By Michael Massing
American ProspectJuly 2, 2001
Last year, during a visit to Ciudad Juárez, Mexico, I got a firsthand look at the underside of globalization. Located across the Rio Grande from El Paso, Texas, Juárez is home to more than 400 plants known as maquiladoras. Here, workers assemble parts sent by foreign companies--mainly U.S.-based corporations--for subsequent export. Most of the plants are located in industrial parks guarded by tall metal fences that insulate them from the grit and tumult of the surrounding city. The maquiladoras provide tens of thousands of jobs, helping to give Juárez one of Mexico's lowest unemployment rates.
While work is easy to find, starting salaries average less than a dollar an hour, or $35 to $40 a week. Wages can increase with time, but workers seldom stay with one company long enough to benefit. The vast majority are women, and most burn out after two or three years of monotonous and exhausting work. Factory conditions tend to be grim, with poor ventilation, unsanitary bathrooms, and abusive managers. Beyond the plant walls, the flood of newcomers into Juárez has completely outstripped its ability to provide services for them. With affordable housing virtually nonexistent, shantytowns have sprouted on the edges of the city, their dwellings patched together from wooden pallets and cardboard boxes discarded by the maquiladoras. Running water and sanitation are rare, roads are mostly unpaved, schools are severely overcrowded, and bus service is so sporadic that many workers rise before dawn to make it to work on time.
Such conditions are present to some degree all along the 2,000-mile U.S.-Mexican border. And the fact that they exist so close to the United States makes them seem all the more intolerable. Juárez is both a product of globalization and a test of the movement to reform it.
That movement is making a lot of noise. But is it making headway? In an effort to find out, I interviewed a number of economists, political scientists, unionists, students, and activists. One thing that immediately became clear was the impressive speed with which the globalization-reform movement has grown. On 200 college campuses, students have set up chapters to protest the use of sweatshop labor by multinationals that make apparel bearing university logos. Environmental groups like the Sierra Club, Friends of the Earth, and Greenpeace have mounted campaigns against oil companies, mining concerns, and banks that threaten the rain forest and endanger wildlife. Trade unions have rallied to protest the flight of jobs overseas, while church groups have organized to press for cancellation of third-world debt. It's become difficult for the World Bank, the International Monetary Fund (IMF), and the World Trade Organization (WTO) to meet without attracting hordes of angry demonstrators. In fact, the World Bank has scrapped its plans for an upcoming meeting in Spain owing to the expected crush of protestors; instead, the meeting will take place on the Internet.
In France the farmer-activist José Bové became a national hero after vandalizing a McDonald's. Oxfam, Global Witness, and human rights groups in Africa have collaborated to pressure the diamond industry into ensuring that gems mined in Africa are not used to fund the region's bloody conflicts. A transnational consortium of "green" groups has attacked Citibank for helping to underwrite the Three Gorges Dam in China and other eco-disasters. And in cities stretching from Buenos Aires to Seoul, workers and students have filled the streets to protest austerity programs imposed by the IMF and the World Bank.
These protests have begun to change the terms of the debate. "I hang around a lot with the economists and trade experts and policy wonks who are the intellectual mainstays of the WTO and other open-trade institutions," says Dani Rodrik, a heterodox economics professor at Harvard University's John F. Kennedy School of Government, who himself is a leading indicator of the growing acceptance of dissent. "Four years ago, they would have dismissed out of hand the issues of labor, the environment, transparency, the concerns of NGOs [nongovernmental organizations]. Now practically everybody treats these as something they have to respond to." Noting that he had just been invited to attend the next meeting of the WTO, Rodrik said, "I get invitations at least once a week from any number of international organizations that are bringing in people from NGOs and others who are hostile to the international financial institutions--to try and create a dialogue."
At the last meeting of the World Economic Forum in Davos, Switzerland, the usual elite roster of government leaders, industry titans, and tame intellectuals was joined by such outsiders as AFL-CIO President John Sweeney, Lori Wallach of Ralph Nader's Global Trade Watch, and Jeremy Rifkin, the crusader against biotechnology. Microsoft's Bill Gates, a regular at Davos, announced that he was contributing $100 million toward the development of an AIDS vaccine. Describing the shock he felt upon learning how little money was being spent to research diseases that affect the world's poor, Gates declared: "There is a real market failure here--a failure of visibility, a failure of incentives, a failure of cooperation that has led to a very disastrous situation."
