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Catfish and Cod
Friday, August 01, 2003
The lords of capitalism and the new colonialism.
(Link path: King of the Blogs, Blog Mela @ Gene Expression, Time Magazine)

The most positive thing about the Information Revolution is that information can be moved anywhere. Ideas are now free to travel the world on beams of light, bound by no conveyance. A tank cannon is fired in Baghdad, and a rancher in Wyoming watches live. A blogger in Tennessee makes a comment, and instantly changes the course of the second Iranian revolution.

The most negative thing about the Information Revolution is that many jobs can be moved anywhere. Only physical matters have to be dealt with personally; only physical objects have to be placed in a single location. Any job or business that depends on ideas, however, can be placed anywhere there are people with sufficient skills.

When the ticker was invented, suddenly it was less important to live and work near Wall Street. You could find out what the prices on the NYSE were anywhere in the country. That dispersal of news led to a dispersal of the financial industry: a very welcome development for financial freedom in the age of J. P. Morgan & Son. But the move of banking concerns to Hartford, Charlotte, and elsewhere was a disaster for Wall Street denizens who believed they had a monopoly on large-scale U.S. stockbrokering simply due to their location. The equivalent advances today in the Internet and global shipping have made it possible to send manufacturing, IT, finance, engineering, telemarketing, customer support, and even R&D abroad. Your proximity to your home company has no meaning anymore; and for capitalist companies with no binding ties to their original nation, that means the company has no loyalty to any local employees anymore. The advances in communication and transportation mean that business is less dependent on location.

In the union battles of the nineteenth and twentieth centuries, one of the biggest threats that managers and owners could bring to bear against striking workers is the threat of replacement workers. Many managers carried out that threat; the most recent example was Reagan's replacement of striking air traffic controllers in the 1980's. If your labor is not indispensable, then all your offers and threats mean little: your labor is no more valuable than the next man's. In a free market, that means that the cost of labor is set by the man who is willing to work for the least amount of money. In the language of capitalism, you are "underbid".

Replacement workers are only possible in a labor glut. If there are plenty of laborers around desperate for work, you can hire up workers cheap and throw the striking bums into the unemployed pool. But if labor is scarce, then you will find few people willing to work for peanuts. And to hire people away from other companies, you'll have to offer them benefits at least as good as the ones they were receiving at their old job, and potentially better.

When I go on vacation, I often take trips to historical sites all over America. Two locations I've visited on my trips were the Vanderbilt mansions in Hyde Park, N.Y., and Asheville, N.C. On both trips, the tours include a walk through the servants' quarters. In North Carolina, the quarters were cramped, dark, and plain, with very few amenities. In New York, servants had wide corridors, ample sleeping spaces, and crystal and china only a shade less beautiful than the masters'.

Why the difference?, I asked the tour guide. The answer was simple. In New York, there was a severe shortage of workers willing to be house servants. (Most immigrants came to the U.S. to get away from such affectations, and native-born Americans were too proud.) In addition, there were multiple wealthy families nearby competing for the same small labor pool. The families had to outbid each other in order to attract well-trained servants; the Vanderbilts were very careful, for instance, to offer twice the salary of their neighbors the Roosevelts. In North Carolina, there were plenty of dirt-poor people, including former slaves who remembered house-service, and no competition at all.

The relative amounts of labor and work determine the price of labor, and hence the standard of living of the laborers. In a labor glut, work is cheap and workers are poor. In a labor shortage, work is expensive and workers are well treated.

The combined forces of exponential population growth, globalization, and the Information Revolution have created the worst labor glut in the history of the world. As a result, companies are free to choose their location and their workers without any regard to local concerns. Austin or Bangalore, the Ruhr or the Siberian Far East; there's no difference. Every town in the world is now in direct competition with every other town in the world.

I've watched this process at work in Mississippi. In order to attract factories and jobs, local governments must offer tremendous bonuses to incoming corporations. Land deals. Free utility connections. Tax breaks. New roads built specifically for companies, at taxpayer expense. Subsidies for worker housing. Education programs directed at training factory workers. All these sweetheart deals are on the table -- indeed, are forced onto the table. Your local government has no choice; if it wants the local economy to grow, it must offer a sweetheart deal, and the bigger the better, because there might be another town or county or state that will give an even better deal and convince the company to abandon you.

And even when the plant is built and the workers hired and a history and relationship established, there's no guarantee that the company won't pull up stakes in just a few years. Because the government contributed heavily to the investments in the plant, there is less investment made by the company. This means smaller losses if the plant is shut down in favor of better labor costs in Mexico or China. The local government must actively continue to woo the plant, and offer even better monetary deals. Less environmental regulation. Less monitoring of labor regulations. Tolerance of migrant workers. Acceptance of layoffs. Approval for toxic waste dumping. And, in effect, tolerance of whatever whims "senior management" choose.

The companies, in effect, hold more power than the government, because they hold the power of the purse over the heads of everyone in the town. In some places, this has held true for hundreds of years. When the company is munificent, shows concern for the local population, and has no intentions of leaving, the result is the happy and prosperous town of Corning, New York. When the company is moneygrubbing, indifferent to local opinion, and ready to leave for greener pastures at a moment's notice, you get the miserable coal-towns of West Virginia.

The old "colonial" system allowed Europeans to extract natural resources and utilize native labor. Because of the overwhelming techonological, economic, and military advantage held by the European powers, local governments from Benin to Bahrain had to accept whatever dictates and forms of government were decreed from the capital. The European powers, on the other hand, were safe from such dictates because they, and they alone, held the factories and skilled laborers that made industry possible. While peoples around the world toiled for whatever improvements they could beg, plead, or borrow from European masters, the labor unions and democrats of the West won concessions and power and wealth and safety.

With population and education on the rise everywhere, the Western populations no longer have a monopoly on industry or even technology. Globalization means that corporations no longer have any affiliation or loyalty to the Western nations that gave them birth. And the information age, plus cheap global trade, means that every land and people on Earth can be freely competed against, for the most efficient generation of wealth.

There are no "colonial regions" anymore, or any "colonizing nations". We are all, now, colonies of the capitalists.