U.S. Labor & Foreign Competition

Milton Fisk

PROTECTIONIST PRESSURES are testing the open-market outlook dominant in the United States since World War II.

The U.S. labor leadership has taken a solidly protectionist stance toward the crisis brought on by foreign competition. Union leaders treat protectionism as the only alternative to the so-called free-trade stance of the multinationals and of successive U.S. governments. The struggle is so far a one-sided one, however, with the power of the multinational industries and banks overwhelming that of the leadership of a union movement in retreat.

The free-trade reality has always included government backing in manipulating foreign labor markets — lowering their labor costs — so that U.S. labor is placed at a competitive disadvantage. Once this is pointed out, a third alternative — a solidaristic perspective — looms up to challenge the protectionist stance of the labor leadership.

To validate this challenge, it is important to develop three points:

1) The political tradeoff for winning protectionism will be ever deeper concessions by U.S. labor;

2) A campaign against U.S. support for the repression of foreign labor can make U.S. labor significantly more competitive; and

3) The mobility of multinational capital undermines any benefit protectionism might bring to U.S. labor.

Acting on these points would not keep U.S. labor from the hard knocks of the competitive world market. It would, though, reduce their severity and pave the way for a cooperative system of world trade.

U.S. Labor and Foreign Competition

The leadership of the U.S. union movement has two responses to the crisis due to foreign competition. One is to use trade barriers to save good jobs. The other is to use concessions to retard capital flight.

Until labor has been chastened by even deeper concessions, however, trade barriers will be blocked by the dominant force within business. Were the leading groups within business to become desperate enough to resort to protectionism, they would not want it with a triumphant labor if they could have it with a defeated labor. The union leadership understands this and thus accepts concessions.

The free-trade policy of the U.S. government and big business in the 1970s and the 1980s has little to do with the old doctrine of comparative advantage. According to this doctrine each country should specialize in producing for export those things it can produce most efficiently. Trading such products would then give each country more than it would have had if it had put up a trade barrier in order to continue undiminished production of the things it produces less efficiently.

But what are a nation’s most efficient industries? The problem is simply that in a period of rapid technological change, of variability in component costs and of changing organization of work, there is no stable conception of which industries are most efficient.

Instead, U.S. trade policy now serves to reduce labor costs for U.S. industry generally. This is accomplished by keeping competition alive with areas of repressed labor In the face of this competition, management threats to go out of business or to move to low-wage areas are effective in winning concessions from labor.

Owen Beiber, president of the United Automobile Workers (UAW), was then being naive in assuming that the Reagan administration did not see these consequences of its free-trade policy when on Feb. 26, 1987, he said to the Subcommittee on Trade of the House Committee on Ways and Means, “The UAW … described the danger posed by our passive trade policy years ago, yet we were ignored by administration officials.”

The prospect of the labor leadership getting the trade barriers it wants is fairly dim in view of the potential that foreign competition holds for extracting concessions. It is made even dimmer once we consider the nature of the new global economy.

Our period is characterized by the rapid growth of the multinational corporations (MNCs), including manufacturing, service and financial corporations. Protectionism would curtail their international operations. Their rise is associated with a rise in the export share of world output from 12% in 1962 to 22% in 1984. In the United States the MNCs account for almost half of all imports. A growing portion of their imports comes from their majority-owned foreign affiliates — this portion doubled from 16% in 1970 to 32% in 1982.

U.S. labor, whose operations are primarily national, cannot be expected to have more than a limited effect on these global giants. In this new global economy, trade and production transcend national boundaries. A merely national policy of erecting extensive trade barriers cannot ignore this global economy. Weakened by the very concessions needed to get trade barriers, U.S. labor would hardly be in a good position to force benefits from business.

Now we can see that in addition such barriers will be limited by the global interests of the powerful MNCs. They will find ways to penetrate walls around national economies. Apart from more familiar problems with trade barriers, problems originating in the new global economy yield a discouraging picture of what U.S. labor can hope to gain from protectionism.

