The Human Cost of "Deindustrialization"

As Multinational Monitor enters its third year of publication, the debate about corporate power has become sharper than ever. High unemployment, record numbers of business failures and growing concern about Third World debt have forced the American people to take a hard look at the policies of multinational corporations and banks, and the future of the U.S. economy.

Central to this topic is the issue of the U.S. industrial base, badly eroded in the last few years by plant closures. On one side of the debate are bankers, investors and industrialists, who see manufacturing as a thing of the past, and favor a move into high-technology, capital-intensive service and information industries. On the other side are workers, trade unionists, activists and a growing number of economists who see the dismantling of the U.S. industrial base as a threat to jobs and community, and see the move of U.S. industry to the Third World as exploitative of workers both in the U.S. and abroad.

How this debate gets played out could determine the future of the U.S. economy - and affect the jobs of millions of workers.

The argument in favor of high-technology was developed to its fullest last November in Forbes Magazine, the publication that calls itself the "capitalist tool."

In an article entitled "The Molting of America," James Cook makes the case that this depression - "a strange, undesperate kind of depression" he calls it - is part of an evolutionary process in which the U.S. economy is "throwing off an old skin and growing a new one." "The implications," he says, are favorable for the future."

In Cook's view, the transition from the "old skin" (manufacturing) to the "new skin" (knowledge industries) began when Congress mandated lower fuel standards. This forced the "downsizing" of the automobile industry, and has led to decreased use of steel, rubber and glass. A similar "downsizing" in housing has affected forest products, cement and copper.

As this process continues says Cook, "the U.S. is profoundly changing the way it uses men and materials, capital and manufacturing processes."

Cook sees two solutions to the problems of industrial change. One is the "Japanese way;" cutting back on less competitive industries, shifting resources to new industries, and transferring less competitive industry to "places like Korea, Taiwan and Hong Kong." The second is the "British way" (before Thatcher): preserving basic industry through protectionism and subsidies.

Cook clearly prefers the "Japanese way." Electronics computer, and information processing, he says, "are replacing the blue-collar industries in the advanced countries as inexorably as the service and blue-collar industries once supplanted agriculture as the principal activity of mankind."

But here is where the problem comes in. These industries, it seems, just cannot employ as many people as manufacturing, and will in fact cause a loss of jobs as business utilizes the new technology to automate their factories and simplify inventory control. While freely acknowledging this fact, Cook claims the trend is inevitable because - in the words of one electronics executive - if industry doesn't adapt "you'll lose the jobs completely, you'll not be competitive in the world market."

"In the long run," Cook argues, there will be jobs in services. Though U.S. unions "like to sneer at the new jobs," he says, "they forget electronics, data processing, the law and such fancy new opportunities as environmentalism, affirmative action, astronautics and hazardous waste control."

But just in case these "fancy" jobs don't provide employment, Cook pulls his trump card. The problem, it seems, will be alleviated by demographics. "Luckily," he says, "there has also been a downsizing of the U.S. population growth rate. . .This means that a labor shortage could conceivably develop in the traditional manufacturing and service occupations,"

For Cook, the logical response to the shrinking population is to move U.S. industries abroad. "To ensure markets for our high-skilled output," he says, "we're going to need to cultivate the labor-intensive economies of the developing world."

Of course this may not bring much cheer to the unemployed auto, steel and machine shop workers. "But for the country at large, for the world at large and for the children of the present generation, there is absolutely no reason to despair for the economic future," Cook concludes.

Cook's views are not confined to the United States. They are also the views of certain Third World countries that are pegging their development plans on the dismantling of American industry. One such country is South Korea, which is aggressively - and successfully - promoting itself as site for the relocation of heavy industry from the U.S. and Japan.

In the U.S., this promotional lobbying is being done by the Korea Economic Institute, a government-sponsored "think tank." Set up to "promote beneficent relations" between the U.S. and South Korea, the institute has an American staff and advisory council that includes two former American ambassadors to Korea, William Gleysteen and Richard Sneider.

