Archive for September, 2010

Wal-Mart Plays the Victim

Thursday, September 23rd, 2010

In the mid-1990s business groups such as the American Trucking Association – then led by Thomas Donohue, currently head of the U.S. Chamber of Commerce – launched a crusade to ban union corporate campaigns. The effort fizzled out, but now Wal-Mart may be trying something similar to thwart site fights pursued by community groups opposed to the opening of the giant retailer’s stores and distribution centers.

The company is pouncing on a story published in the Wall Street Journal in June reporting that rival grocery chains such as Safeway and SuperValu helped to pay for the services of a firm called Saint Consulting Group, which has worked with community groups around the country in campaigns against Wal-Mart projects. The article also reported that Saint’s fees are sometimes paid by the United Food and Commercial Workers. The UFCW does not hide the fact that it works with community groups opposed to the virulently anti-union Wal-Mart, whose expansion threatens the jobs of UFCW members at unionized competitors. The UFCW confirmed to the Journal that it has funded Saint and insisted it had every right to do so. The newspaper said that the rival chains declined to comment.

In a just-published follow-up article, the Journal reports that Wal-Mart is asking courts to compel its opponents to disclose who is paying their legal bills in various environmental lawsuits challenging the company’s expansion. This could be the first step in an effort to get courts and perhaps friendly legislatures to put restrictions on site fights and their funding. While Wal-Mart claims to be most upset about the involvement of its competitors, the company may try to use this issue to weaken community groups and the UFCW, its long-time nemesis.

It is the height of hypocrisy for Wal-Mart to complain about collusion among its adversaries. The beast from Bentonville has never hesitated to use every trick at its disposal – including the funding of front groups – to advance its expansion efforts. Over the summer it succeeded in getting permission to build a second store in Chicago by using tactics such as creating fake community groups and hiring low-income people to pose as demonstrators supposedly eager to get a Wal-Mart job. The company also pretended to have seriously negotiated with unions on wage rates for the store.

Several years ago, Wal-Mart sought to defuse criticism of its detrimental impact on local businesses by launching an “Opportunity Zone” program that amounted to little more than bribing small firms to back its agenda. In 2006 it came to light that two blogs that appeared to be written by independent supporters of the company were actually created by Wal-Mart’s public relations firm, Edelman. That was in addition to reports that the company was cultivating real bloggers, some of whom were repeating company talking points verbatim.

The amount of money Wal-Mart’s competitors have contributed to site fights probably does not compare to what Wal-Mart has spent itself. Apart from the direct costs of those site battles, the company cultivates political support through direct means such as campaign contributions and is believed to make wide use of indirect means such as giving consulting contracts to relatives of public officials.

State and local governments end up paying for the company’s campaigning through the economic development subsidies (estimated at more than $1.2 billion) they give to Wal-Mart and the forms of tax avoidance (estimated at billions more) that the company arranges for itself.

Wal-Mart may feel that the likes of Safeway and Supervalu are violating some unspoken rule by supporting site fights, but it has broken every rule in the book itself in pursuit of endless expansion. But rather than defending those rivals, the most important thing is to be sure Wal-Mart does not exploit this issue to put shackles on community groups and unions, which are often the only forces working against the company’s quest to take over everything.

Boeing’s Subsidy Coercion

Thursday, September 16th, 2010

For many years Boeing has complained that its European rival Airbus unfairly benefited from government subsidies as it grew to become the world’s top jet builder. The U.S. company felt vindicated when the World Trade Organization ruled last June that Airbus had indeed received improper below-market-rate loans from European governments.

But now Boeing has been hoisted by its own petard.  Responding to a counter-complaint filed by the European Union, the WTO has just concluded that Boeing received its own illegitimate government help – both from research contracts awarded by federal agencies and from states that put together large incentive packages to lure production facilities for Boeing’s next-generation 787 Dreamliner. The value of the questionable payments was said to be in excess of $20 billion.

The ruling itself was not made public, but the descriptions of it that have emerged in the press undermine Boeing’s long-standing contention that its government assistance, unlike that received by Airbus, is legitimate. The company has strained to argue that the deals offered by the states are incentives and that incentives are not the same thing as subsidies. The WTO now seems to be saying that this is one of those distinctions without a difference.

Since the text of the WTO decision is not available, I thought it would be helpful to recount what kinds of assistance Boeing has received from various states. The deals were well covered but it is easy to forget how willing the company has been to make use of public giveaways.

WASHINGTON STATE. Boeing’s association with Washington State dated back to the company’s founding in 1916, but when it was making plans in the early 2000s for the Dreamliner, it forced the state to compete with around 19 others to be chosen as the location for a $500 million plant and up to 1,200 jobs.