Foreign Policy and the World Labor Market

In the new global economy neither free trade — the position of the MNCs backed by government support for labor repression — nor protectionism — the position of labor officials faced with a global economy — is viable for Jabot There is another view, which is defensible from the perspective of labor, a view dedicated to reducing the competition among labor forces by undermining the repression of labor. To support this solidaristic view I shall, first, discuss the link between free trade and labor repression and, second, discuss the failure of protectionism to help labor in the new global economy.

In country after country U.S. foreign policy has lent itself to keeping labor weak through its support for ant labor regimes. Thus the free trade it has supported is not characterized by a free labor market.

Beginning with the Allied occupation of Japan and going through more recent U.S.-Japan mutual security arrangements, the U.S. government played the role of partner in reducing Japanese labor from class struggle to cooperation under paternalistic rules. U.S. collusion with the generals in overthrowing democracy in Brazil in 1964 led to a reduction of living standards for workers and peasants, on which the Brazilian export economy was expanded.

Today in Guatemala and El Salvador the American Institute for Free Labor Development (AIFLD) union federations use Agency for International Development (AID) funds to weaken militant union federations.

This is a serious challenge for U.S. labor. To meet it calls for trying to stop support for anti-union regimes, since such support is an indirect subsidy to foreign and multinational corporations for solving their labor problems. These subsidies undermine the position of U.S. labor on the world market Cheap foreign labor did cheapen consumer goods for U.S. workers; now, however, concessions and mass migration to low-paying jobs counteracts this effect Meeting the challenge is a first step toward a solidaristic trade policy.*

There are other ways in which U.S. foreign policy has been an obstacle to a free labor market Since World War II, it has supported a large arms sector of the U.S. economy. This sector is protected in at least the sense that it is run with funds extracted, through taxes and borrowing, from the non-arms sector.

The arms sector does not acquire its funds from its ability to compete in the national and international market Protection has led it to generate inefficient management styles that have spread elsewhere making the non-arms sector less competitive in foreign markets. This military sector’s thirst for dollars is a factor in keeping interest rates so high that investment in the non-arms sector has been affected. Investments in productivity have been delayed until markets are already lost.

Reducing the arms burden is vital for the future of U.S. labor. The growth of the military budget in the 1980s made for a more rapid recovery from recession in 1981-82, but there are other possible means of stimulating recovery.

Reducing the arms burden calls for a reorientation in two ways. First, there must be a rethinking of the imperialist view that the United States has the right to demand that nations be aligned with it or suffer serious consequences. This view commits the United States to acting as a global policeman. Second there must be a rethinking of the view that uses difficulties in policing the U.S. empire as an excuse for intensifying the Cold War. Until there is a reorientation of these views in the labor movement, labor leaders will continue to support the arms sector and thereby weaken labor in face of foreign competition.

By its support for international banking, the United States is a partner in cheapening Third World labor through austerity programs designed to prevent default. Since the devaluation of the peso in 1982, the wages and benefits of Mexican workers have become a small fraction of what they were. General Motors was able to take advantage of this development; by the mid-1980s it had built seventeen plants in Mexico, where autoworkers are making $1 per hour compared to $12 in the United States.

Mexico’s ability to negotiate new loans and to renegotiate the payment of earlier ones depends on the willingness of the heads of the leading Party of the Institutionalized Revolution (PRI) to continue to crush labor. So long as Third World labor can be crushed still further, neither the administration nor the Congress in Washington is willing to put limits on the bonanza the banks are extracting. Through a foreign policy that backs the banks and encourages the tough line of the International Monetary Fund (IMF), the United States constrains the power of labor in Third World markets, thereby making U.S. labor vulnerable to so-called free trade.

The mechanism by which U.S. involvement helps to hold foreign labor back varies from country to country. In the case of Japan, for example, it was the country’s integration into the United States’ global security system. The ruling Liberal Democratic Party (LOP) has defended this integration since the late 1940s when it came to power. Early labor opposition to this arrangement stemmed from Gen. Douglas MacArthur’s harsh treatment of the labor movement at a time when important elements within it had initiated workers’ control of production based on shop committees.

