Committees of Correspondence for Democracy and Socialism
Module #1
“On Neoliberal Globalization and its Impacts”
PART-A
Primary Readings
1. International Labor Organization, “Globalization Failing to Create New, Quality Jobs or Reduce Poverty”
2. Edward S. Herman, “The Threat of Globalization”
3. Manning Marable, “Globalization and Racialization”
4. Ralph Blumenthal, “Levi’s Last US Workers Mourn Loss of Good Jobs”
5. Celia W. Dugger, “Guatemala: Supermarket Giants Crush Farmers”
ILO Report Sees Wide Gaps in Wages, Productivity Gains
International Labour Organization
December 9, 2005
Global economic growth is increasingly failing to translate into new and better jobs that lead to a reduction in poverty, according to a new report issued by the International Labour Office (ILO) here today. In the report, the ILO points out that within this global trend, different regions show mixed results in terms of job creation, productivity results, wage improvements and poverty reduction. Taking a global view, the 4th Edition of Key Indicators of the Labour Market (KILM) (Note 1) says that currently, half the world's workers still do not earn enough to lift themselves and their families above the US $2 a day poverty line.
"The key message is that up to now better jobs and income for the world's workers has not been a priority in policy-making", said ILO Director-General Juan Somavia. "Globalization has so far not led to the creation of sufficient and sustainable decent work opportunities around the world. That has to change, and as many leaders have already said we must make decent work a central objective of all economic and social policies. This report can be a useful tool for promoting that objective."
The study finds that while in some areas of Asia economic expansion is fostering solid growth in jobs and improvements in living conditions, other areas such as Africa and parts of Latin America are seeing increasing numbers of people working in less favorable conditions, especially in the agricultural sector. The KILM also says that for millions of workers, new jobs often provide barely enough income to lift them above the poverty line, or are far below any adequate measure of satisfying and productive work. The total number of working women and men living on less than $2 a day has not fallen over the past decade although at 1.38 billion it is a smaller share of global employment at just below 50 per cent, a decline from 57 per cent in 1994.
The report emphasizes that in many developing economies the problem is mainly a lack of decent and productive work opportunities rather than outright unemployment. Women and men are working long and hard for very little because their only alternative is to have no income at all. The new KILM paints an in-depth picture of both the quantity and quality of jobs around the world by examining 20 key indicators of the labour market. The KILM covers quantitative topics such as labour force participation, employment, inactivity, employment elasticities, sectoral employment, labour productivity and unemployment, and qualitative issues such as hours worked, wages, employment status, unemployment duration and others.
Economic growth is not leading to job creation
In recent years there has been a weakening relationship between economic growth and employment growth, meaning that growth is not automatically translating into new jobs. The report's "employment elasticities" indicator allows one to look at the relationship between economic growth - measured in GDP - and two of growth's contributory variables, the positive or negative change in employment and productivity. The biennial study found that for every 1 percentage point of additional GDP growth, total global employment grew by only 0.30 percentage points between 1999 and 2003, a drop from 0.38 percentage points between 1995 and 1999.
With employment growing between 0.5 and 0.9 percentage points for each additional percentage point of GDP growth, the most employment-intensive growth has taken place in the Middle East and in Northern and sub-Saharan Africa. A review of other indicators, however, shows that much of the employment growth in these regions is in the category of "self-employment" which includes most women and men in the informal economy where working conditions are often poor. While more jobs are being created in economies where agriculture dominates employment such as those in sub-Saharan Africa, many of the jobs are in the informal economy, at low-levels of productivity, and fail to provide workers enough income to pull themselves or their families out of poverty. For example, the number of workers living on less than US$1 per day increased by 28 million in sub-Saharan Africa between 1994 and 2004.
By contrast, economic expansion in East Asia was sufficient to generate employment growth, productivity growth and a reduction in the high incidence of poverty in the region. Latin America, however, experienced a decline in the employment intensity of growth between 1999 and 2003. At the same time, the number of working poor in the region at the US$1 a day level increased by 4.4 million. In recent years, economic growth in Latin America has been relatively more employment intensive for females than for males, which reflects a substantial narrowing of the labour force participation gap between men and women in the region.
In both Western Europe and North America, the services sector has experienced the most robust growth - both in terms of value added and employment growth. Between 1991 and 2003, for every 1 percentage point of growth in the services sector, employment increased by 0.57 per cent in North America and by 0.62 per cent in Western Europe. However, the report finds evidence of a divergence in employment performance between North America and Western Europe between 1991 and 2003, with the employment intensity of growth decreasing in the former and increasing in the latter between 1991 and 1999, with a further significant reduction in North America and a mild reduction in Western Europe between 1999 and 2003.
Global wage inequality on the rise
The 4th Edition KILM shows that between 1990 and 2000, wages increased faster in high-skilled occupations than in low-skilled occupations globally. Although these findings do not show a general deterioration of the wage position for low-skilled workers, they do suggest widening wage inequality between high- and low-skilled workers during the 1990s.
Rising wage inequality in the developed economies has been mainly attributed to greater demand for higher-skilled labour, which is in short supply and to lesser demand for workers with lower-level education. Other explanatory factors, although of less impact, include increased trade with developing countries and increased immigration of low-skilled workers. In developing countries, factors impacting on rising wage inequality include industry wage premiums resulting from changes in trade policy that favour workers in specific industries, the increasing size of the informal economy, which generally has lower wages and less favorable working conditions, and a shortage of high-skilled workers.
Labour costs and labour productivity bring unequal results in terms of global competitiveness
The report concludes that the competitiveness of a high-wage economy is not immediately threatened by lower labour costs elsewhere, as countries with low labour costs are usually also characterized by lower productivity levels. The report demonstrates how competitiveness is determined by the combined outcomes of elements of the productive process - the cost of utilizing labour (labour compensation) and labour productivity (output per person employed) - and by exchange rate fluctuations. The report's analysis of competitiveness in the "unit labour costs" indicator shows the following:
o In the European Union-15, it is not so much high labour costs but lower productivity in the manufacturing sector and appreciation in the Euro that has threatened the competitive position of the region vis-à-vis the United States.The United States continues to show the highest labour productivity levels measured as value added per person employed. Despite faster productivity growth rates in some European Union countries, especially the new EU Member States, the productivity gap, measured in value-added per person employed, between the United States and most developed economies continues to widen. One exception is Ireland where this measure of the productivity gap with the US has been steadily narrowing since1980. A slightly different picture emerges if productivity is measured by value-added per hour. This shows that some European countries are more productive than the US and for others the gap is less wide. However, most Europeans work shorter hours and have longer holidays than their US counterparts.
o The manufacturing unit labour cost level in Japan has not only been high relative to the United States, but also in comparison with that of the EU-15. However, since the mid-1990s, the gap has decreased due to a moderation in wage growth in Japan, a weakening of the yen-US$ exchange rate in 2005 and an improvement in the comparative productivity performance of Japanese manufacturing.
o The Republic of Korea has shown rapid improvement in labour productivity relative to the United States, but unit labour costs in the country have increased due to rapid wage increases during the early 1990s.
o Productivity has weakened in Mexico, but because labour compensation levels are lower, unit labour costs have also remained lower than in the United States.
