Google Puts Money on Robots, Using the Man Behind Android,” JOHN MARKOFF, New York Times,  December 4, 2013

[xi] http://news.cnet.com/mcdonalds-hires-7000-touch-screen-cashiers/8301-17938_105-20063732-1.htmlMcDonald’s hires 7,000 touch-screen cashiers

Other readings

BHL’s & UBI’s, By Jessica Flanigan, April 30, 2012;  http://bleedingheartlibertarians.com/2012/04/bhls-ubis/

Eight ways robots stole our jobs in 2013”,  By Lydia DePillis Wonkblog, Washington Post, December 23, 2013

“Giving All Americans a Basic Income Would End Poverty,” Danny Vinik, http://www.slate.com/blogs/business_insider/2013/11/17/american_basic_income_an_end_to_poverty.html

“How to Cut the Poverty Rate in Half (It’s Easy)”. Matt Bruenig and Elizabeth Stoker, Atlantic Magazine, Oct 29 2013, http://www.theatlantic.com/business/archive/2013/10/how-to-cut-the-poverty-rate-in-half-its-easy/280971/

Hundreds of German Workers at Amazon Walk Off the Job,” The Nation, Allison Kilkenny on December 16, 2013

“Swiss to vote on 2,500 franc basic income for every adult”, Reuters, Berne, Oct 4, 2013

“Rethinking the Idea of a Basic Income for All”, Bruce Bartlett, NY Times Economix blog, December 10, 2013

“Welfare Benefits for Big Business”, CASEY B. MULLIGAN, NY Times Economix blog, December 25, 2013

“Why the future doesn’t need us,” Bill Joy, Wired, 1993

Capital Strike, Part Deux: Can Obama Negotiate?

 

Capital Strike, Part Deux:  Can Obama Negotiate?

Carl Proper

carlproper.com

 Apple Operations International, in the Hollyhill Industrial Estate,

one of the Irish subsidiaries employing  4 percent of Apple’s global

work force and purportedly earning 65 percent of its worldwide income

AppleIrelandBuilding

Michael MacSweeney/Reuters

As I reported in this blog December 9 (“U.S. multinationals pursue victory in Capital strike against taxes”), nominally U.S. multinationals are refusing to bring back to the United States nearly $2 trillion in self-defined “overseas earnings,” as long as they must pay the 35 percent tax on the earnings.  Faced with a similar situation in 2004, President George W. Bush arranged “repatriation” of nearly $400 billion at a tax rate of only five percent, based on a kiss and a promise to use the money to create American jobs.  New York Times investigative reporter David Kocieniewski later found the action had led to no discernible increase in American investment or hiring. On the contrary, some of the companies that brought back the most money laid off thousands of workers.  A study by the National Bureau of Economic Research later concluded that 92 cents on every dollar was used for dividends, stock buybacks or executive bonuses.”[i]

In a standoff, there has been no repatriation since that time.

But on May 22, one of the still-ongoing tax strike leaders, Apple CEO Tim Cook testified before the Senate Permanent Committee on Negotiations, headed by liberal Democrat Carl Levin of Michigan.  Word was that Cook would propose a “dramatic simplification” of corporate tax laws.  In a promise reminiscent of 2004, he would “present specific proposals aimed at encouraging companies to bring back foreign earnings to the United States and invest that money in job creation, as well as research and development.”[ii]

Cook had been roasted in advance of the hearing for Apple’s use of a web of offshore entities — some with no employees or physical offices — that allow it to pay little or no taxes on tens of billions of dollars, according to a Senate investigation.  Most of Apple’s profits actually derive from research at its Cupertino, California headquarters, rather than from low-wage manufacturing operations.  In 1980, however, it signed over to Irish subsidiaries the right to declare profit from that research.  Between 2009 and 2012 alone, Apple shielded at least $74 billion in profits from U.S. tax laws by setting up subsidiaries in Ireland.[iii]  Press and Senate critics have singled out to two Irish shell companies, one of which brought Apple $30 billion between 2009 and 2012, but paid no taxes to any government.  The other paid a tax rate of 0.05 percent in 2011 on $22 billion in earnings.[iv]

“Apple sought the Holy Grail of tax avoidance,” said Sen. Carl Levin (D-Mich.), chairman of the committee, before the hearing opened. “It has created offshore entities holding tens of billions of dollars while claiming to be tax resident nowhere.”  Even John McCain of Arizona, the senior Republican on the committee, noted that Apple is “among America’s largest tax avoiders. (The arrangement) “gives significant advantage compared to smaller companies.”