Japanese labor soon learned another lesson about integration into the U.S. security system during the Korean War; it was repressed under the U.S. military as Japan was mobilized for war production for the Korean front Since it was believed that a new Japanese empire could grow within the U.S. military shield, the LOP and big business joined to defeat the massive opposition to the U.S.-Japan Mutual Security Treaty of 1960.

Security against communism within the U.S. global security system was generalized by 1980 to include not just military but also economic security. A continuing Japanese export boom was the product of this aspect of security, which included the rationalization of production by outsourcing to non-union shops with low pay, by disciplining labor through fear in quality-control circles, and by promoting pro-government and pro-company union federations. Attacks by labor on these measures could now be met with the charge that they were attacks on Japanese security.

Thus integration into a system designed for the security of the United States remains a vital element in keeping Japanese labor weak.

Toward Labor Solidarity

Surveying this record, it is dear that both conservative and neoliberal free trade is a market rigged against U.S. labor, which has had the wisdom to want nothing to do with free trade. It rightly feels it should not have to compete with maquiladoras (Mexican border factories) whose workers are paid so little because the international banks promote labor austerity to keep Mexico from default. It rightly feels it should not have to compete with Hyundai whose workers are paid $2.40 per hour because of repression by South Korean dicta­ tors. It rightly feels it should not have to compete with workers who have little protection from health and safety hazards.

But should rejecting this kind of free trade imply embracing protectionism? What is needed is a change of U.S. foreign policy away from support for repressive regimes. Of course, this will reduce but not end competition between national working classes. Still, the claim that Third World wages and benefits are dramatically lower simply because the Third World is a labor surplus area ignores the role of U.S. support for repressive regimes.

Ending support for repressive regimes is only the negative aspect of a new U.S. labor strategy. Its positive aspect is the development of cooperation with foreign labor movements in their struggles against repression, poor terms of trade and financial exploitation. This means developing alternatives to AID and National Endowment for Democracy-funded agencies of the AFL-CIO such as AIFLD and the Asian American Free Labor Institute. Now such agencies support union activity that rarely departs from State Department policy.

U.S. labor cooperation with such independent trade-union federations as UNSITRAGUA in Guatemala, UNTS in El Salvador, CUT in Brazil, COSATU in South Africa, KMU in the Philippines, the militant sector of SOHYO in Japan, and with the militant Hyundai Group Labor Union Coalition, among others, in South Korea would serve to increase the costs of government repression against these federations.

Socialists and communists play roles in these formations, and this is the basis for State Department and AFL-CIO hostility to them. This hostility cashes out as support for a kind of unionism that is reluctant to challenge regimes that keep labor cheap.

So a tough question is posed for U.S. labor. Does it want to unite with the AFL-CIO leadership’s obsessive struggle against socialism and communism, or does it want to save some of the gains it made when it was stronger? It cannot have it both ways since to save some of these gains, it must solidarize with other labor movements that are fighting reductions in living standards by their U.S.-backed regimes.

If the U.S. labor movement decides to spurn these militant movements, then it should be content with concessions and unemployment as noble sacrifices in the crusade against socialism and communism.

The past few years have witnessed some modest experiments in international labor solidarity. Through the efforts of the Amsterdam-based Transnationals Information Exchange (TIE), a number of international conferences have taken place. As a result of contacts made at an international meeting of GM workers in Liverpool, Irish workers, who had struck their GM plant, were able to get GM workers at a British, a German, and a Portuguese plant to agree not to do the work the Irish had been doing.

In March 1987, TIE, in conjunction with the Brazilian union federation CUT, sponsored an autoworkers’ conference in Sao Paulo with delegates attending from fifteen countries, including the United States and Japan. Despite talk of solidarity, the delegates thought that Third World workers need protectionist measures to limit the multinationals and agreed that workers in developed countries had a right to act against changes that would eliminate their jobs. The important thing was the development of links that can be the basis for further concrete acts of solidarity.

