Labor Movements

Labor Movements

Global Perspectives

Stephanie Luce

Copyright © Stephanie Luce 2014
The right of Stephanie Luce to be identified as Author of this Work has been asserted in accordance with the UK Copyright, Designs and Patents Act 1988.
First published in 2014 by Polity Press
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1.  Introduction
Part I: Background
2.  A Role for Unions?
3.  Why Unions Decline: External Challenges on the Macro Level
4.  Adding to Further Decline: Labor Market Changes
Part II: Union Response
5.  Changing from Within
6.  Union Power
7.  Rebuilding the Movements
8.  New Directions – Going Global


The material in this book was gathered over many years, and I am grateful to colleagues and scholars who helped me understand the labor movement in a more global context, including Sara Abraham, Emiko Aono, Ralph Armbruster-Sandoval, Carolina Bank Muñoz, Anannya Bhattacharjee, Edna Bonacich, Anita Chan, Dan Clawson, Eli Friedman, Ellen David Friedman, Sarita Gupta, Jeroen Merk, Pun Ngai, Matt Noyes, Ashim Roy, Gay Seidman, Yamasaki Seiichi, Akira Suzuki, Hirohiku Takasu, and Ben Watanabe. A special thanks to Naila Kabeer, who invited me to visit India and Bangladesh with her to interview activists, workers, and scholars, which helped me understand labor standards from another perspective. Thanks to Shannon Lederer and Ashwini Sukthankar for sharing time to discuss their work. I have also learned a great deal from working with the Asia Floor Wage Campaign, National Guestworkers Alliance, the Retail Action Project, and Labor Notes.

The book is immeasurably improved by insightful feedback from Paula Chakravartty, Ellen David Friedman, Heidi Gottfried, Amy Hanauer, Penny Lewis, and Ruth Milkman. I have benefitted enormously from working over many years with my students, colleagues, and staff at the University of Massachusetts-Amherst Labor Center, and the Murphy Institute, at the School for Professional Studies, City University of New York. Ilana Berger, Johanna Brenner, Eli Deuker, Kim Gilmore, Jen Kern, Catherine Sameh and Erin Small all provided support of various kinds to help me through the writing process. I am also grateful for the support of my family and the Brenner family.

I am thankful for Emma Longstaff at Polity Press for her vision that such a book should be part of the social movement series, and for inviting me to contribute. Thanks also to Jonathan Skerrett, Elen Griffiths, and Clare Ansell who patiently guided me through this process, and Ian Tuttle for copyediting.

I owe deep gratitude to my partner Mark Brenner, who read the manuscript multiple times and helped me formulate my ideas, making the book much better as a result. It was he who convinced me to write this book, as his own persistent optimism in the labor movement pushes me to keep working.

This book was inspired by the hundreds of activists, organizers, students, union members, and leaders I have met in dozens of countries. Some have risked their livelihoods, and even their lives, in the fight for a more just world. It is to them that I dedicate this book.




Vignette #1:

When the BJ&B hat factory opened in a free trade zone in the Dominican Republic in 1987, it brought the promise of jobs and a better life for local residents. Over 2,000 workers, primarily women, were hired. But soon, the women realized the jobs came at a cost. Managers were verbally abusive, sometimes threatening physical violence, forcing most workers to work overtime shifts, and firing or refusing to pay workers for small infractions. By the late 1990s, a small group of workers began to organize a union. But when they declared their union in 2001, 20 union supporters were fired. The workers enlisted supporters in the Dominican Republic and abroad, and over the next two years, they waged a campaign against BJ&B. The company asserted that unionization would result in factory closure (Gonzalez 2003; Ross 2004).

The U.S.-based United Students Against Sweatshops launched a campaign against Nike and Reebok, two of the largest purchasers of BJ&B products, urging the companies to pressure the factory owners to recognize the union. After much effort, in 2003, BJ&B agreed to let workers decide whether to form a union, remain neutral during the process, as well as negotiate a contract if that was the workers’ decision. They also agreed to rehire the fired workers. Workers won raises, scholarships, and better working conditions. The victory was hailed as groundbreaking, since unions have had little success organizing workers in the free trade zones of the Dominican Republic or elsewhere (Ross 2004).

But soon after the victory, the large brands began reducing their orders and moving work to cheaper factories in other countries. In February 2007, the brands abruptly ended all orders and BJ&B shut its doors without warning, leaving the workers without jobs and with little recourse (Greenhouse 2010; Dreier 2011). Like so many cases where garment workers have organized, the victory at BJ&B was short-lived. In the end, the factory owner’s dire predictions that work will dry up were not just idle threats (Armbruster-Sandoval 2005).

