Labor’s New Power in Asia

Forget the toppling stock markets, the crashing property prices and the food riots in the streets of Jakarta. Asia’s future, long term, is brighter than you think. I saw that future last week, in the unlikeliest place imaginable.

It was at a conference of East Asian union leaders, hosted by the AFL-CIO, on the old Clark Air Force Base outside of Manila.

“Our biggest problem here in the Philippines is job flight,” said a union organizer, who works with minimum-wage employees in the export-processing zones near Manila, “As soon as we start to organize a union, the company threatens to move to Vietnam.”

His colleagues agreed. “This race to the bottom has got to stop,” one said. “We need international regulations to keep companies from moving to low-wage countries like Bangladesh.”

That was the unanimous view among the labor leaders and human rights workers at the conference and, as Asian workers increasingly band together for higher wages and better working conditions, it will change the world.

For the last 40 years, as industrialization spread through Asia, it was the boast of Asia’s business elite that their industrialization would be different from what happened in Europe and North America. In the U.S. and Europe, industrialization transformed agricultural societies. Extended families were broken up as young people flocked to the city. Angry at exploitation, workers organized militant trade unions and fought for better wages and working conditions. Workers’ parties demanded and won basic economic reforms by law: an end to child labor; health and safety regulations on the factory floor; the 40-hour work week; Social Security, and unemployment insurance.

Asian elites, looking at the expensive welfare states, regulatory structures and redistributive tax policy that developed in the West in response to labor pressure, vowed to go a different way. For many years, Asian labor agreed. When Western trade unions sought to limit the ability of companies to move to low-wage havens abroad, or sought to ban the use of child labor in internationally traded goods, Asian labor joined Asian governments in cries of protectionism. It was unfair to force developing Asian economies to introduce Western social policies, said management and labor together: It ruined the cost advantages of Asian manufacturers.

Now all that is changing. Even before the economic crisis knocked the Asian tigers for a loop, labor was losing patience with wages and working conditions that are among the worst in the world. Manufacturers throughout the region, often working under license for famous Western brands, routinely flout health, safety and pay regulations in Asia. Workers do not get the minimum wage; they are cheated out of overtime pay; they are exposed to hazardous materials. In China and Thailand, terrible fires have swept through toy and apparel factories; hundreds of young women workers died because factories broke basic fire laws.

In some countries and industries, labor has already built powerful organizations. Korean unions helped force that country’s dictatorial rulers to democratize. Hong Kong trade unionists not only try to improve working conditions in the territory; they and human rights groups affiliated with them monitor labor conditions inside China and do their best to help workers on the mainland learn about and exercise their legal rights. In other countries, like Indonesia, government opposition to real trade unions remains strong and inflexible.

But in all the major Asian economies today, labor is assuming a critical new importance. For one thing, with millions of manufacturing jobs added in the region since 1985, industrial workers have become a more powerful force. At the same time, labor’s key demands for higher wages and a better life are exactly the medicine that Asia’s sick tigers need to regain their economic health.

Currently, the Asian economy, as a whole, is a parasitic economy. Led by Japan, the leading Asian economies depend on consumer demand in the West for their prosperity. China is the world’s leading producer of toys, but Chinese children don’t get many of them. Vietnamese workers don’t buy many Nikes; Indonesian factory workers can’t afford the blue jeans they make. As long as Asia’s workers are poor, this will remain true.

This export-oriented growth strategy used to work quite well, but the Asian economic crisis shows its limits. When just a handful of countries were exporting low-wage goods to the West, the markets were large and so were the profits. But today’s Asian manufacturer for Western markets faces stiff competition from other Asians. Indonesian computer plants must compete with companies in Thailand; Philippine garment manufacturers compete with the Bangladeshis. All this competition drives down prices and profits and, in any case, the United States and Europe can only buy so many computers and pairs of shoes.

For Asia to start growing again, it will have to rely on home-grown demand. Asian manufacturers must learn to sell to Asian consumers--and that means Asian workers need to earn more money.

A good example: In the last 10 years, Asia has fallen into what some call “golf-course capitalism.” The high savings rates of the Asian economies created vast pools of investment capital. Because nobody had any better ideas about what to do with this money, much of it was channeled into prestige real-estate projects such as golf courses and fancy shopping malls. The trouble is, there weren’t enough golfers to support all those country clubs, or shoppers with the money to buy Armani clothes and imported champagne.

Asian bankers and property developers have to learn the lessons of Levittown. Scores of millions of Asian families badly need modest housing with clean water. Asia’s banks need better customers than fly-by-night golf-course developers. Earlier this century, the U.S. developed a financial system that makes it possible for ordinary people to afford homes with a small down payment and a 30-year mortgage. Single-family mortgages have evolved into a vast market in the United States. It is a profitable market for banks. It has given us a thriving construction industry. It has improved living standards for three generations of Americans.

Asia needs Levittowns of its own. If it gets them--if workers’ wages rise and the credit system adjusts to serve the needs of ordinary people--the Asian miracle could get a second wind.

This is why the tigers need strong and smart unions. Let’s hope they get them quickly. After all, those newly prosperous Asian workers won’t just buy from each other. They will also buy from us, reducing the U.S. trade deficit and improving the outlook for millions of American workers.

Asia’s emerging labor movement is not only fighting to protect workers from abuses. It is fighting to make Asia and the United States safer, richer and happier. This is everybody’s battle. U.S. government policy and U.S. civil society should back Asian labor to the hilt.