In the summer of 1988, a coalition of non-governmental unions in South Korea held a large international meeting. Militant unionists from numerous nations were in attendance. The meeting highlighted the need for cooperation in order to deal with the vast wage differences that put workers of the world in competition with one another.

Speedup and Jobs under Trade Barriers

Having said something about the advantages for labor of a solidaristic form of trade, I turn now to the consequences of protectionism for labor.

In the current debate, the advocates of protection feel themselves constrained by the underlying free-trade orthodoxy. Thus they advocate only a temporary, conditional form of protection, designed to help those enterprises that can soon recover their competitiveness, rather than to keep alive those that are unlikely to recover at all. It is conditional insofar as protection is granted only if the enterprises to be protected will reduce their costs, in particular their labor and management costs.

Temporary conditional protection is seen as a way to reduce costs of adjustment to changes in international trade, notably to changes in competitive positions. (These costs are not recognized in the classical theory of free trade, which assumes a static economic world.) The adjustment costs-unemployment, plant closings, bank failures-could disrupt a national economy unless changes in the national economy resulting from the international situation are slowed down. Temporary conditional protection will, it is claimed, slow them down, there by spreading the adjustment costs over time.

What can we expect from this form of protection in the short run? How much will labor be helped by the increased demand for domestic products induced by protection? The tidy equation between a $1 billion trade deficit and the export of 25,000 jobs does not easily convert into the creation of 25,000 jobs with a $1 billion decline in the trade deficit. We can expect, in the new global economy, a massive effort at labor saving that undermines the potential for creating jobs.

If, for example, proposed domestic-content legislation for autos were somehow to pass despite the opposition of the MNCs, what would the effect on employment be? The legislation would mean that companies, domestic or foreign, selling large numbers of cars in the United States would have to put at least 90% locally produced content in those cars. Despite the cutback of imports, Americans would still want new cars. To respond to this demand, there would have to be an increase in the production of cars and of car parts in the United States.

Would this entail a surge in employment? There are several factors limiting any such surge. First, the Big Three auto producers have faced a problem of low profitability for years in their U.S. operations. Dealing with this problem would be a priority under conditions of increased demand; no effort would be spared in reaching the high profit rates needed to put the industry ahead technologically.

There would then be an incentive to continue the reorganization of labor that is already underway. There would be little labor opposition since the union leadership would have weakened union power in advance as a condition for getting content legislation. The resultant laborsaving would partly offset any employment surge. Recovering profitability is, though, only one source of pressure against an employment surge under protectionism. Consider, second, the fact that at present plant capacity for auto production within the United States outstrips total U.S. sales of both domestic and imported cars. The intense competition for market shares this creates would remain after protection.

The competitors who reduce their labor costs the most will be at an advantage. A labor-saving reorganization of labor will be pushed throughout the industry. Job classifications will be collapsed everywhere, and unions will weaken themselves everywhere through playing leading roles in team-work plans. Adding the effects of the scramble for market shares to the effects of the drive to recover profitability leads to serious doubts about an employment surge.

It is interesting to note here how the new global economy would contribute to undercutting the employment surge that U.S. protection is supposed to create. Protection would only increase foreign investment in order to compensate for the loss of sales from imports into the United States. Much foreign investment would be in the form of buyouts, but new capacity would also be created, intensifying the scramble for market shares.

A protective wall will not be able to recreate lost jobs since foreign MNCs have the mobility to get behind it. (Japan’s Bridgestone Corp. has taken over Firestone lire Co. and Sony has purchased CBS Records.) They will thereby intensify the competition enough to force the refinement and general adoption of a version of the organization of labor they used in their parent countries.

The mobility of the MNCs could be stopped by restrictions on foreign investment of the sort proposed in December 1988 by William Winpisinger of the Machinists union. This would, though, be a direct assault on the basis of the new global economy. To take on this economy in order to restrict the flow of investment would call for muscle and will lacking in a labor movement that buys protection with concessions. In fact, most U.S. labor leaders are courting foreign investment to get back jobs displaced by imports.

