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The New Internationalism

Speaker: John J. Sweeney, President, AFL-CIO
April 1, 1998
Foreign Affairs

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Council on Foreign Relations
New York, NY

Note: Remarks as prepared for delivery

Thank you, Paul, for that kind introduction and thank you all for your warm welcome. I'm delighted at the opportunity of sharing thoughts and exchanging ideas with such a distinguished group.

I was born and raised a few blocks and a thousand miles from these rooms—and my father, an Irish immigrant who drove a New York City bus, would take particular delight in knowing it took me only 64 years to travel those few blocks!

Tonight, I leave discussion of the political perils of the AFL-CIO to the question period, along with the state of America's unions.

Instead, I'll speak more generally about the new internationalism and the challenge to U.S. global policy that I believe will frame much of our political debate over the next few years.

For the last two decades, US economic policy has been devoted to the creation of the global market.

Trade accords tore down barriers.

Global agreements protected property and investment.

Public institutions, from the IMF and the World Bank, to the Ex-Im Bank and OPIC, provided subsidy and incentive—carrots and sticks—to integrate countries into the process.

Today, we experience the blessings as well as the bane of that effort. Communication sends instant messages across the world. Transport girds the globe. Production, marketing, distribution networks are international in reach.

This global market is dominated, not surprisingly, by a handful of great transnational corporations. They claim a steadily growing share of global commerce—one third of all manufacturing exports, three fourths of commodity trade, four fifths of the trade in technology and services.

The market is fueled and foiled by de-regulated capital transactions, with over a trillion dollars a day changing hands in foreign exchange markets, 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—the poster children of the global economy—have been leveled virtually overnight by its changing tides.

I suggest to you that we are now at an historic turning. As the Asian collapse makes clear, the challenge now is no longer how to create a global market, but how to put sensible boundaries on the market that already exists. How to make the market work for the majority and not simply for the few. How to protect us from its excesses.

The drive to forge the global market was led primarily from the suites—the plush offices of banks and corporations, the comfortable seminar rooms of the foreign policy community. The new internationalism—the drive to make this economy work for people, to secure basic worker and human rights, environmental and consumer protections, sensible anti-trust and financial regulation—is being driven from the streets. And signs of that are everywhere.

In Chiang Mai, Thailand two months ago, thousands of children began a global march against child labor. Delegations came from the Philippines, Bangladesh, and Indonesia where 8 and 10 year olds work 14 hour days for eight to ten pennies an hour. They sew the shirts, and hammer rivets into the jeans worn by youngsters their own age in our country.

In Michigan, mothers were stunned when their children grew sick from uninspected, imported vegetables. The Clinton Administration immediately scrambled to increase funding for America's food and drug agencies.

In Mexico, workers in Tijuana's Han Young truck assembly plant finally won recognition for an independent trade union. One of Mexico's notorious maquiladoras, the Han Young factory paid workers $4 dollars a day; for many just getting to and from the plant consumed one-third of their wages. Most were not given masks to protect themselves from suffocating smoke. The plant initially fired the labor activists. But after hunger strikes, legal action, U.S. demonstrations outside of Hyundai showrooms, and international protests, the company—and the Mexican Labor Ministry—are now being compelled to confront the legitimate demands for an independent union.

On Wall Street, investors wonder at the sudden decline of Nike. The "swoosh" is everywhere, hawked by Michael Jordan, Tiger Woods and gaggles of other celebrities. Yet, consumers are turning away from Nike shoes and choosing others like New Balance. Part of the reason for Nike's fall from grace may well be that consumers are voting against Nike's labor practices—given notoriety by Doonesbury cartoons, human rights campaigns, campus protests, and Internet alarms.

Now, at the height of the new global economy, those who know it best are the most worried, for they understand how close to global deflation we were and are. In the wake of the Asian collapse, thoughtful and independent men like George Soros have called for dramatic reforms to limit speculative capital flows.

Will U.S. leaders and the foreign policy community—and the policy elite of other governments—embrace a new internationalism, and make it a centerpiece of policy, thought, and social invention? Or will they continue to see it as a distraction or worse.

Too often, of course, the struggles to create a new approach have been dismissed as protectionist. Those who reach this too simple conclusion fail to understand that working men and women will no longer accept this intellectual double standard. Laws that protect property and copyright are deemed part of a free market system, but those that protect worker and human rights are labeled reactionary. Efforts to free up capital flows are viewed as essential, while efforts to limit their wanton excess dismissed as retrograde.

