Nations Built on Lies
Volume 1 – How the US Became Rich
CHINESE ENGLISH POLSKI PORTUGUESE SPANISH
© Larry Romanoff, October, 2021
Part 3 – Labor and Wage Theft
Contents Part 3
A Brief History of US Labor
Child Labor in America
Coca-Cola, Wal-Mart, Apple, Nike, Amazon, Starbucks
A Brief History of US Labor
In contrast to most other industrialised nations, the US has never accepted the concept of labor unions, which were always described and denigrated in the US media as a kind of dangerous socialism that would exploit workers. But it was always true that it was capitalism that exploited workers and socialism that attempted to protect them. Thanks to the media, most Americans today still have this understanding backwards from reality. In truth, from examining the historical record, it is abundantly clear that neither the US government nor its corporations have ever held workers or employees in much regard. There was a brief period after the Second World War during which enlightened corporate self-interest driven by fear produced a rather benign labor landscape, but that was only a kind of illusion which was dispelled by the 1980s when both government and capital reverted to their original colors. Beginning in the 1980s, the numbers of industrial private-sector workers with any kind of union fell by about 70%, largely through the harsh capitalist and legislative climate. The majority of American workers still wanted labor unions, but the anti-union conspiracy was too powerful.
Both the US government and corporations acted to infiltrate labor unions with corrupt politicians and other officials in attempts to destroy them from the inside. When those attempts failed and labor organisers showed signs of being successful, they were either simply murdered or framed and convicted of crimes, and often executed. The US government has for all of its history acted with absolute disregard for the law, whenever the law became inconvenient to the purpose at hand. One of these purposes was the crushing of labor, where the government frequently not only fabricated criminal charges against union organisers but convicted them under laws that had never existed. In one famous case, labor organisers trying to create a mine workers union in Pennsylvania were charged by the state with murder and conspiracy. When these charges failed to hold, the organisers and about a dozen union members were hanged for “obstinacy”.
In February of 2015, Sam Mitriani wrote an informative article titled “The True History of the Origins of Police: Protecting and Serving the Masters of Society” (1), that reflected accurately the origins and applications of the American justice system. Here is a brief edited summary of his comments.
This liberal way of viewing the problem rests on a misunderstanding of the origins of the police and what they were created to do. The police were not created to protect and serve the population. They were not created to stop crime, at least not as most people understand it. And they were certainly not created to promote justice. They were created to protect the new form of wage-labor capitalism that emerged in the mid- to late-19th century from the threat posed by that system’s offspring, the working class. Before the 19th century, there were no police forces that we would recognize as such anywhere in the world. Then, as Northern cities grew and filled with mostly immigrant wage workers who were physically and socially separated from the ruling class, the wealthy elite who ran the various municipal governments hired hundreds and then thousands of armed men to impose order on the new working-class neighborhoods. Class conflict roiled late-19th century American cities like Chicago, which experienced major strikes and riots in 1867, 1877, 1886 and 1894. In each of these upheavals, the police attacked strikers with extreme violence. In the aftermath of these movements, the police increasingly presented themselves as a thin blue line protecting civilization, by which they meant the bourgeois elite portion of civilization, from the disorder of the working class. This ideology has been reproduced ever since, and is still the foundation of American law and justice today, which is one reason corporate executives are virtually immune from prosecution for even the most egregious of crimes while the lower classes will suffer five years in a prison for a minor theft or smoking marijuana.
There was a never a time when the big city police neutrally enforced “the law” – nor, for that matter, a time when the law itself was neutral. Throughout the 19th century in the North, the police mostly arrested people for the vaguely defined “crimes” of disorderly conduct and vagrancy, which meant that they could target anyone they saw as a threat to “order.” In the post-bellum South, they enforced white supremacy and largely arrested black people on trumped-up charges in order to feed them into convict labor systems. The violence the police carried out and their moral separation from those they patrolled were not the consequences of the brutality of individual officers, but of policies carefully designed to mold the police into a force that could use violence to deal with the social problems that accompanied the development of a wage-labor economy. The police were created to use violence to reconcile electoral democracy with industrial capitalism. Today, they are just one part of the “criminal justice” system that plays the same role. Their basic job is to enforce order among those with the most reason to resent the system.
One of the most famous American labor leaders was the Auto Workers’ Walter Reuther, whose socialist views were anathema to the owners of General Motors and other automakers. At one point, while negotiating for worker safety and livable wages, Reuther was shot and seriously wounded in his home, that event followed by two more assassination attempts. Those were followed by the very suspicious crash of a private plane in which he was travelling. Reuther survived that one, but was finally killed in a second equally suspicious private plane crash. (2) (3) (4) As of the time of writing, the FBI still refuses to release hundreds of pages of documents relevant to Reuther’s death (5). Aside from the deliberate killings and frame-ups, the US government, unique among nations, has a long and sordid history of using its military to suppress and brutalise its own citizens whenever they came in conflict with the capitalists who have always controlled the Congress and White House. It has also accumulated a history of equally sordid legislation designed to protect and enhance the profits of its corporate elite at the expense of the people of the nation. (6)
But if we look farther back, we can see the fundamental attitudes toward the non-elite that had been embedded in American capitalist and government DNA since the first days of the Republic. Prior to the late 1800s most people were either engaged in farming, owned a small shop or perhaps plied a trade like carpentry, blacksmithing or tailoring, the remainder eking a living from odd jobs and temporary employment. During this time a massive social change resulted when industrialisation finally took hold, with a large percentage of the public migrating to urban areas in search of employment and therefore shifting from independent farmers and micro-business owners to dependent full-time laborers. In this context, in the minds of both capitalists and government leaders, these workers and their desire for livable wages were the enemies of progress. During this period, workers were almost constantly and universally decrying their virtual wage slavery and lack of work safety while the government was equally universally and very callously employing the military to ensure the safety not of the workers but of the profits of capitalism.
From the late 1800s, the US military was one of the main tools of worker suppression. In Chicago in 1894 US troops put an end to a strike by railway workers, by opening fire and killing dozens of workers. (7) (8) (9) Mining in the US was an extremely hazardous occupation for centuries as it still is today, with strikes by mine workers being especially common. In 1914, US troops opened fire on a group of striking mine workers in Colorado, again ending the strike by killing the strikers (10) (11). A bit later, individuals trying to organise a labor union in a coal mine in Pennsylvania were shot and killed by the company management who were acquitted in a brief trial (11). Even the police were not immune; in 1919 a police strike in Boston was ended when the military was called in to violently end the strike, and many police officers were killed (12) (13). In the same year, a labor organiser in Washington was captured, tortured, castrated and then lynched. (14)
The military weren’t immune, either. In 1932, as the Great Depression became severe, almost 50,000 veterans from World War I, marched to Washington to ask the government to pay a few years early the $625 bonuses they had been promised (15) (16). The soldiers, most with their families, camped on some flat land near the Capital to raise sympathy for their plight, but sympathy was not forthcoming. Instead, then-President Hoover sent in the police, a move that resulted in brutality, violence, and quite a few deaths. When that failed, Hoover sent in the active military to disperse the ‘dissidents’, who had caused no trouble but only embarrassment to the government. The military, led by the great General Douglas MacArthur and assisted by then-Major Dwight Eisenhower (who would later become US President) and the pathologically-renowned George S. Patton, stormed the encampment, firing on the veterans and flooding the camp with tear gas, injuring several thousands and killing some newborn babies (17). MacArthur was so determined to disperse his own former soldiers that he continued with the attack even after receiving an order from the President to cease. The veterans were dispersed and left empty-handed.
By the 1920s, US capitalists and the government had already developed nationwide plans to control workers and their wage demands, creating task forces whose duty was to identify and sabotage all union organisers and critics of capitalism and government. Many were imprisoned without charge and without access to legal counsel. The military had improved in efficiency as well, in many occasions now using bomber aircraft to attack striking workers from the air. In one large miners’ strike in West Virginia in 1921, several thousand soldiers carried on a shooting war with about 5,000 striking miners.(18) When a clear victory seemed out of reach, the US government sent in thousands more troops and employed a chemical warfare unit in addition to bombers and fighter aircraft (19) (20). When the strikers finally surrendered, the survivors were charged with treason and imprisoned. In 1930, hundreds of farm workers were beaten and arrested in California for attempting to form unions, and convicted of “criminal socialism” (21) (22). There are many dozens of examples spanning many decades, of the US military brutally and violently terminating labor strikes by killing the strikers.
It wasn’t only the US military that was engaged in these atrocities. Many large corporations supported standing armies of their own to be used against striking workers, John Rockefeller being one of the worst, but by no means the only example. In 1927, striking miners at one of his mines in Colorado were massacred by his private army using machine guns. (23) (24) (25) Two years later in North Carolina, more groups of striking textile workers were ambushed and murdered (26). A few years later, more than 500,000 mill workers went on strike in South Carolina, a strike that was so violently suppressed by both US military forces and private armies that no one dared try to form a union for another twenty years (27) (28) (29). In 1935, striking electrical workers at a plant in Toledo, Ohio were attacked and killed en mass by more than 1,300 US troops including eight rifle battalions and three machine gun battalions (30) (31). A year earlier, police in San Francisco shot and killed many dock workers during a strike, shootings so outrageous as to provoke a general strike in the entire San Francisco-Oakland region (32) (33). The media were already playing their part by claiming that “communist agitators had seized control of the city”.
This 1914 photo provided by the Denver Public Library, Western History Collection, shows the funeral of Louis Tikas with thousands of fellow miners accompanying his body Newspaper accounts of the time said the funeral procession was “several miles long”.
One particularly infamous event known as the Ludlow Massacre, involved a strike by coal miners against the inhumanity of the Rockefeller family owners, one of the most brutal attacks on workers in North American labor history (34) (35) (36) (37) (38) (39) (40). For background, the workers were forced to work in extraordinarily harsh and dangerous conditions where fatality rates were very high and wages low. Further, the workers were not paid in cash but in paper scrip which could be spent only in the company-owned store that carried very high prices. The mine workers succeeded in organising a labor union that then attempted to institute safety regulations and have increased wages paid in real money. These safety and wage problems had already existed throughout American industry for many decades, but the industrial elites and the government even then were firmly united against laborers and the poor.
In this case, tensions reached a peak when a union organiser was killed by the mine managers, resulting in a widespread general strike against the Rockefeller mining interests and the installation of the labor union. Rockefeller, who controlled much of the region through his mine ownerships, was outraged at the union’s demands, and evicted all the miners from their company-owned houses, leaving them and their families homeless in a wilderness area in the middle of a harsh winter, beginning a seven-month program of continued brutality and repression. The Rockefellers, as did so many other large US corporations in those days, took an astonishingly aggressive stance against the striking workers, hiring hundreds of armed thugs to harass, beat and kill. Rockefeller obtained armored cars mounted with machine guns to drive through the tent areas where the miners were camped and strafe the tents with gunfire, killing many workers and their children. Union members and organisers were kidnapped and beaten. When the private army proved insufficient to destroy the strikers’ will, Rockefeller arranged for the government to send in the National Guard that continued the same belligerent and violent policy. Finally the government ordered the National Guardsmen to empty the miners’ camps, which they did by entering the camps with massive firepower and machine-gunning the encampment in a battle that lasted for almost 14 hours.
