Domestic political economy has historically been constructed around the divide between capital and labor, with firms and workers being at odds over the division of the economic pie. Within this construction labor is usually represented as a monolithic interest, yet the reality is that labor has always suffered from internal divisions. Globalization sharpens these divisions, which helps explain why corporations have been winning and workers losing.
A core problem for labor is that workers are also consumers, thereby creating a divide between desires for higher wages and desires for lower prices. Historically, this identity split has been exploited to divide union and non-union workers. Globalization amplifies the worker – consumer identity split through its promise of lower prices, a problem that is exemplified in the debate over Wal-Mart.
This problem is worsened by the fact that globalization impacts the economy unevenly, hitting some sectors first and others later. The process can be understood in terms of the hands of a clock. At one o’clock is the apparel sector; at two o’clock the textile sector; at three the steel sector; at six the auto sector. Workers in the apparel sector are the first to be impacted, but all other workers get price reductions. Thereafter, the process picks off textile sector workers at two o’clock. Meanwhile, workers from three o’clock onward get price cuts, as do the apparel workers at one o’clock. Each time that the hands of the clock move, the impacted workers are isolated. In this fashion, globalization moves around the clock with labor perennially divided.
Manufacturing was first to experience this process, but technological innovations associated with the internet are putting service and knowledge workers in the firing line as services become tradable. Even retail workers are vulnerable as shown by the viability of the Amazon.com business model. Public sector wages are also indirectly in play since declining wages mean declining tax revenues. The problem is that at each moment in time workers are divided, with the majority being made slightly better off while the few are made much worse off.
Globalization also divides capital, creating a new division between bigger internationalized firms and smaller firms that remain nationally centered. This division has been brought into sharp focus with the debate over the trade deficit and the over-valued dollar. In previous decades manufacturing as whole opposed trade deficits and an over-valued dollar because of the adverse impact of increased imports. The one major business sector outlier was retailing, which benefited from cheap imports. However, the spread of multi-national production and out-sourcing has divided manufacturing into two camps. In one camp are larger businesses that have gone global and benefit from cheap imports: in the other are smaller businesses which remain nationally centered in terms of sales, production and input sourcing.
This division opens the possibility of a new alliance between labor and those manufacturers and businesses that remain nationally based. This is a potentially potent alliance since in the U.S. there are approximately seven million enterprises with sales of less than ten million dollars, versus two hundred thousand with sales greater than ten million dollars. However, such an alliance will always be unstable since traditional labor – capital conflict over income distribution can always reassert itself. Indeed, this pattern is already evident in the internal politics of the National Association of Manufacturers (NAM). The NAM has been significantly divided regarding the over-valued dollar, and one way to address these divisions is a domestic competitiveness agenda aimed at weakening regulation, reducing legal liability and lowering employee benefit costs.
Solidarity has always been key to political and economic advance by working families, and it is key to mastering the politics of globalization. Developing a coherent story about the economics of globalization around which working families can coalesce is a key ingredient for solidarity. So too is understanding how globalization divides labor. Such understandings can help counter deep cultural proclivities to individualism, as well as other historic divides such as racism. However, as if this were not difficult enough, globalization creates additional challenges. National political solutions that worked in the past are not adequate to the task of controlling degenerate international competition. That means the solidarity bar is further raised, calling for international solidarity that supports new forms of international economic regulation.
Why not just revoke corporate personhood and outlaw lobbying? That will stop so-caleed globalization in its tracks. That has about as much chance of happening as global worker solidarity.
Great post. Great clock hand metaphor. I’ll steal these right away.
la- what effect would revoking corporate personhood have on globalization? Do Chinese, European, Japanese corporations have constitutional protection as persons?
I am able to read your articles on economics! That is either a tribute to your writing skills or a slam against the economics profession, I’m unsure which. The clock analogy is powerful, but what is the corrective action? It almost demands a government empathy program . . . maybe a Nickel and Dimed approach in which all young people must serve for two years at a Wal-mart or gas station or other similar job. It is as if our current jobs are specially engineered to keep us unfeeling and cocooned from the rest of humanity. Until of course we are ourselves directly affected.
