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Mr. John Sweeney's Reflections on the Workings of International Monetary and Trade Organizations

Published in: The Intiative Report

1999
Sincere Catholics can disagree regarding issues of economic justice. One area of disagreement, addressed recently by John Paul II in Mexico City, has been mobilization of the economy and related issues of trade agreements and the workings of international monetary and trade organizations. Catholic Common Ground has asked one of its committee members, the president of the AFL-CIO, to offer a perspective on this from the viewpoint of organized labor. We look forward to reflections from other points of view, equally relating those views to elements of Catholic social teaching.
                                
The Editor

Nations and communities around the world are today confronting the process of globalization. In the following article I describe, from a labor perspective, how economic globalization is impacting us as Americans and as Catholics. I believe that understanding these developments and their implications is crucial to our quest for common ground and fidelity to the church's social teaching as we enter public policy debates.

I. Globalization: the new reality
Globalization refers to the process of creating a unified global economy through the breaking down of barriers between national economies. It is a process that is driven both by the imperatives of the market and by the actions of policy makers. 
For the last two decades, G-7 economic policy has been devoted to the creation of the global market. Trade accords have torn down barriers, and global agreements have been struck to protect property and investment. Public institutions, from the International Monetary Fund (IMF) and the World Bank to the World Trade Organization (WTO), have used the carrot and stick of subsidy and denial of financial assistance to integrate countries into this process.

Today, a new globalized world economic order has taken shape. Electronic communication sends instant messages across the world. Transport girds the globe. Production, marketing, and distribution networks are international in reach. This new order is increasingly dominated by a handful of huge transnational corporations. It is fueled and foiled by deregulated capital, with over a trillion dollars changing hands in foreign exchange markets each day — an amount that is many times that needed to finance trade or real investment. The power of this market is apparent. The totalitarian states of the Soviet block could not withstand it. Europe's social democracies, now seeking shelter in a European union, retreat before it. The state capitalist tigers of east Asia, previously the poster children of the global economy, have been leveled virtually overnight by its changing tides. 

II. The dark underside of the global economy: challenge and response

A core part of the global market is what might be called the "Nike economy"—footloose companies that play countries against one another while seeking subcontractors with the lowest wages and conditions. Consider Ava-Line Company of Whippany, New Jersey, a lapel pin manufacturing firm that was named one of Entrepreneur Magazine's "Hottest New Small Businesses in America." When Ava-Line's president, Irwin Gordon, was asked by Business Week to explain his success, he told the truth. Let me quote:

We have a factory in China where we have 250 people. We own them; it's our factory. We pay them $40 a month and they work 28 days a month. They work from 7 a.m. to 11 p.m., with two breaks for lunch and dinner. They eat all together, 16 people to a room, stacked on four bunks to a corner. General-ly, they're young girls that come from the hills.
Mr. Gordon has built one of America's hottest companies by keeping young girls in bondage and paying them nine cents an hour to work fourteen hour shifts, seven days a week. 

As we approach the new century, we are at an epochal moment. East Asia's collapse makes clear that the challenge now is no longer one of creating a global market, but is instead one of how to put sensible boundaries on the market that already exists, how to make the market work for the majority and not simply the few, and how to protect us from its excesses.

For globalization to work for America, it must work for working people. The measure of success must be whether every worker gains a fair share of the wealth that he or she helps to produce, whether the lowest paid workers enjoy working conditions that are as safe and humane as those of the highest paid executive, and whether all Americans are guaranteed basic economic rights like the right to comprehensive health care, the right to adequate retirement security and the right to join a union. In short, we should measure the success of our economy and the strength of our democracy by the breadth of our middle class, and the scope of the opportunity offered to the poorest child to climb into that middle class. We should measure it by the access it provides to the American Dream, and not on the basis of whether it provides a fantasy of lavish wealth for the few.

However, by definition globalization involves the entire world, and it is not enough that just American workers benefit from it. Workers around the world must also benefit. Globalization links all countries, and if workers in all countries do not benefit, then this will unleash political pressures that lead it to unravel. In today's globalized economy, borders are porous and standards and rules are incomplete and haphazardly applied. In many countries, laws fail to protect workers, the environment, and consumers. Independent unions are banned. Trade agreements, such as that which created the WTO, have transformed countries' copyright laws, their capital controls, and their industrial policies. However, they have made no provision for basic protections vital to working people. By failing to do so, these trade agreements have actively encouraged the growth of the "Nike Economy."