This 1914 photo provided by the Denver Public Library, Western History Collection, shows children and some adults posing for a photo at camp Ludlow in south central Colorado.
Two women and 11 children died in a fire at the camp during a battle between the Colorado National Guard and striking coal miners.
One miner approached the National Guard headquarters to attempt the negotiation of a truce, but he was beaten and filled with bullets. That night, Guardsmen entered the encampment and set fire to a number of tents, burning alive many women and children, and shooting dead many others attempting to escape. As news of this massacre spread, workers all across the US went on a national strike, but in the end the power of money and the vicious brutality of the US government were supreme, and the workers failed entirely. No one was ever charged with the murders or other crimes.
Rockefeller wasn’t the only elite capitalist to have his own private army (41) for dealing with his workers. Cyrus Eaton, who owned the Republic Steel Company, deserves special notice, even in a nation dominated by ruthless criminal capitalists, for his tendency to shoot and kill anyone attempting to form a labor union. His company maintained an armory of weapons that included military-grade firepower plus tear gas and other weapons. During one strike, when police proved unable to disperse the strikers with multiple arrests, Eaton’s army moved in with guns, tear gas and clubs, leaving many workers dead and injured, many of the dead having been shot in the back (42) (43) (44). I mentioned earlier the death of the Auto Workers’ Walter Reuther, but his prior life was similar to its end, where in one case he and his staff were severely beaten by the Ford auto company’s private military (45) (46). The Carnegies and other rich American elite industrial families all fit this same mold (47) (48) .
Repression in the US has always had a different flavor than in other nations. In America, any corporation with the ear of the government could count on the assistance of the US military to support their predatory human practices, but they could also form their own private military that would operate with almost total immunity when dealing with the working poor. For those companies without an army, there was a third option, this infamous source of brutality toward unhappy workers being the Pinkerton Detective Agency (49) (50) (51) which, at the height of its power was the largest privately-owned law enforcement agency in the world, employing more men than the US military itself. During this period, corporations would hire the Pinkerton agency to infiltrate unions, intimidate workers and confront strikers with military-style violence. This firm was bitterly hated by almost everyone who wasn’t a major industrialist, the mayor of one US city describing Pinkertons as follows: “They are a horde of cut-throats, thieves, and murderers and are in the employ of unscrupulous capital for the oppression of honest labor.”
The problems with low wages, inadequate or non-existent worker safety, long working hours, the lack of medical care especially for work-related injuries, continued to build until 1945. During the Second World War, wages in the US were frozen while corporate profits reached extremely high levels, which situation created intense bitterness and resentment among industrial workers. During this 5-year period – when strikes were banned because of the war effort – the US experienced more than 14,000 strikes involving almost seven million workers, mostly in the mining, steel and auto industries. Usually, President Roosevelt called in the military to forcibly put down these insurrections.
These labor problems increased after the war, when the wartime wage freezes and bans on strikes were removed. The first six months of 1946 was a period the US Labor Department now calls “the most concentrated period of labor-management strife in the country’s history”, (52) (53) (54) when virtually the nation’s entire workforce finally rebelled against decades of brutality and injustice. American workers en masse and in totality, filled with rage and frustration at their system-induced misery, finally reached the point where they were defiantly unwilling to slave in dangerous and low-paid occupations while the corporations and their elites celebrated unprecedented and stratospheric profits. In January of that year, 200,000 electrical workers called a strike, followed by 100,000 meatpackers and a few days later almost a million steelworkers staged the largest strike in US history. This was quickly followed by several hundred thousand coal miners striking and disrupting the electricity supply for much of the nation, immediately followed by many hundreds of thousands of railway and oil industry workers. The US government, true to its roots, used the military to take control of all these industry locations and President Truman threatened publicly to hang these striking workers (55) (56) (57) whom he called traitors, and for whom he proposed severe criminal penalties. It was in this environment of unprecedented social unrest that Walter Reuther finally met his end.
Then, and almost suddenly, the climate changed, due primarily to the very real fear among the elite of a second American revolution. These circumstances of resentment and revolt were so widespread as to have rapidly created a society so unstable it had become ungovernable, with the nation in anarchy and facing an imminent economic collapse. It was this that forced a revision of the social contract with new norms that included a minimum wage and regular workweek along with regular and increasing wages and the expectation of steady and perhaps permanent employment. Holidays, health care and other benefits were eventually added. It was this new social contract of labor stability, increasing real wages and narrowing income disparity that produced the superior economic performance the US experienced for almost forty years. It was this increased labor consistency and wage equity producing the vast improvements in wages, working conditions and social equity that permitted even factory workers for the first time in history to own homes, cars, boats, and to take regular vacations.
Perhaps even more importantly, this huge adjustment in the social contract, and the increased wages, produced for the first time in American history a widespread access to higher education for children of the middle and even lower the class, since American families with a living wage from employment could afford to abandon the meager income from child labor and leave their children in school. The people were filled with suddenly boundless expectations for the future as this fundamentally socialist approach produced a thriving American economy simultaneously coupled with transforming technological developments. It was these children born during and after the Second World War, the first generation of Americans who grew up in an atmosphere of hope. It was this context that produced poll results for the first time in American history where citizens reported increasing hope for the future and expected their childrens’ lives to be better than their own. None of these sentiments existed on any scale prior to this quasi-revolution. It was only the universal and almost uncontrollable labor revolt and genuine fear of a widespread and total public uprising that produced these massive social changes that resulted in the creation of the American middle class. All this was the result of America’s brief transformation from a brutal “free market” capitalist society to a socialist democracy. But it wasn’t to last.
In typical American style, having been forced to abandon their sins, the elites not only took credit for their new excess of Judeo-Christian virtue but began to propagandise yet another historical myth with America suddenly being redefined as the land of opportunity, and thus was born the American Dream. It was all propaganda. American workers went in short order from being some of the most abused and brutalised laborers on the planet to those for whom life suddenly contained more than hopelessness and drudgery, and the propaganda machine, led by Hollywood, went immediately into high gear to convince Americans that things had always been this way – good, and improving. And they didn’t stop there. The Dream expanded by the year, rapidly leaving behind thoughts of valuable but boring regular jobs to be replaced with dreams of riches and success that were possible in no other nation. And of course, the elite capitalists were busy plotting to relieve this new middle class of all its money by promoting consumerism and a ‘standard of living’, firmly entrenching the consumer society as a way of life. It was all a hoax generated by a massive propaganda campaign perpetrated on a gullible public to replace revolutionary resentment against the elites with false hope for a fictitious future.
This ‘golden era of labor’, the new social contract and the attendant propaganda were not only a hoax and a myth but also a mere temporary diversion while the elites regrouped and rebuilt their political and military strength that had served them so well for so many prior decades. The elites and their secret government were never pleased with the financial sacrifices they had made in sharing money with the peasants of America, and the situation could never have lasted. Many authors and historians today agree that an operative plan exists to eviscerate the US middle class. Their conclusion is correct but many miss the essential flavor which is that the top 1% are not stealing money from today’s middle class; rather, they are reclaiming what had always been theirs. Their generosity in sharing wealth with the peasantry, and thereby creating America’s middle class, was an anomaly forcibly thrust upon them which they are now reversing by recovering all that wealth still residing in the middle and lower classes. In simple terms, they want their money back. Plans to bring to an end all that peasant happiness and confidence in the future, and to loot all those middle-class bank accounts, had already been made during the 1970s and were enacted with a vengeance when the US FED engineered the vicious recession in the early 1980s. And that was the beginning of the end. The 2008 financial crisis, also engineered by the FED, was the middle of the process. The end is still to come, and wage theft is one method of accelerating it.
Then we had Paul Krugman, in an article in the NYT on March 2, 2015:
“Then there’s history. It turns out that the middle-class society we used to have didn’t evolve as a result of impersonal market forces – it was created by political action, and in a brief period of time. America was still a very unequal society in 1940, but by 1950 it had been transformed by a dramatic reduction in income disparities, which the economists Claudia Goldin and Robert Margo labeled the Great Compression. How did that happen? Part of the answer is direct government intervention, especially during World War II, when government wage-setting authority was used to narrow gaps between the best paid and the worst paid. Part of it, surely, was a sharp increase in unionization. Part of it was the full-employment economy of the war years, which created very strong demand for workers and empowered them to seek higher pay. The important thing, however, is that the Great Compression didn’t go away as soon as the war was over. Instead, full employment and pro-worker politics changed pay norms, and a strong middle class endured for more than a generation. Oh, and the decades after the war were also marked by unprecedented economic growth.” (58)
I find it astonishing that Krugman should be so ignorant about his own country’s economic history. He not only has his facts wrong, but his understanding of events appears pre-pubescent at best, then he finishes by trivialising with a foolish comment one of the most important economic events in American history: “Oh, and the decades after the war were also marked by unprecedented economic growth.”
James Petras categorises this time as The Great Transformation (59), when the US government, the FED, the bankers and the large multinationals took their alarming ideological turn to the extreme right. As you will see a bit later, this was when labor became disposable and the social contract between employer and employee was terminally severed along with all pretensions of loyalty, but this trashing of the social contract was not a result of the recession. Instead, it was the purpose of Volcker’s deliberately-engineered recession to facilitate the unilateral rewriting of the contract. It is important to understand that the severe economic contraction in 1983 was not an accidental disaster resulting from mysterious market forces; it was deliberately engineered and executed by the elites, by the US FED and the Jewish European bankers who own the FED. Paul Volcker, as Chairman of the FED and acting under instructions, induced yet one more savage recession precisely intended to rewrite the entire financial and corporate landscape as well as trashing the social contract that had existed for forty years. (60) (61) (62) (63)
The plans for destroying the post-war social contract and reconfiguring the economic landscape were being made and put into effect almost immediately after the contract was first written. The economist Edwin Dickens examined records of the meetings of the FED’s Open Market Committee from the 1950s to the present, with his analysis proving the FED’s actions were consistently intended primarily to benefit the top 1% by creating conditions to make workers more insecure and therefore more compliant in terms of wages and working conditions. He identified repeated occasions where the FED deliberately contracted the money supply and credit immediately prior to the expiry of major union contracts, intending this to drive down wages and benefits during the impending negotiations. John Maynard Keynes was warning the world about the FED and other private central banks when he wrote “the object of credit restriction is to withdraw from employers the financial means to employ labor at the existing level of wages and prices … intensifying unemployment without limit, until the workers are ready to accept the necessary reduction of money wages under the pressure of hard facts.” (64) In other words, class warfare. Contrary to propaganda and popular belief, the US FED’s policies have never been a matter of monetary discipline, but of class discipline through control of labor. It should be obvious that the FED executing policies to maintain full employment would be self-defeating since it would serve only to create class conflict between capital and labor, at least in America’s predatory style of capitalism. “The Federal Reserve serves the needs of the powerful. Its role is to protect capital against the interests of labor. In order to maintain labor discipline, the Federal Reserve Board is entrusted with the task of maintaining a level of unemployment high enough to keep workers fearful of losing their jobs.”
