No.21,Jan.1998

Economic Crisis of Asia and Activities
of Multinational Corporations

Kazunori Ohki

1. Structural Contradiction Rooted in the Asian Economic Crisis

In the background of this economic crisis, there exists a structural imbalance of Asia's economy and the intensified socioeconomic contradictions, caused by multinational corporations that have been carrying out activities in this region since the second half of the 1980s.

As they widely know it, in recent years Asian countries have adopted a policy of introducing foreign capital with priority given to multinationals, thus absorbing enormous investment capital from all over the world, and promoting an international-scale intra company's division of labor by multinationals in Asian countries. In this way, they have achieved a rapid economic growth. On backstage of this economic growth that they sometimes describe as a miracle, however, severe problems have emerged: the traditional industries, especially agriculture, have been destroyed or declined; the environmental destructions have become worsened; conversion of economy into gbubble economy" has been progressing; and income disparities between the people have widened so much that they have been divided into two groups with a handful of the rich on one hand, and a great majority suffering unemployment and poverty on the other. As a result, the Asian economies have come to face insufficient domestic demands, decline of competitive ability due to a rise in personnel expenses, slowing of export growth, speculation in real estate, and frequent occurrence of labor dispute. In Newly Industrializing Economies (NIES), unemployment has become a serious social issue due to the closure of factories and transfer of production, with the large-scale transfer of capital into developing countries searching for inexpensive land, workforce, resource and market. The recent currency crisis resulted from foreign capitals' movement, with its prediction of slowing of economic growth and collapse of bubble economy of Asia, resorting to capital flight from Asia and speculating in currency.

Even today there is an argument to evaluate that the economic development of Asia with the introduction of foreign capital as motive power was a success. But this is an argument that pays no attention to the facts. At least it is an undeniable fact that the activities of multinationals in the special economic zones established apart from traditional industries and local communities have not been of any help to foster national, independent industries and companies in Asian countries. Far from it, in many cases multinationals' activities are factors that hinder Asian nations from achieving their autonomous industrialization, and fix their dependency upon the import of machinery and products from abroad. The reality is that multinationals' activities have sometimes become an obstacle for Asian countries in building a well-balanced, independent industrial infrastructure. The problem is not only limited to the industry. Asia's agriculture today is specializing in the production of bananas, asparagus, cauliflowers, sugar, coconut oil and cut flowers, following the demands of the world market; the fields have been converted into golf courses, and most farmers have been driven away from the land. Farmers who are now forced to gproduce something that they do not consume and consume something that they do not produce," are obliged to live buying imported rice from the United States and other countries.

Obviously, a rapid increase of direct foreign investment in East Asia and the establishment of a gnew international division of laborh by multinational corporations have given rise to factors of today's economic crisis of Asia.

2. New Mechanism of Exploitation and Plunder Established in East Asia

In this respect we should pay attention to a mechanism of exploitation and plunder that has recently been established by multinationals in Asia producing an extraordinary, high profit. The problem is that while multinationals are rapidly expanding their producing ability to such an extent that they are now swallowing the economy of each country in the region, they have structurally made up economic relations that would reduce or restrain the working people's wage and labor conditions andincome level. Now let me refer to the characteristics of the foreign-affiliated companies advancing in Asia, bearing particularly the cases of Japanese multinational corporations in mind, because they have the biggest weight among others.

First, a greater part of ASEAN countries' workforce is employed in agriculture and different kinds of industries owned by small-scale companies, including home industry. With these industries falling into crisis due to the activities of multinationals and the economic growth controlled by foreign capital, a huge number of industrial reserve armies have emerged. In agriculture, under the ggreen revolution" introduced by the World Bank, more of the production were allotted to export crops. Consequently the production of basic food necessary for people's living has become critical, and under needy circumstances a large number of people have started leaving rural areas to flow into cities and other foreign countries. As for the industries run by small and medium-sized enterprises with ten employees or less, they are now in constant crisis of bankruptcy, due to the structural and international-level difficulties, such as the difficulty in securing raw materials, the plunder by the subcontract system and monopolization of markets. In these industries, we can see a new expansion of black market activities and family labor, increase of half-unemployed workers who are employed for short hours, or the growth of extremely low-wage workers, especially middle-aged and elderly women, who are paid less than half the normal level. Furthermore, the spread of child labor has now become a serious problem. In this way, a hotbed for a bottomless low-wage has been formed in Asia's economy.

