NIKE and Free Trade Failures
Source Dave Anderson
Date 99/05/01/22:00

/* Written 8:27 PM Jul 19, 1998 by in igc:labr.all */
/* ---------- "NIKE and Free Trade Failures" ---------- */
>From Sun Jul 19 16:58:55 1998

NIKE AND FREE TRADE FAILURES an analysis by Campaign for
Labor Rights July 14, 1998

* * * * * * *

"When Nike enters a country to manufacture products,
wages increase and poverty decreases." - from a packet
distributed by a Nike representative to concerned
students at the University of North Carolina, Chapel Hill
in 1998

"With millions of impoverished people facing food
shortages, President B.J. Habibie asked Indonesians to
fast twice a week to save badly needed rice." - Journal
of Commerce web edition, July 6, 1998

* * * * * * *

Sooner than many would have predicted, the global economy
is proving to be a failure, even on its own terms. What
went wrong?

Consider Indonesia under Suharto. A ruthless dictator,
Suharto was packaged as a statesman by his friends in the
international diplomatic establishment. Economists
credited Suharto with having worked a development
miracle. His army received endless U.S. military aid.

Now that Indonesia is in trouble, its problems are blamed
on "crony capitalism." Suharto amassed tens of billions
for himself and his family and friends. Was the
international investment community duped? Did Suharto's
corruption take the White House and Wall Street by

Did the Indonesian economy collapse because of an
aberration in the free trade system...or because of the
system itself?

Corruption in Suharto's Indonesia was legendary,
affecting every aspect of the country's economic life. A
tiny elite systematically looted Indonesia of its wealth.
To do business, Nike contractors and other foreign
companies had to pay enormous bribes to Suharto's inner
circle (up to 30 percent of total operating costs,
according to the ECONIT Advisory Group, a Jakarta-based
consulting firm). Even so, the premium for foreign
investors - a cheap, non-union, repressed workforce - was
worth the price.

Footloose transnational corporations seek out low-wage,
non-union havens and reward them with investment. Not
coincidentally, these also are havens of repression. It
is true, as promoters of free trade never tire of
repeating, that the unemployed in such countries are
desperate to find jobs in sweatshops. What these
promoters regularly fail to mention is that, once
sweatshop workers experience humiliation, exploitation
and outright cheating on their wages, they are willing to
risk their jobs (and more) by going out on strike. In
short order, the police and military of their government
put down labor protests.

The momentary triumph of free trade theory was not a
victory of simple economics or of ideology. It was
equally a triumph of force. Trade policy of the United
States government is mirrored by its diplomatic and
military policies. Hence the flow of U.S. arms and
military training to Suharto's government.

An article published by the research department of
Jardine Fleming International Securities Limited
underscores this free trade / repression linkage. In the
kind of arrogant stupidity that one has come to expect of
Nike, a company representative reprinted this article and
included it in a packet he distributed to concerned
students at the University of Colorado, Boulder in 1997.
The section titled "Nike likes a strong government"

"If we delve deeper into where Nike has produced sneakers
and its comments about political stability, we notice
that Nike tends to favour strong governments. For
example, Nike was a major producer in both Korea and
Taiwan when these countries were largely under military
rule. It currently favours China, where the communists
and only two men have led the country since 1949, and
Indonesia where President Suharto has been in charge
since 1967. The communist party is still very much alive
in Vietnam. Likewise, Nike never did move into the
Philippines in a big way in the 1980s, a period when
democracy there flourished. Thailand's democracy movement
of 1992 also corresponded to Nike's downgrading of
production in that country."

Just as the absence of labor rights depends on
repression, so too does repression seem to lead
inevitably to corruption. Investors - whether they are
putting their money into productive facilities or into
currency exchanges and other speculative instruments -
understand this linkage. The small investor may often be
duped. Big money usually knows exactly what it is getting
into. The rate of return makes the risks worthwhile.

The risks are not what they seem. The bulk of the Asian
bail-out brokered by the International Monetary Fund went
to foreign banks and other large-scale international
speculative investors. The point is not a minor one. The
bill of goods we were sold under the heading "free trade"
was, after all, laissez faire capitalism, the doctrine of
governmental non-interference in economic affairs. In
practice, however, the IMF bail-out socialized the
speculators' losses through mandating rising
unemployment, rising inflation and the disappearance of
price supports and other safety net policies. The working
class of Southeast Asia is being made to pay (punished)
for the unwise choices of the international investor

The same scenario was played out in Mexico's peso crisis
earlier this decade: anti-labor practices enforced
through repression, corruption, sudden collapse, bail-out
of foreign investors-of-scale conditioned on implementing
policies harmful to the working poor.

Preparations for more mayhem are underway. The U.S.
Congress is considering the IMF's request for a special
$3.5 billion appropriation earmarked to cover (socialize
the costs of) the next crisis. Are these guys thinking
ahead, or what?

Lest we worry that the worst might be over, the IMF is
doing everything in its considerable power to force more
collapses. One condition of the Asian bail-outs requires
that recipient governments make it even easier for
speculative investors to move their money from country to
country. Remember: It was precipitous dumping of the
rupiah by currency speculators which brought the
Indonesian economy grinding suddenly to a standstill.