“What impresses me is the effortlessness of Apple’s international planning,” added Edward Kleinbard, a tax law professor at the University of Southern California and a former chief of staff of the Congressional Joint Tax Committee.  “It’s as if Apple checked a box to elect out of worldwide taxation on a vast swath of their international income.” [v]

During the hearing, however, Cook’s low-key demeanor, his mere willingness to testify, while other CEO’s demurred – and the great popularity in the U.S. of Apple’s products – totally disarmed the committee.  Cook won a hands-down victory over Congressional “investigators.”

Apple, he testified, pays “all the taxes we owe — every single dollar.”  Apple is simply “a victim of an outdated tax system. Unfortunately, the tax code has not kept up with the digital age.”

Missouri Democratic Senator Claire McCaskill was convinced:  “I love Apple” she testified. “I harassed my husband until he converted to a MacBook. It’s a huge part of my life.”  Not to be outdone, pre-hearing attack dog Levin added that, “We love the iPhone and the iPad… I know it’s not easy to come in front of a spotlight but it’s important for us.”

During the hearing, Senator John McCain also thanked Cook for his testimony:  “You have to be a pretty smart guy and a pretty tough guy, too, and I say that in a complimentary way,” he beamed.

Sen. Rand Paul (R-Ky.), who had not wavered, got right to the Libertarian point, saying the committee owed Apple an apology for “dragging” Cook and other Apple executives to Washington when they had not done anything illegal. He proposed lowering the corporate tax rate from thirty-five to five percent to encourage companies to bring operations back to the United States – exactly what President Bush had achieved nine years earlier.

Even Cook himself was a bit more generous:  “To incent a huge number of companies” to bring back money, he testified, the new rate “would have to be a single-digit number.”

With Congressional leaders seemingly fleeing the fight, and with President Obama’s last election behind him, the game may now be on.  Given the duration and solidarity of the capital strike, it’s clear that the final tax rate – unlike yours or mine – will be negotiated.  George Bush and Rand Paul’s five percent plan is the floor, and the ceiling is probably in the 20s.

It will be up to Obama, initially, to negotiate a deal that could repatriate enough wealth, in the pockets of ordinary taxpayers , to provide a significant boost in employment and a second stimulus to the economy.  During his election campaign, he lambasted his opponent for dodging taxes through use of overseas tax shelters.

Many in labor, the left, or just ordinary taxpayers might wish Rich Trumka would handle this negotiation.  But we are stuck with Obama. Apple computer, at least, with $10s of billions parked overseas, was recently forced to borrow $30 billion to pay dividends to stockholders.  But we will need to mount one more campaign to raise the money that now sits in overseas banks, when the taxes payable could hire back tens of thousands of teachers and long-unemployed working people.

c:\users\owner\documents\home\writing\for blog\capital tax strike, part deux.doc


[i] ‘For U.S. Companies, Money ‘Offshore’ Means Manhattan,’ David Kocieniewski, NY Times, May 21, 2013

[ii] “Apple CEO Tim Cook to propose tax overhaul,” Cecilia Kang, Washington Post: May 16

[iii] “Apple’s Web of Tax Shelters Saved It Billions, Panel Finds”, Nelson D. Schwartz And Charles Duhigg, NY Times, May 20, 2013

[iv] “Apple avoids taxes with ‘complex web’ of offshore entities, Senate inquiry finds, Cecilia Kang, Washington Post,  May 20

[v] Floyd Norris, One Response to Apple Tax Strategy May Be to Copy It, NY Times, May 21, 2013, Floyd Norris “One Response to Apple Tax Strategy May Be to Copy It”

U.S. Multinationals in Capital Strike Against Taxes

U.S. multinationals in Capital strike against taxes

Carl Proper

Jan. 12, 2013

Global, nominally U.S. corporations have been on a tax strike since the last “repatriation holiday” in 2005.  Corporations like Apple computer and General Electric are refusing to bring an estimated $1.7 trillion in “overseas earnings” back to the U.S. as long as the United States demands a 35% tax payment on those earnings. Apple, for example, has more than $12 Billion parked offshore.  Google has $17 billion and Microsoft, $29 billion.  “To the companies,” Washington Post reporters Jia Lynn Yang and Suzy Khimm note, “no other tax issue matters more.”

