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Globalization and Labor: Reflections on Contemporary Latin America

Published online by Cambridge University Press:  21 November 2007

Eric Hershberg
Eric Hershberg
Affiliation:
Simon Fraser University
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As the editors note in their introduction to this special issue of the journal, for more than 500 years, indeed since the conquest, Latin-American economies and societies have been profoundly affected by developments in the world system. Over the past century alone, watershed moments such as the Great Depression of the 1930s and the oil shocks and international debt crisis of the 1970s and 80s, have rocked Latin-American economies, transforming development paradigms and with them the circumstances of the many millions who inhabit the region. Today, a quarter century has passed since Latin-American economies embarked, unevenly yet largely irreversibly, on the path of market-oriented reform. Designed to stimulate growth through insertion into global markets, structural adjustment programs swept Latin America in the wake of the debt crisis and were followed by a panoply of measures that sought an enduring restructuring of economies in the region. The pursuit of these so-called Washington Consensus policies did away with the inward-oriented strategies that had shaped development in the region throughout the postwar period. However reluctantly, Latin America staked its future on a renewed engagement with the world economy, and became a player in the highly contested processes of globalization that are reshaping societies and economies around much of the planet.

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Type
Research Article
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International Labor and Working-Class History , Volume 72 , Issue 1 , Fall 2007, pp. 164 - 172
Copyright
Copyright © The International Labor and Working-Class History Society 2007

As the editors note in their introduction to this special issue of the journal, for more than 500 years, indeed since the conquest, Latin-American economies and societies have been profoundly affected by developments in the world system. Over the past century alone, watershed moments such as the Great Depression of the 1930s and the oil shocks and international debt crisis of the 1970s and 80s, have rocked Latin-American economies, transforming development paradigms and with them the circumstances of the many millions who inhabit the region. Today, a quarter century has passed since Latin-American economies embarked, unevenly yet largely irreversibly, on the path of market-oriented reform. Designed to stimulate growth through insertion into global markets, structural adjustment programs swept Latin America in the wake of the debt crisis and were followed by a panoply of measures that sought an enduring restructuring of economies in the region. The pursuit of these so-called Washington Consensus policies did away with the inward-oriented strategies that had shaped development in the region throughout the postwar period. However reluctantly, Latin America staked its future on a renewed engagement with the world economy, and became a player in the highly contested processes of globalization that are reshaping societies and economies around much of the planet.

The present generation of globally-driven processes, like those that came before, has altered the world of work for tens of millions of people. Cross-border flows of capital, goods, technologies, and even labor itself have accelerated, affecting poor and rich countries alike. There has been a spatial reconfiguration of the production of goods and services at the same time that financial liberalization brings heightened vulnerability to international capital markets and thus pressure on governments to sustain fiscal restraints. These developments influence the sectoral distribution of the work force, its composition, and its relationships with the state, as well as the modes through which it organizes as a collective actor. Of course, these variables have been affected by domestic dynamics as well as by the broader global context. Distinguishing the relative importance of global as opposed to regional, national, and subnational forces is hardly straightforward, and is perhaps unnecessary: What is clear is that the two dimensions are intertwined: domestic conditions respond to the global context, while transnational phenomena are shaped by the national settings in which they operate. In Latin America as elsewhere in the developing world, the push toward market-driven models has entailed fundamental social and economic restructuring, and that change has been stimulated by ideas and interests operating both within and outside the region, as well as by the strategies of governments, firms, and multilateral institutions such as the World Bank and the International Monetary Fund.Footnote 1

A burgeoning scholarly literature offers valuable insights into the consequences of restructuring for macroeconomic performance in Latin America and for the relative importance of different kinds of economic activity in the region.Footnote 2 There is also growing understanding of the impact of the new development paradigm on efforts to reduce income inequality and promote social welfare, as well as on the changing roles of states and enterprises in shaping economic trends. This literature generally concludes that the emerging model of accumulation has yet to demonstrate a capacity to generate sustained growth or to overcome skewed patterns of distribution that have long plagued Latin America.Footnote 3 Nonetheless, ample evidence emerges to confirm that adoption of externally-oriented development strategies is altering longstanding relations of power within societies of the region, and effecting profound transformations in Latin America's relations with the rest of the world.Footnote 4

