Reversing the Race to the Bottom

excerpts from the book

Global Village or Global Pillage

Economic Reconstruction from the Bottom Up

by Jeremy Brecher and Tim Costello

South End Press, 1994


An Agenda for Upword Leveling


As long as democracy remains exclusively national it will remain largely powerless to address the economic problems of ordinary people. It will take democratization at each level from the local to the global to implement an effective alternative economic program. And it will take continuing grassroots mobilization to see that such a program actually works. Such democratization will require a struggle-but so has every advance in democracy from the American Revolution to the abolition of apartheid in South Africa. The democratic struggles of the past provide a treasury from which to draw and perfect means to use in the struggles of the future.

To cope with the New World Economy, the absolute version of national sovereignty must evolve toward a worldwide multilevel democracy. Global institutions like the World Bank, the IMF, and GATT/WTO will have to be radically democratized. Global corporations will have to be brought under democratic control The global economy will have to be reshaped to encourage rather than impede democratic government at lower levels. National and local governments will have to be recaptured from the global corporations. They will have that support and cooperate with the environmental, economic, and social regulation that is needed at a global level to serve as stewards representing global human and environmental interests in the areas under their control People will have to win the right to organize in and democratically control their workplaces, schools, neighborhoods, and other institutions in civil society. In short, we need a multilevel process of democratization leading to democratic self-government at every level from the global to the local

The demands of the Zapatistas in Mexico illustrate what it means for social movements to project democratization at multiple levels. They simultaneously demanded autonomous self-government for indigenous people in southern Mexico; free elections not dominated by wealth for Mexico as a whole; and an end to what they called the "neo-liberal project" in Latin America.

In the New World Economy, democracy is not something we have; it is something we have to recreate. Democratization requires the redistribution of power. It currently has four principal fronts:

Democratize global institutions. The past decade has concentrated enormous power in such global institutions as the IMF, World Bank, and GATT. Yet these institutions are virtually unaccountable to those who are affected by their decisions. Today, these organizations are dominated by the United States and a few other rich countries; their governance needs to be opened up to include the world's poor, represented by their governments and citizen organizations. Their operations are conducted with enormous secrecy; they need to be made open to public scrutiny. They are formally accountable only to national governments; they should be made more accountable to the United Nations and to non-governmental organizations representing citizen interests. They make decisions without the consent of local communities affected by them; their plans should be made in consultation with and require the approval of local communities they affect.

End "preemption" of democratic decision-making. A principal function of global institutions and agreements has become to prevent governments from doing things their people want them to. The Uruguay Round GATT agreement, for example, restricts the freedom of countries to favor domestic suppliers, subsidize domestic businesses, impose health or environmental standards above specified levels, control prices, nationalize anything, or engage in economic planning. The effect of these restrictions is almost always to "pre-empt" governments from doing things that would raise labor, social, and environmental conditions.

Such negative "conditionalities" should be ended. Instead, international rules should encourage governments to improve the conditions of their people. Rather than punishing countries for spending on education, health, and welfare, the conditions governments and international institutions require for loans, investment, aid and trade advantages should encourage them. International standards should be "floors" not "ceilings."

Recapture governments from global corporations. All over the world, national, provincial, and local governments have become the pawns of global corporations and the Corporate Agenda. This has occurred through legal domination of the political process, political corruption, erosion of democratic processes, and the power of blackmail provided by capital mobility. Coalitions of popular movements and organizations, utilizing tactics adapted to the political context at hand, need to challenge this domination, People need to reassert the right to use governments to regulate corporations and markets in the public interest

Establish the right to self-organization. Such basic human rights as freedom of speech, assembly, publication, political participation' unionization, cultural expression, and concerted action are crucial supports for resistance to downward leveling. Yet they are widely denied, not only in authoritarian governments, but also in workplaces, schools, and other institutions of supposedly democratic countries. Democratic organization in and control of such institutions can be a crucial vehicle for resisting downward leveling. The self-organization and empowerment of discriminated-against groups, such as racial and ethnic minorities, women, immigrants, and migrants is particularly crucial for countering the race to the bottom.

Coordinate Global Demand

Ironically, as the economy has become more globalized, international cooperation to encourage adequate global economic demand has been virtually abandoned. The richer countries must share responsibility for countering the current downward spiral.

In the past, minimum labor standards, welfare state programs, collective bargaining, and other means to raise the purchasing power of have-nots did much to counter recessions and depressions within national economies. So did the tools of monetary and fiscal policy. Similar instruments increasing the buying power of those at the bottom and providing economic stimulus are now required in the global economy.

Ending the world economy's downward spiral requires ad hoc, and eventually institutionalized, coordination. The IMF needs either to be replaced with a new agency or radically r~ formed in its purposes, policies, and personnel. Its goal should be to regulate the flow of capital, debt, and repayment to end the present downward economic spiral, reverse the polarization of wealth and poverty, and support the efforts of lower-level polities to mobilize and coordinate their economic resources.