Vignette #2:

In August 2008, 134 workers at the Stella D’oro bakery in the Bronx, New York went on strike, two weeks after their union contract expired. The company was demanding significant wage and benefit cuts. Stella D’oro was founded in 1932 by a New York family, who grew it to a successful business with 575 employees. In 1992 the family sold the company to Nabisco, which sold it to Kraft, which then sold it to Brynwood Partners, a private equity firm, in 2006. Brynwood obtained over $425,000 in tax abatements from the city to upgrade machinery at the plant, but by 2008, it argued that wages must be cut to retain profits (Jaccarino 2009; Lee 2009).

The workers, members of the Bakery, Confectionery, Tobacco Workers and Grain Millers Local 50, went on strike for the next 10 months. The union filed charges with the National Labor Relations Board (NLRB), one of which claimed that Brynwood had refused to provide the union with a copy of its 2007 financial statement, thereby failing to bargain in good faith. In June 2009 an NLRB judge ruled in favor of the union, and ordered the company to reinstate the workers.

The next week Stella D’oro invited the workers back but within a few weeks announced that it would close the factory and move production elsewhere. Brynwood sold the company to the Lance Corporation, which moved the production to a non-union bakery in Ohio.

Despite a strike, significant community support, favorable court ruling, and media coverage in major newspapers, the union was unable to keep the plant open or maintain the jobs of its members. While the company ended up moving production inside the U.S., the dynamics are indicative of the reduced power that unions have in an era of global capitalism. Whether companies threaten to move overseas or to the neighboring city, they can still use their mobility to break a union. When employers are free to move investments and production with little penalty, what can unions do?

* * *

Just a few decades ago, mainstream economists predicted that increased international trade and the spread of free markets around the globe would lead to new jobs for many and an increased standard of living for all. Noted economist Paul Krugman argued for increased free trade, dismissing those who raised concerns as “silly,” protectionist, or simply wrong (Greider 2013). But while globalization has led to a massive increase in wealth, and an average increase in gross domestic product per capita, a closer look reveals a troubling picture for many of the world’s workers.

In the world’s biggest economy – the United States – unemployment, including long-term unemployment, is at levels not seen since the Great Depression of the 1930s. Worse, millions of workers are underemployed in various ways – working part-time when they want to be full-time, or stuck in seasonal and temporary work. A 2012 report found that over half of new college graduates were either unemployed or working in jobs that did not require a college degree (Associated Press 2012).

The picture is similar across much of the world. Since the great recession of 2008, youth unemployment has skyrocketed. Almost 13 percent of young people around the world – 73.8 million people under the age of 25 – are officially unemployed, and the numbers are much worse when we include those who are underemployed or not in the formal economy. For example, 12.7 percent of European youth are not in the labor market or in school as of 2012 (ILO 2013).

It isn’t just young people that are suffering. The International Labor Organization (ILO) found that 197 million people world-wide were without jobs in 2012 – almost 6 percent of the formal labor market. But 39 million people have dropped out of the labor market due to the recession, meaning that unemployment is actually much higher – and the ILO predicts things will only get worse in the coming years. In 2012 part-time employment increased in two-thirds of wealthy countries (ILO 2013).

More disconcerting is the growth of workers in the informal economy and in “precarious employment” or contingent work – people in temporary or seasonal work, or other forms of work with no job security and lack of social protection.1 Neoclassical economics predicted that as capitalism spread, and economies experienced economic growth, formal employment would rise. Yet in many countries this has not been the case, as the past few decades of economic growth have come hand in hand with an increase in informal employment.

High unemployment and underemployment, and increasing precarity comes alongside stagnant, or even falling, average wages. What is most remarkable is that in many countries, wages have stagnated while labor productivity has increased. For example, between 1999 and 2011, labor productivity grew over twice as fast as wages in wealthy countries (ILO 2013). Figure 1.1 shows that whereas wages and labor productivity moved together in the United States for several decades after World War II, the two began to diverge in the 1970s, resulting in a serious gap. And where the postwar period saw workers maintaining their share of the expanding economic pie, over the past four decades employers have captured the gains from increased productivity.

Even before the global financial meltdown, some analysts noted the alarming trend of stagnant wages. Morgan Stanley economist Stephen Roach wrote in 2007:

The pendulum of economic power is at unsustainable extremes in the developed world. For a broad collection of major industrial economies – the United States, the euro zone, Japan, Canada and the U.K. – the share of economic rewards going to labor stands at a historical low of less than 54% of national income – down from 56% in 2001. Meanwhile, the share going to corporate profits stands at a record high of nearly 16% – a striking increase from the 10% reading five years ago. (Roach 2007)

After the 2008 crisis, things looked even worse. The global labor income share continued to fall in the OECD (Organization for Economic Development and Cooperation) countries as well as most developing countries, as the share of national income going to corporate profits rose – particularly in the financial sector (ILO 2013).