In Central and Eastern Europe, the transition to a market economy led to an increase in productivity but a fall in employment. The new EU Member States show a significant advantage in terms of international competitiveness with unit labour cost levels at approximately 70 per cent of the US level. Increased competitiveness, however, is not benefiting the population in terms of job creation and wages. The region shows some of the world's highest unemployment rates and many of those not working have simply given up the job search, as reflected in the region's high inactivity rates.
In other key findings, the KILM shows that:
o Women are continuing to catch up to men in terms of participation in labour markets throughout the world. Nevertheless, women continue to be disproportionately engaged in low-wage, low-productivity and part-time jobs, and in many regions such as the Middle East, North Africa and South Asia, women's participation in the labour market still lags far behind.
o While the most severe working poverty is growing in Africa, it is declining in Asia and Central and Eastern Europe.
o Youth unemployment rates are typically at least twice as high as adult rates and are sometimes much higher. However, in most countries, the illiteracy rates of adults are higher than those of youth, suggesting that young people are increasingly better prepared for the labour market.
o Developed economies and the European Union are faced with a growing number of "underutilized" labour resources, including the unemployed and involuntary part-time workers looking for a full-time job. In both France and Italy, the rate of "underutilized" labour reached 21 per cent in 2004, up from 17 per cent in 1994 in France and 12 per cent in Italy.
The Threat of Globalization
By Edward S. Herman
New Politics
vol. 7, no. 2 (new series), whole no. 26
Winter 1999
Globalization is both an active process of corporate expansion across borders and a structure of cross-border facilities and economic linkages that has been steadily growing and changing as the process gathers steam. Like its conceptual partner "free trade," globalization is also an ideology, whose function is to reduce any resistance to the process by making it seem both highly beneficent and unstoppable.
And as with free trade, while globalization may sometimes yield economic benefits, both the process and economic-political regime it is helping bring about threaten progressive ends, and should be recognized as such and fought at every level. Admittedly this is a formidable task, as the economic and political power of its beneficiaries, and its momentum, are great and contesting it seems an almost utopian undertaking. But globalization has its vulnerabilities, and attacking it intellectually, at the local level of plant abandonments and moves, as well as at the national political level can help build understanding and support for a larger oppositional movement.
Globalization as Ideology
Globalization is just one of an array of concepts and arguing points that have been mobilized to advance the corporate agenda. Others have been deregulation and getting government off our backs, balancing the budget, cutting back entitlements (non-corporate), and free trade.
Like free trade, globalization has an aura of virtue. Just as "freedom" must be good, so globalization hints at internationalism and solidarity between countries, as opposed to nationalism and protectionism, which have negative connotations. The possibility that cross-border trade and investment might be economically damaging to the weaker party, or that they might erode democratic controls in both the stronger and weaker countries, is excluded from consideration by mainstream economists and pundits.[fn 1] It is also unthinkable in the mainstream that the contest between free trade and globalization, on the one hand, and "protectionism," on the other, might be reworded as a struggle between "protection"--of transnational corporate (TNC) rights--versus the "freedom" of democratic governments to regulate in the interests of domestic non-corporate constituencies.
As an ideology, globalization connotes not only freedom and internationalism, but, as it helps realize the benefits of free trade, and thus comparative advantage and the division of labor, it also supposedly enhances efficiency and productivity. Because of these virtues, and the alleged inability of governments to halt "progress," globalization is widely perceived as beyond human control, which further weakens resistance.
The Economic Failure of Globalization
As the globalization process has been engineered by corporate elites, and serves their interests, they have successfully conveyed the impression that globalization is not only inevitable but has been a great success. This is fallacious. Even ignoring for the moment its distributional effects, globalization has been marked by substantial declines in rates of output, productivity, and investment growth. Under the new regime of enhanced financial mobility and power, with greater volatility of financial markets and increased risk, real interest rates have risen substantially. The average rate of the G-7 countries (U.S., Britain, France, Italy, Germany, Canada and Japan) has gone from 0.4 percent, 1971- 82, to 4.6 percent, 1983-94.[fn 2] This has discouraged long term investment in new plant and equipment and stimulated spending on the re-equipment of old facilities along with a large volume of essentially financial transactions--mergers, buybacks of stock, financial maneuvers, and speculative activities. This may help explain why overall productivity growth [fn 3] in the countries that are members of the OECD fell from 3.3%, 1960-73 to 0.8%, 1973- 95, or by some 75 percent. Gross fixed investment fell from 6.1%, 1959-1970, to roughly 3.1% thereafter, or by half. OECD country annual rates of growth of real GDP fell from 4.8%, 1959-1970 to 2.8%, 1971-94, or by 42 percent.
But the elites have done well despite the slackened productivity growth. Because globalization has helped keep wages down, while increasing real interest rates, the upper 5 percent of households have been able to skim off a large fraction of the reduced productivity gains, thereby permitting elite incomes and stock market values to rise rapidly. But it was a different story for the global majority. Income inequality rose markedly both within and between countries. In the United States, despite a 35 percent increase in productivity between 1973 and 1995, the median real wage rate was lower in the latter year. Inequality rose to levels of 70 years earlier, and underemployment, job insecurity, benefit loss, and worker speedup under "lean" production systems all increased. [fn 4 Insecurity is functional. As Alan Greenspan complacently explained to Congress in 1997, wage rates were stagnant in this country because worker insecurity was high. [fn 5] That this high insecurity level reduced the well-being of the affected workers did not bother Greenspan, or Congress and the mainstream media.
The gap in incomes between the 20 percent of the world's population in the richest and poorest countries has grown from 30 to 1 in 1960 to 82 to 1 in 1995, and Third World conditions have in many respects worsened. Per capita incomes have fallen in more than 70 countries over the past 20 years; some 3 billion people--half the world's population, live on under two dollars a day; and 800 million suffer from malnutrition. [fn 6] In the Third World unemployment and underemployment are rampant, massive poverty exists side-by-side with growing elite affluence, and 75 million people a year or more seeking asylum or employment in the North, as Third World governments allow virtually unrestricted capital flight and seek no options but to attract foreign investment. [fn 7]
The new global order has also been characterized by increased financial volatility, and from the Third World debt crisis of the early 1980s to the Mexican breakdown of 1994-95 to the current Asian debacle, financial crises have become more and more threatening. With increasing privatization and deregulation, the discrepancy between the power of unregulated financial forces and that of governments and regulatory bodies increases and the potential for a global breakdown steadily enlarges.
Only an elite perspective permits this record to be regarded as an economic success.