The failures of the market have become a preoccupation of the World Bank as well. Stung by charges that its policies have actually worsened the lot of the world's poor, the bank in late 1999 adopted a new antipoverty initiative that requires all its debtor nations to submit "poverty reduction strategy papers" proposing specific steps they will take to help their poorest citizens. In preparing its World Development Report 2000/2001, the bank drew on interviews with more than 60,000 poor people in 60 countries. And reflecting their views, the report frankly acknowledges the limitations of market-based reforms. "At times," it notes, "reform programs have failed to deliver as much as expected--and at times reforms have failed entirely." As remedies, the report calls for land reform, gender equality, income redistribution, and microcredit--all planks of the World Bank critics' agenda.
Yet the bank's policies have not changed along with its rhetoric. For the organization still answers to its member countries--the most powerful of which is the United States--and, mirroring their interests, continues to push on developing nations the same market reforms criticized in its World Development Report. The World Bank's chief economist, former Clinton adviser Joseph Stiglitz, was basically fired for being too outspoken in his criticism of its orthodox policies.
And so it goes with the globalization-reform movement in general. While sparking a profound change in the discussion about globalization, it has not had much impact on the world economy itself--yet. What prospect does the movement have to change more than institutional rhetoric? How might it mature into a coherent opposition?
The Limits of Latte
Before answering such questions, it's necessary to define exactly what the movement is. The most common label for it--"antiglobalization"--is one that those involved in the movement generally eschew, for, apart from a fringe of anarchists, protectionists, and neo-Luddites, they do not oppose globalization per se, recognizing the benefits to be gained from increased trade and cooperation among nations. What they do object to is the growing might and mobility of capital and giant corporations' ability to move their assets around at will, hungrily seeking the cheapest and most docile labor in the drive to maximize their profits. Reformers' ire is directed less at global commerce than at global capital and the way that it has increasingly come to elude national and international controls and, in the process, widened the divide between the world's rich and poor, both within countries and among them.
Interestingly, some of the most militant and engaged individuals in the movement are the most optimistic about the prospect of real reform. A good example is Kevin Danaher of Global Exchange, a San Francisco–based nonprofit that is a leader of the movement's populist wing. Fifty years old, Danaher holds a doctorate in sociology from the University of California at Santa Cruz and is the author of eight books, with titles like Corporations Are Gonna Get Your Momma. An organizer of the highly successful U.S. divestment campaign against South Africa, Danaher in 1988 helped found Global Exchange. Back then it was a shoestring operation with three employees. Today, it has a staff of 40, a slick Web site (www.globalexchange.org), and a line of creative moneymaking ventures, including Reality Tours, a sort of reverse Club Med that shuttles tourists to places like Cuba, Mexico, and Nicaragua for a real taste of third-world living.
"I tend to be pretty positive," Danaher said. He ticked off a long list of reasons, helpfully organized into three categories. The first is the "corporate accountability movement," which seeks to document, publicize, and rein in the activities of transgressing multinationals. As examples, Danaher mentioned several campaigns: to stop Shell Oil from using the North Sea as a dumping ground for an oceangoing oil rig, to expose Chevron's complicity with the military governments of Nigeria, to get Home Depot to stop selling lumber culled from old-growth forests. In the second category are efforts to "expose global government" through mass mobilizations. "Whenever the WTO, the Free Trade Area [Agreement] of the Americas, the World Bank, and the IMF have meetings," Danaher said with pride, "we can put 10,000 people in the street. This exposes to public view what these institutions are doing." Global Exchange was a key organizer of the November 1999 protests in Seattle and helped to coordinate the activities of hundreds of grass-roots groups.
Finally, Danaher pointed to an amorphous category of "alternative economic institutions"--microfinance programs modeled on the Grameen Bank in Bangladesh (there are now hundreds of such loan programs around the world), socially responsible investment funds (the AFL-CIO is currently reassessing where to place its trillions of dollars in pension funds), and the Fair Trade movement, which seeks to convince first-world consumers to buy third-world goods at premium rates in order to provide a higher return to the producer. Global Exchange runs two such stores in the San Francisco Bay Area plus a virtual store on its Web site. Here, shoppers can buy silver gecko brooches made in Bali ($15), drawstring bags made in Nepal ($45), and body slings made in Guatemala ($60). Also available is Fair Trade coffee grown in Sumatra and Nicaragua ($6 a pound).