Faced with the same situation seven years ago, President George W. Bush let capitalist allies off with a five percent tax payment, and nearly $400 billion was eventually brought back to the U.S.  But, while the tax holiday was “sold” to the public with the promise of job-creating domestic investment, ninety-two percent of that money was instead returned to shareholders in the form of dividends and stock buybacks..  Times reporter David Kocieniewski describes two differing versions of how one of the big winners, pharmaceutical giant Merck Corp., used the tax giveaway.  According to:

“Merck spokesman, Steven Campanini…. the company used the [repatriated] money for “U.S.-based research and development spending, capital investments in U.S. plants, and salaries and wages for the U.S.” 

But..

 According to regulatory filings, the company cut its work force and capital spending in this country in the three years that followed. …

Merck brought back $15.9 billion in October 2005. The next month, it unveiled a restructuring plan to cut 7,000 jobs. Over the next three years, about half those cuts were made in the United States, where the company’s employment fell to 28,800 jobs, from 31,500….

… Much the same happened elsewhere, according to a review of taxpayer data by the National Bureau of Economic Research. “For every dollar that was brought back, there were zero cents used for additional capital expenditures, research and development, or hiring and employees’ wages,” said Kristin J. Forbes, a professor of economics at the Massachusetts Institute of Technology’s Sloan School of Management.  Forbes was a member of President Bush’s Council of Economic Advisers and led the study.

The pitch today is to eliminate U.S. taxes on foreign profits altogether, and switch to a “territorial system” – in which a company only pays taxes where it claims the money was made.  But global companies have many ways of attributing earnings to tax havens like the Cayman Islands to avoid local taxation – or avoiding taxes altogether in “free trade zones” around the world.  (U.S.-based Intel Corporation, for example, negotiated “foreign trade zone” status to avoid taxes in 2011 on its new facility in Chandler, Arizona.)

Unsurprisingly, wealthy global corporations find widespread political support for their strike, including from Co-Chairs Alan Simpson and Erskine Bowles of the National Commission on Fiscal Responsibility and Reform.  “At least,” says Bowles in justifying the giveaway, “(the money) will be here and not circulating in other countries.” The territorial system of taxation was also endorsed by President Obama’s Jobs Council, headed by General Electric CEO Jeffrey Immelt.  Thankfully, this Council has not met since early 2012.  A call for this colossal break was also part of GOP Presidential nominee Mitt Romney’s economic platform, and House Republicans have passed a budget that includes a transition to a territorial tax system.

The effects of caving in to this “bring it home free” demand would include long-term damage to future U.S. budgets.  “The territorial tax system they envision would gut the entire U.S. Corporate tax code,” according to Edward D. Kleinbard, a Professor of Tax Policy at the University of Southern California.  Kimberly Clausing, an Economics professor at Reed College calculates that as many as 800,000 jobs could be added to low-tax countries instead of the United States.

Among factors making a complete Obama Administration cave-in on this demand unlikely is opposition from domestic firms, which already pay higher taxes than the country’s biggest multinationals.  But some negotiated compromise seems likely, though not necessarily as part of “Fiscal Cliff” negotiations.  A 20-25, percent taxation agreement, followed by significant financial repatriation, could be a significant Democrat victory, and a boost to the domestic economy.

Another arguably positive resolution might be following the Japanese example.  Japan switched to a territorial system in 2009.  But they also tax a company’s foreign income if taxes paid in another country are less than 20 percent.  While 20 percent is still a low number, a global 20 percent standard would represent a remarkable move toward tax discipline in a global world.

It seems likely, however, that U.S. corporations would respond to this idea by continuing their strike.

