One of the key points raised by Asian Times commentator Henry Liu in his important series on the dollar and China is that Chinese workers are facing rising unemployment and poverty level wage rates – and this cannot be remedied by fiddling with the value of China’s currency.

Liu writes (in part two):

“With a high rate of unemployment and excessively low wages by any standards, China has no reasons to revalue the yuan’s exchange rate. What China needs is a national full employment policy with an aggressive wage enhancement strategy.”

Yet there are increasing calls heard from the U.S., including from the AFL-CIO, that China needs to push the value of its currency up! If China were to allow its currency to float freely it is entirely possible that it would actually FALL in value as Chinese savers shifted out of the fragile Chinese economy into more secure environments.

Instead, I think Liu is on the right track in arguing for a balanced expansion of the domestic Chinese economy. And the starting point is to raise Chinese workers wages. Yet, oddly, Liu fails to argue for the surest way to win a raise for Chinese workers – allow those workers to organize genuine unions! The implementation of the freedom of association, a basic principle of international law, is a crucial first step. This right is denied Chinese workers as they are forced to join a state and Communist party controlled labor organization.

I made this point in a letter published in the Financial Times earlier this year.

http://64.23.39.67/Gaping%20hole%20in%20Chinese%20labor%20law.doc

AFL-CIO President John Sweeney is travelling to China later this month.

(http://seattlepi.nwsource.com/business/apbiz_story.asp?category=1310&slug=Labor%20China)

This would be a perfect opportunity to meet with independent union leaders like Han Dong Fang of the China Labour Bulletin and to press for the release of jailed union activists in support of the freedom of association for Chinese workers.

(For more information on the situation of workers in China go to the excellent CLB website at: http://www.china-labour.org.hk/iso/)

Here is the link to part four of Liu’s series:

http://www.atimes.com/atimes/China/FL01Ad01.html

and a link to another Asia Times piece by Jack Crooks that sharply poses the China-Greenback issue:

http://www.atimes.com/atimes/China/FK12Ad05.html

Even Federal Reserve Chairman Alan Greenspan has now made clear that he is concerned about the apparent free fall of the U.S. dollar. After more than a decade of using U.S. dollars to finance imports from other countries, it would appear that we have come to a possible braking point (or breaking point!).

While this seemed like a virtuous circle for a time – the Federal Reserve pumped dollars into our banking system, we borrowed them and then spent them to buy products from the new manufacturing centers of Asia; in turn, the Asians built massive manufacturing capacity and built up a surplus of dollars that they then used to buy U.S. treasury bills and U.S. corporate bonds and stocks so that the whole cycle could continue. But at the end of the day the U.S. must pay interest on the debt it takes on and that means our economy must be generating sufficient value to meet that interest payment. There are credible indications that we are not able to do that.

UCLA economic historian Robert Brenner argued in a recent talk that in fact U.S. corporate profitability has not recovered from the slump of the late 70s – that the boom of the late 80s was built on junk bonds that collapsed in the early 90s and that the boom of the late 90s was built on dot com illusions which collapsed in the spring of 2000. Any semblance of recovery since then, he suggests, is resting on a new bubble, this time in real estate.

The decline in the dollar relative to the Euro in the past few months suggests that foreign investors may no longer be willing (or able) to continue their role in the cycle. If that is the case and Brenner is right then we may be headed for a dramatic economic collapse. One leading Wall Street economist recently told clients that the U.S. had only a ten percent chance of avoiding “financial armageddon.”

This is heady stuff and complicated as well. Attention to this issue will be a central goal of GlobalLabor in the months to come. For anyone who wants to plunge into this issue here is a link to a series of articles by Henry Liu, an investment banker and writer for Asia Times, who follows these issues closely particularly as they impact China.