Upon his appointment as Chairman of the Federal Reserve, Volcker announced a determination to break inflation, but his real determination was to permanently break the back of labor. Volcker literally launched a class war on the working lower and middle classes of America, fully intending to spill blood. His pronouncements about fighting inflation – which the FED itself caused, but which was now being blamed on labor – was propaganda meant only to silence the masses and keep them ignorant of the vicious assault he was planning against them. His first act was to tighten the money supply to such an extreme that he immediately plunged the country into the worst economic downturn since the Great Depression, and let up only when the entire US financial system was itself threatened. During all of this blood-letting, Volcker’s only interest appeared to be the terms of labor contract demands and settlements. His only determination was that wages would fall, stating repeatedly that “The standard of living of the average American has to decline” (65) (66) (67). The corporate elites – the top 1% and the bankers – were increasingly laying fictitious blame on domestic wages, but it was only greed from the memory of past unconscionable profits that was driving them. Business Week inadvertently identified the class-war nature of Volcker’s actions when it stated in an editorial, “Some people will have to do with less. Yet it will be a hard pill for many Americans to swallow – the idea of doing with less so that big business can have more” (68). And that was the entire story.
Michael Mussa, director of the IMF’s research department, highly praised Volcker’s approach, writing, “The Federal Reserve had to show that when faced with the painful choice between maintaining a tight monetary policy to fight inflation and easing monetary policy to combat recession, it would choose to fight inflation. In other words, to establish its credibility, the Federal Reserve had to demonstrate its willingness to spill blood, lots of blood, other people’s blood.” (69) And spill “other peoples’ blood”, he did. By the time Volcker was finished, millions of manufacturing jobs had disappeared, wages had dropped by 30% or more, and the industrial Midwest never recovered. Another arrow in his quiver was deregulation, intended to further lower wages and break the back of US labor. As one columnist wrote, “Interestingly, the intended enemy of this war – the workers – went unmentioned in this recollection, as did the collateral damage to farmers and the Latin Americans. But what had workers done to make the state treat them as enemies? Were these people culpable of some evil act for wanting more than a pittance?” When Obama remarked in a recent speech that “starting in the late 1970s, the social contract began to unravel”, he was fully aware of the causes but chose not to state them.
There was once an amusing cartoon series in the US titled ‘The Wizard of Id’ in which, in one cartoon some poor peasants accosted the King to ask, “We thought you declared a War on Poverty”, to which the King replied, “I did”. The peasants then asked, “Why are we still poor?”, to which the King replied, “Because you lost”. And that perfectly reflects Volcker’s beginning of the Great Transformation. And while the proletariat were licking their wounds and contemplating their new proximity to poverty, the American bourgeoisie, the top 1%, were equally as successful in re-applying those stolen wages to more useful purposes. This is why the top 1% captured virtually all income and asset gains since that time and why corporate executive salaries grew from ten times that of the average worker to several hundred times that level. CEOs who had once earned $300,000 per year were now earning $20 million, often being rewarded more for incompetence than ability. In what should have been a stunning condemnation of American capitalism, a study by Michael Jensen of Harvard’s Graduate School of Business showed that 95% of all CEO contracts provided enormous severance packages even for executives guilty of fraud or embezzlement (70). In one typical case, after announcing that under his leadership Merrill Lynch had lost $8 billion in one quarter, Stanley O’Neal was ‘terminated’ with more than $160 million in stock, options, and other retirement benefits (71). And Warren Buffett told his shareholders, “Getting fired can produce a particularly bountiful payday for a CEO. Indeed, he can ‘earn’ more in that single day, while cleaning out his desk, than an American worker earns in a lifetime of cleaning toilets. Forget the old maxim about nothing succeeding like success: Today, in the executive suite, the all-too-prevalent rule is that nothing succeeds like failure.” (72)
Until the late 1970s, Americans had better lives with their comfort and financial security having greatly increased, with family incomes doubling or tripling since the revolutionary turmoil of 1946. Then, thanks to the US FED and its friends and owners, the party was over. Wages fell, household incomes dropped, prosperity slowly evaporated, and both the American middle class and the American Dream were on their way to extinction. Few realised at the time that Volcker’s recession was not a temporary anomaly as other recessions had appeared to be; this one was a permanent and on-going assault. John Kennedy was famous for saying that a rising tide lifts all boats but, as someone wrote, this time “a growing number of boats have been chained to the bottom”. And that has proven true. Since then, productivity has risen markedly while wages remained stagnant and even falling. Good jobs have increasingly disappeared to be replaced by low-wage employment. Benefits have been drastically cut and employment has become much less secure. It began with the destruction of labor and deregulation, continued with globalisation and outsourcing, and progressed to financialisation and what we call “Wal-Martisation” and the Task Rabbit economy – the replacement of well-paying full-time employment with part-time poverty. By the early 1980s, the Treaty of Detroit had been unilaterally repealed and the golden age of labor was at an end.
“If Volcker’s and Carter’s attacks on unions were indirect, Reagan’s were altogether frontal (73). In the 1980 election, the union of air-traffic controllers was one of a handful of labor organizations that endorsed Reagan’s candidacy. Nevertheless, they could not reach an accord with the government, and when they opted to strike in violation of federal law, Reagan fired them all. Reagan’s union busting was quickly emulated by many private-sector employers.” And indeed, virtually every large corporation followed Reagan’s lead by deliberately forcing strikes as a tool to destroy their unions. As one author noted, “the age of broadly-shared prosperity was over”. As was corporate loyalty. At the beginning of the 1980s, a Conference Board survey found that a majority of executives agreed on the importance of employee loyalty and that it should be rewarded, but only ten years later, only 5% held this opinion. Jack Welch, the CEO of GE, was quoted as saying, “Loyalty to a company is nonsense”, and made clear that in the future his firm would be rewarding only stockholders and not employees. Under Reagan, the deregulation of the corporate and labor markets was intended to facilitate the destruction of what we can call the ‘job for life’ social contract and to remove labor unions from the landscape altogether. It eased the transition to out-sourcing and the final de-industrialisation of the US economy as well as severely weakening the power base of the political Left. All of this was intended only to resurrect the slave labor landscape of the 1920s and prior, to turn American labor into a powerless, odd-job, Task Rabbit contract-employee society.
In 2013 Robert Kuttner wrote a thoughtful and intelligent article titled The Task Rabbit Economy (74), in which he described the pathetic labor situation in the US today, the plight of perhaps 40 million Americans having been reduced to part-time, casual, occasional and odd-job labor in order to survive. In his article he included this sentence: “As we try to figure out why the United States is becoming an economy of ever more casual employment and how to reverse this trend, we had better get the answers to these questions right.” I feel sorry for Mr. Kuttner; he looks, but he doesn’t see. In spite of all the facts confronting him, he still wants to believe that this destruction of labor in America was some kind of unfortunate accident which his government and politicians desperately want to repair. But the truth is they don’t want to repair it. They caused it. They brought it about. They wanted it to happen, to return American labor and capital to the pre-war condition; the FED-induced recessions, perhaps especially those of 1983 and 2008, were meant to facilitate this reversion. This transformation is not yet complete; there is more to come.
We need only look at the historical record to realise the changes were too drastic and too widespread to have resulted naturally from a simple economic downturn. Almost as soon as the recession hit and millions of people were losing their jobs and homes, the large corporations, as if on command, leapt into the process of suddenly terminating millions of employees and rehiring them as contract workers. That was neither accidental, nor a result of economic hardship and necessity; it was part of the plan to return to the pre-war status of capital-labor relationships and income disparity. And it succeeded. The top 1% have captured virtually all of the income gains since 1980 while at least half of the middle class has become impoverished and descended into the lower class, with the planned income disparity in America today approximately equivalent to that of many nations in Central and South America. One columnist stated the situation perfectly when he wrote, “Only if the suppression of labor’s power is made part of the equation can the overall decline in good jobs over the past 35 years be explained. Only by considering the waning of worker power can we understand why American corporations, sitting on more than $1.5 trillion in unexpended cash, have used those funds to buy back stock and increase dividends but almost universally failed even to consider raising their workers’ wages.” (75) His assessment is 100% correct.
Psychologists know that dread – the anticipatory fear of an event – can produce more anxiety and can, if prolonged, be even more damaging, than the event itself. They also know that the loss of a job is one of the most damaging experiences to the human psyche, often worse than a divorce or the loss of a limb. In these latter cases, the psyche recovers, even if slowly, and the victims return to normal. But unemployment carries more arrows with which to wound, one of these being a degradation of social and financial status. Spouses and children often suffer wrenching emotional distress from losing their standard of living and the consumption level they had enjoyed. This is especially true in the moralistic and judgmental Christian society of America where ‘winners’ are idolised and ‘losers’ are despised. Richard Layard, a highly-respected British economist, wrote that unemployment was a very special problem that “hurts as much after one or two years of unemployment as it does at the beginning”. What this means is that if workers generally have a fear – a dread – of becoming unemployed, any drop in employment rates will likely silence their discontent. They become malleable and compliant, non-complaining.
And of course, this psychological knowledge didn’t escape the attention of the US FED, and formed a pillar of US economic policy when Alan Greenspan was Chairman of the FED, speaking of what he called the “traumatized worker” (76), referring not to those unemployed but rather to those with a fear of unemployment. As Robert Woodward reported, Greenspan saw the traumatized worker as “someone who felt job insecurity in the changing economy and so was resigned to accepting smaller wage increases. He had talked with business leaders who said their workers were not agitating and were fearful that their skills might not be marketable if they were forced to change jobs.”
In testimony to the US Congress, Greenspan said bluntly that “The rate of pay increase still was markedly less than historical relationships with labor market conditions would have predicted. Atypical restraint on compensation increases has been evident for a few years now and appears to be mainly the consequence of greater worker insecurity.” It was due to this fear and the consequent gutting of American employment that wages stagnated and that both corporate profits and income inequality soared to such heights in the US, much the same as in the early 1900s and during the Second World War when wages were frozen while corporate profits were not. Of course, Greenspan wasn’t blind to the causes of the enormous increase in income disparity but, evasive and dishonest as always, he claimed that “There is nothing monetary policy can do to address that, and it is outside the scope, so far as I am concerned, of the issues with which we deal.” Of course, that was a big lie since not only was the FED primarily responsible for the income disparity, it deliberately created the conditions to bring about its occurrence. Massive income disparity in America was not an accident. It was a plan. In fact, it was exactly the same plan George Kennan outlined in 1948 for the US versus Asia and the world, with the fruits of Kennan’s international income disparity plan flowing to precisely the same people – the same 1% – as the domestic fruits of the plans of Volcker and Greenspan. And just as in the century prior to the 1940s, the American government, driven by commitment to the top 1%, uses its military power to suppress dissension. Today it is militarised police forces and the Department of Homeland Security instead of the regular military, and Occupy Wall Street instead of striking coal miners, but all else is the same.