Just to add to our woes, the globalization of production pits worker against worker internationally. Even if domestic solidarity is achieved, this creates the impression that US workers are allied against foreign workers (chiefly in under-developed nations) and their aspirations for a higher standard of living – a PR nightmare that the corporate lobby can (and does) exploit. Our coherent story about globalization must recognize this and seek to distance embattled US workers from any desire to see continued low standards of living in most of the rest of the world – something in which they have no vested interest.
Great blog, Tom!
Personally, I feel that globalization is the mechanism by which the “powers that be” have decided to reign in a new world order…A new world order where “nationalism” will be nonexistent. Has anyone noticed how politicians and our US “economists” care nothing for our nation or the people that reside in it? Why do you think they talk only about the benefits of getting cheap junk (while they forget to mention we’re buying it all on credit from Asian countries)?? The US’s power is simply being used to integrate the entire planet into one super economy–nationalism and individual citizens rights are largely irrelevent. American are either to stupid or too busy thinking about the next “consumable” to be concerned about the royal screw we’re all getting. Who needs communism when you can blind people equally well with consumerism?
“Globalization” is an unfortunate term. Globalization is the inevitable result of modern communications and transportation technology and can’t be stopped–only steered. Global laissez faire is really the problem. It’s a problem because of asymmetries of information and mobility. Capital has money and information to influence politicians. Capital is mobile, labor isn’t. Controls on globalization should focus here.
NAM will never ally with labor. It was started as a union busting organization and still shows contempt for workers and any kind of regulation.
Solidarity is a nice idea but it won’t happen until workers get so desperate they feel they have nothing more to lose. Even then, they need government support, which means a new political regime.
We will never get rid of lobbyists, but perhaps we could tax them and give the proceeds to public interest lobbying groups?
My favorite “pie in the sky” idea is to form another independent branch of government which is immune to political patronage (like the judiciary) and which does nothing but evaluate the effectiveness of government and make the info publicly available. A branch of it would be dedicated to secret (CIA, DOD, etc.) areas of the government and would have the power to declassify information it deemed unnecessarily secret.
The total subjugation of the working class will be the end result of globalism. Unless we as Americans force the politicians to make new laws to protect us and dicourage outsourcing, within 10 years, our standard of living will be well on the way to the bottom. 60 cents an hour is the new benchmark for wages in manufacturing. Wealth will accumulate in the hands of the few, while the many compete to see who can labor the cheapest. The CATO institute promotes these concepts and Bush and the republicans listen to them and implement their positions. If we’re going to be a capitalist country, we the people need to have some control as to how it shakes out. A wild horse can cause a lot of damage, but a bridled horse can be an invaluable asset. So it is with capitalism. Without controls it’s just like a wild horse, with controls it can help, instead of hurt people. We have to eliminate the competitive advantage gained by outsourcing through our laws.
The clock-sequence is a good expository image. In steering or mitigating these trends, it seems both labor and capital have the inherent challenge identified by Mancur Olson and others: the general public interest is inherently hard to develop a political agenda and support for, while special interests in contrast receive a disproportionate payback for their lobbying or contribution dollars. Until this is grasped by the broader public, they are unlikely to aggressively support, say, public funding of elections or make donations to groups that seek broadly humanistic goals rather than specific ‘hot button’ measures. The republic badly needs a modern counterpart to the educational campaigns of organized labor when it was much stronger, and perhaps the net will enable it.
the Canadian arm of the international film union is being starved into accepting a contract which will abolish senioity and begin errode our hard fought for standards. It will force us to compete with each other , meanwhile our wages and standards will be brought lower and lower as we compete with film workers around the globe. GE, NBC Universal, Viaqcom(Disney) Paramount,CBS you should be ashamed of your selves . I guess the upwards of $$20 billion profits are not enough? We will be working for wages we earned 20n yrs. ago. Please feel free to comment or give stategies!