Materials cited in this article:

In ‘Fiscal Cliff’ Debate Companies Quietly Push For Tax Break On Foreign Profits,” Jia Lynn Yang And Suzy Khimm, Washington Post, November 29, 2012

Companies Push for Tax Break on Foreign Cash,” David Kocieniewski,  New York Times, June 20, 2011

Globalization and Union Power

 

Carl Proper

April, 2013

Capital is global today, and not only wealthy, but politically powerful.  Organized labor, like most democratic organizations, is local or national, and at a disadvantage.  While corporate globalization hits manufacturing workers first, the resulting shift in wealth and power eventually affects service and government workers, and their unions, as well.

Capital, despite many heroic efforts by workers and their unions, appears to be winning the class war.  Unions need to change.

I believe that organized labor, like political democracy, will need to coordinate much better globally to contribute at a significant level, and the sooner, the better.  To be taken seriously, we must challenge the heart of corporate power – unchecked control over who works, who doesn’t, and on what terms.  Globalization is much harder for organizations like labor unions that rely on communication from the bottom up, than for top-down corporate command structures, but workers of the world, unite! is still the path to justice.

One reason global capital is winning is that our former political allies – liberals, the educated middle class – are also global in their travels, education and world view.  Where once liberals leaned politically toward labor as a force for justice, and for a better future, now they are on the sidelines as we fight and too often lose.  They see unions as well-meaning, but as resisting global progress and not representing the poorest.  (Of course, the pocket-book interests of upper middle class consumers also affect their world-view.  They are well served by low-cost imported goods and undocumented services.)

More fundamentally, the great economic and political power capital has gained through global operations means that general political opinion in particular countries – liberal, conservative, labor — is not terribly important.  This is because democracies speak mostly for particular populations, but everyone wants the jobs that global corporations control.

In the early stages of globalization, many manufacturing workers in developing countries were made redundant.  As their incomes fell, retail bottom-feeders like Walmart rose, and resentment rose as well, not only against the rich, but against more fortunate workers. Tax revenues declined, harming public employees.

Meanwhile, the vast corporate wealth derived from buying labor from the lowest-wage countries, and selling products to the most advanced, buys political influence wherever it goes.

In a 1981 article on bargaining, authors Samuel Bachrach and Edward Lawler[i]  defined power in a way that is useful for understanding our current situation.  Power in ongoing relationships, they argue, is a function of need.  Party A’s power depends entirely on Party B’s need for A or something A controls.  If B needs nothing from A, A has no power over B, regardless of any intrinsic strength.  If B needs A – or something A controls — more than A needs B, A dominates.  In general, the side that needs the other side less in a relationship has more power (whether for good or ill).

Let’s consider how this has played out in reality for one global corporation.

IntelChinaIn 2010, Paul Otellini, CEO of the nominally American microchip manufacturer, Intel, described to New York Times Op-Ed Columnist Thomas Friedman why he was locating his newest factory, and hundreds of jobs, in China, instead of the U.S. [ii] :

“The things that are not conducive to investments [in the U.S.] are [corporate] taxes and capital equipment credits,” he said. “A new semiconductor factory at world scale built from scratch is about $4.5 billion — in the United States. If I build that factory in almost any other country in the world… I could save $1 billion, because of all the tax breaks these governments throw in.”

 Otellini complains as well about lack of U.S. investment in technical higher education.

“Intel can thrive today — not just survive, but thrive,” Friedman notes, “and never hire another American.”

Asked if his company was being held back by weak science and math education in America’s K-12 schools, Otellini explained:

“As a citizen, I hate it. As a global employer, I have the luxury of hiring the best engineers anywhere on earth. If I can’t get them out of M.I.T., I’ll get them out of Tsing Hua” — Beijing’s M.I.T.

 

The irony of pleading for lower U.S. taxes while calling for increased investment in education escapes Otellini, and Friedman.  Yet increasing corporate tax immunity is a primary factor in layoffs and wage reductions for state employees and deficit spending at the Federal level.

In the months following opening of the plant in China, Intel spokespersons, through the media — and no doubt in conversations with public officials — consistently made the pitch for lower taxes.

And in fact, after the China plant went online, Intel in 2011 announced its next new plant, a $5 billion investment at an existing Intel “campus” in Chandler, Arizona.  The announcement followed a tour of the facilities by President Obama.[iii]  What were the terms for the new investment?

“To be honest, when we changed the sales-tax factor . . . that’s when Intel was making the decision to either divest from Arizona or stay in Arizona,” said Barry Broome, president/CEO of the Greater Phoenix Economic Council…This $5 billion, Intel is not going to pay taxes on that investment,” he said. “It is in a foreign-trade zone. The taxes are abated.”