There are some exceptions. China has experienced real wage growth in the last decade, even when controlling for cost of living increases. Real wages went up for salaried workers in India for most years since 2005. The growth in wages and employment in China and India means that absolute poverty has fallen in those countries, and on average, worldwide. But despite these gains, over one-quarter of the world’s workers are living in poverty. In 2012, 397 million workers in developing countries were living in extreme poverty, despite holding a job, and another 472 million were above extreme poverty but did not have enough income to regularly meet their basic needs (ILO 2013).2 Furthermore, despite wage growth in China and India, inequality is rising rapidly as the share of national income going to workers is not rising nearly as fast as the share going to corporate profits (ILO 2013). In most countries the wealthy have done well in good times and bad, while workers fall further and further behind. Historically, labor unions have been the primary institution to counter inequality and fight for worker rights, but today they do not appear able to address the crisis. Where are the unions?

Source: The State of Working America, 12th edn., Figure 4U.

Figure 1.1 U.S. Wages and Productivity, 1947–2011

State of the Unions

Unions would seem the natural vehicle to raise wages and improve working conditions, but in most countries, unions have grown weaker over the past few decades. In a 2006 report, the U.S. Bureau of Labor Statistics (BLS) compared union membership and density (the share of wage and salaried workers that belong to unions) data for countries belonging to the OECD (Visser 2006).3 The total number of union members grew in many of the countries in the 1970s and 1980s, but since 1990, those numbers decreased in 18 countries and grew in only six. International union density rates vary dramatically, with as many as 70–80 percent of workers unionized in Denmark, Finland, and Sweden, while as few as 8–15 percent are unionized in France, the United States, Korea, and Poland. According to the BLS study, density rates fell in 20 countries from 1970 to 2003, increasing in only four (Belgium, Denmark, Finland, and Sweden). Table 1.1 shows data for countries from 1999 to the most recent year available, along with the percent difference and the total number of union members. In all but two of 33 countries, union density fell over this period, and fell by almost 4 percentage points for all OECD countries.

There are no comparable statistics for non-OECD countries (sometimes called the “global south”). The New Unionism Network compiled data from the International Trade Union Confederation (ITUC) and U.S. State Department to track union membership since 2000 for 94 countries. This data shows that union membership has increased in 50 of the countries, while declining in only 32. Six countries were relatively stable, and six do not allow unions. This suggests that the phenomenon of declining union power is not as universal as some might believe. Some of the countries that show large percentage growth are those that do not allow independent trade unions, such as China, Syria, and Vietnam. But a number of other countries show substantial increases in union membership. The countries with large growth as well as relatively large union membership include Argentina, Belgium, Brazil, Canada, Egypt, Luxembourg, Nigeria, Singapore, Taiwan, and Turkey. It is clear that union growth was not confined to one particular region.

Still, growth in members did not translate to increases in union density in all cases, suggesting that unions are not keeping pace with a growing workforce. In addition to membership decline in some global south countries and most in the global north, union power measured in other ways suggests unions have become much weaker. Historical alliances between political parties and trade unions are fraying or have been severed entirely in a host of countries, including Spain, England, Argentina, South Africa, and Sweden. In the past decade, labor-backed parties have come into power in many countries and instituted reforms that undercut union power or benefits.

Some measures suggest there is also a drop in public support for unions. In the U.S., Gallup polls show public support for unions is at near historic lows in the post-World War II era, with just 52 percent of those polled saying they approve of unions (Jones 2012). Some Canadian polls suggest that the public trusts management more than labor unions (Hébert 2012).

Many argue that unions have outlived their usefulness, if they were ever useful. In the global economy, the argument goes, companies engage in cut-throat competition with others from around the world. They do not have the luxury to pay higher wages than competitors in low-wage countries like China, and they cannot compete if they have to provide generous benefits. The global economy is fast-paced and fickle, and employers need to be flexible when faced with the demands of the market. Against this new reality, unions artificially inflate the price of labor and erect rigid work rules that stifle employers’ ability to hire and fire when needed.

Table 1.1  Union Density Rates and Total Union Members, OECD Countries

Source: OECD Stat Extracts. Data for union density and union members are for the most recent year available.

Furthermore, in emerging economies, much of the workforce operates in the informal sector, where individuals are afforded few, if any, legal protections and often lack a formal employer. The trade union model, resting on collective bargaining agreements and industry standards, does not apply to workers who are technically self-employed, often working from home.

But the fall in wages, and marked rise in inequality within and between countries, could also suggest that unions are more necessary than ever. It may be that the dynamics of a globalized economy introduce new challenges and obstacles for unions, but that does not make them irrelevant.