In this new race to the bottom, some parts of the US have already successfully reverted to the identical labor situations that existed there 100 or more years ago, corporate farms in Florida being one typical example. Florida agriculture, dominated by huge agri-business firms, is a multi-billion-dollar industry that is highly labor-intensive and relies on the most ruthless exploitation of domestic and foreign workers (77). The day begins at 4:30 AM and includes at least ten hours of work in 90-degree heat with back-breaking work and exposure to dangerously high levels of pesticides. Workers must pay $50 per night to sleep in roach-infested slave camps and must pay high charges for food and other essentials; they work under the supervision of armed guards and are not permitted to leave. Many of these camps are surrounded by high fences topped with razor wire just as in prisons, and many have been whipped, raped and threatened with death if they attempt to leave the camps. This industry is of course illegal, but is widespread and ignored by the US government. It is also exacerbated by corporations like Wal-Mart and the huge supermarket chains ruthlessly using their buying power to drive down wages and destroy working conditions. With circumstances such as these existing in so many parts of the US today, we have no doubt about the terms of the new social contract in today’s America.
Just so it doesn’t go unmentioned, the US wasn’t the only country where the American government has employed these tactics in the past and still freely employs them today. The US has often sent its military to invade other nations on the pretext of defending democracy or ‘protecting American interests’, but in reality using the US military to violently put down strikes at American companies throughout Central and South America as well as in Asia, and including China. I have elsewhere included a list of US military interventions, which contains official reasons for each item, listing causes like “protecting American interests, suppress civilian general protest strike, battle civilians during anti-US protests, put down anti-American business protests, control anti-American civilians, war against civilians to protect dictator”. All of these and more were purely commercial endeavors, with the top 1% using the public power of the US military as a private tool to brutally enforce what was effectively slave labor by American companies owned by these same people in dozens of nations. I have already written of General Smedley Butler’s claims that he and his US marines were busy for decades acting as murderous gangsters for American capitalism and its bankers. This is what he was talking about. It was for this reason the US began supplying its 50 or so brutal puppet-dictators with high-grade weapons and civilian suppression training – to save the US military the expense and trouble of repeatedly invading these nations to put down civilian labor protests against the inhumanity of American multinationals and international bankers. This is yet one more way the US became rich – by using its military to enforce a virtual slavery on the working populations of dozens of poor nations. When I wrote earlier that the US “cannibalised” much of the world, those words were not chosen lightly.
Child Labor in America
Miners: View of the Ewen Breaker of the Pennsylvania Coal Co. The dust was so dense at times as to obscure the view. This dust penetrated the utmost recesses of the boys’ lungs. A kind of slave-driver sometimes stands over the boys, prodding or kicking them into obedience. South Pittston, Pennsylvania. Image credit: https://rarehistoricalphotos.com/child-laborers-newsboys-1910/ Some more pictures available here: https://rarehistoricalphotos.com/child-labor-america/
Many forms of child labor, including indentured servitude and child slavery, have existed throughout American history until the recent past but became more widespread and organised as industrialisation increasingly brought families into the factories and workshops of urban areas. Factory owners generally preferred children because they were cheaper, more manageable, and less likely to strike. Children constituted about 25% of the manufacturing labor force of the industrialising Northeast, and 40% to 50% in cotton and wool mills.
The Industrial Revolution in both Britain and America spawned the factory system that William Blake categorised as “those dark Satanic mills” that exploited and oppressed children as young as six years old. These children were most often locked in the factories for sixteen hours a day, and suffered terribly. Children were constantly exposed to toxic industrial chemicals and heavy metals, resulting in loss of vision, paralysis, mental illnesses and death. Those late for work or with insufficient productivity were frequently severely beaten. Their lack of maturity and experience coupled with pitifully primitive and unsafe machinery, and fostered by the most cruel disdain on the part of owners, resulted in countless hundreds of thousands of mangled little bodies. It was a daily occurrence that childrens’ hands and arms were caught in machinery and torn off. “Little girls often had their hair caught in the machinery and were scalped from their foreheads to the back of their necks.” Almost always, these children who were wounded or crippled in the factories, were simply thrown outdoors and left to die in the streets of their injuries. (78) (79) (80) (81) (82) (83) (84) As John Foster Dulles was so fond of telling us, “There are only two kinds of people in the world: Christians who believe in capitalism, and the other kind”.
Credit Image: https://www.history.com/news/child-labor-lewis-hine-photos
In the late 1800s and early 1900s, many individuals and social groups attempted to pressure the US government to regulate or ban the worst excesses of child labor, usually without success. Even on the few occasions when a child labor law was passed, it was immediately rescinded. In 1916 Congress passed the Keating-Owen Act as a first attempt to control child labor by forbidding the interstate transportation of goods made in factories that employed children, and restricted the workday to eight hours. The US Supreme Court quickly declared the law “unconstitutional”. Congress then passed a second law that heavily taxed the profits of factories employing children but the court, pressured by the Drexel Furniture Company, also quickly declared this law unconstitutional. Many women’s groups put pressure on Roosevelt to bring an end to the tragedies of child labor, but Roosevelt was once again true to his elite roots and uninterested in labor reform. It was only just before the onset of the Second World War that new labor laws were passed which contained some restrictions for child labor. Most economic historians have concluded that the primary factor for the reduction of child labor was not labor legislation but rising incomes that permitted families to keep their children out of the work force and send them to school instead. In other words, the US government, controlled by its ‘invisible people’ did nothing to prevent or even ease the miseries of child labor, this travesty ceasing only through an unplanned reduction in poverty which was itself brought about by fears of another American revolution.
The American robber barons bitterly resented these restrictions and, true to their Judeo-Christian roots, turned to God and religion to defend their profits. They claimed the lack of work would turn children into idle tools of the devil and would destroy their initiative and self-reliance. Many of these companies cooperated in mounting a large propaganda campaign urging all Americans to accept their “solemn responsibility to the country” to ensure child labor laws were never permitted passage, claiming their intention to “save the young people of all future generations from moral and physical decay under the domination of the devil himself”.
Credit Image: https://www.history.com/news/child-labor-lewis-hine-photos
Despite all the hypocritical noise made by the US State Department about child labor in the Americas or Asia, child labor is still common in the US today. Kruse and Mahony did a recent comprehensive study of current child labor in the US and estimated that, at the least, many hundreds of thousands of minors are employed during a year, at least some in hazardous occupations, working well over 100 million hours per year and paid almost $600 million. Family farms have always taken advantage of family labor, even the youngest contributing whatever effort they were capable of making. Labor was scarce and expensive, and often a large family was necessary to ensure a labor supply. But family farms are not the issue at hand. Current estimates are that about 10% of farm workers in the US today are children, most employed in industry, with few of them working on family farms. Most US farms today are owned by large agri-business corporations that are heavily mechanised and employ great amounts of pesticides and other chemicals. The child laborers on these industrial farms are often as young as seven or eight years old and can work 14-16 hours per day, seven days a week. They receive only short lunch breaks and are not even supplied with toilets or drinking water. The federal minimum wage is $7.50 per hour but these children are often paid as little as $2.00.
One would think that any knowledge of this past history would be sufficient to produce revulsion to any thought of using small children as laborers, but apparently not. In 2011 US Senator Jane Cunningham from Missouri proposed the total repeal of all child-labor laws, at least in her state, permitting even small children to return to the mills. Tellingly, her proposed law would remove all government authority to inspect locations that employed children or to force them to maintain employment records. Her claim is that this law would “loosen an overly broad prohibition on child labor”, and disingenuously pretended she wanted only to ‘legalise baby-sitting’. (85) (86) When this woman was widely attacked for her repugnant proposal, she blamed the “hysteria” on “misinformation and politics”.
The economic theory of slavery continues today in a practice we now term “wage theft. Here is the rest of the story. During 2014, the New York Times and other media sources ran several articles on what is now called wage theft, the corporate practice of underpaying staff which gives signs of becoming an epidemic in the US and today afflicts higher-paid white-collar workers as well as hourly employees. ” (87) (88) (89) (90). The methods and tactics appear to be limited only by the imaginations of employers, but include paying below the legislated minimum wage, forcing staff to work extra hours, refusing overtime pay and stealing tips from restaurant staff. Many employers apparently demand staff sign blank time cards, then insert false numbers for hours worked. In one reported case, Google, Apple, Intel and Adobe were involved in a large antitrust lawsuit for having colluded in a scheme to not hire each other’s staff, thereby severely depressing wages for engineers and other higher-paid staff in all of Silicon Valley who claim they were cheated out of $3 billion in lost wages. Various government departments in many US states and cities have recovered tens of millions of dollars for some groups of workers, but authorities claim these recoveries are a minuscule portion of the existing total, and that wage theft may be the largest continuing financial crime in the country, one that appears to be increasing every year. In many companies and industries, workers testify they were forced to work as much as 90 days in succession, often for 70 hours per week, with no overtime pay. Many firms, Fedex being one, claim their employees are really independent contractors and therefore not entitled to overtime nor, in many cases to statutory benefits. McDonalds and Wal-Mart appear prominent in some of these lawsuits but the practice is widespread in the US. In another editorial in 2014, the New York Times wrote that job growth in the US was so slow most economists were claiming “it would take until 2021 to replace the jobs that were lost or never created in the recession”, a tragic social situation especially considering that corporate profits were at an all-time high and many companies were sitting on huge reserves of cash. Productivity has increased substantially while wages have in fact been falling, a condition not caused by ‘market forces’ in any sense but rather from a plan to enhance profits at any cost.
After the savage FED-induced recession in the early 1980s, Western governments, the international bankers and their multi-national corporations conspired to rewrite the social contract, after which wage theft became rampant and the attack on the middle class was no longer hidden. As one example of many I could cite, a regional telecom company in Canada fired without notice about 3,500 people, 30% of its workforce. The company re-hired more than 3,000 of them in the next quarter, but as contract workers only, with salary cuts of 10% to 20%. However, in addition to the reduced wages, the company was no longer responsible for paid vacations or statutory holidays, nor sick leave or training costs. The company was no longer legally responsible for providing statutory benefits, and therefore avoided the costs of pensions, health care, unemployment insurance, and much more. In one swoop, the company reduced its total wage bill by 50% or more, this enormous addition to corporate profits extracted entirely from the pockets of the employees. Literally thousands of companies did the same with at least a portion of their staff, this being one of the main reasons corporate profits soared after the recession and one of the main reasons Western firms are today sitting on a combined cash pile of trillions of dollars. This flood of companies rushing to contract labor (and outsourced labor) was an undisguised assault on the middle class, with the only possible result (and therefore a clear intention) to impoverish the bottom 90% and vacuum all revenue into the boardroom. And of course, this was in fact the result. Since the late 1970s and early 1980s, real incomes in America (and in other Western nations) have remained static after inflation, meaning no effective pay increases for about 40 years. Prior to this time, wages had constantly increased with productivity, this pattern so consistent that economists taught this as a natural law. But the bankers and industrialists repealed this law sometime in the late 1970s, and real wages have not risen since then even though US productivity had increased almost every year. This was due in large part to the US deregulation of the financial industry, permitting not only such travesties as 2008 but opening the doors to siphoning wealth from the workers and out of the corporations into the hands of the top 1%.