Second, with the above-mentioned basis for low-wage labor as a background, multinationals focus their workforce exclusively on young, vigorous underpaid workers, especially unmarried women younger than the early twenties. In fact, the corporations set the following as the standards for the employment in the export processing zones and free trade zones: the age of eighteen to twenty-five, high education (graduate of highschool or university,) attractive looks, transferable, unmarried. Young women are preferred in employment, because compared to men workers they are gnot only quick and careful in work, but also inexpensive and obedient." Besides, companies have a policy to evade granting legal maternity leave or allowance, and they also have a prejudice that married women are less productive because they have to take care of their families. On top of this, young unmarried woman's workers are frequently treated as housekeepers, forced to clean up the housing for the corporation's management staff. These women are working with their human rights infringed upon. The reason multinationals can continue to employ exclusively young women workers are that these women would quit their jobs to be replaced by newcomers, after five to six years' service at the longest since the graduation from high school, and that discriminatory employment and dismissal are allowed.

Third, multinationals today take a policy even in Asia of substituting temporary or non regular workers for regular workers, which consequently makes the position of regular workers considerably unstable. Non regular workers include various types of low-wage, unstable employees, such as part-timers, short-term contract laborers, long-term trainees, working students who paid even below the minimum wage, dispatched workers, apprentices and immigrants. What is more, it is no exaggeration to say that there is now legal or administrative regulation for such an expansion of bottom labor with no rights granted.

Fourth, in the workplaces of multinationals in Asia too, highly-intensive labor is organized today. Particularly in the processing and assembly sections in the export processing zones or free trade zones, with the introduction of assembly lines as a lever, labor intensity has rapidly been elevated thorough standardized work operation, multi-tasking of the labor force, the introduction of shifts, personnel reduction, and prolonged actual working hours. Such a present-day type of intensified labor, with the coerced excessively heavy quota due to the piecework system, limited breaks for the restroom, unpaid overtime work, has created a harsh environment of workplaces, and there have been some cases of death from over work or the so-called Karoshi.

Fifth, the wage standard in multinationals has been restrained to an extremely low level. The salary conditions of local field workers directly employed in each country is very poor, even in the cases of regular workers. Women workers who have become the key labor force must play a central part in securing the family income, but their wage is being reduced to the level as low as the minimum wage, even though the length of their service is extending in the same company. With such a low wage, it is utterly impossible for them to cover the family expenses. Besides, many factories and companies actually pay less than the legal minimum wage or even deliberately avoid paying their employees. Even the professional women workers are obliged to be employed in sideline labor, and for not a few of them it is indispensable to get into debt every month to secure their living with Engel's coefficient amounting to 50 to 70 percent of the family budget. It is hard for them to make a living, and in many cases the living conditions are very poor; wells and bathrooms shared by different families, and several persons living in one room of about ten square meter sizes.

Sixth, though they are small in number, technical experts with high-level occupational abilities and white-collar workers in developing countries have capacities excellent enough to satisfy the multinationals' management. These workers have a good command of English and information technology with a high-level ability of handling clerical work, accuracy in grasping the situation shown by their way of arranging the details of the meeting, cleverness in negotiating with foreign companies, and abilities to make creative proposals and carry out development. Especially, Asia's young, university graduates working in management and clerical sections, often display abilities higher than that of young workers in the company's home country. However, the salary of these professional workers is much smaller than that of the workers from the company's home land who are assigned to the local office in other countries. What is more, in many cases their salaries are constantly depreciated due to inflation, so that making a living is not very easy for them.