Paying Farmers More than Beans
The Fair Trade coffee project shows how activist groups like Global Exchange work and what they can--and cannot--accomplish. Fair Trade coffee seeks to aid third-world growers by setting up an alternative to the brute logic of the market. Much of the coffee sold in the United States is grown on large plantations in Latin America, Africa, and Asia; both the pay and the working conditions on them tend to be horrific. Since the coffee industry's large importers rarely disclose the locations of these plantations, they are hard to monitor. Some coffee, however, is grown by small farmers who sell their beans to middlemen at prices set by the commodities exchange on Wall Street. Since 1989, when the International Coffee Agreement collapsed, the market for beans has often been glutted, and growers typically receive only 30 cents to 50 cents a pound for coffee that retails for 10 or 20 times that much. This works out to just $600 a year for the average family--nowhere near enough to live on.
Fair Trade coffee seeks to change this by appealing to high-end coffee drinkers. Surveys show that people who are willing to pay $10 for a pound of premium coffee don't mind spending an extra dollar to help guarantee a fair price for the producer. The key is educating those consumers about the conditions in which the coffee they drink is produced so as to nudge them to buy a Fair Trade alternative. This puts pressure on roasters and importers to carry beans that meet standards certified by a nonprofit monitor. The most important of these standards is paying a minimum of $1.26 a pound for beans--a sum that goes directly to the farmer rather than to the middleman. In 1998 the Fair Trade movement, led by Global Exchange, launched a campaign to promote the sale of such coffee in and around San Francisco. Student, labor, church, and other grass-roots groups staged demonstrations in favor of Fair Trade coffee. These were dutifully covered by the news media, and, within a year, more than 100 retailers in the Bay Area were selling coffee with the Fair Trade label.
Deciding to take the campaign national, Global Exchange targeted the premium coffee market at its most visible spot: Starbucks. In the fall of 1999, the organization approached Starbucks CEO Howard Schultz to request that his company carry Fair Trade coffee in all of its stores. Starbucks refused, contending that the beans sold under that label were of low quality. Turning up the pressure, Global Exchange staged demonstrations at Starbucks stores, lobbied shareholders at their annual meeting, circulated an open letter signed by dozens of grass-roots organizations, and flooded the company with faxes and postcards. Finally, in April 2000--three days before demonstrations were scheduled at 30 more Starbucks stores--the company relented, agreeing to sell Fair Trade coffee at its 4,000-plus outlets. "For the 550,000 farmers who are participating in the Fair Trade program," Danaher said, "they're getting twice as much for their coffee as Folgers or Nescafé is paying."
In seeking to mobilize consumers so as to place pressure on a blue-chip company, the coffee campaign offers a textbook case of how globalization-reform activists work. They attempt to take brand names and use them against their owners, deploying the cudgels of shame and embarrassment to beat them into submission. Kathie Lee Gifford crying over revelations about the use of child labor in her factories is the paradigm. With such campaigns multiplying around the world, anticorporate activists see in them the roots of an alternative system to untrammeled global capitalism. As Naomi Klein puts it in her book No Logo: Taking Aim at the Brand Bullies, "Ethical shareholders, culture jammers, street reclaimers, McUnion organizers, human-rights hacktivists, school-logo fighters and Internet corporate watchdogs are at the early stages of demanding a citizen-centered alternative to the international rule of the brands" that is "as global and as capable of coordinated action as the multinational corporations it seeks to subvert."
But as the coffee campaign shows, this approach has some serious limitations. Thus far, Starbucks has agreed to sell Fair Trade coffee only in whole-bean form; all of those lattes and cappuccinos brewed on its premises are made with free-trade beans. What's more, the Fair Trade beans are not widely advertised. On a visit to my local Starbucks, I found that the price of Fair Trade coffee is not even posted; when I asked the woman behind the counter how much it cost, she had to look it up. (It goes for $11.45 a pound, compared with $9.95 for the house blend.)