The consequence of this failure has been to exclude millions of workers from fairly participating in the benefits of globalization. Side-by-side, corporations have increasingly used the threat of transferring jobs to Nike Economy countries to intimidate workers and roll back their wages and benefits. The lesson is clear. If we fail to give working people the protections they need, and if we allow corporations to use the global economy to exclude workers from its benefits, then ordinary working people will increasingly want out of the global economy. Our failure will be their justification. And our failure will also be the cause of tragedy. It will mean that we lose the enormous economic benefits that a globalized economy, predicated on fair and just rules, can provide for all.

The new challenge is to establish fair and just rules that make the global economy work for all. This challenge has clear parallels with the challenge that faced American workers at the beginning of the twentieth century. Then, the challenge was the power of the trusts and the formation of an integrated national economy: now, it is the power of multi-national capital and the formation of an integrated global economy.

Unions were essential in meeting the earlier challenge, and they are essential in meeting the new challenge. Today's union response is to call for and work toward a "new internationalism" rooted in effective governance that secures basic worker rights, environmental and consumer protections, and sensible anti-trust and financial market regulation. This new internationalism represents a civilized and humane alternative to the current model of globalization. Thus far, globalization has been led primarily from the plush offices of banks and corporations, and from the comfortable seminar rooms of the foreign policy community.  It has been presented as if there were no alternative.  The new internationalism reflects the voices of working people and shows otherwise.

At the AFL-CIO, we have argued that the U.S. must take the lead to define a new global reform agenda. Its elements are clear. Trade accords and international institutions should enforce workers' rights and environmental protections, not subvert them. The global financial architecture should ensure stable equitable growth, not booms and busts that trammel the lives of working families. "Hot" money must be turned into "cold" money that invests on the basis of long-term fundamentals. At home, workers need to be empowered, not weakened. Corporations require greater accountability, not more freedom. Families exposed to the treacherous currents of the global economy need the security of living wages, guaranteed health care, decent pensions, and affordable education. Displaced workers and communities require investment, training, and support— real programs, not rhetorical promises.

Such an approach rests on a commitment to thinking about the economy from the perspective of the working person. It is an approach that is clearly reflected in the church's social teaching. It is plainly visible in Pope John Paul II's encyclical letter Laborens exercens, and it is also stated in the U.S. Bishops' 1986 Pastoral Letter, Economic Justice for All, which says "We judge any economic system by what it does for and to ordinary people and by how it permits all to participate in it. The economy should serve the people, not the other way around."
The argument is not between protectionists and internationalists. Unions and companies, workers and investors, all call upon governments to define the rules for the global market. The question is what are the rules? and who sits at the table? The potential of the global market can only be realized if its blessings are shared, its excesses curbed, and its brutalities outlawed. Rather than fight the "new internationalism," business should join with labor in leading it at home and abroad.

III. The need for a new internationalism

I have described the concerns of the labor movement about globalization. While opinions within the church may vary on the role of nations and international bodies in regard to globalization, it is my belief that the labor movement's concerns closely reflect Catholic social teaching. This teaching emphasizes that people have a right to work, that they should be paid a just wage, and that work should be consistent with human dignity and contribute to fulfillment as a human being. 

If globalization is subject to no rules other than those designed to facilitate the daily business of multinational corporations, it will inevitably frustrate the realization of Catholic social teaching. In its present incarnation, globalization impinges negatively on every dimension of this teaching. The forging of a global market, in which footloose business can roam the globe in search of the cheapest most exploitable workers, has dramatically unleashed the forces of wage competition. In doing so, it has undermined the payment of just wages. Wages in the Nike Economy have never been linked to the value of the contribution that workers make. Now, workers in the industrialized world are also increasingly excluded from the fruits of their labors. 

The globalized market has also made it easier for companies to take advantage of abominable employment conditions in countries where workers are denied rights of free association and collective bargaining. The denial of these fundamental human rights has blocked workers from forming unions that can improve working conditions. This has helped preserve conditions that are fundamentally at odds with the Catholic principle that work should be consistent with human dignity and contribute to the fulfillment of persons as human beings. Rather than seeing such conditions diminish, we are seeing them spread. Sweat shops are even returning to America. The denial of rights of free association and collective bargaining is at odds with Catholic teaching, which enjoins workers to engage in self-help activities. It also instructs states not to prohibit unions which are described as an essential and basic right of labor. 