Temporary employment agencies can fill a need in a nation’s labor market since it often occurs that companies in many industries require additional labor during vacation periods or high seasonal demand. Corporate managers appreciate them because a single phone call can produce the requisite number of workers for a day, a week or a month. But the senior executives of American MNCs appreciate them for other reasons, the main one being that these temporary workers by definition are paid only an hourly rate, often the legal minimum wage but, even more importantly, are not entitled to the range of statutory benefits which include health care, pensions, unemployment insurance, legislated termination notice periods, pregnancy and sick leave, and many other such requirements. Many statutory provisions apply only to permanent staff, so you can see the temptation. This American labor practice has been attracting increasing government attention in many countries, the alarming tendency to outsource permanent, full-time staff to temp agencies, primarily to avoid the cost of paying statutory benefits but also to escape responsibility for a host of other actions which would otherwise be illegal. Coca-Cola is famous for this American practice. In many nations, Western and other, it is illegal to hire full-time permanent staff through temporary agencies or to employ outsourced labor for other than temporary positions. But, if you have a clever lawyer play with the rules, you can find ways to pretend these are really only “temporary” employees, and you can pay them much less while avoiding all responsibility for their welfare and statutory benefits.
To quote a Huffington Post article, (Les Leopold; 10/27/2015) ‘Wage Theft Comes to America’, The Economic Policy Institute (EPI) provided a national estimate: “The total annual wage theft from front-line workers in low-wage industries in the three cities approached $3 billion. If these findings in New York, Chicago, and Los Angeles are generalizable to the rest of the U.S. low-wage workforce of 30 million, wage theft is costing workers more than $50 billion a year.” And this conclusion refers only to low-wage workers like clerks at Wal-Mart, the staff at fast-food chains and similar; it does not include the losses to the middle class which would be almost infinitely greater. This is free-market capitalism operating in an unregulated nation, where the immense social destruction is obvious to anyone who looks. The most telling feature is that the once-large American middle class has mostly disappeared, more than half of it sliding precipitously into the lower class during 2007-2008 when the entire American middle class suffered an average loss of 50% of their total assets. Many more formerly middle-class have descended since then, a condition that appears permanent, increasing, and irreversible. One of the methods increasingly used to entrench this social condition is the outsourcing or reclassification of staff as contract or temporary workers, the companies shedding all signs of social responsibility.
Many companies push the limits in myriad other ways, one of which was Apple’s famous “warranty-avoidance” warranties where the company regularly charged Chinese customers about 50% of the original cost of a device, for warranty repairs that were supposed to be free (91) (92). The company also made repairs so difficult and time-consuming to obtain at Apple stores that many customers paid for their own repairs at other shops. So, with luck, ‘wage theft’ can extend even to a company’s customers. Many firms do something similar by avoiding product recalls, the auto industry for decades being notorious for this, just another way to privatise the profits and socialise the losses. We had classic examples of the Ford Pinto, of General Motors’ famous ignition switch, Takata’s air bags and Volkswagen’s faulty transmissions in China, in all cases involving badly-designed products which could potentially kill a great many people but were expensive to fix. I would note here that in all the merger and acquisition activity we read about, the profitability of the company being purchased is only part of the equation, and perhaps only a small part. The reason is that in addition to the potential wage theft of the company’s own staff, there is lurking in the background a much larger pool of wages to plunder, that of the company’s supply chain. Since wage theft is such a major source of corporate profit today, the longer a company’s supply chain and the more people employed in that chain, the greater the profit potential. Apple is an ideal example because the company has a long supply chain with one and a half to two million workers, all of whose pay packets can be plundered, and this was the source of virtually all of Apple’s huge profits. I doubt very much that without this massive theft of wages Apple would have had any profits.
There are two other aspects to this theft from workers, one being the Wal-Mart syndrome of violent opposition to labor unions which has increasingly affected corporate America at all levels and which leaves the vast majority of workers with no advocate and no solution other than class-action lawsuits which are seldom successful. The other is also a Wal-Mart specialty. In the US, Canada, and other Western countries, a full-time job is generally defined as one consisting of 40 hours per week, at which level employers must provide a full range of benefits that includes health care, pensions, unemployment insurance and other items. Wal-Mart defines ‘full-time’ as 35 hours, thereby avoiding the entire cost of these statutory benefits that normally comprise at least 30% of labor costs. There is perhaps no indication more clear than this of the planned destruction of the social contract which was the foundation of the American middle class and the sole contributor to the rising standard of living. The American Dream is truly dead.
Another practice, that of unpaid internships (93) (94), emerged after the 2007 financial meltdown and has accelerated to an alarming degree in many sectors of the US. With a stagnant job market and few employment opportunities for new university graduates in America, a surprising number of well-known large companies have turned to these unpaid laborers to fill open staff positions. The regulations governing internships are explicit but ignored. By law, interns must receive training in job skills but this seems to almost never occur, and instances where an intern actually lands a job after the internship period could be counted on the fingers of one hand. According to many media and government reports the number of new graduates in these unpaid positions is in the millions, so many they have formed internship societies to share their experiences. Many of these young people work as long as one year without pay, only to be dismissed at the end, clearly indicating no possibility of a full-time job had ever existed. All this is yet another indication of the class war that exists in the US today, evidence of the destruction of the social contract, and the continuing marginalisation of labor. All signs are that this condition will continue to accelerate. Since the US economy has, after almost ten years, shown no signs of a recovery, little hope exists for improvement, and indeed this trashing of labor has become a kind of social movement that is still gathering momentum and may well become the acceptable norm. It was interesting to note that the famous (or infamous, for his ‘scorched-earth’ practices) General Sherman, a leader in the American civil war, wrote in the late 1800s that “There will soon come an armed contest between Capital and Labor. They will oppose each other not with words and arguments and ballots, but with shot and shell, gunpowder and cannon. The better classes are tired of the insane howlings of the lower strata, and they mean to stop them.”
American multi-nationals are enthusiastically exporting their pathological labor practices to other nations, leaving government authorities scrambling to moderate the damage and create appropriate legislation to deal with this unexpected flood. As in the US, their wage theft scams appear limited only by their imaginations. One of the more common and unfair labor practices among American companies in China is to conduct recruiting in smaller cities in Central China where wage levels are comparatively low, then position the new hires in the larger centers like Shanghai or Guangzhou where living costs (and wages) are far higher. Another American practice in China that has been attracting increasing government attention is that of out-sourcing permanent, full-time staff to temp agencies, primarily to avoid the cost of paying statutory benefits. Coca-Cola is famous for this practice, with some of its ‘temporary’ employees having been in the same job for ten or more years. One Coca-Cola employee reported that just prior to China’s new Labor Laws taking effect, “they called us into a meeting … with no notice, and told us that they were outsourcing our jobs and turning us over to a third party. We would no longer be Coca-Cola employees”. They were also informed their incomes had been cut in half after the transfer to the third-party agency. Schering-Plough, a subsidiary of US-based Merck Pharma, did the same, at one point firing all its staff in Shanghai and relocating them to a temp agency with a reported 70% reduction in pay. Naturally, most staff quit, but the company persisted. Many companies have adopted similar strategies in attempts to lower wages and salaries to a subsistence level while avoiding the payment of (legislated) statutory benefits like health care and unemployment insurance. The standard procedure for American MNCs in many countries is to dismiss all their employees and turn them over to a temporary labor contractor. The staff still work at the same place for the same company, doing the same jobs, but are no longer company employees, being now contracted to the temp labor firm that pays much lower salaries and by law is not responsible for statutory benefits, thus lowering the labor bill by as much as 50%. The practice of providing permanent labor through temp agencies is illegal in most countries since it is obviously a scam, but many companies ignore the laws. If you play with the rules, you can find ways to pretend these are really only “temporary” employees, and you can pay them much less while avoiding all responsibility for their welfare and benefits – and their mistreatment.
The American fast-food companies like KFC, McDonald’s and Pizza Hut have for many years incorrigibly paid their staff only 60% of the legislated minimum wages, repeatedly claiming unclear laws and frustratingly repeating these illegalities in thousands of locations in spite of court orders and fines. We have read of Apple, Nike and other American companies who subcontract their manufacturing with such tight margins as to guarantee starvation wages to millions of workers throughout Asia. US-based P&G have been repeatedly accused of forcing temporary staff to work 12-hour days without overtime pay, and of heavily lobbying China’s national government against the establishment of minimum labor standards. The American Chamber of Commerce, AmCham, one of the most stridently anti-social organisations in the world, is well-known for doing the same. In the meantime, the US NGOs like Human Rights Watch scold Nike or Coca-Cola for utilising what they call ‘slave labor’, while Nike and Coke pretend they had no idea but will check immediately. And so the story has continued for generations.
Yum, KFC, Pizza Hut, and McDonald’s are renowned as much as Coca-Cola for finding every possible way to pay their employees less. This is especially true, and especially irritating, in China where KFC earns half of its worldwide profits on a sales volume half that of the US. Part-time staff are particularly unfairly exploited, with both KFC and McDonald’s paying only 60% of China’s minimum wage, persistently blaming “unclear regulations” while continuing to violate the laws. American critics complain that US companies are singled out for this kind of media attention, but the fact is that American companies came to China boasting of their high standards and high quality, of employing “international best practices”, and being generally superior in all respects, then proved to be the least honest and most predatory of all companies.
And it isn’t only Coke, Apple and Nike who prey on the helpless. Most American companies do the same, including many generally seen as having clean faces, companies like P&G, Disney, Mattel, all of whom proclaim innocence and virginity while the drastic labor situations continue unabated. A large variety of American toys manufactured and promoted in China like Fisher Price, Barbie, Toy Story, Matchbox cars, Thomas the Tank Engine, Hot Wheels, Transformers, Cars 2, are all produced in similar circumstances. A SACOM representative said, “Consumers could never expect that the lovely toys which bring joy to children are manufactured in such deplorable conditions”, asking the public en masse to convey in graphic terms the repugnance of their actions to these American firms, and to demand remedial action. They also recommended that parents refuse to purchase any of these American-branded products until these firms accept responsibility for their actions and adopt humane employment practices. And in a truly offensive response, the so-called ‘International Council of Toy Industries’ Care Foundation’, an American toy industry apologist, said, “… we refuse to accept the sensationalist, media-oriented declarations of any group … The plain truth is that workers in many toy factories in China are better off now than they were before …” Lies this big should be punishable by public flogging.
The labor violations committed by American firms are legion, and consist not only of institutionalised meanness, but of a cleverness I would categorise as pathological. Employees are often forced to sign a ‘voluntary’ document agreeing to work far beyond legislated maximum overtime, and often without pay. Staff have so often testified they are forced (and even offered money) to lie and give misleading responses to factory audits by government officials, and threatened with severe punishment for failing to do so. One investigation discovered employees producing American products were working a six-day working week, with up to 288 hours a month, and in many other cases a compulsory seven-day week during peak periods, with the companies paying far below the minimum wage. Investigators said employees who had attempted to raise awareness of the abuses and to inspire colleagues to fight for their rights, were immediately fired. Sacom continued, “Mattel, Walmart and Disney, the renowned toy companies, always claim they strictly comply with local laws and adhere to their respective code of conduct. The rampant violations at Sturdy Products, including excessive overtime, arbitrary wages, unfair punitive fines, child labor and negligence of occupational health, prove that the pledges are empty statements. There is no effective enforcement mechanism and remedies for workers at all.” And yet, like Apple and Nike, these corporations are producing profits from these same products in the hundreds of millions of dollars.