Indeed, survey data suggests that many workers still want to join a union. The Worker Representation Survey, conducted by Harvard economist Richard Freeman, shows the proportion of workers in the United States who want a union increased from the mid-1980s to 1995, and again by 2005, when a majority of workers indicated that they would join a union if they could, and over three-quarters of workers said they would like some form of representation in the workplace (Freeman 2007). While there is less research on this question in other countries, existing studies suggest the results are similar. Charlwood (2003) found that about 40 percent of non-union British workers overall, and 50 percent of manual workers, would likely join a union if given the option. Bryson (1999) found similar results for Canadian workers. Givan and Hipp (2012) analyzed survey data from 24 countries and found that, on average, workers have a positive perception of unions’ ability to improve working conditions.

Unions may be one of the only institutions capable of correcting the great imbalances in today’s global economy. Even some conservative analysts see that the growing inequality between wealthy and poor creates an unstable situation, a risk for massive unrest, and weak aggregate demand (Roach 2007; Blodget 2012). In 2002, the World Bank released a report reviewing over 1,000 studies on collective bargaining and economic outcomes, and concluded that while union density seems to have no correlation with most economic indicators, it does have a negative relationship to wage inequality and dispersion. In other words, countries with higher union density have lower wage inequality. They also found that while greater collective bargaining coverage alone can correlate with higher unemployment, countries with highly coordinated collective bargaining (such as the Scandinavian countries) are more likely to have lower unemployment and less persistent periods of unemployment, as well as stronger productivity growth (Aidt and Tzannatos 2002).4

This decline in wages, employment conditions, and union power are not just the outcome of a global economic crisis. Rather, they represent a longer-term trend connected with the rise of neoliberalism: a set of policies that promote free trade, deregulation, privatization, downsized government, liberalized financial markets, and fiscal austerity. These policies are driven by an economic and political philosophy that is based on a belief that “free markets” are efficient and desirable, and that governments should prioritize policies that promote expansion of markets and individual property rights, and de-emphasize government programs and democratic collective institutions, such as unions. Neoliberals argue that when investors and employers are free to pursue maximum profit, the world as a whole will benefit. They see unions as a major barrier to profit maximization.

While globalization itself it not new, neoliberalism (what some call corporate globalization) gained prominence in the last several decades. In the mid-twentieth century, the labor movement grew strong in many countries because governments regulated everything from trade to labor standards, creating restrictions on what employers and investors could do. With the ascendance of neoliberalism, governments have transformed their regulatory functions, dismantling many rules and practices that leant power to workers and unions while reregulating in a way to give more freedom to employers. Globalization itself is not a problem for unions, but neoliberalism is.

In this book, I argue that unions are still necessary in the global economy. Despite major challenges for union effectiveness and even survival, the labor movement must find a way to adapt in order to provide a voice for billions of working people who otherwise have little power and few resources. By most metrics of individual well-being and qualitative measures of a healthy economy and environment, the neoliberal policies adopted throughout much of the world have failed. The labor movement represents one of the best options for generating the dialogue needed, and the organizing required, to create a more sustainable model. While not the only solution to global inequality, unions are one of the largest and most well resourced options that workers have to represent their interests. In addition, unions have access to certain kinds of power that other social movements or organizations do not – notably, power to withhold labor and stop or slow production.

To make the case for unions’ key role in turning our imbalanced economy upright, I close this chapter with a more detailed review of the phenomenon known as “globalization,” including its impact on workers and labor organizations. In chapter 2, I provide arguments for why, despite challenges, there is still a need for unions and labor movements today. Chapters 3 and 4 discuss the external challenges that unions face, from labor law to capital mobility, trade agreements, international institutions, political ideology, and dramatic changes in global labor markets. These factors set the legal and policy parameters in which unions must function, at the same time that unions attempt to build enough strength to reshape the political and economic landscape through protest or legislation.

It is important to recognize that not all challenges unions face are external. Unions have also made errors of their own, failing to adapt to a changing economy and labor force. In some countries unions have been prone to corruption of various forms, and in many places, have relied on limiting the labor supply and excluding workers from the workforce in order to gain power. Even under the harsh political and economic climate of today’s global economy, union leaders could make better decisions concerning their internal functioning, and how to use their resources and set priorities. These are the subject of chapter 5.

Chapter 6 provides a discussion of potential sources of power that unions might use to rebuild. Most analysts agree that the global economy favors corporations over workers, and it will take tremendous effort and organizing to change that balance. I start with a closer look at how neoliberalism has given more power to employers in relation to workers. I then review a few theories of power, and discuss traditional strategies that unions have used to win: workplace organizing, strikes – including general strikes – and political action.

