Putting capital in its place: globalization and the prospects for labor

The fate of workers in the face of globalization has been much decried and debated, but usually from the wrong angle. The focus of conventional discussion is almost always on labor markets and the woes of international wage competition. In critical approaches, the miracle of global capital mobility and the power of transnational corporations come in for the most attention, for their presumed role in the o€shoring of industry from the advanced economies and build-up of cheap-labor platforms in the newly industrializing countries. In contrast, the argument presented here points the ®nger of blame away from the economic failings of workers and successes of capital to the worldwide political defeat of the working class and global economic failures of capitalism. Ó 1999 Elsevier Science Ltd. All rights reserved. A pressing question of our time is the fate of labor and the working people of the world in the face of the rampant globalization of capitalism. Much ink has been spilled on the topic and some titanic political battles have been shaped by the debate, including those over the North American Free Trade Alliance (NAFTA) and, in Europe, over the single currency, high unemployment, and the 35 hour work week. My own locale, California, has been swept by ®erce political disputes over immigration, taxation, health care and other matters of moment to people feeling the pressure on incomes. While there may be no de®nitive answer to the question Ôdoes globalism raise or lower wages?Õ, we can nevertheless frame the matter squarely in economic, geographic and political terms, so that our discussion is not cock-eyed from the outset. In so doing, we can shift the balance of debate away from the labor markets, where it almost always rests, toward a discussion of global capital. This will run counter to the prevailing view that stagnant wages in the US or high unemployment in Europe are due chie ̄y to the competition of foreign workers, failures of labor training or ̄exibility, or the miracle of globally mobile capital. Indeed, I want most of all to point the ®nger of blame away from the failings of workers to the political successes and economic failures of capital. I take as my starting point the plain evidence that these are hard times for the working class around the world. The majority of working people are no better o€ than they were a quarter century ago and many are much worse o€. In the Northern Tier countries (de®ned as the members of the Organization for Economic Cooperation and Development (OECD) or Group of Eight) for the period 1973 to 1996, the average rate of wage increase was only one-third that of the preceding 25 years, while the rate of unemployment was double that of the postwar era. On average, workers su€er greater job insecurity and more widespread unemployment than before. The Ôproductivity wageÕ of the postwar era, when wages could be expected to rise in tandem with productivity and national output, is but a hazy memory of a Golden Age that lasted all of a decade or two in America and Europe. Workers also su€er the indignity of greater inequality as compared with the ballooning incomes and wealth of the rich, particularly the top 5% of people who own most of the capital (property and ®nancial assets) in the world. Unhappily, the US, which will serve as my chief point of reference, leads the way in most indicators of Geoforum 30 (1999) 263±284 www.elsevier.com/locate/geoforum q I would like to dedicate this paper to the memory of Ric Gordon of Santa Cruz, who was a partisan of labor and political change, as well as great fun to be around, and who died far too young. * Tel.: +1-510-642-3903; e-mail: [email protected] 1 Moody (1997). The Golden Age was more chequered than usually realized, Webber and Rigby (1996). 0016-7185/99/$ see front matter Ó 1999 Elsevier Science Ltd. All rights reserved. PII: S 0 0 1 6 7 1 8 5 ( 9 9 ) 0 0 0 1 6 0 inequality and wage erosion among Northern Tier countries. · Real hourly wages for all employees fell by 12% between 1973 and 1990 and remained ̄at throughout the ÔboomÕ of the 1990s. · The median family of four earned the same in real income 1996 as in 1973, while working more hours. · The average working year was four weeks longer in 1990 than 1960. · More people are working extra jobs and womenÕs Ôsecond shiftÕ gives them a 65 hour average work week. · Inequality between skilled and unskilled workers increased. · Unemployment was on average double that of the previous twenty-®ve years. · The volatility of employment (labor market churning) increased by over 40% between 1970 and 1987. · Union membership declined from 35% in 1955 to under 15% in 1996. · Strikes fell almost 90% from peaks in the 