American companies are world-famous for pressuring local governments to avoid setting health, labor, environmental or other standards that would interfere with their profitability, often drawing on the political power of the State Department to bully local governments into relaxing standards or avoiding prosecution of the executives of American companies. The executives and management of Coca-Cola in particular lobby governments everywhere in attempts to prevent or derail labor and wage legislation, as well as lobbying and interfering with environmental laws. These problems exist in every nation, but undeveloped countries are hit the hardest because of inadequate legislation and the lobbying power of these companies from political pressure and bribery. There has been no shortage of reports that Coca Cola executives, as a regular business practice, frequently bribe local officials and politicians to overlook violations and give them effective sanction to break laws. P&G executives have been repeatedly accused by labor organisations of labor violations such as forcing “temporary” employees to work 12-hour days, and company executives deserve public exposure and condemnation for their lobbying of Chinese government officials against establishing minimum labor standards in China. Starbucks in the UK was treated to a media storm that revealed an astonishing pent-up anger directed toward the company by its own staff, involving mandatory changes in their employment contracts that would reduce or eliminate many of the staff benefits, including lunch breaks and the elimination of staff sick days and maternity benefits. The staff claim they were presented with a new contract and ordered to either sign or be fired.
Coca-Cola’s executives and management have long been accused of mistreating workers in their bottling plants, of underpaying employees, of forcing extensive unpaid overtime, of beating employees who claim their wages, and of often resorting to extortion, physical and other threats, and even murder, to prevent employees from forming unions to protect themselves. Coca-Cola’s representatives in Central America have a reputation of hiring hit men to kill anyone trying to form a union in a Coca-Cola plant (95). And, just as in China, the company claims no responsibility for the actions of their “agents”. The evidence for these claims exists in many countries, including China. If you want something to open your eyes, do an internet search for the phrase, “bottling coke and spilling blood”. It is for good reason that Coke is one of the four most-boycotted companies in the world. South and Central America are among the worst areas, covered in a book Mark Thomas published in 2009, titled “Belching Out the Devil: Global Adventures with Coca-Cola” (96). In El Salvador, in addition to abuse of workers, Coke has been exploiting children by using them for hazardous labor in sugar cane fields. This issue was first documented by Human Rights Watch, with some devastating film footage shown in a BBC documentary. Coca-Cola in the US has been exposed to many lawsuits over the years for racial discrimination relating to salaries, promotions and performance evaluations. The New York Daily News reported one lawsuit where staff claimed that working for Coca-Cola was like being in a “cesspool of racial discrimination” (97). The company has also been in litigation for wage theft, with one major class action claiming company management refused to pay overtime wages among other labor violations. A few years ago, the company was forced to pay almost $200 million in the largest settlement in US history for racial discrimination violations.
In 2001, Human Rights Watch and the United Auto Workers filed a lawsuit in Miami against the Coca-Cola company and several of its Colombian partners for a series of murders of union leaders and for conducting “an ongoing campaign of intimidation, terror, and murder”. The executives of Coca-Cola in Columbia have been accused of “rampant illegal labor practices, intimidation techniques, unfair firings and physical attacks.” In the lawsuit, the union claimed at least six of its leaders had been murdered by death squads, which it claims secretly worked for local Coca-Cola plant managers. This is not a new problem. More than 20 years ago, union leaders complained to senior Coca-Cola executives that their plant managers were employing death squads. On one occasion, hired assassins shot dead the union leader during contract negotiations, then set fire to the union hall in an attempt to kill all the workers. When that failed, the killers returned to the Coca-Cola factory, gathered all the workers at gunpoint and ordered them to either resign from the union or be killed. The workers all resigned. One other fact bears noting: The above-mentioned lawsuit was filed against the Coca-Cola company and its bottlers and partners in Columbia but, in yet another reminder of the independence of the US courts and judiciary, and in testimony to the US following ‘the rule of law’, the US State Department and the Justice Department intervened in the case and convinced the judge to release Coca-Cola from the lawsuit, permitting it to proceed only against the Columbian partners. And, to give you a full appreciation of not only the extent of support received by Coca-Cola executives for these death squad killings of union leaders, but also an appreciation of the depth of depravity of American businessmen generally, listen to the President of the American Chamber of Commerce: “Why should we worry about the death squads? They’re bumping off … our enemies. I’d give them more power. Hell, I’d give them some cartridges if I could, and everyone else would too … Why should we criticize them? The death squad – I’m for it.”(98) Feel free to draw whatever conclusions you believe are appropriate.
One columnist wrote that Coca-Cola executives have “a labor record that puts even most other multinational companies to shame. In Guatemala and Colombia, there is strong evidence that the Coca-Cola company actively supported the murders of union activists by paramilitary members at bottling plants run by its subsidiaries and contractors over the years. In Mexico, El Salvador and other countries there have also been ample allegations of the company using paramilitary strength to prevent unionizing and keep employees in line.” Coca-Cola executives said they could not be held responsible for the murders because the plants were not directly under their control, but the union stated that “Coke has [a] financial investment in the bottlers and has a working relationship with them.” A senior lawyer from the International Labor Rights Fund said, “There is no question that Coke knew about and benefited from the systematic repression of trade union rights at its bottling plants in Colombia …” At the time, Coca-Cola spokeswoman Lori Billingsley denied that the Coca-Cola company employed death squads to prevent the formation of unions, and said the legal charges filed by the union “are completely false and are nothing more than a shameless effort to generate publicity using the name of our company.” But then these events generated an extensive “Boycott Coca-Cola” campaign which forced the company to pay $10 million anyway.
Horror stories of the abuse of workers by Coca-Cola management emerge from every part of the world. In 2013 or 2014, there was a great scandal reported in the Mexican press that Coca-Cola forced all its employees to resign their jobs – many of them at gunpoint – because they agreed to form a union. The employees were rehired the next day, but they were no longer union members and were unlikely to ever become such. At the time, the President of Mexico was the former president of Coca-Cola. It was interesting that the news reports of this criminal extortion flooded the Mexican media but then totally disappeared within one or two days. It cannot be found on any US websites, Google has no record of it, and even the original Mexican news sites lost it. That’s influence. Americans complain about China’s censorship, but it’s much worse in the US because all these events are totally censored and Americans don’t know what they don’t know. In Turkey, workers at a Coca-Cola bottling plant in Istanbul were immediately fired for having joined a union so they organised a peaceful sit-down strike in front of the main offices of Coca-Cola, many with their spouses and children, and had union leaders meet with company executives to arrange their reinstatement. However, while Coca-Cola’s senior management were meeting with union leaders, they ordered Turkish riot police to attack the workers, leaving hundreds of people badly beaten and requiring hospitalisation. Lawsuits are pending. Coca-Cola executives did the same in India, on at least several occasions when police were called out to brutally suppress public demonstrations against the Coca-Cola company. In one case, 500 people marched to the gates of a Coca-Cola factory to demand the plant be shut down, and were attacked by a huge flock of Coca-Cola security guards assisted by the local police. You have read about Citibank in Indonesia persistently using outsourced “labor” – in this case using thugs and goons to intimidate delinquent customers by the application of physical violence, in at least one case beating a customer to death. Coca-Cola is essentially cut from the same cloth, even using the same brand of thugs and goons, the primary difference being that the beatings are not conducted on Coca-Cola premises so as to keep company executives one step further removed from the gallows. There are many American MNCs that fit this mold.
In the US and Canada, and most Western countries, “full-time” employment normally means a 40-hour week and, for its full-time workers, companies must provide and pay for a full range of statutory benefits that include unemployment insurance, pensions, health care, etc. But reports are that Wal-Mart in every location provide only 30 or 35 hours of weekly employment while still inaccurately referring to these jobs (and staff) as full-time – which of course they are not. The advantage to Wal-Mart to provide less than the legislated minimum hours is that legally these employees are officially classed as “part-time” and therefore entitled to no benefits. Since these statutory requirements cost an additional 30% to 35% of payroll which the company avoids, this immense wage theft is added to corporate profits. Wal-Mart also tends to pay only the legal minimum wage, or as little as possible in each location. For many people, this is below the poverty level, which means that Wal-Mart’s so-called “full-time” staff must depend on food stamps, Medicaid and US government welfare assistance to survive. Wal-Mart also has a habit of retaliation against workers who dare to speak out, many store managers and other staff stating their working hours had been drastically cut after making complaints about the company.
Wal-Mart began in a single store in Rogers, Arkansas in 1962 and expanded rapidly into a chain of stores. At that time, the US federal minimum wage was $1.15 per hour, but Sam Walton was paying his staff only half that amount. When confronted by the government, Walton argued that the law applied only to businesses with more than 50 employees and claimed each of his stores was a separate business entity. The Department of Justice and the courts rejected Walton’s self-serving explanation and he was heavily fined for violations of federal law. But that didn’t stop Walton from his insane determination to ensure his staff were paid the least possible under every circumstance. In retail operations, payroll costs are usually around 10% to 12% of sales, but Wal-Mart store managers – if they want to remain managers – are forced to maintain payroll expenses at around 5.5%, and seldom higher. In cases where Wal-Mart is subjected to extreme political or other pressure to increase wages, the company will outsource its employees to so-called temp agencies, thereby lowering wages even further and again avoiding payment of any statutory benefits. Sam Walton, his successors, and all the company’s executives are violently opposed to labor unions because they would force the company to pay higher wages and provide benefits, and the company has been extremely successful in preventing their formation. One media report noted that “When butchers in one Texas outlet voted to [form a] union, Wal-Mart eliminated the meat department in that store and in every other store in Texas and the six surrounding states.” In one case in Canada, where the company failed to prevent employees from forming a union in a newly-opened store, Wal-Mart immediately closed the store, claiming “poor sales”. In both cases, the message was clear: form a union, and lose your job. After witnessing the social destruction inflicted by Wal-Mart’s inhuman methods on the rural areas of America, the company had been blocked by politicians and unions from opening stores in the nation’s urban areas. It was therefore a surprise that Washington DC agreed to permit the construction of five Wal-Mart stores (in spite of the powerful objection of most of the public), with a stipulation that the company would open two of those stores in the city’s poor districts where retail was in short supply. Wal-Mart built the three stores in affluent areas, then reneged on the agreement and walked away, claiming they would be unprofitable. Privately, city government members stated Wal-Mart executives confided to them that new proposed laws to increase the city’s minimum wage “would effectively impose a huge tax” on the company. The city legislators had further proposed to legislate minimum hours for full-time staff and require DC employers to provide medical leave. With Wal-Mart’s profit bible consisting almost entirely of wage theft, the company violated a legal agreement and apparently threatened to close its three new stores if the city proceeded with its minimum wage legislation. Consider in the light of this, the claims of Wal-Mart executives that they adhere to all labor regulations in the jurisdictions in which the company operates.