Globalization as an Attack on Democracy
The globalization of recent decades was never a democratic choice by the peoples of the world--the process has been business driven, by business strategies and tactics, for business ends. Governments have helped, by incremental policy actions, and by larger actions that were often taken in secret, without national debate and discussion of where the entire process was taking the community. In the case of some major actions advancing the globalization process, like passing the North American Free Trade Agreement (NAFTA) or joining the European Monetary Union (EMU), publics have been subjected to massive propaganda campaigns by the interested business-media elites. In the United States, public opinion polls showed the general public against NAFTA even after incessant propaganda, but the mass media supported it, [fn 8] and it was passed. In Europe as well, polls have shown persistent majorities opposed to the introduction of the Euro, but a powerful elite supports it, so that it moves forward.
This undemocratic process, carried out within a democratic facade, is consistent with the distribution of benefits and costs of globalization, and the fact that globalization has been a tool serving elite interests. Globalization has also steadily weakened democracy, partly as a result of unplanned effects, but also because the containment of labor costs and scaling down of the welfare state has required the business minority to establish firm control of the state and remove its capacity to respond to the demands of the majority. The mix of deliberate and unplanned elements in globalization's antidemocratic thrust can be seen in each aspect of the attack process.
The assault on labor. One of the main objectives of TNC movement abroad has been to tap cheaper labor sources. Labor is often cheapest, and least prone to cause employer problems, in authoritarian states that curb unions and enter into virtual joint venture arrangements with foreign capital, as in Suharto's Indonesia and PRI's Mexico. Capital moves to such friendly investment climes in an arbitrage process, shifting resources from the more expensive to the less costly locale, in a process that penalizes and thereby weakens democracy.
The actual shift of capital abroad, and the use of the external option to drive hard bargains at home, has weakened labor. Labor has also been weakened by deliberate government policies of tight money and restrictive budget policies to contain inflation, at the expense of high unemployment. These policies, and the incessant focus on labor market "flexibility" as the solution to the unemployment problem, reflect a corporate and antilabor policy agenda, fully institutionalized. There have even been more open and direct attacks on organized labor--both Reagan and Thatcher engaged in union busting, and the latter was quite explicit in her aim to weaken labor as a political force. [fn 9] Democracy, according to pluralistic theory, is said to rest on the existence of intermediate groups, like labor organizations, that can bargain and work on behalf of an otherwise atomized population. The deliberate weakening of such groups is thus an attack on democracy.
The ideological campaign. In the United States, Britain, Canada, and other countries the business community has also mounted a sustained ideological campaign to make their preferred policies part of common understanding. These campaigns have proceeded in parallel with globalization and have been remarkably similar, reflecting the global flow of ideology and overlapping sources of funding. The favored neoliberal ideology pushes the idea that the market can do it all, that government is a burden and threat, and that deregulation and privatization are inherently good and inevitable. It presses an extreme individualism and the value of "personal responsibility," which is highly advantageous to corporate power, leaving bargaining between large firms and isolated individuals. Collective and community values, the threat of externalities and ecological damage from unconstrained business growth, free market instability--all are shunted aside in this ideological system. This ideological campaign has been highly successful, because vast sums of business money fed to intellectuals and think-tanks, and business domination of the mass media, has allowed their views to prevail. Heritage Foundation leader Edwin Feulner has described the strategy of his corporate- funded and globally linked thinktank as analogous to Procter & Gamble's in selling soap--saturate the market with messages that overwhelm any that are less well funded. [fn 10] But this is a corruption of democracy; it is a bought market of ideas, not a free market of ideas.
Capturing or immobilizing governments. The business community has also mounted a powerful effort to dominate governments--either by capture or by limiting their ability to serve ordinary citizens. Globalization has contributed to this effort, partly by the arbitraging process mentioned earlier, which favors authoritarian rule. Apart from this, by enlarging business profits and weakening labor it has shifted the balance of power further toward business, so that political parties have been even more decisively influenced by business money in elections. In the United States, it is notorious that Mr. Clinton has sought and received enormous sums from business and serves their interests almost exclusively, with only token efforts on behalf of the major nonbusiness constituencies of the Democratic Party. The globalizing corporate media have added their growing strength to the advance of neoliberal ideology and opposition to any vestiges of social democracy, making social democratic policies difficult to implement. The Murdoch effect on British elections, and the current Murdoch-Blair connection illustrates the point.[fn 11]
Another well-known and important antidemocratic force is the power of global financial markets to limit political options. Social democratic policies make for an unfavorable investment climate. Businesses will therefore respond to politicians and acts serving ordinary citizens with threatened or actual exit. Financial market effects on exchange and interest rates can be extremely rapid and damaging to the economy. Spokespersons for the new global economy actually brag about the ability of capital to penalize "unsound" policies, and the fact that money capital now rules.[fn 12]
These business efforts, aided and validated by the IMF and by media support, regularly cause social democrats to retreat to policies acceptable to the rulers. Thus, in country after country social democratic parties have accepted neoliberalism, despite the contrary preferences of great majorities of their voting constituencies.[fn 13] But this means that nominal democracy is no longer able to serve ordinary citizens, making elections meaningless and democracy empty of substance. This helps explain why half or more of eligible U.S. voters no longer participate in national elections.
Supra-national limits on democracy--the New (TNC) Protectionism. Not satisfied with this level of political control, the business community has pushed for international agreements, and policy actions by the IMF and World Bank, that further encroach on the ability of democratic polities to act on behalf of their constituencies.
These agreements and the demands of the international financial institutions invariably call for precisely the policies desired by the TNC community. The EMU conditions give primacy to budget constraints and inflation control, in accord with the neoliberal and corporate agenda. GATT, the WTO, and the NAFTA agreement also give top priority to corporate investor and intellectual property rights, to which all other considerations must give way. In the early 1980s, the IMF and World Bank took advantage of the Third World debt crisis and used their leverage with numerous distressed Third World borrowers to force their acceptance of Structural Adjustment Programs. These forced the borrowing countries to agree to give first priority to external debt repayment, private as well as government; it compelled them to adapt austerity programs of tight money and budget cutbacks focusing heavily on social expenditures affecting the poor and ordinary citizens; it forced a stress on exports, which help generate foreign exchange to allow debt repayment and that more closely integrate the borrower's economy into the global system; and it stressed privatization, allegedly in the interest of efficiency, but serving both to help balance the budget without tax increases and to provide openings for TNC investment in the troubled economy. The IMF is doing the same in Asia today.
A second characteristic of the new agreements and IMF-World Bank actions is their denial of democratic rights to non-corporate citizens and elected governments. These are subordinated to the rights of corporate investors, the superior class of global citizens with priority over all others and beneficiaries of the New TNC Protectionism. In the NAFTA agreement, governments are denied in advance the right to take on new functions; any not asserted now are left to the private sector and to the superior class of citizens. In these agreements, also, and even more aggressively in the Multilateral Agreement on Investment now under consideration, the global TNCs have no responsibilities and none can be imposed on them. They can fire people, abandon communities, fatally damage the environment, push local companies out of business, and purvey cultural trash at their full discretion. They can or will be able to sue governments, and disagreements are to be settled by unelected panels outside the control of democratic governments.