In chapter 7, I analyze the ways in which unions have had to look for additional sources of power as their traditional methods have become weaker under neoliberalism. I explore the various ways in which unions and workers today are attempting to revitalize and renew, including adopting new organizing models, forming labor–community coalitions, and building non-union worker organizations.

Finally, I conclude with a look at some of the experiments that have been underway in the past few decades, where unions are attempting to challenge the constraints they face and remain relevant in the global economy. These examples vary in scale and scope, and few can claim major success. Still, they are instructive as potential components of a revitalized labor movement. This book is not a comparative study of labor movements, nor does it intend to cover all parts of the world. Rather, I focus on the U.S. labor movement through a global lens, in relation to movements in other regions.

How Did We Get Here?

The roots of our current situation revolve around different theoretical models coming out of the collapse of the global economy of the 1930s. These models have been labeled as socialism, communism, social democracy, and free markets, but in fact the majority of countries have adopted various forms of capitalism that have had different roles for workers and labor organizations.

Most of the global north countries (the U.S., Canada, Europe, Australia, New Zealand, and Japan) adopted variations of “managed capitalism” (Stiglitz 2006). This camp argued that, despite the Depression, capitalism could still provide benefits to the population, but a strong role for government was necessary to regulate markets, and to develop programs to provide social goods and redistribute wealth. Today, the British economist John Maynard Keynes gets the most credit for the theoretical perspective that arose from the period, though Keynes’ thought was similar to and built off of other scholars. The United States’ version of this was known as the “New Deal” – much less ambitious than what was adopted in much of Europe – but still operating on the theory that government intervention was required to maintain a healthy capitalist economy.

For the most part, unions played a large role in managed capitalist economies – in some cases, they were brought in to ward off movement toward a more radical economic model. Capital was weak in Europe and Japan postwar, so labor had greater relative strength in those countries and could assert a voice in national economic rebuilding. Most industrialized countries had established labor or socialist parties that supported the establishment and political participation of mass industrial unions during this period.

In the U.S., unions experienced a major upsurge and gained legal recognition in the 1930s, but this growth was rooted in a historically compromised context, including decades of severe repression, no established labor parties, and almost no institutional foundations. In general, unions in the global north were strong enough to win some major demands, but not strong enough to challenge the fundamental logic of capitalist production and global managerial control.

The second model coming out of the 1930s was the command economies, or central planning. The Soviet Union and China declared themselves workers’ states run by workers, for workers. But in reality, trade unions were connected to the ruling party, and independent trade unions were not allowed. Without autonomy, unions were one-directional institutions helping implement production goals set by government planning agencies rather than giving workers voice on the job. Unions generally served the interests of managers rather than workers – and in places like China and Vietnam operated more like an insurance program, or at best, a social services agency.

Many of the remaining countries, called the “Third World” by some, were still under colonial rule – approximately 30 percent of the global population lived under colonial rule in 1945 (Brutents 2010). Sometimes referring to themselves as the Non-Aligned Movement, many of these countries fought for national liberation and political independence, and also attempted to create their own models of economic development, not necessarily tied to or governed by the Western model or the USSR (Prashad 2007).

Two of the dominant economic models that developed in these countries were Import Substitution Industrialization (ISI), and export-led growth. The ISI model developed in Latin America, where Argentinean economist Raul Prebisch proposed a path for economic development using high tariffs and “infant industry protections” in order to move up the development ladder from raw material extraction, to greater value-added production. In the process, countries would reduce their dependence on imports from wealthier nations.5 Many Latin American countries, and some in Asia, adopted variations of ISI. The state assisted by subsidizing the purchase of imported machinery and establishing high tariffs on the import of finished products like automobiles (Gereffi and Evans 1981). For the most part, labor unions in Argentina, Brazil, Mexico and elsewhere were partners in the ISI development regime, via populist labor parties that governed for many decades (Murillo 2000).

The second major model, export-led growth, aimed to develop industry aimed at international markets. Theories about the role of export promotion in economic growth go back to the nineteenth century, but the theory was put to the test in a handful of Asian countries in the postwar period. South Korea, Taiwan, Hong Kong, and Singapore in particular adopted export-led strategies in the early 1960s, pursuing growth by liberalizing the economy, increasing exports, and, in theory, reducing the role of government. Neoliberal economists held up these countries as models, suggesting that neoliberal reforms led these countries to experience significant sustained economic growth for several decades (Lin 2012). Yet in reality, the countries only adopted a modified form of neoliberalism. For example, although the countries did increase exports, the states played a strong role in industrial planning and provided protections for infant industries, via import barriers and direct subsidies for certain domestic firms, depending on performance and production goals. The state also controlled labor: workers did not have many basic rights, and the state used direct repression against workers organizing, although union rights were sometimes expanded in response to protest, such as in South Korea in the late 1980s (Rodrik 2002; Hart-Landsberg 2009).