Even with the Starbucks agreement, coffee sold under the Fair Trade label accounts for well under 1 percent of all the coffee sold in the United States. Further organizing and consciousness-raising could no doubt raise that percentage. (In Europe, where the Fair Trade campaign is more than a decade old, such coffee accounts for 5 percent of all sales.) Starbucks has indicated that it might begin to use Fair Trade coffee in its brewed drinks, but there simply isn't enough such coffee on the market to provide more than a small part of its overall supplies.
Starbucks, in turn, accounts for only a modest portion of total coffee sales in the United States. Four companies--Procter & Gamble, Philip Morris, Sara Lee, and Nestlé--control 60 percent of the U.S. market and 40 percent of the world's. Catering to a less political public, these companies would no doubt be far harder to crack than Starbucks. That's especially true now, when the glut on the world market has kept coffee prices low and consumers happy. One reason there's a glut is that the World Bank has for years been pushing third-world countries to grow cash crops like coffee to boost their export earnings. So many countries have taken its advice that coffee prices are now at a 30-year low. Until something is done about the overall structure of the world coffee market--such as negotiating a new global agreement that sets a fair price floor--it's hard to imagine a broad improvement in the lot of small coffee farmers. As admirable and resourceful as the Fair Trade campaign has been, it seems incapable of fundamentally challenging the power and prerogatives of multinational capital.
The same is true of the antisweatshop movement. The 200 affiliates of United Students Against Sweatshops (USAS) have shown remarkable energy and ingenuity in the last two years. From Penn to Purdue, students have staged hunger strikes, held sit-ins, blocked streets, and occupied administrative offices--all aimed at ensuring that caps, jerseys, and sweatshirts bearing their university logos are produced in a "no sweat" environment. In line with the counterbranding strategy, the main target has been Nike, the dominant force in the college apparel industry. Responding to the growing concern over sweatshops, Nike, along with Reebok and other manufacturers, has helped form a monitoring group called the Fair Labor Association (FLA). Human rights and other NGO representatives also sit on the FLA, but the industry's participation has raised concerns about its independence; as an alternative, students have formed the Worker Rights Consortium (WRC). The WRC has put forth a far more stringent code of conduct than the FLA guidelines, and Nike has criticized the group for being too radical, but USAS, displaying its own militancy, has gotten 80 universities to sign on.
The WRC's first test came earlier this year, when it learned of the troubles at the Kukdong factory in the state of Puebla, Mexico, about 70 miles southeast of Mexico City. Owned by Koreans, the factory produces college sweatshirts for Nike and Reebok (on a contract basis). As at many apparel plants, the employees at Kukdong had to endure low wages, surly managers, poorly maintained bathrooms, and rancid food. In December, workers--most of whom are young women--began boycotting the factory cafeteria to protest the quality of its food. In early January, five of the boycott's organizers were fired, and in response hundreds of workers initiated a work stoppage. Their demands included the reinstatement of the organizers and the replacement of the government-backed labor union with an independent one. When the demonstrators refused to leave, state and local police moved in and forcibly evicted them.
In mid-January, the WRC sent a team of lawyers, academics, and human rights activists to Puebla to investigate. After four days of interviews, the delegation concluded that the five workers had indeed been unlawfully dismissed from the plant and that the protesting workers had improperly been kept from returning to their jobs. It also found that Kukdong managers had physically and verbally abused workers, that the plant was paying some seamstresses less than the Mexican minimum wage, that the food served in the cafeteria had been substandard, and that the union at the plant was more interested in protecting management than in representing workers.
On its return to the United States, the delegation issued an initial report detailing the abuses it had found. Sensing its vulnerability, Nike agreed to press Kukdong's managers to reinstate the workers who had participated in the work stoppage. The news was picked up by The New York Times. "A year-old labor rights group formed by students and universities has registered its biggest success thus far by getting Nike, Inc., to press managers at a Mexican apparel factory to rehire hundreds of workers after a three-day strike," Steven Greenhouse reported. With the situation threatening to get out of hand, Nike decided to hire its own nonprofit auditing firm to visit Puebla and report back. After the firm confirmed many of the WRC's findings, Nike developed a remediation plan. The company agreed to establish a grievance procedure, to crack down on managerial harassment, and to make sure that the food served in the cafeteria was wholesome. All in all, the Kukdong case seemed a stirring victory for the antisweatshop movement.