A third characteristic of the new agreements and IMF-World Bank actions is that they rest not only on neoliberal theory but on a false reading of recent experience and economic history. As noted earlier, globalization so far has been a productivity failure, a social disaster, and a threat to stability. The claim of its proponents that free trade is the route to economic growth is also confuted by longer historic experience: no country, past or present, has taken off into sustained economic growth and moved from economic backwardness to modernity without large-scale government protection and subsidization of infant industries and other modes of insulation from domination by powerful outsiders. This includes Great Britain, the United States, Japan, Germany, South Korea and Taiwan, all highly protectionist in the earlier takeoff phases of their growth process.[fn 14] The governments and institutions bargaining on behalf of the TNCs today, through the IMF, World Bank, WTO and NAFTA, have been able to remove these modes of protection from less developed countries. This threatens them with extensive takeovers from abroad, thoroughgoing integration into foreign economic systems as "branch plant economies," preservation in a state of dependence and underdevelopment, and most particularly, an inability to protect their majorities from the ravages of neoliberal top-down development priorities.
Concluding Note
In sum, we are in the midst of an antidemocratic counterrevolution in which globalization and its imperatives are being used to weaken popular and elected authority in favor of a system of domination by super-citizens, the TNCs. This process sows the seeds of its own destruction, as it serves a small global minority, damages the majority, breeds financial instability, and exacerbates the environmental crisis. Its destructive tendencies are likely to produce an explosion if the process is not contained and democracy is not rehabilitated.
Halting this antidemocratic juggernaut will be difficult, not only because of the power of its beneficiaries, but also because it operates within the framework of nominally democratic structures and musters plausible arguments. But these arguments are self- serving and wrong, and should be vigorously contested. An agenda should be advanced that serves ordinary citizens rather than the TNCs and financial institutions. Negatively, this agenda will include strenuous opposition to all supranational arrangements that take power out of the hands of democratic governments to serve some alleged economic need. Positively, the agenda requires support for the imposition of serious limits and responsibilities on TNCs, including capital controls and other deterrents to financial speculation. Pursuit of this agenda is going to require a combination of understanding and effective organization of the large majority who are the victims of globalization.
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Notes
1. Many leftists also strenuously deny that globalization is having a damaging effect on the power of the state. This denial seems to be based mainly on fears that a pessimistic analysis will render workers apathetic and destroy the socialist project. The deniers stress that the state still works well in serving the transnational corporate community; they ignore the possibility that such efficient service is quite compatible with globalization weakening the power of the state to do things that TNCs and the financial community oppose. For statements of the denial school, see Ellen Wood, "'Globalization' or 'Globaloney'?," Monthly Review, Feb. 1997; William Tabb, "Globalization is An Issue, the Power of Capital is The Issue," Monthly Review, June 1997; Linda Weiss, The Myth of the Powerless State (Cornell, 1998). For a rebuttal, see Richard DuBoff and Edward Herman, "A Critique of Tabb on Globalization, " Monthly Review, Nov. 1997.
2. The data in this paragraph is taken from David Felix, "Asia and the Crisis of Financial Globalization," in Dean Baker et al., Globalization and Economic Policy (Cambridge University Press, 1998).
3. More precisely, total factor productivity growth, which is the weighted average of growth in labor and capital productivity.
4. See Kim Moody, Workers In A Lean World (Verso, 1997), esp. chap. 5.
5. In his testimony on monetary policy before congress on July 22, 1997, Greenspan noted that the proportion of workers in large companies fearful of layoffs rose from 25 to 46 between 1991 and 1996.
6. Ignacio Ramonet, "The Politics of Hunger," Le Monde Diplomatique, Nov. 1998; UN Development Program, Human Development Report 1998 (New York, Sept. 1998).
7. On the underrated problem of uncontrolled capital flight in Latin America, see David Felix, "Debt Crisis Adjustment in Latin America: Have the Hardships Been Necessary?," Washington University, St. Louis, Working Paper 170, Sept. 1992.
8. Edward Herman, "Mexican Meltdown," Z Magazine, Sept. 1995.
9. See Margaret Thatcher, The Downing Street Years (Harper/Collins, 1993), p. 676 and passim.
10. Alex Carey, Taking the Risk Out of Democracy (University of New South Wales, 1995), pp. 106-7.
11. Rupert Murdoch, who controls a third of the print media circulation in Britain, was widely credited with the Tory election triumph over Labour in 1990, by virtue of his papers' frenzied attacks on the latter. Tony Blair, the new head of the Labour party, traveled to Australia to visit with Murdoch, persuaded him to reconsider his support, and succeeded in getting Murdoch's papers to support Labour in the l997 election campaign. Blair unilaterally repudiated the Labour pledge to seek a decentralization of the media, and his policies have received accolades from the right: Margaret Thatcher's favorite think-tank, the Adam Smith Institute, described Blair's as a "remarkably promising start." (Daily Mail, Dec. 10, 1997). Canadian business columnist Peter Cook refers to Blair as "the man who made the country safe for Thatcherism" (Globe and Mail, May 15, 1998).
12. Walter Wriston, former CEO of Citicorp, has repeatedly stressed that 200,000 financial market monitors in trading rooms control national monetary and fiscal policies "through a kind of global plebiscite." "Decline of the Central Bankers," New York Times, Sept. 20, 1992.
13. William Robinson, Promoting Polyarchy: Globalization, US Intervention and Hegemony, Cambridge, England: Cambridge University Press, 1996; Jochen Hippler, ed., The Democratisation of Disempowerment, London: Pluto, 1995; Edward Herman, "The End of Democracy?," Z Magazine, Sept. 1993.
14. Alice Amsden, Asia's Next Giant (Oxford, 1989); Robert Wade, Governing the Market (Princeton, 1990).
*Edward S. Herman, Professor Emeritus of Finance, Wharton School, University of Pennsylvania, is the author of a number of books, including Manufacturing Consent (1988, with Noam Chomsky), Triumph of the Market (1996), and The Global Media (1997, with Robert McChesney).
Globalization and Racialization
by Manning Marable
In 1900, the great African-American scholar W.E.B. Du Bois predicted that the “problem of the twentieth century” would be the “problem of the color line,” the unequal relationship between the lighter vs. darker races of humankind. Although Du Bois was primarily focused on the racial contradiction of the United States, he was fully aware that the processes of what we call “racialization” today—the construction of racially unequal social hierarchies characterized by dominant and subordinate social relations between groups—was an international and global problem. Du Bois’s color line included not just the racially segregated, Jim Crow South and the racial oppression of South Africa but also British, French, Belgian, and Portuguese colonial domination in Asia, the Middle East, Africa, Latin America, and the Caribbean among indigenous populations.