Military and diplomatic support for repressive
governments may be understood as another form in which
laissez faire doctrine is "honored in the breach." U.S.
military aid intervenes on behalf of elites all over the
globe. Only in the rarefied air of economics textbooks do
the conflicting interests of capital and labor reach
equilibrium purely in the marketplace. Instead, the hand
of government sees to it that the balance is tipped in
favor of capital.

More than 500 people died in the protests which
eventually culminated in Suharto's downfall. A change of
faces at the top has not produced a change for ordinary
Indonesians, who continue by the tens of thousands to
protest IMF-imposed austerity measures and who continue
to see their protests suppressed by the military.

As recently as a year ago, the new free trade global
economy seemed inevitable, unstoppable, a law of physics,
a matter of common sense. If there were labor abuses,
well, these were nothing more than growing pains in
economies destined to reach their potential. In
Indonesia, new factories abounded. Peasants driven off
the land by rural poverty joined the growing industrial
workforce and became the urban poor. But, as long as the
macro-economic indicators looked good, promoters of free
trade were happy.

Until Asia went bust, Nike credited itself for that all
that was strong in the region's economy. The Jardine
Fleming article distributed by Nike opined that, "Nike's
arrival usually corresponds to an economic boom, while
its departure usually signals that the time has arrived
for a country to move up the development scale." A Nike
"Informed Consumer Update" quotes the 6/22/97 New York
Times: "...plants making clothes and shoes for foreign
markets are an essential first step toward modern
prosperity in developing countries." And Nike executives
regularly cited the company's shifts in production - from
Japan to Taiwan and South Korea to Southeast Asia and
then to China - as a kind of trailblazing for prosperity.

Nike, so quick to grab the credit when the indicators
were up, has not rushed forward now to take the blame for
the region's economic ills.

In recent months, Nike has cut 44,000 of its peak 120,000
shoe manufacturing jobs in Indonesia and an undisclosed
number of garment production jobs there. Jardine Fleming
to the contrary, Nike's partial pull-out does not signal
that the time has arrived for Indonesia "to move up the
development scale." Nike, once the self-styled engine of
Asian prosperity, now portrays itself as a reluctant
caboose on the train of circumstances as it downsizes its

Nike is not solely responsible for what has gone wrong in
Asia, any more than it was solely responsible for what
had previously seemed to be going right.

Nike is a big player by anybody's standards - whether in
dollars ($9.6 billion revenue last year) or in workforce
(550,000 worldwide last year). Equally important as its
economic impact has been Nike's role in the debate about
the global economy and overseas labor practices.

Nike was the leader in the sport shoe industry in moving
its production to countries with the most vulnerable
workers. It became the symbol of mobile production
capital in all industries. Nike has come under the
closest scrutiny and the harshest criticism for its labor
practices. Nike also had the highest profile of any
company as apologist for the free trade regime. All sides
understand that when we debate Nike, we are debating the
new global economy.

Advocates of free trade made two key claims: 1) Low-wage
production jobs, although perhaps harsh by the standards
of the industrialized world, are a necessary step toward
development for impoverished countries; and 2) the global
free trade regime is the only path to economic stability
for the developed world. As for the first claim, the
Asian Tigers have been neutered.

As for the second, we are all holding our breath. Only a
year ago, free trade promoters advised that we are part
of the global economy, like it or not. Curiously, those
same apologists have now stood their earlier claim on its
head. As the Asian contagion spreads to China, Brazil,
Eastern Europe and beyond, the pundits would have us
believe that the U.S. economy possesses a special
immunity. Not to worry.

What the free traders have done to Asia - and the havoc
they may wreak upon ourselves - represent a profound
betrayal. And, even yet, they are not admitting their
mistakes or trying to correct their ways. The response of
the IMF to the Asian crisis is to prescribe overdoses of
the same tainted medicine which brought on the problem:
more deregulation, faster capital flows, more sweatshops.

Until a year ago, people of conscience already had reason
enough to oppose the free trade sweatshop agenda. Now
there is a new urgency to our work. The system is broken.
Let us intensify the Nike campaign, the Han Young
campaign, the Disney/Haiti campaign and other important
sweatshop struggles.

While fighting for reforms is an important and necessary
part of our work, we are not going to reform the free
trade agenda out of existence. At worst, reforms will
allow a "kinder and gentler" free trade regime to persist
even longer: sweatshops with a smiley face. We must
oppose the free trade system which has betrayed us all.

More than reforms, our program should be to support the
empowerment of workers. From this perspective, victory in
one of our campaigns means opening another window for
workers to form independent, democratic unions. The
importance of such victories cannot be measured simply by
counting the number of workers who win bargained
contracts. True unions - independent, democratic unions
- have a potential for becoming leading agents in forcing
profound, even revolutionary, changes in their countries.

If and when we experience a major economic crisis in the
U.S., cynical politicians will try to deflect our
attention through scape-goating and wars of intervention.
The alliances we are forming now between unionists and
community-based progressives may determine whether those
schemes succeed.

Asia caught the pundits sleeping. The speed and the
extent of the collapse surprised most of us. Economic
meltdown is a frightening prospect. But we should also
take heart from these events. If the global sweatshop
economy is more vulnerable than any of us had supposed,
then maybe our international labor rights movement will
prove more powerful than any of us has so far dared to

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