Labor Alerts: a service of Campaign for Labor Rights

Consider Indonesia under Suharto. A ruthless dictator, Suharto was packaged as a statesman by his friends in the international diplomatic establishment. Economists credited Suharto with having worked a development miracle. His army received endless U.S. military aid.

Now that Indonesia is in trouble, its problems are blamed on "crony capitalism." Suharto amassed tens of billions for himself and his family and friends. Was the international investment community duped? Did Suharto's corruption take the White House and Wall Street by surprise?

Did the Indonesian economy collapse because of an aberration in the free trade system...or because of the system itself?

Corruption in Suharto's Indonesia was legendary, affecting every aspect of the country's economic life. A tiny elite systematically looted Indonesia of its wealth. To do business, Nike contractors and other foreign companies had to pay enormous bribes to Suharto's inner circle (up to 30 percent of total operating costs, according to the ECONIT Advisory Group, a Jakarta-based consulting firm). Even so, the premium for foreign investors - a cheap, non-union, repressed workforce - was worth the price.

Footloose transnational corporations seek out low-wage, non-union havens and reward them with investment. Not coincidentally, these also are havens of repression. It is true, as promoters of free trade never tire of repeating, that the unemployed in such countries are desperate to find jobs in sweatshops. What these promoters regularly fail to mention is that, once sweatshop workers experience humiliation, exploitation and outright cheating on their wages, they are willing to risk their jobs (and more) by going out on strike. In short order, the police and military of their government put down labor protests.

The momentary triumph of free trade theory was not a victory of simple economics or of ideology. It was equally a triumph of force. Trade policy of the United States government is mirrored by its diplomatic and military policies. Hence the flow of U.S. arms and military training to Suharto's government.

An article published by the research department of Jardine Fleming International Securities Limited underscores this free trade / repression linkage. In the kind of arrogant stupidity that one has come to expect of Nike, a company representative reprinted this article and included it in a packet he distributed to concerned students at the University of Colorado, Boulder in 1997. The section titled "Nike likes a strong government" reads:

"If we delve deeper into where Nike has produced sneakers and its comments about political stability, we notice that Nike tends to favour strong governments. For example, Nike was a major producer in both Korea and Taiwan when these countries were largely under military rule. It currently favours China, where the communists and only two men have led the country since 1949, and Indonesia where President Suharto has been in charge since 1967. The communist party is still very much alive in Vietnam. Likewise, Nike never did move into the Philippines in a big way in the 1980s, a period when democracy there flourished. Thailand's democracy movement of 1992 also corresponded to Nike's downgrading of production in that country."

Just as the absence of labor rights depends on repression, so too does repression seem to lead inevitably to corruption. Investors - whether they are putting their money into productive facilities or into currency exchanges and other speculative instruments - understand this linkage. The small investor may often be duped. Big money usually knows exactly what it is getting into. The rate of return makes the risks worthwhile.

The risks are not what they seem. The bulk of the Asian bail-out brokered by the International Monetary Fund went to foreign banks and other large-scale international speculative investors. The point is not a minor one. The bill of goods we were sold under the heading "free trade" was, after all, laissez faire capitalism, the doctrine of governmental non-interference in economic affairs. In practice, however, the IMF bail-out socialized the speculators' losses through mandating rising unemployment, rising inflation and the disappearance of price supports and other safety net policies. The working class of Southeast Asia is being made to pay (punished) for the unwise choices of the international investor class.

The same scenario was played out in Mexico's peso crisis earlier this decade: anti-labor practices enforced through repression, corruption, sudden collapse, bail-out of foreign investors-of-scale conditioned on implementing policies harmful to the working poor.

Preparations for more mayhem are underway. The U.S. Congress is considering the IMF's request for a special $3.5 billion appropriation earmarked to cover (socialize the costs of) the next crisis. Are these guys thinking ahead, or what?

Lest we worry that the worst might be over, the IMF is doing everything in its considerable power to force more collapses. One condition of the Asian bail-outs requires that recipient governments make it even easier for speculative investors to move their money from country to country. Remember: It was precipitous dumping of the rupiah by currency speculators which brought the Indonesian economy grinding suddenly to a standstill.

Military and diplomatic support for repressive governments may be understood as another form in which laissez faire doctrine is "honored in the breach." U.S. military aid intervenes on behalf of elites all over the globe. Only in the rarefied air of economics textbooks do the conflicting interests of capital and labor reach equilibrium purely in the marketplace. Instead, the hand of government sees to it that the balance is tipped in favor of capital.