Building on Du Bois’s insights, we can therefore say that the problem of the twenty-first century is the problem of global apartheid: the racialized division and stratification of resources, wealth, and power that separates Europe, North America, and Japan from the billions of mostly black, brown, indigenous, undocumented immigrant and poor people across the planet.
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…the problem of the twenty-first century is the problem of global apartheid…
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Inside the United States, the processes of global apartheid are best represented by what I call the New Racial Domain. This New Racial Domain is different from other, earlier forms of racial domination, such as slavery, Jim Crow segregation, and ghettoization, or strict residential segregation, in several critical respects. These earlier racial formations or domains were grounded or based primarily, if not exclusively, in the political economy of US capitalism. Anti-racist or oppositional movements that blacks, other people of color and white anti-racists built were largely predicated upon the confines or realities of domestic markets and the policies of the US nation-state. Meaningful social reforms such as the Civil Rights Act of 1964 and the Voting Rights Act of 1965 were debated almost entirely within the context of America’s expanding domestic economy and a background of Keynesian, welfare state public policies.
The political economy of the “New Racial Domain,” by contrast, is driven and largely determined by the forces of transnational capitalism and the public policies of state neoliberalism. From the vantage point of the most oppressed US populations, the New Racial Domain rests on an unholy trinity, or deadly triad, of structural barriers to a decent life. These oppressive structures are mass unemployment, mass incarceration, and mass disfranchisement. Each factor directly feeds and accelerates the others, creating an ever-widening circle of social disadvantage, poverty, and civil death, touching the lives of tens of millions of US people.
The process begins at the point of production. For decades, US corporations have been outsourcing millions of better-paying jobs. With whole US urban neighborhoods losing virtually their entire economic, manufacturing and industrial employment, and with neoliberal social policies in place cutting job training programs, welfare, and public housing, millions of Americans now exist in conditions that exceed the devastation of the Great Depression of the 1930s. In 2004, in New York’s Central Harlem community, 50% of all black male adults were unemployed. When one considers that this figure does not count those black males who are in the military, or inside prisons, it’s truly amazing and depressing.
In July 2004, labor researchers at Harvard University found that one-quarter of the nation’s entire population of black male adults were jobless for the entire year during 2002. What these nightmarish statistics mean is that for most low- to middle-income African-Americans, joblessness and underemployment (e.g. working part-time or sporadically) are now the norm; having a real job with benefits is now the exception.
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These oppressive structures are mass unemployment, mass incarceration, and mass disfranchisement.
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With the onset of global capitalism, the new jobs being generated for the most part lack the health benefits, pensions, and wages that manufacturing and industrial employment once offered. Neoliberal social policies, adopted and implemented by Democrats and Republicans alike, have compounded the problem. After the 1996 welfare act, the social safety net was largely pulled apart. As of January 2004, the number of families on public assistance had fallen to 2 million, down from 5 million families on welfare in 1995. New regulations and restrictions intimidate thousands of poor people from requesting public assistance.
Mass unemployment inevitably feeds mass incarceration. About one-third of all prisoners were unemployed at the time of their arrests, and others averaged less than $20,000 annual income in the year prior to their incarceration. When the Attica prison insurrection occurred in upstate New York in 1971, there were only 12,500 prisoners in New York State’s correctional facilities, and about 300,000 prisoners nationwide. By 2001, New York State held over 71,000 women and men in its prisons; nationally, 2.1 million were imprisoned. Today about 5–6 million Americans are arrested annually, and roughly 1 in 5 Americans possesses a criminal record.
Mandatory-minimum sentencing laws adopted in the 1980s and 1990s in many states stripped judges of their discretionary powers in sentencing, imposing draconian terms on first-time and non-violent offenders. Parole has been made more restrictive as well, and in 1995 Pell grant subsidies supporting educational programs for prisoners were ended. For those fortunate enough to successfully navigate the criminal justice bureaucracy and emerge from incarceration, they discover that both the federal law and state governments explicitly prohibit the employment of convicted ex-felons in hundreds of vocations. The cycle of unemployment frequently starts again.
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In Mississippi, one-third of all black men are unable to vote for the remainder of their lives.
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The greatest victims of these racialized processes of unequal justice, of course, are African-American and Latino young people. In April 2000, utilizing national and state data compiled by the FBI, the Justice Department and six leading foundations issued a comprehensive study that documented vast racial disparities at every level of the juvenile justice process. African Americans under age 18 constitute 15% of their national age group, yet they currently represent 26% of all those who are arrested. After entering the criminal justice system, white and black juveniles with the same records are treated in radically different ways. According to the Justice Department’s study, among white youth offenders 66% are referred to juvenile courts while only 31% of the African-American youth are taken there. Blacks make up 44% of those detained in juvenile jails, 46% of all those tried in adult criminal courts, as well as 58% of all juveniles who are warehoused in prisons.
Mass incarceration, of course, breeds mass political disfranchisement. Nearly 5 million Americans cannot vote. In seven states, former prisoners convicted of a felony lose their voting rights for life. In the majority of states, individuals on parole and probation cannot vote. About 15% of all African-American males nationally are either permanently or currently disfranchised. In Mississippi, one-third of all black men are unable to vote for the remainder of their lives. In Florida, 818,000 residents cannot vote for life.
Even temporary disfranchisement fosters a disruption of civic engagement and involvement in public affairs. This can lead to “civil death,” the destruction of the capacity for collective agency and resistance. This process of depoliticization undermines even grassroots, non-electoral organizing.
Not too far in the distance lies the social consequence of these policies: an unequal, two-tiered, uncivil society characterized by a governing hierarchy of middle- to upper-class “citizens” who own nearly all private property and financial assets, and a vast subaltern class of quasi- or subcitizens encumbered beneath the cruel weight of permanent unemployment, discriminatory courts and sentencing procedures, dehumanized prisons, voting disfranchisement, residential segregation, and the elimination of most public services for the poor. Institutions that once provided space for upward mobility and resistance for working people, such as unions, have been largely dismantled. Integral to all of this is racism, sometimes openly vicious and unambiguous, but much more frequently presented in race-neutral, color-blind language.
The anti-globalization struggle must confront this New Racial Domain with something more substantial than tired ruminations about “black and white, unite and fight.” The seismic shifts have created new continents of social inequality, transcending nation-states and the traditional boundaries of race and ethnicity. What is necessary is an original and creative approach that breaks with comfortable dogmas of all types, while advancing openly a politics of civic advocacy and democratic empowerment for those most brutally oppressed and exploited. I am not suggesting here that the anti-globalization movement play a “vanguard” role for global social change. In the tradition of C.L.R. James, I am convinced that the oppressed, on their own terms, ultimately will create new approaches and organizations to fight for justice that we now can scarcely imagine. Rather, it is our political and moral obligation to provide the critical support necessary for social struggles and resistance that is already being waged on the ground today. Examples of that resistance are in every city and most communities across the country.