Seventh, multinational corporations have organized a layered subcontract system in Asian countries to promote a large-scale outsourcing of production and business such as transportation, packing, maintenance, service, etc. The feature of this subcontract system is a combination of international-scale subcontract and domestic one; i.e., in their own countries multinationals' subcontractors are developing a multi-layered subcontractor's network as parent companies in prefectures, cities and districts, with shed factory-like production and family work organized at the lowest level of the network. Such a subcontract production has been developed to cover many types of industry, including car parts, leather goods, toys, food, textile, handicrafts, music instruments, paper and paper goods, plastic, rubber and metal goods. Many of these subcontract production networks have been set up and maintained under the political support from the government, now extending beyond the borders.

Activities of multinational corporations during the 1990s have caused Asian countries not only a high economic growth but also the extension of the latest contemporary, gdeveloped countries" type of hardships in labor and poverty, and this is a structural factor of the economic crisis hitting Asia today.

3. Formation of a Mechanism of Exploitation and Plunder and Politics of gDevelopment-First Power Politics"

Nevertheless, the above-mentioned mechanism of exploitation and plunder could not have been formed and maintained so easily without various types of policies carried out by Asia's gadministrations" to give preference to multinational corporations. In this respect, we should give special attention to the following points.

First is the regulation over the labor movement. In Asian countries and regions, deregulation or setting up and expansion of special economic zones with the aim of introducing foreign capital are being promoted, while imposing regulation on strikes and trade union activities there. In most cases the government or military intervenes daily in the labor issues, or the government adopts a policy of officially recognizing a certain trade union as the only one in the country, thus jeopardizing the workers' rights to independently set up of or choose a trade union, as well as the trade union rights.

Second is the promotion of gfree economy" policy based on liberalization and deregulation with no policy taken to protect workers employed by multinationals. They do not ratify ILO Conventions, and even ratified, the labor administration has practically no legal force. At the same time, we can see the situation that the governments of Asian countries accept the demand of the World Bank and IMF, who play a role of mouthpieces for multinationals pressing them to restrain the workers' wage raise as a condition for their granting loans.

Third is a large-scale transfer of the labor force organized under the approval and support of the governments but without any guarantee or protection of workers' rights. The aim of such a transfer of the labor force is to prevent the labor shortage in various sectors that would cause the wage increase, and the growth of social anxiety caused by the frequent occurrence of unemployment and poverty, as well as to ease the shortage of foreign currency. At the same time it has become a driving force in forming an international labor market that serves the interests of multinationals.

It is only a matter of course that multinational corporations operating their business under above-mentioned conditions are making profits in Asia, often as many times large as the earnings they are making in other regions.

4. New Tendency under the Economic Crisis

Asian countries have put into practice measures to deal with the economic crisis, and the nature of these measures on the whole is to accelerate the above-mentioned tendency even further. For instance, as is the case of South Korea and Hong Kong, the governments and employers' groups strongly demand the restriction, abolition or freeze of protection for workers and guarantee of trade union rights, saying that these are weakening the nation's economic competitiveness in the world market. The recent gmeasures to deal with the economic crisis" are also characterized by the intensified restrictions against the mass movement through a strict check on the organizational registration, action as a group and international exchange. What is more, they have pushed forward a policy to incorporate even the public labor into the domain of multinationals' control, by drastically promoting the privatization of state-run or public-managed sectors. And the biggest problem is the policy of practically transferring the real power of the state's economic management to IMF and U.S. multinationals, which allows an international intervention in the employees' working conditions. This way isto authorize the mechanism or exploitation and plunder as an international framework. It is quite possible that a series of policies mentioned above will change the structural contradictions of Asian economy into something more vicious and chronic.