Job Effects in Selected Industries

We already have previews of the speedup that would result from more trade barriers. After GM made several tries at cutting job classifications at Allison Transmission in Indianapolis, it finally won in January 1988 when it threatened to build its transmissions elsewhere. The threat to relocate produced a lopsided vote in UAW Local 933 in favor of cutting two-thirds of the job classifications.

With workers doing several jobs and production simplified to yield one universal truck transmission rather than three different ones, jobs would be reduced from 1,750 to 540, assuming that Allison’s share of the truck transmission market remained steady. West German and Japanese competition would not move ahead of Allison in this area after it had reduced its labor force by more than two-thirds by 1990. The same tactic would have been appropriate had West German and Japanese firms been competing with Allison from behind a U.S. protective wall.

In other industries, trade barriers have existed for some time. But they have a dismal record for saving jobs. Since 1969 there have been quotas on Japanese and European steel imports to the United States. But in the 1970s the U.S. steel industry actually declined in productivity, thereby building pressure for more imports with resulting job losses.

Things turned around in the 1980s as efforts were made to modernize steel production. But since the emphasis was on labor-saving technology, this did not stop the job losses. The U.S. Steel Corporation claims it has increased productivity from 10.8 labor hours per ton in 1982 to 3.5 in 1988. While doing this, it cut employment by 75%, cut capacity and reduced wages and benefits.

So despite the 1984 quotas limiting imports from fourteen major steel-producing nations to 21% of the U.S. market, in the Gary area, where a growing share of the nation’s steel is produced — 20% of it in 1988 — employment in steel has dropped to half what it was in 1980. Currently booming production is, though, threatened by competition from plastics used as steel substitutes. Over the twenty-year period from 1969, protection was unable to stem massive job losses in steel.

Beginning in 1973, the Multifiber Arrangement restricted textile imports from countries such as South Korea, Hong Kong and Taiwan. Relatively few jobs were lost in the 1970s due to imports, but rapid productivity increases in the U.S. textile industry were a major source of job losses. Numerous workers were displaced by imported textiles in the 1980s, when the Reagan administration refused to enforce the Multifiber Arrangement. With an estimated 390,000 jobs lost in the textile, apparel and shoe industry in the 1980s, can the losses be stopped? Textiles are included in the AFL-CIO backed Textile and Apparel Act approved by the House in1987. But a Textile and Apparel law will not stop the drive to reduce labor costs: speedup, piece work, technology, undocumented workers, cottage industry and upstairs sweat shops.

In textiles, the drive to reduce labor costs under protection will be fueled by intense competition among numerous producers and by the threat of renewed low-wage foreign competition when protection is removed. Of the jobs gained most will be well below union standards.

Foreign Investments in the U.S.

If the short-term gains are not encouraging, the long-term prospects are worse. Temporary conditional protection is supposed to make the nation stronger. Some sectors, it is said, will have to trim down and take a smaller market share; others will be able to expand. This reorganization will insure greater job security and a halt to the decline of the standard of living. The United States will not regain undisputed leadership; the two-to-one advantage in productivity it began to enjoy among the great powers toward the end of the 1930s is gone for good.

Still, it is argued, the more modest goal of a stronger economy promised by temporary conditional protection appears worth pursuing.

There is, however, a major obstacle. In the third quarter of 1987, earnings on U.S. investments in foreign countries that came back to the United States were topped by earnings on foreign investments in the U.S. that left the country. The United States then had a net deficit in investment income. This contributed to what economists call a current account deficit, which also included an enormous deficit in merchandise trade.

When the deficit in merchandise trade began in the early1970s, repatriation of earnings on investments outside the United States could be relied on to keep the current account in surplus. But beginning in 1982, international earnings were no longer able to prevent a current account deficit. It was certainly true that things turned around in the fourth quarter of 1987 with a net surplus for investment income. But this was not large enough to prevent a fourth-quarter $39 billion current account deficit.

