Combating Globalization: Confronting the Impact of Neoliberal Free Trade Policies

By Richard D. Vogel

II. Rising Inequality: The War on Working People
The term globalization is a euphemism for the economic policies of neoliberalism and free trade that drive the megatrends ravaging the world today. Globalization in this essay refers specifically to the domination of the world economy by transnational capitalism through state-sponsored policies that subordinate the broad interests of communities and nations to the interests of the owners of capital.

The primary economic drivers of globalization are:

the capture of emerging CONSUMER and CAPITAL MARKETS to insure the continued accumulation of capital through sales revenue and interest income
access to cheap RAW MATERIALS and LABOR to increase the rate of capital accumulation on the production of goods and services
It is capitalism's relentless quest for cheap labor that impacts working people directly and drives the megatrend of rising inequality on both national and global levels. The creation of wealth by human labor, whether the worker is employed in agriculture, manufacturing, or service, is the sustaining activity of all societies and the division of that wealth between the workers and the owners of capital is the essence of class struggle.

To understand and combat globalization, it must be kept foremost in mind that it has been through consolidation of political power at every level of government from local to international that capital has attained its domination of working people in the modern world.

The following discussion focuses on the megatrend of increasing inequality in North America, but the same tendency is growing in both developed and developing countries around the world.



Rising Inequality

Chart 1 depicts the ongoing history of growing inequality in North America:



The Gini coefficient on the vertical axis of chart 1 is the most commonly used measure of income inequality within a nation (http://hdr.undp.org/docs/statistics/understanding/resources/HDR_2003_2_2_global_income_inequality.pdf). A low Gini coefficient indicates more equal income distribution while a high Gini coefficient indicates a more unequal allocation. 0 represents perfect equality (where every person has the same income) and 1 corresponds to perfect inequality (where one person receives all of the income in a society). The income measure used to calculate the Gini coefficients in chart 1 is disposable household income adjusted for household size.

The chart illustrates the trend of inequality that has been on the rise in the USA since the mid-1970s. By the mid-2000s the average household income of the richest 10% of the population was $93,000 per year while that of the poorest 10% was $5,800. The USA is the country with the highest inequality level and poverty rate in all of the counties monitored by the Organization for Economic Co-Operation and Development (OECD) except Mexico and Turkey (www.oecd.org). Since the mid-1980s the distribution of earnings in the USA has widened by 20%.

Accumulated wealth in the USA is allocated even more unequally than income. Currently the top 1% of the population controls 25-33% of the total wealth in the nation, while the top 10% holds 71%. Redistribution of income by government through taxation and the provision of social services in the USA is the lowest in all of the countries monitored by the OECD except South Korea.

The inequality trend in Canada has had a distinctly different history from that of the US. Chart 1 shows that inequality actually decreased from the mid-70s to the mid-90s, and then increased significantly throughout the last decade, mirroring the trend in the USA. The last 10 years has also seen dramatic increases in poverty rates across Canada.

The impact of growing income inequality on working people in both the US and Canada has been heightened by dramatic tax cuts for the wealthy and corresponding declines in social services and social benefits paid in both nations.

The sharp upturn in income inequality in North America is a direct outcome of economic liberalization policies like the North American Free Trade Agreement (NAFTA) that will be examined in detail in the following analysis (The impact of NAFTA on workers in Mexico in contrast to the trends in the US and Canada will be the subject of a subsequent essay.)..

The War of Attrition against Working People

The decline in the fortunes of working people in North America (and worldwide) is a direct result of capital's relentless pursuit of cheap labor markets, a primary driver of globalization. Map 1 charts the history of the war of attrition that capitalism, led by US corporations, has waged against labor in North America in order to maintain high rates of capital accumulation for stockholders:








Working people in the USA have been steadily losing ground since the end of World War II. The Taft-Hartley Act of 1947 in addition to severely restricting the legal rights and grassroots activities that built strong unions prompted states to pass right-to-work legislation (http://www.auburn.edu/~johnspm/gloss/right-to-work) and thereby provided the means for businesses to relocate rather than negotiate with labor unions. The lightest arrows on Map 1 follow the subsequent runaway shop movement of the 1950s and 1960s.

During this period, many manufacturing and heavy industries, supported and subsidized by local, state, and federal agencies, moved their operations from Midwestern cities like Chicago, Buffalo, Cleveland, Detroit, Pittsburgh, and Milwaukee to cities in the South like Atlanta, Birmingham, Houston, and Dallas/Fort Worth where industries not only avoided closed union shops but also profited from a work force stratified along racial lines. The weak unions that did exist in the American South were either de jureor de facto segregated institutions that supported sliding wage and benefit scales which pitted white against Black and Mexican-American labor. Historically, the unions of the Deep South served the interests of capital far more than they did those of working people.

The American South did not remain the final destination of US capital for long. The termination in the mid-1960s of the bilateral Bracero Program that had been implemented during World War II to make Mexican labor available to US agriculture and the subsequent mass deportation of braceros, coupled with the widespread dislocation of workers in the weakened Mexican economy, produced a reserve industrial army for US capitalism just south of the international border.

Industrialists of the North quickly took advantage of this cheap labor market. The mid-tone arrows on map 1 mark the extensive migration of US light manufacturing and assembly firms to the maquiladoras that were established in northern Mexico under the auspices of the Border Industrialization Program (BIP) that was drafted by representatives of US capitalism and ratified by both governments in 1965. To this day, consumer goods and assembly parts produced in the maquila sweatshops continue to flood northern markets and undermine the position of workers in the Midwestern states, Canada, and even the Deep South.

The thin black arrows on map 1 represent the expansion of maquiladora manufacturing to the interior of Mexico under NAFTA and into Central America and the Caribbean under the Central American Free Trade Agreement-Dominican Republic (CAFTA-DR). US capitalism is currently developing new offshoring initiatives under the Security and Prosperity Partnership (SPP) and has not given up on the Free Trade Agreement of the Americas (FTAA) which is aimed at exploiting labor markets in all of the nations of the hemispheric South.

The wide black arrows on map 1 symbolize the ultimate threat to all labor in the Americas--the massive offshoring of manufacturing, service, and professional jobs to the Far Eastern Pacific Rim and Southern Asia. This last strategic move by capitalism--the epitome of globalization--pits all workers in the Americas, blue-collar, white-collar, and even professionals, against the poorest and most oppressed workers on the planet.

If the trend of increasing globalization continues unchallenged, the final destination of ever more production, including the crucial North American auto industry which is currently expanding operations the America South and Mexico, could ultimately be the Far East.

The broken black line on map 1 represents another major trend that has undercut labor in the North--the massive onshoring of Mexican, Central American, and Caribbean workers to bolster capitalism in the USA and Canada. Although the practice of onshoring labor from the South dates back to the US conquest of Mexico in the 19th century, the first official US policy was the Bracero Agreement recounted above. After the termination of that bilateral agreement, the onshore manpower demand of northern capitalism was accommodated by a de facto gatekeeper policy on the southern US border that allowed the influx of migrant labor during periods of high demand and impeded migration during economic downturns.

As part of a strategy to meet the current economic crisis of capitalism, powerful sectors of the US business community want to adopt an official guest worker program to legalize the exploitation of labor from the hemispheric South while avoiding any social liabilities for workers or their families. Any such agenda must be recognized as nothing more than a program of transient servitude that undermines the position of all working people in North America and must be vigorously opposed (see Transient Servitude: The U.S. Guest Worker Program for Exploiting Mexican and Central American Labor at http://www.monthlyreview.org/0107vogel.htm).