Studies of the societal consequences of economic restructuring emphasize not only the general trend toward growing inequality but also the declining role of the central state in the provision of social welfare.Footnote 5 Some of this scholarship considers the fortunes of workers and communities in particular niches of export-oriented economic activity in light of controversies regarding the beneficial or adverse effects of globalization.Footnote 6 Yet most of this research has focused on experiences of workers in isolated sectors and individual countries. Comparatively little attention is paid to transformations at the firm level, which after all provides the setting in which much of the world of work actually takes place. Similarly, the literature typically fails to situate the consequences of global insertion in the context of social and demographic changes that, independently of changes in development strategy at the macro level, condition the preferences and behaviors of individual workers, families, and households throughout the region. In Latin America as elsewhere, there is a pressing need for comparative and synthetic perspectives on the prospects for workers and their families, approaches that highlight continuities as well as changes while illuminating the interconnections among such superficially disparate units of analysis as households, labor markets, and firms.

Globalization alters the opportunities and constraints facing distinct segments of the labor force: rural and urban, male and female, skilled and unskilled, old and young. How are we to make sense of the contradictory trends that accompany the spread of globalization to growing portions of the workforce? To what extent do the dynamics of globalization magnify or attenuate the societal impact of changes in underlying demographic and family structures? What new categories are being employed to grapple analytically with these fundamental questions, and to what extent do they capture processes of socioeconomic change that are unfolding alongside the consolidation of market-oriented reforms?Footnote 7 The essays presented in this issue of the journal represent an important advance in scholarly attempts to shed light on these and other questions at the same time that they propose intriguing directions for subsequent research.

Four Elements of a Framework for AnalysisFootnote 8

Globalization shapes the structure of domestic economies in multiple ways that affect opportunities for workers, and its impact in any particular social or territorial setting is an empirical question. The remainder of this essay suggests four distinct but interconnected approaches to the topic. A first question concerns changes in the supply of jobs attributable to modes of insertion in the global economy: Globalization both creates and eliminates jobs, and this varies across localities and sectors. Secondly, globalization is mediated by institutional factors, such as labor market regulations or their absence, and increasingly by international standards. These variables shape how changes in the supply of jobs are experienced by different groups of workers. A third issue involves changes in labor supply: households and communities respond strategically to opportunities and constraints created by particular patterns of global insertion and institutional fabrics, as well as by demographic conditions. Finally, and consistent with several contributions to this issue of the journal, we can explore how worker identities and modes of collective action shift as the world of work is experienced in new ways.

I) The supply of jobs

Two patterns stand out in examining Latin America's evolving position in the global economy. In South America, commodities exports constitute the leading sectors, as demand in advanced industrial economies and, increasingly, China, has boosted production of raw materials. Higher energy prices are augmenting revenues in several Andean countries, while growing demand for such crops as soybeans and corn have provided a boost to agro-industry, most notably in Brazil and the Southern Cone. Productivity gains are also concentrated in natural-resource-related activities: in comparative terms, the performance of South America's manufacturing sector has been disappointing, nearly everywhere accounting for a diminishing percentage of exports. From the perspective of labor a key implication of these trends is that those sectors offering the greatest potential increase in employment—specifically small and medium-sized enterprises in manufacturing and services—are lagging behind the less labor-intensive activities characteristic of the primary sector. Moreover, local contribution to value-added is concentrated in areas of production in which fixed capital predominates over human capital. Stated differently, neither growth nor productivity increases are concentrated in sectors that provide sufficient or high-quality jobs.Footnote 9

By contrast, for the economies of Mexico, Central America, and the Caribbean globalization has brought with it a substantial increase in labor-intensive manufacturing and related services, as well as in tourism, a quintessentially globalized service industry. As a consequence, the sheer number of jobs has been increasing in this part of the region. However, with few exceptions, job quality in manufacturing remains problematic, as evidenced by studies of maquilas along the US-Mexican border and beyond.Footnote 10 The picture is more mixed with regard to tourism, where some localities have managed to occupy high value-added niches, building in the most promising instances on local resources and capabilities.Footnote 11

Shifts in the organization of production, firm structure and interfirm networks affect demand for distinct profiles of workers employed in a range of different settings. Throughout Latin America, recent years have witnessed a growing concentration of ownership in large firms and in conglomerates (grupos), an increasing importance of transnational enterprises, and an expanding gap between the minority of technologically advanced producers and the majority of relatively backward firms. These are among the structural changes that have shaped the characteristics of employment in the region.