In a telephone interview with Multinational Monitor, Korea Economic Institute president John Bennett talked about the positive aspects of relocating industry in the Third World. "The UAW should be concerned about this," he said. "But the American people should be happy to see it happening. Korea is preeminently a manufacturing company, and very good at it. They can produce these goods much more effectively and cheaply. "

Bennett then outlined the argument for shifting manufacturing overseas. "Korea is an enormous market for the U.S.," he said. "If we don't import, they can't pay for our goods." In this division of labor, Bennett explained, "We sell what we're good at, and buy what others are good at. Does the U.S. lose its economic viability if we don't have a steel industry?"

"Somebody has to be employed," he continued. "And the ones who are unemployed are the ineffective - the auto workers and the steel workers. You just can't stop progress."

There are several problems with "progress" as envisioned by Bennett and Cook.

First, they refuse to consider the issue of workers' rights. The "efficiency" and "competitiveness" of Third World industry is often gained at the expense of trade unions and democracy. In South Korea, for example, the Chun government has in the last two years launched an unprecedented attack on labor, and broken every independent union in existence. Hundreds of trade unionists have been fired or jailed. As a result, wages remain low - and industry remains competitive. This creates the atmosphere for companies like Caterpillar Tractor Co. to start thinking about producing their tractors in Korea instead of in the Midwest - as the company has done recently with fork lift trucks (see MM, January 1983).

Second, high technology does not always bring equal benefits. Even in the "capitol" of high technology - Silicon Valley near San Francisco - serious inequities and health hazards have surfaced. Writing in the most recent issue of Pacific Research, activist Lenny Siegel writes: "The (electronics) industry provides fantastic opportunities for highly educated white men, but women in Asia and Latin America assemble chips and electronic equipment for the same companies, at a fraction of the cost.

"While the industry has brought prosperity to Santa Clara County, the social and environmental costs are growing... workers inside and occasionally the communities outside are exposed to a variety of toxic chemicals and hazardous wastes."

Third, the shift to high technology does not mean better employment opportunities or working conditions. Business Week recently estimated that 40010 of the unemployed in steel, autos and rubber would never get their jobs back. Those that do find work often end up with much lower pay, or in non-union shops. In addition, many of the new jobs require retraining and education - not an easy task for an unemployed worker with a family to feed.

And even high technology is moving abroad. In the past two years, for example, Westinghouse Electric Corporation has shut down two reactor parts plants - and is considering reopening them at some point in South Korea. Bechtel Corporation has done the same thing in engineering; its joint venture in Taiwan is now contracting in the U.S.!

Fourth, both Cook and Bennett overlook a major element in decision-making: public input. The decisions by multinational, corporations and banks to move production overseas were made long ago in the interests of profits and efficiency, without input or consultation. These policies have left behind communities without industry, workers without jobs, cities without a tax base.

It is this exclusion of labor and community from economic decisions and corporate disregard for labor's contribution to the economy that has so angered many trade unionists. Frank Wallick, editor of the United Auto Worker's Washington Report calls this thinking "typical of a lame brain analysis." In an interview with Multinational Monitor, Wallick expressed anger at Korea Economic Institute President Bennett's comments that "Americans should be happy" with the move of industry overseas. "You starve people, throw them out of work without concern for what they've done all their lives or the contributions they have made. It's a terrible condemnation of capitalism. It's horrendous," said Wallick.

"Don't get me wrong," he continued. "We're for helping developing nations. But that doesn't mean we have to destroy another country to do it. These people are destroying our industrial base."

"The UAW," said Wallick, "is not going to roll over and play dead." Wallick's union has been in the forefront of a "local content law" that would require auto companies to produce up to 80% of their parts within the U.S.

The strongest testimony to the disastrous consequences of what MIT economists Barry Bluestone and Ben Harrison call the "deindustrialization of America" comes from those affected by plant closures. Recently, Multinational Monitor received a letter from Brenda Cochrane, a graduate student at the University of Oregon and a labor activist. Ms. Cochrane has been working with unemployed garment workers in Washington - a group that has been hit particularly hard by inexpensive Asian imports. Her account of their experiences says more about the benign vision of "progress" as articulated by Forbes and the Korea Economics Institute than any number of pamphlets or editorials.