(Note: Liu is far more sympathetic to what he calls “socialism” in China than I think is justified. But there is no mistaking his depth of knowledge about these issues. My suggestion is to just substitute “neo-mercantilism” when he talks about Chinese socialism – that seems to me a better way to understand the statist orientation of many of the Asian economies (and some in Europe) that resist the U.S. model of free market economics.)

http://www.atimes.com/atimes/others/Henry.html

Thanks go to Harold Meyerson for an excellent editorial in today’s Washington Post on the recent announcement by retail giant WalMart that it would be willing to recognize unions in its operations in China. The link is below. As Meyerson suggests this is irony of the highest order. WalMart is notoriously hostile to unions in its U.S. operations and yet for some reason has made a public annoucement of its openness to unions in China. What explains the contradiction? Is it hypocrisy? Hardly. In China the only unions the government allows are those it controls and those are unions in name only – they are used to monitor and control workers not to advance their interests. In light of growing worker unrest in China WalMart may have realized that the road to labor peace in China lies in a deal with the state controlled labor federation, the All China Federation of Trade Unions. For more on the nature of the Chinese labor movement see my article on the new Race to the Bottom linked in a post below.

Wal-Mart Loves Unions (In China) (washingtonpost.com)

Here is a link to an interesting analysis of venture capital funding and jobs. It appears that although there has been a recovery of venture capital financing in Silicon Valley that that has not meant a significant increase in local hiring. Either employers are now doing more with less or the jobs are being created offshore. URL: http://64.29.208.119/archive_comm_article.asp?category=Guest+Commentary&content_idx=37922

My article on China and the international labor movement recently appeared in the U.C. Davis Journal of International Law and Policy. An earlier version of the article was published in the Cornell Law School working paper series. Here is the link: http://lsr.nellco.org/cgi/viewcontent.cgi?article=1010&context=cornell/clsops

Here is my abstract of the article:

China is now, and increasingly, an integral player in the global economy and in international relations. Economic and political restructuring in China today is affecting the lives of millions, yet only a small number of top bureaucrats and wealthy regime-backed entrepreneurs are making the basic decisions about the outcome of this process. This bureaucratic and entrepreneurial class resists fiercely any serious attempt to build independent and democratic institutions such as trade unions.

This article will consider four areas of concern. First, the structural changes underway in the Chinese economy are creating both domestic and international imbalances that are exacerbating inequalities among Chinese workers and creating new inequities in the global labor market. Second, the Chinese regime’s approach to labor rights remains rigidly authoritarian and so is triggering ever more dramatic confrontations between workers and the Chinese state, despite the regime’s nominal commitment to “socialism.” Third, these developments are being reinforced by a pathological evolution in the principles that govern key international institutions such as the WTO and the ILO. A conflict has emerged within the international legal arena between the founding principles of these institutions and their current approach to labor and human rights issues. Fourth, within the international labor movement itself a small current is emerging which views an accommodation with the Chinese regime a feasible alternative to the long-standing goal of the international labor movement of independent and free trade unionism in China. This approach threatens the credibility of the labor movement’s opposition to the most damaging aspects of the globalization process, a major commitment of the international labor movement since the “battle of Seattle” that took place at the failed ministerial conference of the WTO in November 1999. An alternative view must be articulated if Chinese and western workers are to join together to reverse the “race to the bottom.”

In the spring of 2000, China’s huge state-owned oil company PetroChina attempted to sell nearly 10 billion dollars worth of stock on the New York Stock Exchange and the Hong Kong Stock Exchange. Because of widespread violations of labor rights and human rights in China, and concerns about enviornmental damage by the Chinese oil industry and investments by PetroChina’s parent company in war torn Sudan, the IPO ran into a wall of protest. I wrote an article that assessed the impact of this unusal political conflict inside the global capital markets that recently appeared in the Journal of Corporation Law (Vol. 29 at 39 (2003)). Here is a link to an earlier version of this article published in the Cornell Law School working paper series: http://lsr.nellco.org/cgi/viewcontent.cgi?article=1012&context=cornell/clsops.

Dramatic changes in the Chinese economy are having a major impact on workers and the international labor movement. Here is a link to a book review I wrote for Dissent magazine on two excellent new books on the nature of economic change underway in China today. The review is entitled: The Chinese Market: An Enigma Unraveled. The URL is: http://www.dissentmagazine.org/menutest/archives/2002/su02/diamond2.shtml

This website aims to provide a source of news, analysis and debate on developments in the global economy with particular emphasis on the impact of the economy on global labor. With the end of the Cold War some fifteeen years ago the terrain upon which the labor movement defends its interests has changed radically. New terrain requires new understanding. I will try to make available to visitors to this site news, research and debates that I encounter in the course of my own work that I think might be helpful to those who are trying to make sense of these same developments. I will welcome constructive contributions from others as well.