Significantly, not only are many of the most dynamic examples of successful adaptation to the demands of globalization found in capital and technology-intensive sectors, but at the same time leading firms operate in symbiotic relation with small and often unregulated enterprises that operate in conditions of complete informality, often relying heavily on family labor.Footnote 12 Thus, on the one hand, demand for highly qualified workers has grown in tandem with opportunities created by liberalization of trade and investment, and workers fortunate enough to find formal employment in such sectors have enjoyed a noteworthy expansion of their opportunities for workplace satisfaction and professional advance. Yet alongside these circumstances, and often intertwined with them, we encounter sweatshop situations rife with exploitation, and with scant opportunities for laborers to expand their long-term horizons. In many instances, there is even cause to doubt whether these disadvantaged sectors are able to accumulate the resources needed to ensure reproduction of the very households which provide the supply of labor needed to sustain the process of accumulation upon which the new economic model depends.

An additional factor influencing the supply of jobs must be noted, and this concerns the contraction of public-sector employment. A core feature of structural adjustment programs has been to downsize the state, privatizing or relegating to NGOs a range of functions once carried out by governments. To be sure, the growing significance of subnational institutions has in many countries compensated for the decline in employment at the level of the central state, but overall the tendency has been toward a substitution of stable jobs associated with the public sector with more precarious employment in private or nonprofit sectors.

II) Labor markets and their regulation

Governments and firms both play pivotal roles in shaping labor markets. States influence wage rates (for example through setting and enforcing minimum wages), establish legal frameworks for hiring and firing of workers and resolving workplace disputes, and regulate workplace conditions. For the most part, heightened competition from abroad and the commitment to suppress inflation has motivated governments to eschew policies that render labor more expensive. However, increased investments in human capital throughout Latin America—themselves a response in part to globalization—reflect government attempts to augment the pool of skilled workers prepared to contribute to high value-added activities in which jobs are of relatively high quality.Footnote 13 Firms, in turn, determine the balance of formal—that is, contractual—employment opportunities and informal work, and through their relationships with one another help to shape patterns of labor market segmentation. With globalization, flexibility has become a core objective of firms seeking to achieve and sustain a competitive edge. At one level there has been an increase in external flexibility, promoted not only by measures to facilitate adding or shedding workers but also by patterns of mobility across enterprises and by rates of job turnover. This is evident not only in low skill niches, as Enrique de la Garza Toledo describes, but also at higher levels, as in the case of high skilled workers in the electronics sector in Costa Rica, where the growing availability for quality jobs facilitates circulation of workers across enterprises.Footnote 14 At the same time, and more positive from the perspective of workers, in some sectors globalization has fostered increased internal flexibility: new forms of work organization within firms that provide workers with greater autonomy and promote multitasking in order to facilitate rapid adaptation to volatile demand. Whereas external flexibility is associated with “low-road” responses to globalization, internal flexibility is generally understood to be a pre-requisite for successful pursuit of “high road” strategies of global competitiveness.

Regardless of their technological level, globalization pressures firms to become competitive with producers abroad. In some instances, this can entail raising the productivity of the workforce and, in the process, improving working conditions. Perhaps more frequently, however, it involves suppression of wages and increasing the capacity to shed excess labor. Thus, unemployment, particularly among low-skilled workers, is exacerbated by trends in the global economy.Footnote 15 Herein lies the most important source of the growth of informal sector activities, as the excess supply of labor is expelled from the formal sector into the more precarious world of informal work.Footnote 16

Fiscal restraints imposed by the need for Latin American governments to maintain macroeconomic stability under conditions of globalization also influence labor markets. Powerful pressures operate to constrain both the growth and the expense of public-sector employment and to render public sector labor markets more flexible. Privatizations, in turn, shift some of the highest paid and unionized segments of the work force from the state sector into transnational firms that seek to constrain wage increases and lessen the influence of unions.

By contrast, globalization has the potential to strengthen unions and enhance labor protections to the degree that developing countries are compelled by international standards that accompany international trade accords or that result from the pressure of NGOs such as those affiliated with the antisweatshop movement. As Mark Anner suggests, these dynamics are evident today in Central America and the Caribbean. Some observers posit that such pressures may stimulate firms to pursue a high road rather than a low road to competitiveness, a scenario that would highlight ways in which globalization can promote the wellbeing of workers.Footnote 17