But before cheering too loudly, consider the effort that went into that victory. The WRC delegation consisted of eight people, including specialists in Mexican labor law, international labor law, and sociology; its leader, Mark Barenberg, is a professor at Columbia Law School who donated tens of thousands of dollars' worth of his time. During its four days in Puebla, the group conducted 180 hours of interviews, including talks with 58 workers and five managers, plus an array of local union officers, human rights representatives, government officials, and lawyers. The final report, a highly detailed legal brief totaling 52 pages, took many more hours to produce.
All of this work was required to improve the conditions at just one plant. Nike has contracts with hundreds of factories around the world. It thwarts efforts to monitor them by refusing in many cases to divulge their location. Nike's factories, meanwhile, make up but a fraction of the tens of thousands of assembly plants that litter the third-world landscape. (Gap alone has 10,000 suppliers.) Finally, the real heart of the troubles at Kukdong--the absence of an independent union--remains unresolved. With help from the WRC, the workers are seeking to form one. Steps are being taken to schedule a union certification election, but given the parlous state of Mexican labor, the prospects for a free and fair vote are uncertain.
The student leaders of the antisweatshop movement are undaunted by such obstacles. "This is a test case," says Charlie Eaton, a junior at New York University who sits on USAS's coordinating committee. "There are hundreds of companies in the apparel industry, but a few are dominant. We're trying to create an ethical niche in an unethical industry, and doing so by making industry leaders like Nike and Reebok provide a constructive example. If we get a foothold in a garment-producing region like Puebla, it could make a big difference. We have to go one factory at a time, but next year at this time, hopefully, we'll be ready for 10 Kukdongs."
Such optimism is not shared by others associated with the Kukdong case, including the leader of the delegation to the plant. "The best private monitoring in the world doesn't have the resources or competence to create the global floors that are needed," observes Mark Barenberg. The global apparel industry is particularly hard to monitor, he notes. "Look at all the time and effort required to monitor this one alleged infraction. At each facility there are dozens or hundreds of potential cases of enforcement each year, and these private monitors can't do the work that the EEOC, the NLRB, OSHA, and other public entities can." The real problem underlying this case, Barenberg says, is the sorry state of Mexican labor-law enforcement. Mexico actually has good laws on the books; it just doesn't enforce them. To make a real difference in the lives of Mexican workers, he believes, it would take outside pressure on the Mexican government, exerted through trade sanctions, heavy fines, or other mandatory penalties imposed by multilateral agencies.
The North American Free Trade Agreement (NAFTA) was supposed to apply such pressure. Its side agreement on labor requires the three signatory countries to enforce their labor laws in 11 key areas; a pattern of noncompliance can trigger the appointment of an outside panel of experts to mandate a solution. Yet as Human Rights Watch observes in its recent report Trading Away Rights: The Unfulfilled Promise of NAFTA's Labor Side Agreement, the provision has no bite in the absence of an independent oversight body and of real sanctions to be applied when violations occur--teeth that NAFTA negotiators failed to include.
More heartening to labor rights advocates has been a new trade agreement between the United States and Jordan. Negotiated last year by the Clinton administration, the accord conditions cuts in tariffs on each nation's compliance with its own labor and environmental laws. Unlike NAFTA, this pact includes such provisions in its main text, thus placing the rights of workers to organize and the duty of companies not to pollute on the same plane as tariff reduction and intellectual property rights. As a result, violations can be more effectively penalized.
For precisely that reason, however, the pact has been vigorously opposed by business officials in the United States, who fear that it will set a precedent for future trade agreements. As a result, the Bush administration has refused to sign it. Even if the accord is eventually approved, the effectiveness of its labor provisions will depend on the political will of the two governments. Given the obstacles that organized labor faces in the United States, one can only imagine the hurdles Jordan's workers will encounter as they try to form unions and exercise the right to strike. Nonetheless, the U.S.-Jordan trade agreement suggests a creative new approach to addressing labor concerns in a particular country, one that seeks to induce broad structural changes in a way that consumer boycotts and codes of conduct cannot.
But even so innovative an accord as this one would address only a limited number of the issues holding back third-world nations. Consider those maquiladora workers in Juárez. Allowing them to form independent unions and to bargain collectively would no doubt help them obtain better working conditions and gain higher wages (though how much higher is uncertain, given the drag on wages caused by Mexico's high unemployment rates). But the needs of these workers extend far beyond this. They include affordable housing, clean drinking water, access to health care, reliable electrical supplies, decent transportation, and good schools.