The surpluses accumulated by some U.S. trading partners found their way back into the United States to buy bonds, stocks, land, skyscrapers and factories. And now for the first time since 1958, these investments are at the point of generating a flow of earnings leaving the United States that matches the flow of earnings into the country, generated from U.S. investments.

Correspondingly, foreign investments in the United States for the third quarter of 1987 were more than double U.S. investments in foreign countries. The trend toward large foreign investment in the United States continues. From $11 billion in 1984, direct foreign investment rose toroughly$54 billion in 1988. This is no accident since the United States can no longer pay for the current account deficit by minting dollars and having foreign central banks hold them as reserves. The overall balance of payments is realized only through foreign investments in the United States.

By1991, Honda, for example, plans to have invested $1.7 billion in its Marysville — Anna, Ohio, auto complex. Honda assembles more cars at its Marysville plant than it sells in Japan, and by 1991 it plans to assemble them with 75% domestic content The engine plant at Anna will make the engines for all Marysville’s Civics and Accords. By 1991, nine years after the first Hondas were produced in the United States, Honda will be exporting 70,000 cars from Marysville, most of them to Japan itself. With the UAW’s record of concessions elsewhere, Honda workers have yet to see that they need the union.

Financing the deficit through an inflow of foreign capital has its drawbacks. The return on that investment to foreign investors limits the sum of U.S.-generated profits available for immediate productive investment in the United States. This will have an effect on the program for economic recovery, called for by the protectionists, of massive investments both to improve productivity and the quality of the product.

To be sure, a portion of the returns on foreign investment in the United States is now recycled internally as productive capital. Still, a sizeable portion of those returns will be going to fund either speculative projects in the United States or projects elsewhere. Where will the vast sums of capital needed for recovery come from? The situation has parallels to one we are all familiar with in the Third World. It was first thought that there the problem of national economic development was to be solved through attracting direct investments from the MNCs. Then it was thought it could be solved through Third World governments obtaining loans from the international banks.

A limited and unbalanced development was achieved, but further development was made problematic as more and more of a nation’s labor time was devoted to generating returns to foreign investors. The export sector is pushed to the limit to meet international obligations.

This problem of development in the Third World is of course not the same as the problem of the recovery of competitiveness in an advanced country. Still, in both cases the drain of resources to foreign investors stands in the way of the desired goal. In each case, focusing on the creation of jobs by foreign investors prevents our seeing how serious this obstacle is.

Protectionism and Foreign Capital

The natural response to this worry is that, since a protective wall will cut the merchandise deficit, there will be a need for less foreign capital to balance payments, and thus there will in fact be less foreign investment. This response lacks plausibility for the new global economy for two reasons. One has to do with the ability of the MNCs to go under protective walls, whereas the other stems from the inability of many Third World exporters to get under them.

The first reason suggests that a protective wall around the United States will encourage foreign investment. This investment goes under the protective wall to maintain accustomed markets. It will tend to offset any reduction in the need for foreign capital in order to balance payments.

The second reason suggests that a protective wall will create problems for international banks that will send them in search of foreign capital. A general rush toward protectionism would restrict entry of products from Third World countries that rely on exports to service their international debts. Since 1981 the United States has taken a greater share of exports from Latin America and has moved from a trade surplus to a trade deficit with Latin America, whose collective international debt rose to $400 billion in 1987. Protectionism would restrict these exports thereby making Latin American problems with debt servicing worse.

Total Latin American exports are already stagnating, and eight countries have declared a moratorium on interest payments. Added to these troubles, U.S. protectionism would create a general default on debt repayment since corporations in Latin America would lack the mobility-due either to the location of their resources or to restricted financing-to retain their share of the U.S. market by setting up production in the United States.

The effects of these defaults would be far-reaching, but one effect would surely be an effort on the part of U.S.-based international banks to recover the assets they will have lost by borrowing from surplus nations. To stave off a crisis in the U.S. economy, the banks would need to be saved by a massive investment of overseas capital.

