LABOR AND ECONOMIC GLOBALIZATION IN EASTERN EUROPE AND LATIN AMERICA(1).(Statistical Data Included)

It is often asserted that labor unions grow as a country's industrial production expands (Kerr et al., 1960). In this view, industrial growth leads to the concentration of production, which in turn produces strong labor unions. This is because the concentration of production engenders large plant size, and large plant size increases "capital's vulnerability to workers' direct action at the point of production" (Arrighi and Silver, 1984: 184). Yet, while this has largely been the story of many advanced capitalist countries in the post-World War II period, by the 1980s and 1990s, the structure of capitalist production had changed. Expanding industrial production no longer created the same conditions that engender union strength.

Gone are the old Fordist mass production regimes where products were made from start to finish inside the four walls of a factory. Corporations are increasingly breaking down, or segmenting, the production process into its component parts and contracting out these segments to independent producers, both within countries and across borders. This has had a direct and harmful impact on labor's ability to pursue its demands. This is particularly true in less developed countries where the constraints on labor imposed by the subcontracting system make organizing an extremely difficult task. This can be seen in countries such as Mexico and Hungary, where the percentage of workers who are unionized in outsourcing plants is much lower than in factories of similar size in the traditional manufacturing sector.

While the segmentation of the production process has left labor weaker at the point of production, it has not left labor without options. In the second part of this paper, I will explore the case of El Salvador, where the challenge facing unions was even greater than in the cases of Mexico and Hungary. Nonetheless, through the strategic use of national and international allies, and the utilization of certain international norms regarding labor standards, unions achieved some limited but significant improvements in working conditions.

The Debate

Paul Krugman describes current processes of economic globalization as entailing "soulless multinationals and rapacious local entrepreneurs, whose only concern [is] to take advantage of the profit opportunities offered by cheap labor."(2) Yet Krugman is quick to add that this situation should not be lamented because the first stage in economic development is always sweatshops. In a similar vein, Jeffrey Sachs notes that his concern "is not that there are too many sweatshops but that there are too few" (ibid). Sachs' assumption is that sweatshops are an indispensable step toward increasing levels of industrialization and thus development. Early industrial relations scholars would add that industrialization

leads to the generation of wealth, the concentration of labor in large factories, and the formation of strong unions (Kerr et al., 1960; Dunlop, 1993). Empirical evidence suggests that there is much truth to these claims in the history of advanced capitalist countries.(3) Almost without exception, in all developed countries the unionization rate of the industrial/ manufacturing sector is much higher than the national unionization rate. For example, while national-level union density in Belgium is 54 percent, 90 percent of manufacturing workers are unionized. In Germany, 37 percent of all workers are unionized whereas 50 percent of manufacturing workers belong to unions. In the United States, 18 percent of wage earners are unionized compared to 25 percent of manufacturing workers (Western, 1997).

However, the early processes of industrialization and the dynamics of industrialization and unionization that predominated in advanced countries in much of the post-World War II period are not the same as the dynamics that characterize industrial production today in developing countries. For Bennett Harrison (1994), global network capitalism has resulted in the increased centralization of capital and the decentralization of production. Gereffi, Korzeniewicz, and Korzeniewicz (1994) use the term "global commodity chain" to describe the vast webs of interrelated units of production, which entail parent companies, retailers and manufacturers, trading houses, suppliers, and contractors and subcontractors. They write, "Capitalism today thus entails the detailed disaggregation of stages of production and consumption across national boundaries, under the organizational structure of densely networked firms or enterprises" (Gereffi et al., 1996: 1).

In less developed countries, the segmentation of the production process has had a negative impact on labor's ability to organize. The reasons for this can be understood, in part, by exploring the sources of union power within the production process. Alfred Marshall (1920) argued that the power of labor unions is related to employers' demand for labor, final product demand, and the ratio of labor costs to overall costs. The first condition relates to the ability of employers to replace workers, which in turn is related to unemployment levels and skill requirements. Structural adjustment has created a large pool of unemployed in both Latin America and eastern Europe, and the system of breaking down the production process and outsourcing jobs has lessened skill requirements and made worker replacement easier. Thus, structural adjustment and outsourcing can be expected to weaken labor's power.

The second condition refers to the ability of employers to pass wage increases on to consumers through higher prices. But this option is not available in segmented production regimes since local contractors do not control the final price of the product. Lastly, in sub-contracted production labor costs are often the most significant production cost since material inputs are supplied by the multinational corporation (MNC) and thus do not form part of the local production cost structure. As a result, any increase in wages or benefits would dramatically affect the local employer's profit margin and be fought vigorously. Taken together, these conditions suggest that the expansion of segmented (or networked) production regimes weakens labor's power.

Labor's power is also influenced by non-material factors such as shared identities forged when workers are placed together in the same factory and face the same problems. The breaking down of the production process and its dispersion across the globe hinders the formation of shared identities and thus weakens labor's capacity to …