More than 500 people died in the protests which eventually culminated in Suharto's downfall. A change of faces at the top has not produced a change for ordinary Indonesians, who continue by the tens of thousands to protest IMF-imposed austerity measures and who continue to see their protests suppressed by the military.

As recently as a year ago, the new free trade global economy seemed inevitable, unstoppable, a law of physics, a matter of common sense. If there were labor abuses, well, these were nothing more than growing pains in economies destined to reach their potential. In Indonesia, new factories abounded. Peasants driven off the land by rural poverty joined the growing industrial workforce and became the urban poor. But, as long as the macro-economic indicators looked good, promoters of free trade were happy.

Until Asia went bust, Nike credited itself for that all that was strong in the region's economy. The Jardine Fleming article distributed by Nike opined that, "Nike's arrival usually corresponds to an economic boom, while its departure usually signals that the time has arrived for a country to move up the development scale." A Nike "Informed Consumer Update" quotes the 6/22/97 New York Times: "...plants making clothes and shoes for foreign markets are an essential first step toward modern prosperity in developing countries." And Nike executives regularly cited the company's shifts in production - from Japan to Taiwan and South Korea to Southeast Asia and then to China - as a kind of trailblazing for prosperity.

Nike, so quick to grab the credit when the indicators were up, has not rushed forward now to take the blame for the region's economic ills.

In recent months, Nike has cut 44,000 of its peak 120,000 shoe manufacturing jobs in Indonesia and an undisclosed number of garment production jobs there. Jardine Fleming to the contrary, Nike's partial pull-out does not signal that the time has arrived for Indonesia "to move up the development scale." Nike, once the self-styled engine of Asian prosperity, now portrays itself as a reluctant caboose on the train of circumstances as it downsizes its workforce.

Nike is not solely responsible for what has gone wrong in Asia, any more than it was solely responsible for what had previously seemed to be going right.

Nike is a big player by anybody's standards - whether in dollars ($9.6 billion revenue last year) or in workforce (550,000 worldwide last year). Equally important as its economic impact has been Nike's role in the debate about the global economy and overseas labor practices.

Nike was the leader in the sport shoe industry in moving its production to countries with the most vulnerable workers. It became the symbol of mobile production capital in all industries. Nike has come under the closest scrutiny and the harshest criticism for its labor practices. Nike also had the highest profile of any company as apologist for the free trade regime. All sides understand that when we debate Nike, we are debating the new global economy.

Advocates of free trade made two key claims: 1) Low-wage production jobs, although perhaps harsh by the standards of the industrialized world, are a necessary step toward development for impoverished countries; and 2) the global free trade regime is the only path to economic stability for the developed world. As for the first claim, the Asian Tigers have been neutered.

As for the second, we are all holding our breath. Only a year ago, free trade promoters advised that we are part of the global economy, like it or not. Curiously, those same apologists have now stood their earlier claim on its head. As the Asian contagion spreads to China, Brazil, Eastern Europe and beyond, the pundits would have us believe that the U.S. economy possesses a special immunity. Not to worry.

What the free traders have done to Asia - and the havoc they may wreak upon ourselves - represent a profound betrayal. And, even yet, they are not admitting their mistakes or trying to correct their ways. The response of the IMF to the Asian crisis is to prescribe overdoses of the same tainted medicine which brought on the problem: more deregulation, faster capital flows, more sweatshops.

Until a year ago, people of conscience already had reason enough to oppose the free trade sweatshop agenda. Now there is a new urgency to our work. The system is broken. Let us intensify the Nike campaign, the Han Young campaign, the Disney/Haiti campaign and other important sweatshop struggles.

While fighting for reforms is an important and necessary part of our work, we are not going to reform the free trade agenda out of existence. At worst, reforms will allow a "kinder and gentler" free trade regime to persist even longer: sweatshops with a smiley face. We must oppose the free trade system which has betrayed us all.

More than reforms, our program should be to support the empowerment of workers. From this perspective, victory in one of our campaigns means opening another window for workers to form independent, democratic unions. The importance of such victories cannot be measured simply by counting the number of workers who win bargained contracts. True unions - independent, democratic unions - have a potential for becoming leading agents in forcing profound, even revolutionary, changes in their countries.

If and when we experience a major economic crisis in the U.S., cynical politicians will try to deflect our attention through scape-goating and wars of intervention. The alliances we are forming now between unionists and community-based progressives may determine whether those schemes succeed.

Asia caught the pundits sleeping. The speed and the extent of the collapse surprised most of us. Economic meltdown is a frightening prospect. But we should also take heart from these events. If the global sweatshop economy is more vulnerable than any of us had supposed, then maybe our international labor rights movement will prove more powerful than any of us has so far dared to hope.

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