Ever since 1990s, the economy of Japan, U.S. and other developed countries have greatly depended upon Asia's economic growth. Such relations of dependence are not weakened under the present economic crisis of Asia, but are to be further expanded and strengthened. Developed countries are covering their contradictions by strengthening their control of Asian economies, and Asian countries are breaking through their economic crisis by accepting the control. As these relations expose more strongly their dependency upon the multinational corporations' rule in Asia, the mechanism of exploitation and plunder set up in this region will certainly display its absolute power more than ever, as multinationals' weapon against workers and peoples in developed countries. For peoples in developed countries as well, the way how multinational corporations are operating their business in Asia cannot be a matter of no concern.

Deindustrialization and Labor Movement
in Hiroshima

Shingo Futami

Introduction

The prefecture's biggest industry is the manufacturing industry, which makes up 24.3 percent of the prefecture's gross product (as of 1994.) Among different kinds of manufacturing industry, processing and assembly industry has a high percentage (48.8 percent, national average is 43.6 percent, 1995) and the total shipment sum of four types of industry, i.e., shipbuilding, steel, automobile and general machinery, account for 52.2 percent of the whole prefecture.

The car industry shares 20.7 percent of all. This is because the head office of Mazda Motor Corp.(Ford recently took whose management right) is in Fuchu-cho, a neighboring town of Hiroshima City, and Mazda and its subcontractors concentrate in this area. Hiroshima City and its adjoining areas form what they call a car industry town.

In this article, I want to make a report on the Hiroshima Prefecture's economic situations with such characteristics in a prolonged recession, along with the activities of Hiroshima's labor movement for the development of local economy and the prevention of deindustrialization.

1. Economy of Hiroshima Prefecture and Deindustrialization

For the First Time in Post-War History, the Number of Establishments Falls Below the Previous Census' Level

In 1996, the number of establishments in Hiroshima Prefecture fell below the previous census' level for the first time since the end of the World War 2. According to the gEstablishment Census" made by the Prefecture Statistics Division, the number of establishments in 1996 was 156,096 or 0.1 percent fewer than that of the previous census in 1991. Small-sized enterprises with five or fewer employees (which represent more than 60 percent of all enterprises) decreased by as much as 3.0 percent. The data divided by industry shows that gwholesalers, retailers and restaurants" dropped by 3,111 (4.4 percent), while the manufacturing industry made a decrease by 1,431 (8.3@percent.)

The number of workers was 1,447,610, which represented an increase of 3.9@percent from the level of 1991, but the rate of increases made a sharp drop compared with the previous one (9.9@percent.) Of all types of industry, the manufacturing industry made a decrease of 31,518 (9.4@percent.) gWholesalers, retailers and restaurants" which showed the biggest drop in the establishments' number, made an increase of 24,023 (6.0@percent) about the number of employees. By the types of business, the auto-related business decreased by 12,359 workers, and the textile-related business, by 6,251 workers (21.8@percent.) The decrease in the number of workers is also notable in the areas where the auto industry concentrates, such as Fuchu-cho 3,165 (12.0 percent) and Kaida-cho 1,840 (9.6 percent.)

The Manufacturing Industry Decreasing for Five Consecutive Years in Annual Census

Let us examine the manufacturing industry, the gprefecture's biggest industry," based on the gmanufacturing census" which is conducted every year.

Both the number of establishments and workers have made a decrease for five consecutive years. From 1991 to 1996, establishments decreased by more than 1,000 while the number of workers reduced by some 32,000. The shipment sum of products continued to decrease for four years since 1992 to 1995. It turned to increase in 1996, but it was still 130 billion yens less than 7,982.2 billion yens of 1994.

Bankruptcy

The bankruptcies of companies have tended to increase ever since 1990 according to Tokyo Commerce and Industry Research. In 1996 it fell below the previous year's level, but it again turned to increase in the first half of 1997, resulting in 185 companies going bankrupt with the total debt of 33.4 billion yens according to the data presented by the Teikoku Data Bank.