The 1973 Crisis and the Rise of Neoliberalism

While the post-World War II era witnessed different models and paths toward economic development, and different roles for unions, by the 1970s, political and economic trends began to create more uniform conditions for unions and workers across countries. In particular, in the late 1960s, economic growth began to slow in many regions, and in 1973, a severe global recession hit. This created an opening for the critics of Keynesianism. With economic instability and stagnation affecting much of the world, theorists, politicians, and activists stepped up efforts to implement new models. Some critics came from the Left, arguing that it was necessary to move from managed capitalism, or social democracy, to socialism or communism. There was a growth in Left organizations around the world in the 1960s and 1970s. The Left took power or came close to it in many countries, including Portugal, Bangladesh, Jamaica, and parts of Italy and Spain.

But other critiques came from the Right – particularly a group of economists and political philosophers advocating for the expansion of “free market capitalism.” Geographer David Harvey (2005) asserts that this period created the conditions for the birth of neoliberalism. Keynesianism was failing to generate enough capital investment, which had slowed by the late 1960s, leading to lower growth and job creation. The debate became, how to reinvigorate investment? Neoliberal thinkers asserted that the free market was the solution. The key was to make the economy friendly to investors and finance. This required changing regulations to make it easier to invest or run a business; it also required reducing any “rigidities” that impede investment, from higher taxes to labor protections, including unions. Neoliberalism became an ideology and a practice. While neoliberal reforms in practice did not always coincide with its theory, they generally represented a move to reregulate labor and capital markets in favor of property owners and investors, and away from social protections and worker rights.

From the 1970s to the 2000s, neoliberalism spread throughout the globe – first as an ideology, then as a political program. Neoliberal policies were first tested in Chile in 1973, after the U.S. government helped overthrow the democratically elected president Salvador Allende and put in place a military dictatorship that enacted major neoliberal reform. A coup in Argentina in 1976 brought in military dictatorship that also began to plant the seeds for neoliberal reform (Teubal 2004). Under President Carter, the

U.S. Congress began deregulating the banking and transportation sectors. In 1978, Chinese leader Deng Xiaoping announced that the country would experiment with markets, including establishing market pricing and allowing foreign trade and investment. In 1979, the U.K. elected Margaret Thatcher as prime minister, and the following year, the United States elected Ronald Reagan as president, and the shift to neoliberalism seemed assured (Harvey 2005). Massive capital restructuring in the 1980s, followed by the fall of the Soviet Union in 1989, sealed its fate. Although neoliberalism eventually came to dominate, it took different paths in different parts of the world.

The Liberal Market Economies Countries that followed a path of “managed capitalism” can be divided into liberal market economies (LMEs) and coordinated market economies (CMEs) (Hall and Soskice 2001). The LMEs (U.S., U.K., Canada, Australia, New Zealand, and Ireland), or Anglo-American countries, are those where firms rely primarily on market arrangements and hierarchies to function. These countries emerged from the war with weak social programs and institutions. While the trade unions in these countries won certain rights and had even enjoyed periods of relative strength, they never obtained a formal role in running the economy or in setting industrial policy. Some did not even have strong labor parties, or saw increasing distance between unions and labor parties starting in the 1980s.

While there was conflict over economic models in the 1970s, in the 1980s it was the neoliberals who won out as leaders and began implementing their reforms in earnest. The global economy began to open up and capital began to restructure. With increased international trade and investment, corporations and investors found it easier to move to regions or countries with fewer restrictions. Corporations looking to restore profit rates of earlier decades sought ways to cut costs, and one major way to do so was through cutting labor costs – moving production to countries with lower wages, freezing wages at home, eliminating unions, and increasing the pace and intensity of work.

It was not only CEOs, but also elected officials who backed this approach. While neoliberalism started as a political ideology, as it took root, it created a vise in which all politicians were forced to operate. The first neoliberals were Republicans and Conservatives, but eventually, the Democratic Party in the United States (the closest thing to a Labor Party in the United States), the Labour Party in the United Kingdom, and the Australian Labor Party all adopted parts of a neoliberal platform.