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…the oppressed, on their own terms, ultimately will create new approaches and organizations to fight for justice…
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The New Racial Domain’s reliance on extreme force and the continued expansion of the prison system reshape how law enforcement is being carried out even in small- to medium-sized towns and cities all over America. The terrible dynamic unleashed against prisoners of social control has expanded into policing itself. There are now, for example, approximately 600,000 police officers and 1.5 million private security guards in the United States.
Increasingly, however, black and poor communities are being “policed” by special paramilitary units, often called SWAT (Special Weapons and Tactics) teams. The US has more than 30,000 such heavily armed, military-trained police units. SWAT-team mobilizations, or “call outs,” increased 400% between 1980 and 1995.
These trends reveal the makings of what may constitute a “National Security State” — the exercising of state power without democratic controls, checks and balances, a state where policing is employed to carry out the disfranchisement of its own citizens.
How do we build resistance to the New Racial Domain in the age of globalized capitalism? It should surprise no one that the resistance is already occurring, on the ground, in thousands of venues. In local neighborhoods, people fighting against police brutality, mandatory-minimum sentencing laws, and for prisoners’ rights; in the fight for a living wage, to expand unionization and workers’ rights; in the struggles of working women for day care for their children, health care, public transportation, and decent housing. These practical struggles of daily life are really the core of what constitutes day-to-day resistance. Building capacities of hope and resistance on the ground develops our ability to challenge the system in more fundamental, direct ways.
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…the social composition of the anti-globalization forces must change, especially here in the United States.
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The recently successful “Immigrant Worker Freedom Ride,” highlighting the plight of undocumented workers who enter the US, represents an excellent model that links the oppressive situation of new immigrants with the historic struggles of the Civil Rights Movement 45 years ago to overthrow Jim Crow. Many sincere, white anti-globalization activists need to learn more about the historic Black Freedom Movement, and the successful models of resistance—from selective buying campaigns or economic boycotts to rent strikes to civil disobedience—which that movement established. You are not inventing models of social justice activism and resistance; others have come before you. The task is to learn from the strengths and weaknesses of those models, incorporating their anti-racist vision into the heart of what we do to resist global capitalism and the national security state.
The anti-globalization movement must be, first and foremost, a worldwide, pluralistic, anti-racist movement, with its absolutely central goal of destroying global apartheid and the reactionary residue of white supremacy and ethnic chauvinism. But to build such a dynamic movement, the social composition of the anti-globalization forces must change, especially here in the United States. The anti-globalization forces are still overwhelmingly upper middle-class, college-educated elites, who may politically sympathize with the plight of the poor and oppressed but who do not share their lives or experiences. In the Third World, the anti-globalization movement has been more successful in achieving a broader, more balanced social class composition, with millions of workers getting actively involved.
There are, however, two broad ideological tendencies within this largely non-European, anti-globalization movement: a liberal, democratic, and populist tendency, and a radical, egalitarian tendency.
The liberal democratic tendency focuses on a discourse of rights, calling for greater civic participation, political enfranchisement, and capacity building of community-based institutions for the purposes of civic empowerment and multicultural diversity. The liberal democratic impulse seeks the reduction of societal conflict through the sponsoring of public conversations, reconciliation and multicultural civic dialogues. It seeks not a complete rejection of neoliberal economic globalization but its constructive reform and engagement, with the goal of building democratic political cultures of human rights within market-based societies.
The radical egalitarian tendency of global anti-racists speaks about inequality and power. It seeks the abolition of poverty, the realization of universal housing, health care and educational guarantees across the non-Western world. It is less concerned about abstract rights and more concerned about concrete results. It seeks not political assimilation in an old world order, but the construction of a new world from the bottom up. It has spoken a political language more in the tradition of national liberation than of the nation-state.
Scholars and activists alike must contribute to the construction of a broad front bringing together both the liberal democratic and radical egalitarian currents. New innovations in social protest movements will also require the development of new social theory and new ways of thinking about the relationship between structural racism and state power. Global apartheid is the great political and moral challenge of our time. It can be destroyed, but only through a collective, transnational struggle.
Dr. Manning Marable is Professor or Public Affairs, Political Science, History and African-American Studies at Columbia University in New York City. He has written and/or edited nearly 20 books, including The Great Wells of Democracy: The Meaning of Race in American Life, New York: Basic Books, 2003.
Levi's Last US Workers Mourn Loss of Good Jobs
By Ralph Blumenthal
New York Times
October 19, 2003
Jeans maker's transfer of work abroad leaves them fearing job hunt
Clara Flores once thought she had the job of a lifetime, even, perhaps, the most solid job in America. She made blue jeans. Not just any blue jeans. Levi's. “It was the original,” Flores said. “Wherever you went, it was the same Levi's blue jeans.”
The $4.2 billion company was founded 150 years ago by Levi Strauss, a Bavarian immigrant who settled in San Francisco to outfit the gold miners. It has turned out more than 3.5 billion pairs of the sturdy denim jeans with their trademark rivets at the seams and little red pocket tab, becoming an American icon.
But by the end of the year, the last pair of Levi's made in America will roll off the sewing and finishing lines at the factory in San Antonio, another casualty of the shrinking homegrown apparel industry that since 1995 has halved its domestic work force in favor of cheaper foreign labor. It will be a setback, too, for San Antonio, home to the Alamo. The city draws a throng of tourists but suffers from a string of factory closings, although Toyota is building an $800 million plant to open in 2006.
Levi Strauss & Co.'s last three Canadian plants will close in March, the company said last month. That's part of a restructuring that will cut the company's payroll to 9,750 by next year -- the peak was 37,000 in 1996 -- and leave none of its jeans production in North America. The work will be contracted to suppliers in 50 countries, from the Caribbean to Latin America and Asia. Competitors, with few exceptions, have shifted their manufacturing to those regions or made jeans there all along.
Philip A. Marineau, who left PepsiCo in 1999 to lead family-owned Levi Strauss Co. as president and chief executive, said he saw little symbolism in the company's shutdown of production in the United States. “Consumers are used to buying products from all over the world,” Marineau said from company headquarters in San Francisco. “The issue is not where they're made. For most people, that's not gut-wrenching anymore.”
But it is for employees such as Flores, 54, an $18-an-hour hem sewer and president of the local of the apparel workers' union, Unite. Flores, who has worked for the company for 24 years, will soon join 819 fellow employees in San Antonio in lining up for severance benefits and possibly retraining classes and grants to start their own businesses.
Workers said the company had a progressive record on providing for its laid-off employees. But Flores noted the workers' four weeks of annual paid vacation and their family medical and dental benefits that cost them only $24 a week. She asked: “Where are we ever going to find something like this?”