Evidently, Arizona’s need for jobs was greater than Intel’s need for Arizona’s workers.  That is, Intel had more power (but still some need).  Arizona felt it had to be extra creative, if not extra-legal, in providing tax-free “foreign trade zone” status to a U.S. company in America.

It is important to understand that workers in all states and countries face the same dilemma.  I recall, for example, a conversation I had in the 1980s with a trade unionist from the Philippines.  An “American” company (really global) had just closed one of its two large unionized plants in his country, relocating them to China.  “Those were OUR jobs,” my friend said.  “How could they just take them away?”

Net results of the ability of corporations to locate, move or terminate jobs virtually at will around the globe include lower taxes and greater power for corporations, vis-à-vis workers, governments and citizens.  The shift of power from public to private interests over the past fifty or so years has led to growing class inequality in the U.S. and globally, and to the shrinking ability of many governments to provide public services.

How did this radical power shift come about?  One entertaining history of the early days of global outsourcing – and corporate empowering – is the 2009 HBO film “Schmatta:  Rags to Riches to Rags.”[iv]  This film depicts the New York heyday of the garment industry, where, as one garment executive notes, “everybody was union.”  Then follows the stunning discovery by employers, in the latter 1900s, that they were now free to lay off their American employees at will and contract assembly work to nations where wages were so low as to disappear as cost factors – and neither the union nor the government could stand in their way or follow.  As Russ Togs executive Irving Rousso puts it, describing an early pants subcontracting venture, with materials purchased in Italy and assembled in Johannesburg, South Africa:  “the work came in nice, and…forget it, at a price that you cannot believe!”

American readers of a certain age may recall being told by government and media spokespersons in the ‘60s, ‘70s and ‘80s that, of course, only “low-skill” jobs like garment assembly would be allowed to leave the country.  “Higher” skilled jobs like auto assembly – and certainly computers — would remain in America.  You may also remember Walmart metastasizing continuously in the same years, owing in part to its “Made in USA” image (soon jettisoned for all-third-world production); or patriotic Intel CEO Andy Grove, an immigrant, committed in his day to domestic employment.

Times changed.  Power shifted.  What was unthinkable in 1955 was unquestionable 50 years later.  U.S. workers needed jobs, but U.S. owners needed U.S. workers less and less.

Failure to follow

The response of my union, the International Ladies’ Garment Workers’ Union, then UNITE (later UNITE HERE) to this crisis was similar to that of most other unions:  we represented particular workers, and tried to defend their interests.  We demanded regulation and limitation of imports.  Our theme song, “Look for the Union Label” was a hit.  But the import tide was undeterred.

Though we had been fairly successful at following corporate runaways a5780PB40F19CP400G.union Labelnd contractors domestically – we were even able, domestically, to hold manufacturers financially responsible for their U.S. contractors’ employees[v] — we never found the way to follow when they contracted across national borders.[vi]  National cultures and national laws were different.  Nationalism and “us vs. them” were and are deeply embedded.

Other unions and industries followed the same pattern.  The shared power, the checks and balances formerly applied by non-corporate domestic stakeholders disappeared into history.  As GM spokesman Greg Martin told a Congressional committee in 2007, “We’re a global car company that happens to be based in the United States.”[vii]  In other words, the services of US industrial workers were helpful, but no longer needed.

Capital had found the magic key that freed them of responsibility to labor and to their country’s laws.  As for the consequent shift in wealth and power, still proceeding in our day: “forget it! You cannot believe!”

By the time Koch-funded Republican Scott Walker made his move against collective bargaining rights of public employees in 2011, the demolition by global outsourcing of manufacturing jobs and unions had been under way for five decades.  Corporate wealth and power had multiplied, while the solidarity – and disposable income — of a 93% non-union private sector was diminished.

“What happens if America loses its unions?”[viii] Washington Post columnist Harold Meyerson asked, and the question cannot be dismissed.

What can be done?  Contributors to this blog have made excellent proposals. To inspire great struggles, all agree, we need great dreams.

We need a revival of strikes that actually shut down production.  But shutting down production today may mean coordinating with the new global centers of production.