1950s, 1960s and 1970s to the doldrums of the 1990s. · The wealth of the bottom 40% fell by half from 1983 to 1992 while that of the top 20% grew by one-®fth. The chief determinants of wages need to be laid out conceptually and weighed against the evidence. The ®rst is the productivity of labor, or the state of production. Where productivity is high and rising, wages should re ̄ect this over time ± if the pro®t-wage split is constant. Long term improvement in production (technological progress) is the essence of industrialization, the principal source of the wealth of the advanced capitalist nations, and the origin of favorable wages compared with the poorer regions of the earth. High productivity is a necessary but not sucient condition for good wages, however. Productivity only delivers good wages if the working class has the historic capacity to extract a good price for its laboring power, i.e., a fair share of the social product. Distribution of income depends ®rst of all on the price of labor-power established in the labor market. Supply and demand conditions may be more or less favorable to workers and wages. They gain leverage against capital through their relative scarcity, unity and experience in the market(s) for labor; they usually lose where supply is too great, workers are inexperienced, or skills are few. WorkersÕ bargaining strength is also undermined by the repeated restructuring of labor demand in the course of industrial change, brought about by new technologies and the search for higher productivity. The ®rst two factors, labor productivity and labor price, are the focus of conventional debates about globalization and the fate of workers. But the net of causality must be cast more widely in order to capture two other forces entertained begrudgingly, if at all, outside the chambers of organized labor or the academic left: politics and pro®ts. The third determinant of wages is the politics of labor, or what used to be called class struggle and is now politely called Ôthe social contractÕ or Ôthe labor regimeÕ. Economies are not bare-bones systems of markets and prices, production and trade. They are political through and through in two senses. On the one hand, the contending classes are engaged in strategic action to improve their share of income (surplus value); i.e., capitalists maneuver to strengthen their hand in bargaining and weaken labor; workers organize to increase their collective strength. On the other hand, classes seek advantage in the arenas of the state, which shape the operations of markets fundamentally, whether through taxes on incomes, tari€s on trade, the law of property rights, or rules governing union elections. The last determinant is pro®t on investment, or the state of capital accumulation. Where capital is earning a good return and reinvesting briskly, productivity and wages ought to be rising. But this is not always so; pro®ts may dip and crisis set in. This can reduce the supply of capital (investment) and the demand for labor. That, in turn, can undermine productivity gains and the strength of labor while steeling the resolve of capital to extract a higher rate of surplus value by reducing wages and other indirect strategies to weaken workersÕ power. The Bible and Karl Marx agree that Ôthe ®rst shall be last and the last shall be ®rstÕ, and while neither the meek nor the proletariat may inherit the earth, capital has come as close as anything to doing so; therefore, we shall see that capital accumulation is very likely the most important condition for the well-being of labor today. Finally, economics and political analysis of whatever stripe is not enough if it leaves out geography. We must, therefore, take into account a ®fth dimension of the problem: the conditions of place(s) ± regions, countries, continents ± as distinct combinations of the previous elements of economy and politics, and how they interact in larger systems of spatial relations all the way up to the global scale. One can therefore speak of the ``®ve Ps of political economy'': production, price, politics, pro®ts, and place. I will devote a section of the paper to each. Corresponding to each is a prevailing myth that clouds the issue and prevents clear understanding by workers of their situation. These myths are rampant in the labor movement of the US. And in every case the trick of ideology is to turn the light of causality and blame 2 Sources, in order: Brenner (1998, pp. 4±5), Belman and Lee (1996), Schor (1991), ibid. Belman and Lee (1996), Borjas and Freeman (1992), Brenner (1998, pp. 4±5), Gottschalk and Mott (1994), Moody (1997), Brenner (1998, p. 195) and Wolman and Colamosca (1997, p. 174). For comparable ®gures on California, see Benner (1999). 264 R.A. Walker / Geoforum 30 (1999) 263±284