I believe this attitude must change—and change quickly. Foreign and economic policy makers must see themselves as "present at the creation"—to borrow from Dean Acheson—devising new, accountable ways to impose sensible rules for the global economy.

The new internationalism can not long be deferred, for two central reasons.

First, an untrammeled global economy is morally, and ultimately politically, indefensible. Treasury Secretary Robert Rubin has correctly warned about the "moral hazard" of IMF programs that bail out profligate speculators from their bad debts, encouraging them to gamble again.

But too little has been said about the "immoral hazard" of forcing working people to pay for the follies of others. There is, I am aware, a furious debate about whether the global economy produces a race to the bottom, or provides the basis for sustainable development. For many years, the Asian tigers were held up as proof of the potential benefits of the latter. Now starvation and food riots plague Indonesia. Mass unemployment faces workers in Korea and Thailand. Wage gains of a decade have been wiped out in a moment.

But whatever you believe about economic development, the combination of competitive global corporations and weak governments leads to conditions—a return to the dark Satanic mills of the early industrial age—that cannot withstand scrutiny.

Recently, a Vice President of the AFL-CIO, also a former garment worker, Clayola Brown, returned from Bangladesh. There Tommy Hilfiger, the GAP, Wal-Mart and K-Mart are opening factories, in flight from the higher wages of Hong Kong, Thailand and even China. Over 2100 factories employ 1.3 million workers. 85% are women or young girls. Children as young as seven work twenty hours a day in garment factories. The minimum wage is $23 dollars a month, but employers are urging the government to devalue the currency to stay ahead of their Asian competitors.

Burma is now ruled by a grim military dictatorship that keeps its economy afloat with a mix of drug trafficking and forced labor, labor that is clearing the land in preparation for the construction of a major multinational gas pipeline.

In China, a recent report by the National Labor Committee documents the fact that U.S. companies actually lower standards in China, slashing wages, eliminating benefits, imposing forced overtime. Factories producing garments for export to the US require that workers labor 12 to 18 hour days, six and seven days a week, for 13 to 23 cents an hour.

Some argue that child labor is a necessity for poor countries, and that attempts to ban it are a form of Western chauvinism. Others claim that enforcing internationally recognized, core labor rights—the right to organize, to bargain collectively, to strike—is interventionist, while imposing U.S. defined rules of copyright, and corporate law is free trade

Here is the simple truth: No society benefits from exploiting its children rather than educating them. No society benefits from impoverishing its working men and women rather than empowering them. No culture or creed can long condone slave labor, sweatshop labor, the imprisonment of workers seeking to organize trade unions.

And civilized opinion will not long accept the smooth rationales and ignore the harsh realities.

The Asia collapse suggests a second, compelling reason why we must turn to a new internationalist vision of making the global economy work for working people. That reason is economic necessity.

Look around the world. Europe struggles with slow growth and high unemployment. Russia and the East have yet to recover from their deep depression. Africa is largely written off. Latin America witnesses rising inequality, and roller coaster instability. Asia—the one area of growth and buoyancy—is now reeling. Japan seems mired in stagnation. This global economy is not working very well for most people.

In this country, with the economy as good as it has been in decades, we don't notice this very much.

Workers are finally capturing some of the gains that their labor has produced. But although wages are rising, they have still not regained the ground lost in the last recession. More and more women have gone to work as families struggle simply to sustain incomes that once were provided by a single worker. Inequality is setting new records. One in four children is born to poverty. One in five workers goes without health insurance.

Growth, low inflation, low unemployment are lifting spirits. But to date, the optimism outpaces the reality.

You don't have to believe we are on the verge of global deflation to understand that Henry Ford was right. A prosperous economy requires that workers be able to buy the products that they produce. This is as true in a global economy as a national one. Labor rights, environmental standards, human rights are morally compelling. But they are also economic imperatives.

This combination of moral outrage and economic necessity is already transforming the debate in Washington and elsewhere. From Seoul to Peoria, popular reaction is building. The current, laissez faire, corporate defined internationalism cannot be sustained. If we fail to understand this political and social reality and continue to blindly follow the free market ideologues, we will reap a whirlwind of ugly, destructive reaction.