Economist Walter Russell Mead has spelled out a possible institutional structure for such coordination. It includes an international fund to provide global economic stimulus; an international bank and specialized international agencies able to adjust interest rates and expand and contract their operations to promote growth and counter economic cycles; and an international trade organization devoted to encouraging the growth of global demand rather than the expansion of exports for their own sake. The UN Development Program's Human Development Report 1992 similarly calls for a new global central bank "to create a common currency, to maintain price and exchange-rate stability, to channel global surpluses and deficits, to equalize international access to credit and to provide the liquidity and credits poor nations need."

Expanded demand will primarily increase the consumption of the wealthiest unless it is combined with global redistribution. The International Confederation of Free Trade Unions has recently proposed a "trade union strategy for world development" that links coordinated recovery in the industrialized countries with jobs and poverty reduction in the developing world. It proposes expanded currency reserves for developing countries and Central and Eastern Europe; debt relief; and redesign of structural adjustment programs to emphasize reducing poverty and creating jobs. Such an approach provides a starting point for a "grand bargain" between North and South.

Establish Global Rights and Standards

To prevent competition among work-forces and communities from resulting in a "race to the bottom," we need minimum global standards for human, labor, and environmental rights. The European Community's "Social Dimension" provides one possible model for minimum standards in such mattes as job security, occupational safety, unemployment compensation, union representation, and social security benefits. For North America, A Just and Sustainable Trade and Development Initiative spells out in some detail an alternative to NAFTA that would protect human and worker rights, encourage workers' income to rise in step with productivity, and establish continental environmental rights, such as the right to know about environmental threats and the right to a toxic-free workplace and living environment. Such rights and standards need to be incorporated in a wide range of international economic agreements and institutions.

Enforce Codes of Conduct for Global Corporations

Global corporations should be made accountable by means of codes of conduct. Such codes might require corporations to report investment intentions; disclose hazardous materials imported; ban employment of children; forbid environmental discharge of pollutants; require advance notification and severance pay when operations are terminated; and require companies not to oppose union organization. While such codes should ultimately be enforced by the United Nations and by agreement among governments, global public pressure and cross-border organizing can begin to enforce them directly.

Reverse the Squeeze on the Global Poor

Globalization has been marked by the extraction of wealth from poor countries and communities. The richer countries have used international economic institutions to force a destructive flow of wealth from poor to rich This is disastrous both for the people of the poor countries, for whom it has been a sentence of poverty and often premature death, and for those of the industrialized countries, who have lost markets for their products and had to face competition from impoverished work-forces.

The first step to reversing this process is to end the structural adjustment and shock therapy programs that the IMF and World Bank have been forcing on poor countries and countries emerging from state-run economies.

Second, new arrangements should be made so that these countries do not have to run their economies to pay the interest



on their debt. Debts for the poorest countries should be written off. Debts for other developing countries should be reduced, with the remaining parts paid in local currencies into a fund for local development.!'

Third, large-scale resource transfers should be provided so that "developing" countries can in fact develop. Reformed trade rules can play a major role. The Third World Network proposes commodity agreements to improve and stabilize poor countries' terms of trade; opening rich country markets to poor countries; and preferential treatment for underdeveloped countries. The Third World Information Network (TWIN) and other groups have developed strategies for alternative forms of trade which they are implementing on a small scale. Under such conditions, trade can become a win-win proposition for different regions- for example, the production in the North of environmentally sound capital goods for the South, with production in the South of consumer goods for the North. Resource transfer also requires some direct compensatory funding; models for such funding can be drawn from the compensatory funds of the EU and the grassroots funds of NGOs.

Encourage Grassroots Development

Deregulation and austerity policies have meant the drain of resources out of local communities. The forced opening of markets to global corporations has created conditions in which small local enterprises are unable to compete. We need instead to foster local, small scale businesses and farms and a growing "third sector" of grassroots, community- and employee-owned cooperative enterprises designed to mobilize poorly utilized resources to address unmet needs. Here are some techniques for doing so.

Grassroots-controlled enterprises. The last few years have seen an enormous range of experiments in new forms of employee and community-controlled enterprises. Initiatives in poor communities in Brooklyn, N.Y. and Waterbury, Connecticut, for example, have established employee-owned home health aide companies which provide a needed service to local communities and jobs to a workforce made up primarily of women of color. In Mali, a cooperative formed by a group of women in the 1970s in the small town of Markala became the nucleus for a Women and Development Program that spread to more than 30 village groups. The women conduct such income-generating activities as soap-making, small animal raising, cloth dyeing, and raising vegetables; they also receive training in how to manage the coops. Such efforts provide a way ordinary people in local communities can control and benefit from productive activity.