Taken together these reasons make it unlikely that a protective wall itself would stop the increase in foreign investment in the United States.

I am deliberately ignoring the possible link between protectionism and a serious world crisis. For the sake of argument, let’s assume that the protectionist could handle temporary conditional protection so deftly a world crisis would not be precipitated. I have been able to show that even in the absence of such a crisis, American labor is not going to improve its lot with protection. In addition, as I noted at the outset, the effort to get protection is itself costly in terms of jobs and union power. The combined effect of, first, the effort to get protection and, second, actually having it, will spell a further major defeat for U.S. labor.

From Competition to Cooperation

Ending U.S. support for the repression of foreign labor will modify, rather than eliminate, the hard knocks American labor has been taking.

The unrigging of the international labor market by changing U.S. foreign policy will, unlike protectionism, lead to a positive effect for American labor. But it is unable to end its woes. The world system will still be a competitive, profit-oriented system. It will undergo redistributions of wealth among nations resulting from changes in competitive ability, based in turn on changes in productivity. U.S. labor will continue for some time to suffer from the redistribution that made this country a deficit nation.

We must target the competitive, profit-oriented system itself if we hope to do more than modify labor’s vulnerability. In this system, states want to increase their power through large trade surpluses, and corporations want to increase profits through moving capital to low-cost regions. This damages first one and then another nation’s working class. Employment, wages and union security are ephemeral achievements rapidly undone in the competitive struggle of states and of companies.

The way out for a nation’s labor force is not for the nation to withdraw from the global economy by protection. Capital in the new global economy is still too mobile to permit such a withdrawal.

Could perhaps the instability due to competition be checked under the leadership of a single dominant nation? That nation could realize international cooperation in the reduction of trade barriers, in the creation of credit and in the stabilization of exchange rates.

Cooperation secures new markets for the leader nation, but also creates liabilities for it. It extends military security to some cooperating nations, causing a cumulative drain on its own ability to grow. It opens its own markets to cooperating secondary powers, which use this opportunity to destroy cooperation.

Leadership is then short-lived, making instability the norm. There is little pause in the whipsawing of national labor forces. Moreover, even in the periods of cooperation under a world leader, the condition of labor in the leading nation and in a few of the more advanced secondary economies is far superior to that in the remaining nations. The stability of the brief and infrequent periods of leadership is then no solution to the chronic problems of national labor security.

To avoid the hard knocks resulting from competitive redistribution, labor has no alternative but to aim for a global economy based on cooperation. A central goal of such an economy is greater equality in productivity among nations. Equalizing productivity would narrow the disparity in labor costs through raising the standard of living of less developed countries.

How would this be financed? A tax on the profits of the more developed countries would provide the financial base for increasing productivity in the less developed ones. This development tax would grow along with the decline of the military tax, preventing it thereby from creating too great a recessionary pressure. Some of the gains made through exports from a high productivity nation to a low productivity nation would, then, find their way via the development tax, into productivity — increasing investments in the low productivity nation.

Decisions about the investment of development funds would not be left to corporate and state elites, who might use them in ways that promote exports without systematically raising the national standard of living and hence labor costs. The competitive redistribution of wealth, based on seeking out low-wage labor regions, would gradually be undermined with a resulting gain in security for labor everywhere.

Ending U.S. support for repressing foreign labor only clears the way for, without actually moving in the direction of, a cooperative global economy. If the MNCs and the states that coddle them are blocking a return to protectionism, surely they will join forces to crush any initiative for a cooperative global economy.

But at least labor everywhere has a genuine motive for preparing itself to do battle with the MNCs and the state over the change from a competitive to a cooperative global economy-whereas labor lacks any good reason to struggle for protection, a losing battle it can only wage in isolated national units.

*But this need was not met by the weak language of the trade bill Ronald Reagan vetoed in May 1988. Under that bill certain violations of foreign workers’ rights would become unfair trade practices to be sanctioned by reducing U.S. imports. Like the sanctions against South Africa, these would have had little chance of effective enforcement.

March-April 1989, ATC 19