Eager to preserve his state’s status as a center of aerospace production, Gov. Gary Locke proposed huge tax breaks for the company and pressured the legislature to approve them virtually overnight in a special session. Locke got his way, and Boeing ended up with a package of research & development tax credits and cuts in Business & Occupation taxes (the state’s substitute for a corporate income tax), sales taxes and property taxes that together were estimated to be worth $3.2 billion over 20 years. Boeing agreed to locate the Dreamliner operation in Washington after the state also agreed to overhaul the unemployment insurance system to reduce costs for employers and tighten up on workers compensation claims.

KANSAS. Hoping to persuade Boeing to perform a portion of the work on its Dreamliner at its 12,000-person operation in Wichita, the Kansas legislature in 2003 approved a plan to make available $500 million in bond financing to the company. The proceeds from the state bond issue were to be turned over to Boeing, which would be allowed to pay off the interest by diverting the state payroll taxes collected from its workers assigned to tasks relating to the new jetliner. The projected cost to the state in lost revenue over the 20-year bond payoff period was estimated at $200 million. In 2005, before it could make use of the bond financing, Boeing sold its commercial operations in Wichita to a Canadian private equity firm, which was allowed to make use of the funding at a reduced level.

SOUTH CAROLINA. The Palmetto State was one of the losers in the 2003 competition set up by Boeing to decide where to locate its initial production facilities for the Dreamliner. But the state kept wooing the airplane manufacturer as well as some of its major suppliers. In 2004 it gave a subsidy deal worth more than $100 million to one of those suppliers, Vought Aircraft Industries. In 2009 Boeing received a subsidy package initially valued at $450 million – later pegged at $900 million – to locate its second Dreamliner production line in South Carolina, where it clearly hopes to keep its workforce non-union.

ILLINOIS. Boeing played the same subsidy game in 2001 when it decided to move its headquarters from Seattle to another part of the country. It set up a competition among three cities that was won by Chicago after state and local officials put together a package of tax credits, property tax abatements and other incentives worth a total of about $56 million.

What this history shows is that Boeing not only mimicked Airbus in making use of anti-competitive subsidies, but that it did so by coercing state and local governments. For Boeing, at least, the main problem is not that it violated the WTO’s abstract notions of fair competition but that it exploited the hunger for decent jobs to extract massive sums from the pockets of American taxpayers.

European Companies Behaving Badly

Thursday, September 9th, 2010

Many American workers are irate these days about the jobs that are supposedly being taken away from them by undocumented foreign laborers. A new report from Human Rights Watch shows that the real threat to our living standards may come not from Mexican farmworkers, chambermaids or carwashers but from another group of “illegal” immigrants: European transnational corporations investing in the United States.

These companies – which include the likes of T-Mobile parent Deutsche Telekom, DHL Express parent Deutsche Post, French construction materials giant Saint-Gobain and Britain’s Wal-Mart rival Tesco – are illegal in the sense that they fail to comply with international labor norms when it comes to their U.S. operations.

Human Rights Watch, usually preoccupied with the mistreatment of dissidents and others in countries such as the Democratic Republic of Congo, Senegal and Kyrgyzstan, has not hesitated to point out that when it comes to the workplace, the United States is far from a paradigm of respect for individual rights. In 2000 it published a report called Unfair Advantage, which showed how workers’ freedom of association is routinely violated by employers.

Its new report, titled A Strange Case, shows how this pattern of abuse is practiced not only by domestic companies used to a climate of lax labor enforcement, but also by European companies that have much friendlier relations with unions in their home countries and that claim to abide by the principles regarding labor rights included in the declarations and conventions of the International Labor Organization, the Organization for Economic Cooperation and Development, and other global bodies.

Noting that these companies “exploit the loopholes and shortcomings in U.S. labor law” to engage in union avoidance and unionbusting practices, the report states: “The European Dr. Jekyll becomes an American Mr. Hyde.” Another way of putting it is that these companies behave like proper Westerners who indulge in sex with children when traveling to Southeast Asia: they are willing to do things abroad that they would never consider at home.

The Human Rights Watch report documents intimidation tactics used, for example, by T-Mobile in response to an organizing drive led by the Communications Workers of America and by DHL Express in response to a drive launched by the American Postal Workers Union. It also shows how European companies have tried to remove unions already organized, such as the decertification effort by Saint-Gobain against the United Auto Workers at a plant in Massachusetts.  Other case studies show how companies such as Norway’s Kongsberg Automotive use tactics such as the lockout of union workers during contract negotiations that, as the report puts it, are “unheard of in Europe.”

