Corporations: Maybe They’re Just Not That Into Us

Until recently, Corporate America relied upon the domestic market of consumers to sell most of its products. But they operate on a radically different strategy these days, a ​“secessionist” approach that represents a global extension of the old strategy of Southern capitalists.

The slavocracy-rooted Southern model of low wages and harshly anti-union labor relations successfully undermined and defeated many social welfare protections, limiting much of the New Deal to whites only, especially in the South, and attacking the entire safety net when Southerners rose to power in Washington, DC from 1980 to 2008. Further, the flight of Northern-based industry to the pitifully-paid, harshly anti-union South drove down workers’ real pay levels across the nation.

Not only did all the old Confederate states enact ​“right-to work” laws that directly discouraged unionization, but South Carolina’s elites worked hard to keep unionization under 4%, even discouraging unionized corporations from setting up shop there.

At present, the Southern model of all-powerful corporations and a submissive low-wage workforce sets the dominant standard for America’s social contract between labor and capital, apparent during last December’s debate over federal aid to General Motors and Chrysler. Union-negotiated wages and job protections are portrayed as hopelessly anachronistic when union membership dropped to under 13%, from 35% in the mid-1950’s.

In his compelling book Covering for the Bosses: Labor and the Southern Press, Joseph Atkins argues that corporate secession from the U.S. – in terms of abandoning the workforce, responsibility for a strong social infrastructure of good healthcare and education, and now strong domestic buying power – is the emerging direction for Corporate America.

Corporations that fled union wages and a strong labor voice in the North first jumped to the South, and have now leap-frogged to benefit from neo-slave wages in China (where factory pay is about 3% of those in the U.S., according to Jeff Faux in The Global Class War) and Mexico (again, about 3% of U.S. levels) and other low-wage, repressive nations. Some of the South Carolina communities where Northern jobs transferred have themselves been devastated by corporate flight. South Carolina towns like Anderson and Spartanburg face unemployment of over 26%.

Profit-maximization is the central basis for this secessionist strategy, with no room for any sense of the most minimal social obligation. For example, even after receiving tens of billions from U.S. taxpayers, General Motors plans to produce a huge increase in auto production overseas. Worse, there is no indication of reciprocity from the Obama team despite protests from the United Auto Workers. As the New York Times reported last spring:

The administration, however, appears to accept the proposition that to return to profitability as quickly as possible, G.M. must import a significant percentage of cars from its plants in low-wage countries, like Mexico and China, or low-cost countries, like Japan.

More than two-thirds of what U.S. corporations sell overseas now actually originates from their plants located abroad. As Uchitelle reported in 2004, overseas sales for U.S.-based corporations ​“have risen to more than $2.2 trillion annually in recent years, dwarf the nation’s exports of roughly $1 trillion.”

Despite America’s massive trade deficit, the Wall Street Journal states that ​“earnings overseas account for 40 percent of the profit growth for all corporations.”

With U.S. wages plummeting, who will buy the products? In recent years, corporations counted on people to use their credit cards and housing equity to make up in borrowing for the wage increases that they were no receiving. Obviously, the big Wall Street meltdown, collapse of the housing bubble, and the credit freeze brought an end to that.

No problem, as Frank Emspak, professor emeritus of the University of Wisconsin’s School for Workers, ruefully notes. ​“There’s six billion people in the world, and even in relatively poor nations like Brazil, China, India, and Mexico, you have 10% of the population – the elites – capable of buying products from the US,” Emspak says.

That means roughly 600 million consumers overseas. So there is much less reliance on the US domestic market and maintaining high wages so people can buy what they make.

The secession from domestic concerns – among some sectors of Corporate America – extends to issues like healthcare, education, and global warming. Referring to the need for massive investments in healthcare, energy, and technology to ensure continuing U.S. competitiveness, even globalization cheerleader Thomas Friedman of the New York Times was uncharacteristically critical of the nation’s CEOs:

When I look around for the group that has both the power and interest in seeing America remain globally focused and competitive — America’s business leaders — they seem to be missing in action.

The sobering implications of this secession from U.S. workers and communities by many American-based transnationals from the U.S. are concisely explained by Faux: ​“The CEOs and principal owners of corporations who have disconnected, or are in the process of disconnecting, their fate from America’s have no interest in paying more taxes to make the society they are abandoning more competitive.”

Finding effective leverage to exert on these secessionist corporations figures to be one of the most vital and most difficult tasks for America’s labor movement.