III) Supply of labor: households and communities

Changes in the territorial and social composition of the workforce are critical to understanding linkages between globalization and labor.Footnote 18 Globalization has arguably accelerated the longstanding trend toward rural-to-urban migration, as trade, agricultural liberalization, and declines in subsidies for domestic consumption have left many rural producers vulnerable to competition from more efficient, technologically sophisticated enterprises abroad. Meanwhile, alongside the decline in employment in traditional plantation-based export crops—in some instances because of technological advances, in others owing to sectoral decline—job creation has been scarce in more dynamic areas of Latin-American agriculture. With a few noteworthy exceptions, nontraditional crops have generated fewer jobs than would be expected given their contribution to overall trade. The stagnation of rural employment has multiple consequences, some of which transcend rural settings themselves. In the first place, levels of vulnerability have reached emergency levels for many rural dwellers. Partly as a result, the tendency of rural inhabitants to engage in nonagricultural employment has increased substantially. Finally, the processes of migration from countryside to city exert still greater pressure on urban labor markets that are clearly incapable of absorbing excess workers above and beyond those entering the labor force through natural rates of population expansion.

Inadequate returns on labor-force participation propel decisions to migrate from countryside to cities as well as across borders. In the wake of structural adjustment programs, emigration from Latin-American countries to North America, and to a lesser degree to Europe, has reached unprecedented levels. Those who opt to move abroad are not only the low-skilled, however, as individuals with secondary and even tertiary education choose exit in response to limited opportunities for employment. Brain drain has become an issue as never before. Meanwhile, in low-wage settings where remittances come to represent the lion's share of household income, members of the household who remain behind may opt not to take part in local labor markets, with consequences that few would anticipate: rural El Salvador, for example, is experiencing increasingly frequent shortages of agricultural labor.Footnote 19

Demographic shifts in Latin America influence household needs for wage income and, consequently, the decision whether or not to enter the labor force. To the degree that globalization fosters growing precariousness and diminished wages for workers with limited skills, households that lack those skills can be expected to compensate for deficiencies in income by increasing the number of people—women, children, the elderly—entering the workforce. As more members of the family enter informal-sector activities in an effort to boost squeezed incomes, and as the young and aged strive to do their part to contribute to struggling households, the changes accompanying processes of globalization can be seen as impinging in very direct ways on the everyday lives of all sorts of Latin Americans, including those who are not traditionally considered part of the workforce.

IV) Forms of organization, identities, and collective action

From the end of the Second World War until the onset of the debt crisis, most Latin-American countries had achieved impressive records of economic growth through Import Substitution Industrialization, which encouraged rapid urbanization and the emergence of substantial working-class populations in the most advanced economies of the region. Workers and other traditionally low-income groups were able to organize themselves during this period in efforts to secure greater political voice and to obtain a larger slice of the economic pie. Formal, stable employment allowed a worker to be covered by the minimal guarantees of a country's labor laws and to organize collectively to press for better wages, benefits, and working conditions. Unionization rates surpassed a third of the formal-sector workforce in some countries. As a result, particularly in the more industrialized Latin-American economies, some but not all segments of this population achieved social citizenship through the state-centric arrangements that today have largely been dismantled.

It is the ability to organize, more than anything else, that is undercut by the growing regime of labor flexibility. Unionization rates have fallen sharply: in few countries does the figure exceed ten percent of the workforce. Flexible employment is not just about the conditions of work, but also about a significant change in the culture of social obligations and expectations. Under a regime of flexible labor every individual is expected to be responsible for his or her own destiny, and to expect nothing from society as a whole. Ideologically, flexible labor is accompanied by the belief that this individualist state of affairs is right, natural, and unavoidable. This marks an enormous cultural change, and one that operates in stark tension with the traditional model of labor as a solidaristic collective actor. New forms of collective action may emerge in such a context, of course, and Salvador Sandoval's contribution to this collection of essays is an extremely insightful treatment of this. Growing informality affects “labor” identities: individualistic petty entrepreneurs may have become the core of the workforce, supplanting the frequently unionized proletariat as traditionally understood.

The decline of organized labor on a national scale is reinforced by the spatial dynamics of economic development under conditions of globalization. Dubbed by some analysts as “glocalization,” it has become commonplace to observe that successful integration into global value chains frequently involves local rather than national capabilities.Footnote 20 It is individual firms or clusters of firms, located in particular communities, that manage to occupy desirable niches in highly segmented global markets. In such contexts, worker identities are understandably focused not on industry as a whole or on the nation but rather on the fortunes of their particular enterprises or localities. In such a context, social incorporation no longer takes place at the level of the nation-state, a situation that cuts the traditional linkages between labor as a collective actor and the development of inclusive sociopolitical orders. If we are to believe scholars who argue that organized labor represents the handmaiden of democracy,Footnote 21 then this circumstance has powerful implications for the future of democracy in Latin America. Indeed, it is one reason to fear that, as Charles Tilly argued in these pages more than a decade ago, globalization may turn out to be bad for democracy.Footnote 22