Racism and anti-communism, were used to divide the working class and block organizing in the South and Southwest in the 1930s and 1940s, and were key to reversing labor progress in the mid-20th century.  But authoritarian socialism, as applied by Stalin, Mao – and Castro – failed to deliver workers a better world, and should not now divide us again.

A national campaign to demand “just cause” for firings in ALL workplaces would help build a class movement, not just an interest group.

But one big dream that is already ON the agenda of workers and activists in many parts of the world is global democracy and global democratic unionism.

If not globally, how else can labor seriously address issues with Apple, Wal-Mart, Intel, Hyatt, Exxon, the World Trade Organization – or world health, world peace, the rights of women, the needs of the environment?  The challenges that stopped the unions from following capital as it took over the globe in the late 20th century still apply, to be sure, but at a less crippling level.  Nationalism, tribalism, vastly different political and labor structures and traditions will no doubt be with us in some form when the 22nd century arrives.  But as capital moves to consolidate its global monopoly, and as workers cross every border to find employment – worker organizing cannot freeze in a 20th century national template.

The Steelworkers, U.E., CWA and other unions, in fact, ARE already seriously building global capability. US LEAP has been incredibly courageous in taking on the assassins of Latin American trade unionists.  International Labor Rights Forum has served us all by identifying sweatshop violations and working toward global contracts for humane sourcing.

Many other farsighted workers, activists and organizations, operating both inside and outside organized labor, are taking the challenge on.  The late Tim Costello, the Teamster intellectual and modest revolutionary and Shanghai law Professor Liu Cheng who worked together to rewrite China’s labor legislation, are examples.  Many other Americans have coordinated with activists in China and elsewhere.

A global fight for democracy and unionism could broaden labor’s base – and also put working people and their organizations back in alliance with the liberal critics and victims of unrestrained capitalism in all countries — those who should be our allies, and can create majorities.  The fight against Coca-Cola capitalism and Exxon excess is our fight, but not ONLY our fight.

The brief collaboration a few months ago between east coast dockworkers, Bangladeshi labor activists and Walmart’s retail employees demonstrated the potential for change.  When a factory burned in Bangladesh last December, killing more than 100 garment workers, dock workers on the U.S. east coast briefly refused to unload the ship carrying goods from that factory to Walmart.[ix]  The Bangladeshi tragedy occurred at the same time as nationwide actions by Walmart’s retail employees here. This blog ran the photo on this page last December, showing Bangladeshi trade unionists holding a banner expressing solidarity with exploited U.S. Walmart employees

Global coordination of this kind needs to be a straw in the wind of global change. Workers’ communication networks are global, and actions can be.

Labor needs today to take many different steps to demonstrate to capital that we can organize on so large a scale that THEY NEED US once again.  They need to know they can run, but they can’t hide.


[i] Samuel B. Bacharach and Edward J. Lawler, in  “Bargaining:  Power, Tactics and Outcomes,” printed in “Bargaining,” Jossey-Bass Publishers, San Francisco, 1981.  My summary is a simplification of their theory.

[ii] “A Word From the Wise”, New York Times, March 3, 2010, Thomas L. Friedman

[iii] “New $5 billion Intel facility planned for Chandler,” The Arizona Republic, Feb. 19, 2011, Ryan Randazzo, Edythe Jensen and Mary Jo Pitzl

[iv] HBO Documentary Films, ©Home Box Office, Inc.

[v] Thanks in part to an exemption from Taft-Hartley and Landrum-Griffin bans on secondary boycott.

[vi] Jefferson Cowie tells a similar story about another industry in “Capital Moves:  RCA’s 70-Year Quest for Cheap Labor,” Cornell University Press, Ithaca, NY, 1999

[vii] Of course, two years later, GM sang a different song, as U.S. and Canadian taxpayers bailed them out.  The game is not over.

[viii] “What happens if America loses its unions”, Harold Meyerson, June 12, 2012, Washington post, and this blog

[ix] While it not generally known, the U.S. garment industry exemption from the Taft-Hartley ban on secondary boycotts (allowing the union to strike a garment contractor to organize the manufacturer, or vice versa) is still in effect and probably valid globally — if there was a strong union to use it, according to lawyers who have dealt with the issue.  If a fatal factory is not a striking issue, what is?