A key plank in the neoliberal program was an attack on unions. In the United Kingdom, Thatcher went after the miners and railway unions; in the United States, Reagan broke the Air Traffic Controllers’ union in the famous PATCO strike. Labor law in the United States had never been strong relative to other parts of the world, and was weakened considerably with the Taft-Hartley Act in 1947, which restricted many union rights. Efforts to strengthen labor law, including eliminating the right of employers to hire replacement workers during a strike, were unsuccessful – including in the late 1970s when the Democratic Party controlled the Presidency, House and Senate. But over time, the National Labor Relations Board – the main agency in the U.S. responsible for implementing labor laws related to unions – became even more conservative, issuing rulings that further restricted union rights, and further undermined freedom of association in practice (Estlund 2002; Gould 2007). Unions were on the defensive throughout the 1980s, and continued to be so into the 1990s under Bill Clinton in the U.S. and Tony Blair in the U.K.

Workers’ rights were further undermined by the proliferation of free trade agreements, which first led to more capital flight in the manufacturing sector where unionization was historically concentrated. The rise of free trade agreements strengthened employers’ bargaining power. For example, labor scholar Kate Bronfenbrenner found that following the implementation of the North American Free Trade Agreement in 1994, employers used the threat of plant closure more frequently during organizing drives (Bronfenbrenner 2000). Approximately 68 percent of employers in mobile industries (such as garment or electronics manufacturing) used such threats in the 1990s, compared to 36 percent of employers in non-mobile industries (such as hotels and restaurants). The threats were effective in reducing unionization and even had an impact on bargaining first contracts. A 2009 study found that these trends had persisted, and in fact had intensified (Bronfenbrenner 2009).

Coordinated Market Economies Other global north countries, primarily in Western Europe, have been classified as CMEs (Hall and Soskice 2001). Here, labor unions were more successful at integrating their role in government post-World War II – through stronger social policies and workers’ rights, and a formal role for unions in establishing wages and working conditions via tripartite governance. As a result, restructuring in the 1980s was not as harsh for workers and unions as it was in the LMEs (Phelan 2006). In countries such as Germany, Sweden, and the Netherlands, unions were able to assert their role in some of the restructuring, thereby mitigating the negative impact. In Sweden, union density even rose for a bit in the 1980s and 1990s (Phelan 2006). For a few decades, it appeared that some of the European unions would be spared the attacks seen in the Anglo-American world.

But even in the CMEs, neoliberal globalization eventually had an impact, particularly in the arena of labor market flexibility. Transnational corporations attempted to cut costs and look for greater returns, in part due to heightened global competition. States and regions got pulled into bidding for capital, trying to become hospitable to business – including foreign capital looking for investment opportunities, or domestic capital threatening to leave. In this context, policymakers moved to create the European Union. Several European nations were operating in coordination via the European Economic Community formed in 1957, but a larger and more formal alliance, named the European Union (EU), was established under the Maastricht Treaty in 1993. The EU established an economic and political entity, with a single market and standard set of rules and regulations, governed by the European Commission (EC) and other supranational institutions. They created a monetary union, called the Eurozone, in 1999, establishing the currency of the euro. There are now 28 countries that belong to the EU, though not all are part of the Eurozone, and not all share the same benefits.

The principle behind the EU was to harmonize upwards: to take the considerable variation in wealth, living standards, policies, and programs across the member states and adopt EU-wide standards that would attempt to lift up those at the bottom. However, built into the EU were competing goals. Alongside the goal of higher standards was the mandate of the “convergence criteria” of the Maastricht Treaty, including that member states keep inflation at no more than 1.5 percentage points above the average of the three lowest inflation member states; that member states not allow deficits to exceed 3 percent of gross domestic product (GDP) each year; and that gross government debt not exceed 60 percent of the prior year’s GDP. These financial criteria – promoted primarily by German Chancellor Helmut Kohl – created constraints on domestic economic policymaking, which grew increasingly restrictive. Overall, the convergence criteria of the EU embody a neoliberal philosophy that prioritizes low inflation and low government spending in the name of attracting investment.

This tension could be seen in the EU labor market policy as well. As early as 1993, the European Commission issued the “White Paper on Growth, Competitiveness and Employment,” which called on European countries to examine the rigidities in their labor market policies in order to expand employment creation (Sbragia 2004). The White Paper stated that flexibility should not come at the expense of those already employed, but the 1997 Luxembourg Summit laid out clear and detailed recommendations, such as “more adaptable types of contracts,” and revised benefit and training policies that would give the unemployed “incentive to look for work.” These recommendations were framed as creating more opportunities for women to enter the labor force, and finding work for the unemployed. The formal goal of EU policy became to balance labor market flexibility with job security, or “flexicurity.” But the other policy interests laid out by the EU institutions, such as price stability and low inflation, were at odds with the goals of security, and instead pushed governments simply toward flexibility.