References

NOTES

1. See Thomas Biersteker, “The ‘Triumph’ of Liberal Economic Ideas in the Developing World,” and Gereffi, Gary, “Global Production Systems and Third World Devlopment,” in Global Change, Regional Response: The New International Context of Development, ed. Stallings, Barbara (Cambridge, 1995)Google Scholar; Drake, Paul W., “The Hegemony of US Economic Ideas in Latin America,” in Turning the Tide? Latin America After Neoliberalism, ed. Hershberg, Eric and Rosen, Fred (New York, 2006)Google Scholar.

2. Stallings, Barbara and Peres, Wilson, Growth, Employment and Equity: The Impact of the Economic Reforms in Latin America and the Caribbean (Washington, 2000)Google Scholar.

3. Hoffman, Kelly and Centeno, Miguel Angel, “The Lopsided Continent: Inequality in Latin America,” Annual Review of Sociology 29 (2003): 363–390CrossRefGoogle Scholar.

4. Garreton, Manuel Antonio, et al. , Latin America in the 21st Century: Toward a New Sociopolitical Matrix (Miami, 2003)Google Scholar.

5. Portes, Alejandro (with Hoffman, Kelly), “Latin American Class Structures: Their Composition and Change during the Neoliberal Era,” Latin American Research Review 38:1 (February 2003): 41–82CrossRefGoogle Scholar.

6. Striffler, Steve, In the Shadows of State and Capital: The United Fruit Company, Popular Struggle, and Agrarian Restructuring in Ecuador, 1900–1995 (Durham, NC, 2003)Google Scholar.

7. Much has been made of the recent electoral triumphs of the left in Latin America, and in some countries leaders articulate a rhetoric that explicitly rejects “neoliberalism” and market-oriented reforms. In practice, however, no Latin-American countries, including Cuba, have sought to isolate themselves from global economic trends. Quite the contrary.

8. The approach outlined below reflects iterative exchanges of ideas with Juan Pablo Perez Sainz and Orlandina de Oliveira.

9. Stallings and Peres, Growth, Employment and Equity.

10. de la Garza Toledo, Enrique, Reestructuración productiva, mercado de trabajo y sindicatos en América Latina (Buenos Aires, 2000)Google Scholar.

11. Sainz, Juan Pablo Perez, Sarchi: Artesania y capital social (San Jose, Costa Rica, 1994)Google Scholar.

12. Scott Martin, “High End Production Complexes in Latin America,” Unpublished manuscript (2005).

13. Inter-American Development Bank, Good Jobs Wanted: Labor Markets in Latin America (Washington, 2004)Google Scholar.

14. Monge, Jorge, “Industrial Upgrading en el sector software en Costa Rica,” in Encadenamientos productivos y pequena empresa en Centroamerica (San Jose, Costa Rica, 2002)Google Scholar.

15. Rodrik, Dani, Has Globalization Gone Too Far? (Washington, 1997)Google Scholar.

16. Sainz, Juan Pablo Perez, “The New Faces of Informality in Central America,” Journal of Latin American Studies 30:1 (February 1998): 157–179CrossRefGoogle Scholar.

17. Schmitz, Hubert, ed., Local Enterprises in the Global Economy: Issues of Governance and Upgrading (Northampton, MA, 2004)CrossRefGoogle Scholar.

18. Ariza, Marina and de Oliveira, Orlandina, “Genero, trabajo y exclusion social en Mexico,” Estudios Demograficos y Urbanos 15:1 (enero-abril 2000): 11–33Google Scholar.

19. Segovia, Alexander, Transformacion estructural y reforma económica en El Salvador (Guatemala City, 2002)Google Scholar.

20. Doner, Richard and Hershberg, Eric, “Flexible Production and Political Decentralization: Elective Affinities in Pursuit of Competitiveness?” Studies in Comparative International Development 34: 1 (Spring 1999): 45–82CrossRefGoogle Scholar.

21. Rueschmeyer, Dietrich, Stephens, Evelyne and Stephens, John, Capitalist Development and Democracy (Chicago, 1992)Google Scholar.

22. Charles Tilly et al., “Scholarly Debate: Globalization Threatens Labor=s Rights,” in International Journal of Working Class History, Special Issue on “Global Flows of Capital and Labor,” 47 (Spring 1995).