Finally, the economic collapse in east Asia has shown how the creation of global financial markets has introduced new forces of economic instability. These forces threaten our ability to achieve and sustain full employment. If we cannot ensure full employment, then the notion of a right to work is rendered meaningless.

The AFL-CIO and the international trade union movement are committed to having core labor standards, as defined by the International Labor Organization (ILO), enshrined as the foundation of the global economy. These core labor standards are:

(1) freedom of association and the effective recognition of the right to collective bargaining;

(2) the elimination of all forms of forced or compulsory labor;

(3) the effective abolition of child labor; and 

(4) the elimination of discrimination in respect of employment and occupation. 

Every trade agreement must make adherence to these standards a necessary condition for participation in the world trading system. The WTO must make adherence to labor standards a condition for countries being exempted from tariffs: at the moment it does not. The IMF and the World Bank must also make adherence to these standards a condition for getting assistance. Such measures will provide the incentive for countries to implement and abide by these standards.

Making core labor standards the foundation of the globalized market is the ethically right course. It fits with the values of the trade union movement, and it fits with the values and teachings of the Catholic Church. However, there is more good news. It is also the economically right course of action. This means that, contrary to those who consider Catholic social teaching as unrealistic in this area, it is very much in touch with economic reality.

Globalization has started what has been called a race to the bottom. We all know that economies are complex social systems that differ in their degree of social, workplace, and environmental protections. In the globalized market place, business argues that these protections are a source of competitive disadvantage. It therefore tries to get them repealed. This is the foundation of the infamous "race to the bottom." 

Each country tries to gain a cost advantage over its rivals by lowering its standards. The only way to stop this race is to make competition over labor standards illegal. Once this is accomplished, business will be forced to look for profits in other ways such as raising productivity and improving product quality. This is the race to the top that we all want to encourage. However, it can only become a reality if we stop firms from taking the low road to the bottom.

Labor standards can also contribute to faster growth. For the last twenty years, economists have instructed the developing world to focus on export-led growth. Though some countries have grown, overall growth has slowed. Export-led growth has inevitably pitted worker against worker. It has caused job loss and wage decline in the industrialized countries. Developing countries have become dependent on overseas markets. It is only because America is the spender of last resort that the world economy is not in depression. The bottom-line is that my exports are your imports, so we all cannot run trade surpluses. Trying to do so will create a spiral of deflation and unemployment.

We need a way out of this quandary. That way is through the development of a broad middle class, such as we have in the American economy. This middle class must be supported by rising wages and a better distribution of income between wages and profits. Achieving this requires equalizing the balance of power between capital and labor. For this reason, globally applied core labor standards are essential. Absent these rights, workers will face a stacked deck in the battle for higher wages. We will fail to create the middle class that is the foundation of successful development.

Finally, core labor standards can help put an end to crony capitalism. This has led to waste and misallocation of borrowed resources. Developing societies need countervailing forces that can block such practices. Human rights, labor rights, and the ability to create independent trade unions are the foundation for a genuine end to economic cronyism.

IV. Closing thoughts

The congruence between the goals and aspirations of the union movement and the Catholic social teaching on labor is remarkably close. It is this that joins us in the just struggle to make globalization work for all. However, there are also differences between us. In particular, union leaders are accountable to their members who pay dues, and this can introduce an element of national parochialism. The Catholic Church is ecumenical in nature, and all humanity is its constituency. That said, the values of the union movement are rooted in solidarity and fairness. This inevitably gives us an internationalist sympathy that pushes us beyond self-interest. It is reflected in the commitment of national unions to advance the well-being of all workers, and it is reflected in our commitment to the international trade union movement.

Today's union movement believes that globally applied labor standards are essential if globalization is to work for all. I believe that such standards are also needed if the goals of Catholic social teaching on labor are to be realized. That is why I believe we all share an interest in the new internationalism and in making such standards an enforced reality. Opponents charge that labor standards would form "hidden" protection, and that they would prevent developing countries from legitimate competition in an area where they have an advantage. They are wrong. Not only are labor standards the ethically correct policy, they are also the economically right one. Labor standards represent a "win-win" situation for workers in both the developing and the developed world.  They are necessary in order to shift global economic development onto a path that is stable, sustainable,  and fair.



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