Guatemala: Supermarket Giants Crush Farmers
By Celia W. Dugger
New York Times
December 28, 2004
Mario Chinchilla, his face shaded by a battered straw hat, worriedly surveyed his field of sickly tomatoes. His hands and jeans were caked with dirt, but no amount of labor would ever turn his puny crop into the plump, unblemished produce the country's main supermarket chain displays in its big stores. For a time, the farmer's cooperative he heads managed to sell vegetables to the chain, part owned by the giant Dutch multinational, Ahold, which counts Stop & Shop among its assets. But the co-op's members lacked the expertise, as well as the money to invest in the modern greenhouses, drip irrigation and pest control that would have helped them meet supermarket specifications. Squatting next to his field, Mr. Chinchilla's rugged face was a portrait of defeat. "They wanted consistent supply without ups and downs," he said, scratching the soil with a stick. "We didn't have the capacity to do it."
Across Latin America, supermarket chains partly or wholly owned by global corporate goliaths like Ahold, Wal-Mart and Carrefour have revolutionized food distribution in the short span of a decade and have now begun to transform food growing, too. The megastores are popular with customers for their lower prices, choice and convenience. But their sudden appearance has brought unanticipated and daunting challenges to millions of struggling, small farmers.
The stark danger is that increasing numbers of them will go bust and join streams of desperate migrants to America and the urban slums of their own countries. Their declining fortunes, economists and agronomists fear, could worsen inequality in a region where the gap between rich and poor already yawns cavernously and the concentration of land in the hands of an elite has historically fueled cycles of rebellion and violent repression. "It's like being on a train with a glass on a table and it's about to fall off and break," said Prof. Thomas Reardon, an agricultural economist at Michigan State University. "Everyone sees the glass on the table - but do they see it shaking? Do they see the edge? The edge is the structural changes in the market."
In the 1990's supermarkets went from controlling 10 to 20 percent of the market in the region to dominating it, a transition that took 50 years in the United States, according to researchers at Michigan State and the Latin American Center for Rural Development in Santiago, Chile. Brazil, Argentina, Chile, Costa Rica and Mexico are furthest along. While the changes have happened more slowly in poorer, more rural Central American countries, they have begun to quicken here, too. In Guatemala, the number of supermarkets has more than doubled in the past decade, as the share of food they retail has reached 35 percent.
The hope that small farmers would benefit by banding together in business-minded associations has not been borne out. Some like Aj Ticonel, in the city of Chimaltenango, have succeeded. But the evidence suggests that the failure of Mr. Chinchilla's co-op is the more common fate. Its feeble attempts to sell to major supermarkets illustrate how the odds are stacked against small farmers, as well as the uneven effects of globalization itself. Many small farmers in the region are getting left behind, while medium-sized and larger growers, with more money and marketing savvy, are far more likely to benefit.
Most fruits and vegetables in the region are still sold in small shops and open-air markets, but the value of supermarket purchases from farmers has soared and now surpasses that of produce exports by two and half times, researchers say. The bottom line: supermarkets and their privately set standards already loom larger for many farmers than the rules of the World Trade Organization. Still, stiff competition from foreign growers is also quite real. To enter the supermarkets of Guatemala's dominant supermarket chain, La Fragua - part of a holding company one-third owned by Ahold - is to understand why Professor Reardon likens them to a Trojan horse for foreign goods.
At La Fragua's immense distribution center in Guatemala City, trucks back into loading docks, where electric forklifts unload apples from Washington State, pineapples from Chile, potatoes from Idaho and avocados from Mexico. The produce is trucked from here to the chain's supermarkets, which now span the country. Scenes at a mall in Guatemala City anchored by Maxi Bodega, one of the company's stores, suggest the evolving nature of grocery shopping for Latin America's 512 million people.
On the ground floor was a sprawling, old-fashioned produce market. At the entry, there was a shrine to its patron saint, the Virgin of Rosario, who had plastic flowers sprinkled at her queenly feet. The sound of women patting out tortillas and the sweet smells of ripe tropical fruits drifted through the market as people stopped to squeeze the avocados, sniff the pineapples and haggle for cheaper oranges. To go upstairs was to leave Guatemala behind and enter a mall that could be in Bangkok or New York, with its synthetic Christmas wreaths, cheap clothing stores and oversized discount packages of napkins and symmetrical tomatoes in plastic trays at the Maxi Bodega.
The Baldetti family exemplified the generational change unfolding here. Delia Baldetti, an 81-year-old housewife, will only shop for produce amid the heaps of tomatoes, chilies and papayas where she can bargain to her heart's content. Her daughter Elsa, a 56-year-old painter, shops both here and at Maxi Bodega, while Elsa's daughter, a 36-year-old business administrator, only has time for the supermarket. Elsa wistfully predicted that while the country's fragrant, raucous markets will never disappear, they will diminish. "We'll lose some of our identity," she said. "We're copying the foreigners." Farmers who do not or cannot afford to change fast enough to meet the standards set by supermarkets are threatened.
The tiny farming community of Lo de Silva clings to a steep, verdant hillside. Slanting cornstalks look as if they would slide into the valley if they were not rooted to the earth. Some of the more than 300 farmers who originally belonged to Mr. Chinchilla's co-op, the Association of Small Irrigation Users of Palencia - known by its Spanish acronym, Asumpal - were from this village. Only eight remain. The only product they still sell is salad tomatoes - and they sell to middlemen, not supermarkets.
José Luis Pérez Escobar, 44, a member of the co-op, scratched out a living for 20 years from his small field, perched in the clouds here. But after his potato crop failed last year, he migrated to the United States to save his land from foreclosure by the bank, leaving his wife, María Graciela Lorenzana, and their five children behind. He now works the graveyard shift at a golf course in Texas for $6 an hour so he can pay his debts. He had dreamed his cooperative would help him escape poverty by selling directly to the supermarkets. "It would be magnificent," Mrs. Lorenzana recalled of that more hopeful time. "The small farmer would not need a middleman. But he was never able to achieve it."
A Transformation Begins
The transformation of Latin America's food retailing system began in the 1980's and accelerated in the 1990's as countries opened their economies, often to satisfy conditions for loans from the International Monetary Fund and the World Bank. As foreign investment flooded in, multinational retailers bought up domestic chains or entered joint ventures with them. Most concern about the perils of globalization for local farmers has focused on unfair trade competition from heavily subsidized American and European producers. But increasingly, supermarkets also leave small farmers exposed as the stores spread from big cities to small towns, from well-to-do enclaves to working-class neighborhoods, from richer countries to poorer ones.
The chains now dominate sales of processed foods and their share of produce sales is growing. In Guatemala, supermarkets still control only 10 to 15 percent of fruit and vegetable sales. But in Argentina, their slice has grown to as much as 30 percent, while in Brazil they control half the market, according to Professor Reardon. As the chains' market share expands, farmers who are shut out find themselves forced to retreat to shrinking rural markets. The changes would not be so troubling if the region's economies were growing robustly and generating decent jobs for globalization's losers. After all, supermarkets are providing consumers with cheaper, cleaner places to buy food, economists say. "It would be an appealing transformation of the sector if alternative jobs could be made available," said Samuel Morley, an economist at the International Food Policy Research Institute in Washington. But economic growth has not kept pace with rising populations. The number of people living below poverty lines in Latin America has risen from 200 million in 1990 to 224 million this year. More than 6 in 10 people living in rural areas are still poor.