One result of this policy is that the entry of Wal-Mart into a new area will either drive out all higher-wage competitors, forcing store closures or bankruptcies and abandonment of territory, or it compels them to lower their pay to Wal-Mart’s level or even below, in order to survive. The obvious effect is that the company’s presence drives down all wages in the region within a few years, this effect not limited to grocery or retail marketing. Many studies have been done to adequately prove this point. Part of the reason this ‘Wal-Mart’ effect is so widespread is due to the company’s control of such a major portion of the retail and grocery landscape in the US, permitting the company to force supplier price reductions throughout its entire supply chains, with the result that manufacturers and distributors are forced to reduce their own wages to remain solvent, and many are forced to relocate manufacturing to lower-cost locations in other countries. Thus, the net effect of the appearance of a Wal-Mart into an area is to impoverish the entire landscape by the destruction of well-paying jobs.
In its advertising, Wal-Mart boasts of its low prices, but those come at a high cost to the suppliers and an even higher cost to their staff. The company is famous for sending teams of accountants and efficiency experts to a factory (not only in the US, but to factories in China and other countries), to seek out every possible change or improvement in a manufacturing process so that a factory can produce products for Wal-Mart at a lower cost. But the factory doesn’t benefit from these lower manufacturing costs; they must all be passed on to Wal-Mart. The company has a reputation for beating suppliers with a stick to obtain every tenth of a cent reduction in price, pushing the suppliers to the wall, forcing profit margins that are razor-thin, and ensuring that no Wal-Mart supplier will ever be able to pay decent wages to his workers. In the end, anyone who is dependent on Wal-Mart, either for jobs or orders, will be unlikely to escape poverty, since the company’s practices inevitably delete all the profits in all parts of a supply chain, and vacuum them into Wal-Mart’s pockets. The company’s operation model is cleverly (I would say, diabolically) designed to accomplish precisely this result: to extract every last cent of profit in an entire supply chain, which chain includes the suppliers of raw materials to a manufacturer, the manufacturing firm, the shipping and transportation firms, the logistics companies, the overseas freight handlers, warehouse staff, and dozens of other unseen categories. The end result is not only to vacuum all profits into Wal-Mart’s bank but to impoverish all employees in any part of that chain. It is a tribute to the power of large corporations in the US, and to the influence they have on government, that Wal-Mart has been permitted to operate in this fashion for so long.
I discussed shelf fees and stocking fees elsewhere, one-time fees charged for acceptance of a product into the stores, plus a high monthly rental per square meter of allocated shelf space. Wal-Mart has exhibited exceptional ingenuity in adding to these fees. For one, the company has begun to charge its suppliers for “storing their goods” in Wal-Mart warehouses – after purchase – and to pay additional ‘fees’ for products “passing through” the company’s warehouses, all this in addition to being forced to wait for longer periods to be paid, apparently as much as 180 days in some cases. And at the same time, Wal-Mart is demanding yet lower prices from these same suppliers. Wal-Mart’s version, according to an article in the WSJ, is that “All of the changes we are asking suppliers to make are to be true to our business model and everyday low prices.” The article didn’t bother to dwell on the precise nature of that business model to which the company was being ‘true’. The same article noted that Wal-Mart also demanded suppliers lower their prices immediately on goods made in other countries, if the exchange rate shifts; these price adjustments presumably occur in only one direction.
Nevertheless, Wal-Mart pushes the limits so far beyond reason that in the US at least, the Department of Justice has frequently laid criminal charges of wage theft, and many groups of employees and others have initiated class-action lawsuits, all resulting in large penalties though not large enough to change the company’s practices. Within the past few years, the company paid almost $650 million to settle 63 lawsuits charging the company with refusing to pay overtime, forcing staff to work through breaks or work beyond their regular shifts, as well as other types of wage theft. At the same time, Wal-Mart faced an additional 76 similar class action lawsuits in courts across the country. In a separate case, the company paid $40 million for refusing to pay overtime, denying employees rest breaks and tampering with time sheets. A bit earlier, Walmart paid $40 million in back wages to 85,000 workers, denying workers rest and meal breaks, refusing to pay overtime, and manipulating time cards to lower employees’ pay. many of them managers who were denied overtime. Then, Wal-Mart paid $11 million for hiring hundreds of illegal immigrants to clean its stores, the company claiming ignorance of contractors employing illegal immigrants. At the same time, Wal-Mart paid $55 million for reducing workers’ break time and employees working unrecorded overtime. A bit earlier, Wal-Mart paid about $35 million in back wages to thousands of employees over the previous five years. At about the same time, workers won a $80 million class-action award for working off the clock, then won an additional $65 million in damages.
Wal-Mart’s labor and pricing practices extend to China, both from its sourcing of products and from its retail presence in the country. The incessant demand for lower supplier prices in China inevitably forces those firms to cut wages, creating “Wal-Mart sweat shops” across the country. In repeated cases, officials have found these suppliers paying below minimum wage, withholding pay from staff who fail to meet sales targets, refusing to pay overtime, and much more. In many cases, staff are told to lie to government auditors. Of course, Wal-Mart executives are fully aware of the conditions they create, but then they have been creating them in the US for more than 50 years and have so far exhibited no concern. One retail industry consultant said about the executives at Wal-Mart: “When asked about labor law, they generally say [they] follow the laws of the jurisdiction in which they are operating, but it’s also clear when they say that, that they put a lot of weight on shaping the laws in the jurisdictions where they are operating.” This latter is a serious issue with all American MNCs in China and in any other nation, in that they will use the entire power of the US government in attempts to force a transfer of their depraved “standards” onto every other nation while doing all in their power to obstruct domestic governments from taking action against them, whether for wage theft or any other criminal activity.
In spite of its pretty face and attractive products, Apple has some of most deplorable labor practices of any American multi-national. I wrote earlier that Steve Jobs’ real innovation was in finding a firm – Foxconn – that would build a one-million employee concentration camp where it could manufacture and assemble iphones while the one million young workers were living on the brink of starvation. I noted too that Apple was sitting on a cash pile of $150 billion (then increased to $200 billion), but that entire cash pile was stolen from the workers who made Apple’s products. If Steve Jobs had paid those employees anything resembling a living wage, Apple’s cash pile would be zero. Steve Jobs wanted Apple to be profitable, with a margin of about 40%, but Apple’s profits did not come from designing and selling cool products; they came from the theft of wages from society’s most vulnerable young people who needed a job and a start in life. To succeed in his quest, Jobs first had to ensure they failed in theirs. And he did. Even in an internal company report, Apple admitted the “sweatshop” conditions inside the factories that make and assemble its products, admitting that at least 55 of its 102 factories were making staff work more than 60 hours per week, that only 65% were paying legal minimum wages or statutory benefits and that 24 factories paid nothing near China’s minimum wage. The pressure placed on these young people for higher productivity was truly unconscionable, with dozens of young people committing suicide, a fact which did not escape the attention of either Steve Jobs or Tim Cook but which resulted in no action. A human rights organisation accused Foxconn of having an “inhumane and militant” management, the executives of neither Foxconn nor Apple being available for comment.
Few people seem aware that Nike, along with Nestle, Coca-Cola, and McDonald’s, are the four most-boycotted companies in the world, I would say all for good reason. One of those reasons is the sweatshop syndrome for which Apple is so famous. A website named ‘123HelpMe.com’ published an article on September 8, 2012, titled “Knowing the Strength of Your Buying Power”, which made the following observations:
“Nike has been fighting a boycott of its products since 1996 when an American magazine showed a photograph of a young Pakistani boy sewing together a Nike football. A year later, the company’s image suffered a further blow when a report revealed that workers in contracted factories in Vietnam were exposed to toxic fumes at up to 177 times the country’s legal limit. By the end of the decade, as the anti-globalisation movement began to make headlines for its protests at WTO meetings worldwide, the boycott of Nike stores was causing serious damage. Reliable news sources publicly exposed the grim working conditions of people employed by contractors making Nike products in Indonesia, Haiti and Vietnam. Nike’s association with the exploitation of third world workers fueled a worldwide boycott of their products. Many publications – the New York Times, the Washington Post, the Sydney Morning Herald, Life Magazine – reported on the unjust treatment of workers making Nike products. There are reports of children sewing soccer balls for 60 cents a day, workers being beaten, sexually harassed, collapsing from exhaustion, being fired on the account of taking sick leave, working in hazardous conditions, being paid below a livable wage and the list goes on.”
Another website named ‘viet.net’ that specialised in Nike in Vietnam, wrote the following:
“You have to meet the quota before you can go home. She hit all 15 team leaders in turn from the first one to the fifteenth … The physical pain didn’t last long, but the pain I feel in my heart will never disappear.” The above statements were made by Thuy and Lap, two female workers at a Nike plant in Vietnam, reported by CBS in October 1996. However disturbing those comments might have been, they turned out to be but a scratch on the surface of a far more horrendous reality – confirmed, quantified, and fully documented in a March ’97 report by Vietnam Labor Watch during its visit to Vietnam. The courage of Thuy & Lap to stand up to Nike sweatshops helped spark a worldwide movement. In 1998, Phil Knight promised to change Nike’s labor practices in Asia. We observed a few improvements, but much of Phil Knight’s plan of actions were nothing but empty promises. Soon after, the two women were fired for talking to a reporter. Despite its progressive image in the United States, Nike is a very different company in Vietnam and in other Asian manufacturing operations. Reports of physical abuse, sexual abuse, salary below minimum wage and debilitating quota systems are confirmed by CBS News, the New York Times, USA Today, Wall Street Journal, AP, Reuters as well as other non-profit and non-governmental organizations. Nike continues to treat its labor problem as a PR matter. Behind closed doors, Nike continues its goal to sabotage any labor organization that stands in its way. To derail cooperation between US labor groups & Vietnam labor organizations, Nike sent a “private” letter to a high-level Vietnam government official accusing US labor activists of harboring a secret agenda “to change the government in Vietnam”.” A bit later, Nike finally agreed to pay more than $1 million in overtime pay to nearly 5,000 workers in Indonesia, which, according to the Vietnamese website, reflected more than 500,000 unpaid overtime hours over two years.
Like Wal-Mart, Amazon promises low prices to consumers, but manages to extract most of their profits from suppliers instead, eventually eliminating the possibility of effective competition among the starving pack, a result generated entirely from a monopoly market position. Wal-Mart charges high fees for shelf placement and Amazon does something similar, with increasingly extraordinary demands, using its marketing power to gobble up almost all the profits in the publishing industry. Where Wal-Mart extorts cash from suppliers for promotions, Amazon extorts payments from publishers to a marketing development fund, absorbing another 5% or 10% of their profits. Amazon has become a particularly nasty company, no longer interested in simply making money by providing a service but having become increasingly predatory. A few years back, the company initiated what it called the ‘Gazelle Project’ its lawyers called the ‘Small Publisher Negotiation Program’ but which apparently took its name from a gazelle being pursued by a cheetah – in other words, as prey. The power of a monopoly buyer has almost no limits, permitting them to impose any terms or demands on their suppliers. Jeff Bezos and his executives at Amazon are doing precisely the same as Wal-Mart and all other American MNCs, using their market power to impoverish the entire supply chain and vacuum all the money into their own pockets. And once the supply chain’s profits disappear, the next to go are the salaries and wages throughout that chain.