On fast track trade legislation, for example, there were many, from the right as well as the left, who opposed the passage of any further trade accords. On the right, nationalists call for abandoning the World Trade Organization as a threat to sovereignty. The AFL-CIO and the new internationalists hold a different position. We argue that trade accords must enforce core labor rights and environmental standards. Last year, instead of forging a reform coalition, the administration and the business community tried to roll the opposition. They failed.

On new funding for the International Monetary Fund, there are many, conservative as well as liberal, who argue that the IMF is more quack than cure, that its prescriptions are spreading the very plague it claims to cure. Conservatives argue that the market can solve the Asian crisis on its own.

The AFL-CIO and most progressives understand that doing nothing is too big a risk. We support public intervention to avoid depression, and limit the damage to working people. But the IMF's current practices create both the moral and the immoral hazard I spoke of before. We urged reforms in the IMF as a condition of expanding its funding. The administration accepted some change begrudgingly, but to date has been blocked by growing opposition on the right.

On Most Favored Nation status for China, which will soon be before the Congress again, many, on the left as well as the right, argue that we should not trade with an authoritarian China that suppresses worker organizing, despoils its environment, and represses church and other independent organization. At the AFL-CIO, we argue that the U.S. should engage China. It is too big and too important to be isolated. But we should not pretend that China is engaged in free trade. We should continue to push for worker rights and individual freedoms. We should balance and manage our trade with them, as they do with us.

Instead, the administration and the Congress gave China MFN status. We now have a trade deficit that exceeds $50 billion dollars a year, with a country that buys less from us than Australia does.

And China's devaluation of its currency in 1994 was a major contributing factor to the collapse of the Asian tigers. Now many worry that a Chinese devaluation in the coming months may set off another round of competitive devaluation.

These debates—over trade, international institutions, aid—will grow more fierce in the coming months. The Asian nations have no choice but to export their way out of their crisis. Experts predict the U.S. trade deficit will soar this year. The Economic Policy Institute projects that over one million workers could lose their jobs as a result. The reaction will continue to build.

I believe it essential the United States put its weight behind a new internationalist progressive reform agenda. The charisma of the president, the logic of the Treasury Secretary, the force of U.S. influence and creativity should be moving now to define basic reforms, to enlist other nations in supporting them and bolstering citizen and workers movements that are demanding them.

The U.S. should be leading the way in making basic internationally recognized worker rights, environmental and consumer standards central to the global trading and investment regimes. IMF conditionality, World Bank loans, OPIC and Ex-Im Bank activities, and A.I.D. programs, should be under review as we seek ways to write new rules for the global market.

Secretary Rubin is right that we need a new architecture for global capital and currency markets. But greater transparency is merely a pre-condition, not an answer. We need to find ways to regulate capital flows as George Soros and others have suggested, and to slow short-term speculation, perhaps with a small transaction tax, as Nobel prize winner James Tobin has argued.

The U.S. should be pushing its European and Japanese allies to join with us to define new regulations—enforceable codes of conduct—on global corporations' behavior abroad. We should be aiding governments, worker and citizen movements to stand up for sensible rules, not forcing them to back down.

We have faced similar challenges before. At the beginning of this century, the great corporations and trusts forged a national market and an industrial economy. Then as now, the wrenching transition produced stark accumulations of wealth and power, generated booms and busts, displaced workers and farmers, sparked upheaval and protest.

Progressives of that era joined to organize unions, extend democracy, and impose new rules to make the economy work for people—food and drug standards, antitrust regulation, fair labor standards, a ban on child labor—and eventually, labor rights, social security, consumer and environmental standards.

These reforms did not come easily. They were not granted by the generosity of those Roosevelt called the "malefactors of great wealth." They met fierce resistance. They required worker organizing, citizen movements, a crusading press, leaders willing to challenge powerful trusts. We now face that same challenge once again, only this time at a global level.

All this may sound impossible. But we have seen the power of an idea whose time has come. We saw it in Selma, Alabama. We saw it in Gdansk. In Soweto. In recent months, we've seen in on the streets of Paris, of Bonn, of Brasilia. In the support given public workers in France and UPS workers in the US. In the courage of the Korean unions. In the shining faces of the children marching for the right to a childhood. Across the world, working men and women are striving to defend their dignity in the face of those who know the price of everything and the value of nothing. Now, American creativity and resourcefulness should enlist in furthering their quest, not frustrating it.

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