Given the difficulties small farmers face in doing business with multinational corporations, traditional strategies, like providing peasants with fertilizer and improved seeds, now seem quaint here. Professor Reardon and Julio A. Berdegué, an agronomist who heads the Latin American Center for Rural Development, are collaborating with supermarket researchers across Asia and Africa, as well as Latin America, to document the trends. In addition, a team at Michigan State has financing from the United States Agency for International Development to help small farmers in Central America, India and Kenya sell to supermarkets. They and other development experts are brainstorming about what to do. Among the ideas: Regulations requiring that farmers be paid promptly. Enforcement of laws meant to curtail monopolies and oligopolies, including mergers of supermarket chains. Improved security and cleanliness at open-air markets. Infusions of credit and technical expertise for co-ops.
But while such cooperatives are almost certainly necessary if small growers are to amass the clout and scale to sell to multinational chains, they have been a disappointment so far. Even in economically vibrant Chile, which has invested $1.5 billion in small-scale farming since 1990, a study of 750 farmer organizations found that 8 of 10 had failed or survived only with continuous infusions of government aid. Mr. Berdegué, author of the Chile study, had sought to make the associations work in the 1990's when he was a senior government official there. The pressure from the I.M.F. and the World Bank to allow greater foreign investment was intended to make Latin American economies more competitive. "But the model did not have a social dimension at the real center," he said. "It was trickle-down economics."
An Experiment Disappoints
Mr. Chinchilla, 46, drove his battered, 20-year-old pickup, laden with crates of tomatoes, into his cooperative's spacious packing shed. The building and the business are in decay. The water had been cut off. Toilets no longer flushed. The roof was missing over the bathroom, its floor covered with bird droppings. The live-in caretakers who sort the co-op's tomatoes had only an open pail of rainwater to wash their hands. They wore no gloves while handling the fruit. Typically, each farmer is growing less than an acre of salad tomatoes in rustic greenhouses that are fast deteriorating. Their production has plummeted because of the blight that dries out the plants, which then yield very small tomatoes. "We haven't found a solution," María Antonietta Muralles, a co-op member, said with a shrug. "Maybe it's the water."
Mr. Chinchilla treated his plants with pesticides to no effect. "You can't fight it with chemicals," he said. Maybe the soil itself is infected, they speculated. "Everything costs money," he explained - money he does not have and cannot afford to borrow at the going rate of 21 percent. "When you don't have access to credit, you can't expand," he said. "We don't want anything given to us, but we need a hand." As the farmers talked, two workers separated tomatoes by size, with the shrunken ones far too numerous. But their co-op's hopes of selling to big supermarket chains withered well before the plants. The co-op got started in the late 1990's, with a small grant from the government to upgrade the packing shed. An agronomist, Candelario López, was given a two-year contract, also at government expense, to advise them.
Over the next couple of years, Mr. López helped the co-op get its foot in the door with La Fragua and C.S.U., another major supermarket chain. The chains have since united to become the Central American Retail Holding Company, with 332 stores and almost $2 billion in sales in 2003. It is one-third owned by Ahold, which had more than $68 billion in sales last year. But the co-op did not manage to supply the big chains for long. The farmers themselves were uncomfortable with the rules of the supermarket game. They found it difficult to wait weeks to get paid. They did not want to sell their vegetables on the books and pay taxes that sharply cut profits. And some of what they supplied was rejected as too bruised or too limp or too ripe.
The co-op's leaders said they quit selling to C.S.U. through its dedicated wholesaler in 2000 after two container loads of vegetables got held up for days at the Nicaraguan border, severely damaging the produce. "We weren't prepared to absorb that kind of loss," said Marco Tulio Alvizures, who then headed the co-op. Perhaps more fundamental, co-op members had trouble consistently delivering the quantity and quality of produce the supermarkets demanded, a problem Mr. Chinchilla readily acknowledged. In the case of La Fragua, Mr. Alvizures contended that the chain never gave the co-op a chance to sell the amount it was capable of. But Jorge González, the chain's manager for vegetables, said the small orders likely reflected La Fragua's judgment, based on weekly evaluations, that the co-op was not up to the task. The co-op was such a small supplier that Mr. González could not recall all the details of their dealings.
The corporate imperative is to reward suppliers who consistently provide what the chain requires. If the vegetables do not arrive, shelves stand empty. "We punish farmers very hard if they don't deliver what we order," said Bernardo Roehrs, a spokesman for the chain. As the co-op members sought to navigate the difficult new world of supermarkets, they lost the critical guidance of Mr. López, the agronomist, when his contract expired in 2001. He is now a salesman for a company that makes high-tech greenhouses the co-op's farmers could never afford.
A Rare Success Story
Not too far from Palencia, in the city of Chimaltenango, is Aj Ticonel, an association of small farmers that has thrived because it has something Mr. Chinchilla's co-op lacked: a shrewd and enterprising businessman to run it. But even for a savvy company like Aj Ticonel, success came not from supplying choosy supermarket chains but rather from its ability to exploit a global market. Aj Ticonel sells three million pounds of mini-vegetables and snow peas for export to the United States, but only 80,000 pounds to supermarkets. Alberto Monterroso said he gave up on growing broccoli for La Fragua. He found the chain bought inconsistent amounts. "There are a lot of competitors here," he said, "a lot of small farmers trying to sell to them, so the prices are low."
The company's success has been built instead on sales of pricey vegetables for export. It now sells the same to La Fragua, and its membership has risen from 40 families in 1999 to 2,000 today. Its plant sparkles. Its 53 packers wear gloves, face masks and hairnets as they sort slender French beans on stainless steel tables. Each box produce is marked with a bar code traceable to the family that grew it. Aj Ticonel sold $2.5 million worth of vegetables last year, but Mr. Monterroso, a sociologist and deal maker with a passion for justice, paid himself only $18,000. Most of the company's profits are plowed back into the plant, marketing campaigns and agricultural education for the farmers. "I want a different country for my sons," Mr. Monterroso said. "I'm trying to redistribute the wealth so people will live in harmony."
One recent afternoon, a big Aj Ticonel truck took a meandering path into the hilly countryside, stopping for peasants waiting roadside with crates of vegetables to load. Many of them grumbled that Aj Ticonel does not pay enough and rejects too many of their vegetables, but most had been selling to the company for years. The evidence of their profit could be seen in new roofs, freshly painted homes and well-clothed children. Still, Mr. Monterroso acknowledged how hard it will be to replicate Aj Ticonel. Three times, the company loaned money to farmers to clone itself. Three times the farmers went out of business. For Latin America's millions of small farmers, he offered this sobering fact of life: "The client buys from us not because poor people produce it, but because it's a good product."