Conservative, moderate and even some left governments implemented neoliberal reforms in a number of CME countries, particularly in the 2000s. For example, the Socialist Party in Spain began the process of labor market deregulation as early as the 1980s, and this was expanded by José María Aznar, when the conservative People’s Party was elected in 1996 (Burgess 2004; Perez 2004). By 2000, Aznar was in alliance with Tony Blair in the United Kingdom, pushing the EU in the direction of neoliberal change. Soon, Silvio Berlusconi was elected in Italy and joined the alliance, creating a powerful coalition that pushed a host of policies, including labor market flexibility, within the EU (Sbragia 2004).

International competitive pressures, as well as EU policy goals relating to finance, have pushed most EU member countries further in the direction of flexibility in recent years. A 2012 study evaluates the labor market policies of 18 EU countries from 1985 to 2008 and finds that most countries have not met the dual goal of “flexicurity” (van Vliet and Nijboer 2012). Overall, flexibility has increased, primarily for those who are already “outsiders” – such as women, or migrant workers, who did not have access to full-time jobs before (Vosko 2000). Such policies created greater inequality between “insiders” and “outsiders,” as well as a larger pool of temporary workers in many EU countries. The stratified impact of these measures may also be the result of unions’ unwillingness to make existing contracts more “flexible,” while being willing to accept increased flexibility for temporary workers who are not their members (Davidsson and Emmenegger 2012). In any case, the result is increasing labor market flexibility without corresponding increases in security for workers in the EU.

The Global South Global south countries were among the first to be subjected to neoliberalism, starting with Chile and Argentina in the 1970s, and spreading rapidly throughout Latin America, Africa, and Asia in the 1980s and 1990s. Like Chile, some countries were forced to adopt neoliberal reforms after military coups – often with the backing of the United States or European governments, and sometimes involving assassinations, in their efforts to overthrow leaders seen as communist or sympathetic to communism. In addition to Chile and Argentina, between 1950 and 1973 left-leaning leaders were ousted in Bolivia, Brazil, Cambodia, Congo, the Dominican Republic, Ecuador, Guatemala, Indonesia, Iran, and Zaire (Keating 2012; Prashad 2007). This set the stage to bring in new leaders identified with the United States, and willing to go along with U.S.-backed neoliberal reforms starting in the 1970s and early 1980s. Soon, the neoliberal path was no longer a choice as all alternatives were gradually closed off.

Some global south countries found themselves pushed into neoliberalism through the policies of international financial institutions and the Structural Adjustment Policies of the International Monetary Fund (IMF) and World Bank. Countries that pursued ISI policies were vulnerable because they had borrowed large amounts of international money to implement ISI. When interest rates spiked in the early 1980s, some tried to, but could not, secure private refinancing and were forced to turn to the IMF and World Bank for assistance. These institutions imposed conditions on the loans. Placing conditions on loans is standard and unremarkable in most cases – such as when a bank requires a certain annual income before approving a mortgage. But with structural adjustment the conditions were extreme, requiring countries to adopt a wide range of reforms designed to liberalize the economy and open it up to the world market. Sometimes the demands were even contradictory to the Constitution or basic laws of the country. For example, the Mexican government agreed to hold down wages in the context of structural adjustment despite a Constitutional right to a living wage (Alarcón-González and McKinley 1999; Anker 2011).

Some African countries were under the leadership of corrupt dictators, supported by their former colonizers or the United States in the 1960s and 1970s. During this period they accumulated substantial debt as they pursued large, sometimes foolhardy, development projects, so when these debts became insurmountable in the 1980s, these countries also began to adopt structural adjustment programs and economic restructuring at the hands of the IMF and World Bank. Over two decades later, most analysts – including the IMF and World Bank – acknowledge that structural adjustment failed, overall, to create healthy economic development. Joseph Stiglitz, who was chief economist at the World Bank in the late 1990s, describes the many ways in which structural adjustment made conditions worse in countries – and made it almost impossible for the new slew of leaders to pursue healthy growth. In fact, even some of the advances countries had made – in health care or public education – were reversed under structural adjustment (Stiglitz 2006).

Still other countries pursued neoliberal policies under the leadership of domestic politicians trained in economics or political science in the United States (such as Carlos Salinas in Mexico and Francisco Flores Pérez in El Salvador). In South Africa, the African National Congress (ANC) adopted neoliberalism on its own after the fall of apartheid in the 1990s (Schneider 2003). But by that period, after the collapse of the Soviet Union and what appeared to be the triumph of free market capitalism, it seemed impossible to pursue any other path to economic development. If the ANC pursued any policies other than neoliberalism, international investors threatened to take money out of the country, destabilizing the economy. Later, leaders such as Luiz Inácio Lula da Silva of the Brazilian Workers’ Party, would face the same constraints. Neoliberalism became the “common sense” among politicians and policymakers across the globe.