Why Capitalism Thrives–and how it self-destructs

“Globalization” is not “international trade”

U.S. workers are losing their jobs in the name of efficiency,
but it’s really labor cost reduction and profit maximization

Those who profit from globalization defend it by correctly explaining the genuine efficiencies of international trade, and then equating that with what is occurring today. But they’re different.

International trade eventually benefits society at large—both here and abroad—when it is based on sound economic principles. In other words, investments are made in those parts of the world that:

  • have the best access to raw materials (despite the protestations of conservative economists, workers are not raw materials—or machines—to be used up and discarded),
  • have the best location in the distribution chain,
  • have developed the best technology,
  • have trained the best managers and workers, and finally,
  • offer the best product at the lowest price—while observing at least minimal standards for the treatment of workers (wages, working conditions) and the environment (air, water, land).

Globalization is hugely and economically inefficient…

…unless you consider human beings as raw materials or machines. The regulations of international trade, or their lack, should not reward those immoral competitors who would compete purely on the basis of their willingness to treat workers the worst. That’s the way globalization was originally designed, that’s exactly what globalization has been doing since its inception, and it’s continuing today.

Nobody, but nobody, builds a plant in Mexico or China—to manufacture goods for the U.S. and most of the rest of the world—because it meets any of the criteria above. In fact, it is economically inefficient to do so, unless you consider the deliberate destruction of working-class incomes as a legitimate efficiency.

Corporations are moving to countries like these for only two reasons. First, labor and environmental costs can be slashed with abandon, with no or few legal restrictions. Second, corporations gain the power to reduce wages in our own country, because the terminated workers increase the labor pool.

When investors close a manufacturing plant in the U.S., it hurts not only the workers who lose their jobs; it hurts all workers. It’s not just 10% of our workforce who suffer, it’s 100%. For two reasons:

  1. The workers who actually lose their jobs in a plant shutdown enter the competitive labor market and adversely affect the wages of others who still have jobs.
  2. Other workers in the U.S. who still have jobs now know that their employer’s threat to leave the country is real. If they cause trouble or join a union, they will be downsized. A poor job with low pay is better than no job at all.

That is why unmanaged world trade hurts workers even in jobs that can’t be exported from the U.S.: trucking, retail, construction, the service industry, etc. Since corporations have put so many people out of work, unions and individual non-union workers have lost the power to negotiate for higher wages.

If workers collectively try to form a union, they get fired. If they’re already in a union, the union can’t press for higher wages because the corporation might close down the plant and move elsewhere. So, investors and corporate executives are screwing working Americans both individually and collectively. It’s a not-so-subtle form of class warfare.

Those who claim that globalization will eventually improve workers’ lives worldwide—for the betterment of all—should go to the archives and read stories like the one in the Wall Street Journal under the head- and sub-headline, “Behind China’s Export Boom, Heated Battle Among Factories; As Wal-Mart, Others Demand Lowest Prices, Managers Scramble to Slash Costs.”  Gary Meyers, a vice president in global procurement at Wal-Mart was quoted as saying, “As things get more competitive, the pressure that comes along with that, yeah, we try to take advantage of it.”

Because corporations such as Wall-Mart are pitting Chinese factories against each other, Chinese workers work as long as 18 hours a day, get paid entry wages of $32 a month (even though the “minimum wage” is $56 a month) and have horrible work-safety records. The Journal quoted a plant manager: “‘Everybody is here trying to make money,’ Mr. Liu says in the shadows of his showroom, where the lights are shut off at lunchtime to save money. ‘I just never thought it would be so hard.’”

Of course, everyone in the U.S. benefits from the lower prices that globalization has brought to us. But only working-class Americans—and the small businesses that depend on the spending of working-class Americans—are making all the sacrifices. Those sacrifices are huge, and in no way can be explained away by those who are profiting from them.

The legitimate benefits of free trade give the apologists for investors and corporate America yet another opportunity to tell an obvious lie—under the guise of a general truth. They sell American voters on the true advantages of free trade, but then insist that there be no enforceable labor or environmental standards. Such trade isn’t “free”—it’s ruthlessly controlled by international corporations.

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