Development with a Human Face
During my visit to Juárez, the mayor, Gustavo Elizondo, readily acknowledged in an interview the woeful state of the city's services. The city, he said, simply didn't have the resources to fix them. The budget for Juárez, which has 1.3 million people, he said, is $110 million; by comparison, the budget for the University of Texas at El Paso, which has 17,000 students, is $250 million. Did the maquiladoras contribute anything to help the city cope with the multitudes coming to work there? Under the trade agreements between the two countries, Elizondo said, U.S. companies paid a small amount to the federal government of Mexico, but little of it reached Juárez. Should the companies be doing more? "Yes," he said, "they have a moral commitment to do more, to make a greater effort to ensure their workers live in better conditions."
I came away from Juárez believing that a campaign of negative publicity directed at those companies could shame and prod them into contributing more toward the city's welfare. But now, having seen the limited impact such campaigns can have, I think I was naive. Driven by the search for profits, corporations will never do more than the minimum needed to keep protesters at bay. Change, if it is going to come, will require the adoption of more enlightened policies at the national level, backed by international-aid agencies truly dedicated to helping the world's poor.
The issue of schools helps point to what I think is needed. By now, there is an overwhelming body of evidence showing that the more a nation spends on its schools, the faster its rate of growth will be. The higher the proportion of young people who complete high school, the more vigorous (and more equitable) its economic performance. In many third-world countries, however, spending on education is entirely inadequate. In a city like Juárez, for instance, the influx of job-seeking women of childbearing age has completely overwhelmed the city's school system. As a result, many kids don't attend school, and those who do get insufficient attention.
There are various reasons that third-world governments don't spend more on education. Some obviously don't have the resources. Others waste the resources they do have on the military, on grand public-works projects, or through corruption. Nothing, perhaps, would do more to improve the fortunes of the world's poor than to get developing nations to spend more on educating their kids. One way to do this would be for institutions like the IMF and the World Bank to require as a condition for their loans that these nations spend a certain percentage of their gross domestic product on primary and secondary education.
I can already hear the objections. What right do the IMF and the World Bank have to set such targets? Well, they already do set many targets--for money supplies, foreign-currency reserves, debt levels, and the like. Why not also for a socially useful category like education?
In the end, the IMF and the World Bank may not be the right institutions to handle this. One way or another, though, the education issue needs to be engaged if world poverty is to be tackled effectively. The same is true of all those other social concerns--matters that range far beyond labor and environmental standards. That these two areas have received so much attention reflects the clout of unions and environmental groups. The prominence of these issues, in turn, has opened up divisions in the movement, with NGOs in the South suspecting that the real goal of activists in the North is to protect their own living standards. Broadening the movement so that it becomes a more forceful advocate for the poor could help overcome such differences.
"Improving labor standards will not matter unless there's a socially oriented development strategy at the national level supported by international policies and resources," says David Trubeck, the dean of international studies at the University of Wisconsin at Madison. "The fight over labor standards is a good way to dramatize the issue, but it's not enough. We need to rethink broader strategies for the developing world."
In the end, it pays to remember that institutions like the IMF, the World Bank, and the WTO are organizations whose constituent members are national governments. While direct protests against corporations and international organizations can help raise awareness, build coalitions, and occasionally even change policy, the U.S. sponsorship of the Free Trade Area Agreement of the Americas and its role in the U.S.-Jordan trade agreement show that it is mainly national policy that needs to change. The opposition movement will not be successful until it influences national governments to adopt a different agenda not only domestically but also globally, for the multinational institutions that govern the flow of the world's capital.
After a 20-year run, the so-called Washington Consensus about the core components of growth--freeing the market, shrinking government, seeking foreign investment, promoting exports--is starting to break down. The great question is what should take its place--what politics, what strategies of regulation and development, what new institutions. While the opposition is still in its political infancy, the good news is that it is winning a hearing. Even as multinational corporations have amassed tremendous power, the ideological underpinnings of the world economic order are crumbling. If the movement can tap the impressive energy and creativity it has shown since Seattle and direct it toward the broader array of issues affecting the world's have-nots, its impact could be truly global.
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