"Since January (1982)," she writes, "I have been following a group of women who lost their jobs when a blue jean factory closed down in Yakima, Washington. Because I knew the woman who had been a union organizer in that plant for many years, I was able to visit the plant before it shut down (there was three weeks notice) and attend the last union meeting. Through surveys and intensive interviews, I have been allowed a glimpse into these women's lives as they have grappled with the devastation that the plant closure has wreaked on their lives. Two-thirds of them were the only economic provider for themselves or themselves and a family, and they have shown incredible strength as they have struggled to survive economically in a small town where decently paid jobs for women workers are hard to find. The ones who had found work when I was last there in November were working for wages which, in most cases, were $2 an hour less than they were making before - and of course, they were in non-union situations without any job protection or health and pension benefits. For those who have not yet found work, the emotional devastation of being unemployed had compounded their economic problems. The statistics on the impact of unemployment on people's lives are no longer abstractions for me. Only after a three hour interview with a woman who was suicidal because of all the pressures generated by the loss of her job, did I really comprehend the true significance of the statistics we are seeing which link suicide to unemployment."

Suicide. Unemployment. There is a connection.

The experiences of these particular women have been repeated all over America, as hundreds of manufacturing plants - from bicycle factories to steel mills - have been closed over the last three years. This tragedy cries out for attention - and a solution.

Developing a strategy to deal with plant closures and unemployment is not a simple task: there are complicated times. But the only sensible answer seems to be a system that puts a priority on jobs, health, welfare, and environment - and allows workers and consumers a voice in economic decisions.

Clearly, the multinational corporations and banks that are responsible for the export of capital and jobs to the Third World have a different view. But as our economic crisis deepens, the corporate vision of "progress" is going to come under increasing criticism by those who are working for a more just and equitable society including trade unionists, church activists, consumer groups, small farmers and community organizers.

As the debate continues, Multinational Monitor will continue to be a reliable source of information and analysis about the role and impact of multinational corporations, both in the U.S. and the Third World.

It is in this spirit that we begin our third year of publication.

- T.S.

About This Issue This month our feature section is devoted to three articles on U.S. relations with Japan and South Korea. These two countries have, in the last twenty years, become important trading partners of the U.S. Since the early 1970s, they have become closely linked to the U.S. military structure in the Pacific. As our feature articles indicate, Northeast Asia is one of the most important - and least understood - arenas for U.S. corporate and political activity Changes Readers will notice a few changes in the format and direction of the magazine. We have reorganized the layout to accommodate more writing and reporting; changed the name of the "Global Newswatch" section to "News Monitor;" started to use a three-column format throughout the magazine; and designed a new masthead for each section. In this and upcoming issues, we plan to introduce several new features, This issue marks the debut of a "Regional Monitor," which will focus on the political economy of specific areas of the world. In the next few months, we will begin an "Update" section, which will follow up on stories previously covered in the Monitor, and a "Commentary" section. "Commentary" will feature articles proposing strategies to deal with corporate power and the economic crisis, Questions that might be addressed include: under what conditions should Third World or socialist countries accept foreign investment? How should workers and communities respond to plant closures? Readers are invited to submit articles and ideas for this section. In terms of content, we will continue to probe the operations and policies of multinational corporations and banks, and explore the links between corporate strategies and U.S. foreign policy, We also plan to focus more on broader issues pertaining to multinationals, and to run two or three articles at time on one topic - as we have done with this issue on Northeast Asia. Readers response needed For such a large subject, Multinational Monitor has a very small staff. To make sure we are on lack with our reporting, we need your input. Please write us, and tell us how you feel about the magazine and the quality of the articles, It is important for us to know how useful the Monitor is in your work. And if you area, writer or an activist, you may have an idea for a story we could cover, or an idea for a "Commentary" piece. You make the magazine - your input will improve it.