Public development authorities. Local, regional, and national development authorities can serve as a vehicle for a proactive economic strategy. A current model is the Steel Valley Authority, established by ten towns in the Pittsburgh area with the power to float bonds, own and manage enterprises, and use the power of eminent domain to save or re-open threatened companies. Another example is the recently created Connecticut Community Economic Development Program. Created by the state government and jointly controlled by the government, representatives of poor communities, and private investors, it provides funding and technical assistance for private, public, and cooperative enterprises in poor communities. Its goals include creation of jobs and development of skills, particularly for people who are unemployed, underemployed, or receiving public assistance; community participation in decision-making; establishment of self-sustaining enterprises; improving the environment; promoting affirmative action, equal employment opportunities and minority-owned businesses; and coordination with environmental and economic planning. The Greater London Enterprise Board -abolished by Margaret Thatcher-provides an even broader vision of what such institutions can do, helping restructure industries and providing support to enterprises based on their contribution to such social objectives as equalizing opportunity, empowering workers, and strengthening communities.

Development banks and credit unions. Banks can be a crucial vehicle for gathering resources and connecting them with needs across time and space. Various forms of community-based and cooperative banking have developed in the Third World and in poor communities in the United States. For example, over t-he past few decades, as most banks collected deposits in poor and middle class communities and channeled them into unproductive speculative investment, Chicago's South Shore Bank reversed this process, dedicating its resources to rebuilding a poor, majority African-American neighborhood which had been cut off from credit by other area banks. By providing residential mortgages and small business loans and organizing initiatives in commercial development and housing rehabilitation, South Shore financed and redeveloped the neighborhood's infrastructure and services, funding the renovation of nearly 30 percent of the neighborhood's apartments."

Sweat equity and labor exchange. Sweat equity converts labor into a right to a share in the product. It lets people build houses and thereby acquire a share of their ownership or work in enterprises and thereby acquire a proportion of their stock. Labor exchange allows people with different needs and abilities to help each other. In the Great Depression, mutual aid organizations made it possible for unemployed carpenters to fix other people's houses h exchange for fish caught by fishers or firewood gathered by laborers. A modern equivalent, known as a "service credit" program, lets people work as volunteers in meeting community needs and receive for each hour of service a "service credit" which entitles them to one hour of service for themselves, their family, or organization from others in the program. Such programs allow people to make use of resources which the mainstream economy leaves to languish.

Community-based development organizations. Solving economic problems requires mobilization of diverse segments of the community. In many parts of the world, citizen-based organizations and coalitions are playing a crucial role in representing the needs and mobilizing the capabilities of grassroots people and organizations. Perhaps the most famous is the Mondragon network of banks, social service organizations, technical education institutions, and producer cooperatives in the Basque region of Spain. In the United

States, several dozen citizen coalitions in different cities are grouped in the Federation for Industrial Retention and Renewal (FIRR). They mobilize community support to aid employee buyouts, start coops, pressure corporations and banks, and encourage government to support local economic development

Rebuild the Public Sector

A central aspect of the Corporate Agenda has been to defame and dismantle those sectors of the economy private companies do not control Structural adjustment programs and the desire to reduce business taxes have led to sharp cutbacks in public sector activities all over the world. The constant attack on government and the privatization of formerly public functions has led to worldwide decay of education, health care, infrastructures, environmental protection and enhancement, and services for the young, the old, and the disabled. It has also led to unemployment and aggravation of the downward spiral

The "free market" has proved an inadequate vehicle for performing many such functions. Even where large numbers of people are unemployed and other resources lie idle, markets do not necessarily channel them to meeting such public needs. An expansion of education, health, infrastructure, environmental, and similar public sector activities is an essential element of economic reconstruction.

Convert to Sustainable Production and Consumption

The victims of downward leveling need, want, and deserve a better life. But the current industrial system is already destroying the earth's air, water, I;and, and biosphere. Global warming, desertification, pollution, and resource exhaustion will make the earth uninhabitable long before every Chinese has a private car and every American a private boat or plane.

The solution to this dilemma lies in converting the system of production and consumption to an ecologically sound basis. The technology to do this exists or can be developed, from solar energy to public transportation and from reusable products to resource-minimizing production processes. However, a system in which the search for ever-expanding profits has no regulation or limits will continue to use environmentally destructive processes to produce luxuries, pollutants, and waste.

This malappropriation of resources is exacerbated by the huge share of human wealth squandered on the military. Despite the end of the Cold War, global military spending is more than $1,000 trillion per year nearly half of it by the United States. This is justified in large part by the need to control economic rivals and the revolts of poor and desperate peoples.

The energies now directed to the race to the bottom need to be redirected to rebuilding the global economy on a humanly and environmentally sound basis. Such an approach requires limits to growth-in some spheres, sharp reductions-in the material demands that human society places on the environment. It requires reduced energy and resource use; less toxic production and products; shorter individual work-time; and less production for war. But it requires vast growth in education, health care, human caring, recycling, rebuilding an ecologically sound production and consumption system, and time available for self-development, community life, and democratic participation.


Global Village or Global Pillage