Franklin Foer wrote an article in the New Republic, titled ‘Amazon Must Be Stopped’ (99), in which he noted that many authors, and many in the publishing business, have expressed concerns that Amazon’s apparently insatiable greed combined with its apparently unlimited contempt for its suppliers, will eventually destroy the advances that publishing houses pay their writers, thereby eliminating many authors from the market. He wrote that “advances make it financially viable for a writer to commit years of work to a project”, and more importantly that “This upfront money is the economic pillar on which quality books rest, the great bulwark against dilettantism.” He is very correct, of course. Foer also exposed the fact that Amazon, like most large American companies, is astonishingly predatory, willing to invest huge sums to destroying potential competitors, writing that Amazon “had a record of shredding young businesses, like Zappos and Diapers.com, just as they begin to pose a competitive challenge. It uses its riches to undercut opponents on price – Amazon was prepared to lose $100 million in three months in its quest to harm Diapers.com – then once it has exhausted the resources of its foes, it buys them and walks away even stronger.”
Starbucks follows much of this pattern, though we seldom read of it in the media. The company has been reported to be loathed by its own staff in the US for many of its business practices, including a policy of staff closing a shop very late at night and returning to re-open it only a few hours later. Starbucks’ staffing practices have been described as particularly severe, with working hours and conditions fluctuating wildly from week to week or month to month, effectively preventing a normal life. Staff across the US complain bitterly about being paid only minimum wages and yet being sent home if sales are slow. Media reports were that the situation deteriorated to the point where staff retention had become extraordinarily difficult. With American parents strongly disapproving of Starbucks employment, the company launched what was called a “family forum”, where they would invite the parents of these young people to listen to “success stories” of kids who “worked their way up the career ladder” and became managers. No report on whether the parents were entranced with the prospect of their kids spending ten years to ascend a two-step ladder. In the UK, the media revealed even more pent-up anger directed toward the company by its own staff, the most recent involving mandatory changes in their employment contracts that would reduce or eliminate many of the staff benefits, including lunch breaks and the elimination of staff sick days and maternity benefits. The staff claim they were presented with a new contract and ordered to either sign or be fired. Interestingly, the staff were also informed that any who discussed the then-current outrage over Starbucks’ UK tax avoidance would be fired immediately. Researchers from the Manchester Business School claimed in a media report that Starbucks was “suffering an implosion of their reputation”, not only externally with the public but also internally with their own staff, which combination inevitably sets the stage for a serious business decline.
American universities, having been almost totally financialised, and with their management now consisting largely of finance types instead of academics, have simply copied the profit-maximisation theories they learned in business school: the fastest way to become rich is to have wageless workers while increasing fees. The elementary and high school systems are beginning to follow in lock-step. Even worse, with the increasingly extreme emphasis on finance and profits, most major US universities are doing away with full-time tenured (and professional) professors and resorting to part-time contract teachers with minimal education who are paid about $2,000 per course and earn little more than US$20,000 per year, a bit more than a full-time job at McDonald’s. And those who are full-time are more interested in publishing papers to maintain their employment than in teaching. Turnover is high since these positions are clearly not a career. A major part of the US educational business model, what Raj Mehta called Harvard’s “innovative governance model for higher education”, involves what is essentially the hiring of temporary and part-time workers, like the so-called “associates” at Wal-Mart. These ‘teachers’ are not full-time academic staff members but contract workers with insecure employment status and who are entitled to no benefits, thereby reducing the teaching payroll costs by 75% and the quality of education by about the same percentage. This is all about profit maximisation, otherwise known as blind greed.
Today’s students at American universities are receiving their “education” from unqualified 25-year-old grad students earning less than $20,000 per year, but are paying tuition fees based on instruction from experienced Ph.D. professors earning $150,000. It has been reliably reported that 70% of college professors and instructors in the US are these contract, part time, temporary adjunct teachers with low levels of education, no teaching instruction, and little if any experience, even though tuition fees are increasing steadily every year (100) (101). Given that these so-called professors will be given most of the undergrad classes, this means that 80% or more of all university students are in this position. In March of 2015 the Washington Post published an article by a young woman who had been one of these “adjunct professors” in Washington, DC, claiming she taught as many as five classes each semester at four different universities during days that often lasted 13 hours, in a job that offered “no job security or access to benefits, and significantly lower wages than regular faculty”. She said that after two years she could no longer tolerate the stress and exhaustion, and left the educational field to work as an editor.
This model has been adapted from the US multinationals as a way to reduce labor costs and increase labor servility and, as Noam Chomsky noted, is part of the general assault on the middle class. This model focusing on what we can call “insecure employment” is a staple in American society. He wrote “When Alan Greenspan was testifying before Congress in 1997 on the marvels of the economy … he said straight out that one of the bases for its economic success was imposing what he called “greater worker insecurity”. If workers are more insecure, that’s very “healthy” for the society, because … they won’t ask for wages, they won’t go on strike, they won’t call for benefits; they’ll serve the masters gladly and passively. And that’s optimal for corporations’ economic health.” And of course, the way to transfer this insecurity to the universities is by not guaranteeing employment, by using grad students and other barely-qualified contract individuals to carry the teaching loads at one-tenth the cost of full professors. This approach of course also provides US universities with labor “flexibility” which means no restrictions on firing staff. Chomsky again: “(it enables) the transfer of funds to other purposes apart from education. The costs, of course, are borne by the students. But it’s a standard feature of a business-run society to transfer costs to the people. It’s harmful to education, but education is not their goal.”
This process of literally trashing the education system has been quietly gathering steam in the US for decades, only now appearing fully in the open when sufficient legislative and judicial support has already been obtained, and is now firmly established in the public-school systems as well. Given the huge push in the US for the privatisation of elementary and high schools, these same ‘Wal-Mart’ teachers will soon be filling all the lower education levels as well. In a landmark ruling in California in June of 2014, the courts struck down teacher tenure and other laws that provided any job security to teachers. An educator named Michelle Rhee, who had been the chancellor of public schools in Washington DC for some years, wrote that the ruling “represents a clear win for all children in California public schools … and for the teaching profession as a whole.” She went on to claim that her purpose in spearheading this court ruling was to “elevate the teaching profession” and that the ruling was “a tribute to teachers”. No idea how, but I can scarcely imagine bigger lies. On this one, somebody really needs to follow the money, especially the money behind Rhee’s organisation laughably named “StudentsFirst”. This educational treason is particularly disastrous since the US had already been experiencing 100% turnover in teachers about every five years, a rate that will now most assuredly accelerate.
But let’s not lose the main point which is that the universities, and now the school systems, are engaged in wage theft on a massive scale. They have been financialised to the point where their main function is raising money and investing endowment funds, focusing on financial profits rather than education, and stripping wages at every step of the chain to funnel all the money to the top. And in this case, to no apparent purpose. If a university does not exist to educate, why does it exist at all? Many American universities, but using Harvard as an example, have endowment funds so large that the entire tuition fees for a year are absolutely trivial in comparison to the size and income from their endowment funds. All could afford to offer free tuition without even noticing the slight drop in revenue, but they persist in bleeding the students for higher fees each year while extracting the maximum wage concessions from the teachers and staff.
Part 4 of 6: IP Theft and Coping
Image credit: https://www.chinadaily.com.cn/a/202109/17/WS6143dbbda310e0e3a6822281.html
Mr. Romanoff’s writing has been translated into 32 languages and his articles posted on more than 150 foreign-language news and politics websites in more than 30 countries, as well as more than 100 English language platforms. Larry Romanoff is a retired management consultant and businessman. He has held senior executive positions in international consulting firms, and owned an international import-export business. He has been a visiting professor at Shanghai’s Fudan University, presenting case studies in international affairs to senior EMBA classes. Mr. Romanoff lives in Shanghai and is currently writing a series of ten books generally related to China and the West. He is one of the contributing authors to Cynthia McKinney’s new anthology ‘When China Sneezes’. (Chapt. 2 — Dealing with Demons).
His full archive can be seen at https://www.moonofshanghai.com/ and https://www.bluemoonofshanghai.com/
He can be contacted at: email@example.com
Reference links Part 3 How the US became rich
Sam Mitriani – The True History of the Origins of Police
Walter Reuther – assassination attempts
FBI still refuses to release documents on Walter Reuther’s death.
Railway strike Chicago 1894
1914, US troops opened fire on a group of striking mine workers in Colorado
Labor union in Pennsylvania coal mine shot and killed by the company management
1919 police strike in Boston
1919 labor organiser in Washington was captured, tortured, castrated and then lynched.
1932 50,000 WWI veterans marched to Washington to collect $625 government bonuses
Miners’ strike West Virginia in 1921, shooting war with about 5,000 striking miners.
1930, farm workers beaten and arrested in California for attempting to form unions
1927, striking miners Colorado massacred Rockefeller private army one of the worst, but by no means the only example. In
at one of his mines in were by his private army using machine guns.
1929 North Carolina, striking textile workers murdered
500,000 mill workers strike in South Carolina, violently suppressed US military
1935, striking electrical workers Toledo, Ohio killed US troops
1930 San Francisco dock workers strike killed many
Rockefeller private army
Cyrus Eaton Republic Steel Company private army
Ford auto company private military beat Walter Reuther
Carnegie private military
Pinkerton Detective Agency
“The most concentrated period of labor-management strife in the country’s history”
Truman threatened to hang striking workers
Paul Krugman, iNYT on March 2, 2015: “Then there’s history. ..the middle-class society
James Petras The Great Transformation
Paul Volcker savage recession
Keynes “the object of credit restriction is to withdraw from employers the financial means to employ labor
Volcker – “The standard of living of the average American has to decline”
Business Week “Some people will have to do with less”.
Michael Mussa, IMF “The Federal Reserve had to show that when faced with the painful choice between maintaining a tight monetary policy to fight inflation
Michael Jensen of Harvard’s Graduate School of Business showed that 95% of all CEO contracts provided enormous severance packages
Merrill Lynch Stanley O’Neal ‘terminated’ with more than $160 million
Warren Buffett “Getting fired can produce a particularly bountiful payday for a CEO.
“If Volcker’s and Carter’s attacks on unions were indirect, Reagan’s were altogether frontal.
2013 Robert Kuttner article The Task Rabbit Economy
“Only if the suppression of labor’s power is made part of the equation can the overall decline in good jobs over the past 35 years be explained.
Alan Greenspan the “traumatized worker”
Florida agriculture ruthless exploitation of domestic and foreign workers.
Child labor in America
2011 US Senator Jane Cunningham from Missouri proposed the total repeal of all child-labor laws
NYT wage theft
Apple’s “warranty-avoidance” warranties charge Chinese customers 50% of the original cost of a phone
Bottling coke and spilling blood
Mark Thomas 2009, “Belching Out the Devil:
New York Daily News Coca-Cola a “cesspool of racial discrimination”.
President of the American Chamber of Commerce: “Why should we worry about the death squads?
Franklin Foer New Republic ‘Amazon Must Be Stopped’
70% of college professors and instructors in the US are these contract, part time, temporary adjunct teachers
Copyright © Larry Romanoff, Moon of Shanghai, Blue Moon of Shanghai, 2021