The report points out that these European companies exploiting the lax U.S. labor rights environment are invariably ones that profess to be practitioners of corporate social responsibility (CSR) and that claim to have policies of cooperating with worker organizations throughout their operations. This, along with the fact that environmental criminals such as BP can claim to be CSR advocates, shows that the organizations that rate firms on corporate responsibility have to do a lot more than take company statements at face value.

Although the Human Rights Watch report doesn’t address it, another factor in the ability of European companies to behave badly in the United States is the unwillingness of the unions in their home countries to take aggressive action on this issue. Some of those unions have spoken out forcefully in support of their beleaguered American cousins, but that has not been enough to stop the abuses.

Yet the central problem is not CSR hypocrisy or inadequate labor solidarity, but rather the dismal condition of labor law in the United States. It would be nice if European companies decided on their own accord to treat American workers as they do employees at home, but even better would be if the federal government compelled both foreign and domestic companies to respect the collective bargaining rights of all U.S. workers.

Corporate Benevolence and Corporate Despotism

Thursday, September 2nd, 2010

When we worry about the influence of big business on our existence these days, we generally think about a variety of companies: our employer, the financial institutions that handle our money, the drug companies that treat our ailments, the agribusiness firms that feed us, the telecoms that allow us to communicate, etc.

Yet there have been many situations in American history in which everyday life was dominated by a single corporation. This occurred when people found themselves residing in what were known as company towns.

The Company Town, an engaging new book by Hardy Green, is apparently the first general history of the efforts by a variety of capitalists in the United States to create communities in which they could control both the working life and the private life of their employees and their families. Green follows the evolution of this special form of urban planning from the textile towns of New England in the early 19th Century to the communities hastily erected by military contractors at the onset of World War II. He also finds modern analogues in amenity-laden corporate campuses such as the Googleplex in California.

Along the way he looks at communities across the country involved in industries such as mining, steel, petroleum, railcars, shipbuilding, meatpacking and logging. The corporate sponsors of these towns included the likes of U.S. Steel, Cannon Mills, Phelps Dodge, Hormel, Maytag, Kaiser Industries and even the federal government (in connection with Oak Ridge, Tennessee, the site of the Manhattan Project).

Green is careful to distinguish between company towns such as Hershey, Pennsylvania that were experiments in corporate paternalism and the harsh communities set up by coal companies to house their miners. The first type represented a form of industrial utopianism, while Green dubs the latter model “exploitationville,” reflecting not only workplace conditions but also substandard housing and overpriced company stores.

Green does a great job in weaving together the biographies of the entrepreneurs responsible for creating many of the company towns with the histories of their firms and industries, putting it all in the context of the tumultuous labor relations of the past two centuries. (Full disclosure: Green is a friend of mine.)

While some of the company towns were created to put manufacturing operations close to the sources of raw materials (e.g. meatpacking plants sited near livestock producers), many were set up to isolate workers from the influences of union organizers and radical agitators. Yet, as Green shows in numerous cases, those influences managed to infiltrate both the paternalistic and the unabashedly exploitative company towns.

He recounts a series of labor disputes beginning with the work stoppages at the Lowell mills and continuing through to the Pullman railcar workers strike in 1894, the Phelps Dodge miners organizing drive in 1917, the Cannon Mills walkout in 1921, the Hershey workers strike in 1937, and the Hormel meatpackers strike in the 1980s.

The willingness of these workers to confront management was all the more amazing in that their employers were also their landlords, meaning that a decision to go out on strike could quickly lead to eviction from one’s home. The will to fight did not always translate into an ability to win, and Green points out that in most cases strikes and organizing drives were crushed by company-town employers – whether they were of the paternalistic or exploitative variety.

Given this oppressive history, it is surprising that when it comes time to analyze the overall lesson of company towns, Green adopts an approach that is far from condemnatory. He suggests that employers who chose the more exploitative approach may not have had a choice, given low profit margins, low skill requirements and other factors in their industries. And he argues that the more paternalistic company towns have something to teach today’s employers.

Some of the features of the best benevolent company towns – affordable housing, day care, good schools, impressive libraries and recreational facilities – certainly have their appeal, especially in today’s climate of cutbacks in public services. Yet those benefits came at a steep price: a loss of freedom, especially in connection with the right to organize for a voice at work.

I would have liked Green to provide more analysis of what the paternalistic and exploitative employers had in common and how the two approaches were simply different ways of achieving the same objective: dominating the workforce while maximizing productivity and profits.

More than the company towns themselves, the struggles of workers in those difficult circumstances provide lessons in dealing with excessive corporate power, whether it comes from one company or many.