Liu Ge: US unions cannot be overlooked by Chinese businesses


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Liu Ge: US unions cannot be overlooked by Chinese businesses


By: Liu Ge    Source: Global Times    Published: 2019-9-4

American Factory, a documentary backed by former US President Barack Obama and former first lady Michelle Obama, records the twists and turns that Chinese glass manufacturer Fuyao encountered while setting up a factory in Dayton, Ohio. In 2017, the New York Times reported on the cultural conflicts the Chinese company had encountered.

Cao Dewang, the Chinese businessman who owns Fuyao, fired several American managers for being inefficient and not doing their jobs, while Americans said the Chinese management did not pay attention to safety and environmental protection.

What annoyed Cao the most was the United Automobile Workers (UAW) organization of activities against the glass maker.

What happened to Cao indicates that unions are the biggest "troublemakers" Chinese companies have to deal with when they integrate into globalization. Labor unions sound familiar to Chinese people, but American labor unions are another animal. They are everywhere, large but invisible. They wield power - enough to influence major decisions made by Washington even though they have lost some of their gloss.

The US has numerous unions. The largest and most influential is the American Federation of Labor and Congress of Industrial Organizations (AFL-CIO), which merged in 1955 after a long estrangement.

The founding of AFL-CIO is viewed as the pinnacle of labor activities.

The decade after the Great Depression, unions inevitably became pawns in the Roosevelt New Deal. Labor unions gained unprecedented development; union leaders became distinguished guests of Washington's political circle. Luxury lifestyles eroded union leaders. Unions, which once got sympathy from the public, became scandalous. When the AFL and CIO merged, one-third of US employees were union members. The merge was, on the one hand, needed for unity; on the other hand, an attempt to regain a positive image. Activities organized by labor unions improved wages and social welfare for industrial workers, which helped the US economy bounce back from the bottom in the 1930s and get on a fast track of development.

In the 1950s, the income gap between rich and poor narrowed and conflicts between labor and capital weakened in US society. The country entered into a golden era of rapid economic development. Unions no longer needed to continue as a social mechanism taking the shape of economic confrontation.

After that, American labor unions stabilized until the 1980s. During former US president Ronald Reagan's administration, US unions withered quickly with fewer members and fading influence. Many scholars have argued that globalization caused this situation since heavy industries, such as automobiles, steel and coal, became less important in the economy.

However, economist Paul Krugman believes that weakened US labor unions are just a single case. In the same period, in contrast, unions in Canada remained steady. The fall of US labor unions is not the result of market power, but of a political atmosphere created by conservative movements, which allow employers to sabotage union activities and punish workers who support unions.

In the 1980s, US economic competitiveness slipped while Japan's rose. Social welfare advocated by unions and Democratic Party policies was seen as the reason for rising social costs and tax burdens, as well as sluggish economic growth. Attacking unions became the practice of the Reagan government and conservatives in the US Congress.

Labor unions have lost their charm, but they still play an important role in US economic and political life. Politicians who rely on votes will never ignore the power of unions. For politicians and investment institutes, retirement funds controlled by unions have become a main force in the capital market - they have replaced mutual funds to become the largest institutional investors. Therefore, unions have a lot of sway in economic life.

Unions can pressure company boards by threatening to sell off stocks in their retirement funds if companies disobey the unions' will. The ballots controlled by unions are also scarce resources politicians have been fighting for. Through grassroots activities, unions can influence members and their families to vote for candidates approved by their union. US labor unions have plenty of tactics and they have become interest groups run by elites instead of ordinary workers.

For China, US unions have turned into a major barrier hampering Chinese exports and investment into the US. AFL-CIO has been accusing the Chinese government and companies of exploiting employees. It also argues that China hurts US workers' interests by product dumping.

In the past, the Chinese government and enterprises have mistakenly failed to consider  unions as genuine stakeholders. Labor unions are tough opponents, and they are opponents that the Chinese government and companies cannot overlook.

The author is a senior fellow with the Chongyang Institute for Financial Studies at the Renmin University of China.