Wednesday, June 24, 2009

Double standard on labor standards

You are an employer under pressure from corporate stockholders to increase the returns on their investment. You decide the way to do so is to slash your present and future labor costs by firing your current workers en masse and recruiting a set of new ones, people among the unemployed so anxious for a job that they accept anything you impose: sub-minimum pay, no vacations, a seven-day workweek, no sick pay, and other drastically lower labor standards associated with a sweatshop.

As an American employer, you would not be able to implement so radical a decision. It would be illegal. It would be bad public relations. It would also, in the eyes of most people, be immoral. You couldn’t get away with it.

But what if instead of hiring other workers in America, you hire workers overseas – foreign men, women, and children willing to work in the real sweatshops of the kind that dot the Asian industrial landscape.

In both cases you impose harm on Americans, and you undermine the progressive U.S. labor market practices built up over decades. Oddly, however, you would be judged harshly in one case and not the other. That’s because we draw a sharp line between the two radical moves, even though the effect in the United States is exactly the same.

Why does an illegitimate and unacceptable radical change in one case become legitimate and acceptable in the other? Simply because one radical change is consummated across borders under the protection of international trade laws that are deemed superior and not be interfered with.

The above paragraphs reformulate a crucial policy inconsistency conveyed by Dani Rodrik, professor of international political economy, in his June 16 talk at the London School of Economics. In outlining the possible future of capitalism (see my June 21 posting) he briefly discussed labor standards as an important globalization issue that needs to be much better understood.

“And yet,” he added, “we have no good way of even talking about this.”

Why is the labor standards issue so little talked about in Washington power circles these days?

Mostly, I think, because the agenda-setting power circle has made up its collective mind on this issue. The unspoken assumption is that today’s trade rules, despite some flaws, are sufficiently legitimate and really have nothing to do with the grave harm imposed on American workers.

Rodrik’s 90-minute talk, as recorded on video, is a good short overview of why the flaws are threats to globalization itself. His video presentation on “Capitalism.3.0” can be found on the London School’s Website. The quickest way to access it is through Rodrik’s June 18 posting on his Weblog at

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