The gTeikoku News" of February 14, 1997, published by the Hiroshima branch of Teikoku Data Bank, underlined the feature of the recent situation saying that a gdeath by weakness" type of bankruptcy was increasing, due to the exhaustion by the prolonged recession. It says that in the manufacturing and retail industries there have been more cases of long-established enterprises with more than thirty years' business coming to a standstill.

2. Ford/Mazda and Deindustrialization

The auto industry that accounts for 20@percent of the prefectural economy in its shipping sum is sustained by, of course, Mazda Motor Corp. and its related companies. Mazda made Mr. Henry Wallace the president in June 1996, by which it was thoroughly incorporated into Ford's strategy. Ford made public in 1994 its world strategy called gFord 2000," the aims of which are:

1) while decreasing the types of platform and engine,

2) cutting out the cost based on the principle of manufacturing more products,

3) raising its share of the world market by increasing profit per car, and

4) finally becoming the world's biggest auto manufacturer.

Just before the inauguration of President Wallis, Mazda announced that it would increase the import of parts from 5 to 30 percent.

The Chugoku District Department of the Ministry of International Trade and Industry conducted a survey on the actual conditions of Mazda-related parts' companies in December 1996. The survey was intended for sixty-five primary subcontractors (fifty-nine of them responded) and thirty-five secondary subcontractors.

First, the situation of primary cooperating companies. Those who had more dealings sum with Mazda than that of the FY 1990 were five; those who had about the same dealings (90 to 110 percent) were nine; and those whose dealings were reduced by more than 10 percent were forty-two. Those who maintained the businesses at a level of 50 to 80 percent were twenty-nine, representing most all.

A drop of sales by 30 percent and over suffered fourteen companies; nine companies, by 20 percent and over; and ten companies, by 10 percent and over. About the number of workers, seventeen companies had reduced 10 to 20 percent of workers; and ten companies, 20 to 30 percent. Through these figures we can see that these companies had responded to the Mazda's demand for cost-cut by reducing its workforce. What is noteworthy is the change in Mazda's business with secondary cooperating companies. Ten of these companies had a decrease in dealings with Mazda by 70 to 80 percent; five companies, 60 to 70 percent; six companies, 50 to 60@percent. Those who suffered a decrease of less than 50@percent amounted to nine.

In a hearing survey for secondary subcontractors, nineteen companies replied that gthe amount of work had decreased in response to Mazda's cut in production of cars;" while five answered that gthe amount of work had decreased due to the change of manufacturing procedure and to order by unit of components and parts." Some companies which answered that there had not been much decrease in the amount of work, but even these companies, just like others, said that the demand for lowering a unit price from primary subcontractors had been so harsh that there was no more room left for them to cut the cost, or they were not able to respond the demand anymore.

There are two major ways for the subsidiary parts' manufactures to choose for their survival. One is to stake their survival in the auto industry on obtaining high quality guarantee certificates (granted by Mazda) or international standards, especially gQS9000," the quality standard set by U.S. Big Threes. The other is to manage to survive by advancing their business into new fields. It should be pointed out, however, that either way will be the hardest one to take for all the subsidiary parts manufactures, except only a handful of them.

Mazda's Streamlining by Personnel Reduction

Mazda's workforce of April 1992 was 33,000, with about 30,700 regular workers and some 2,500 season workers. The number has dropped by 1997 to 25,000 regular workers (with just a few non regular workers), which means they have reduced 8,000 personnel in five years. On top of this, for more than three years since 1994 when Wallace assumed the vice presidency of the company, what is called gunpaid overtime work," or workers working extra hours without overtime pay, has become something normal. To the contrary, Mazda's employees abroad increased from about 8,000 of 1990 to 11,700 of 1995, now corresponding to 40 percent of the domestic employees.

3. Efforts by Trade Union Movement

(1) Mazda General Action

Most of the trade unions of Japan's major corporations are affiliated with gRengo" (Japanese Trade Union Confederation) and adopt an extreme labor-management cooperation as their basic policy. The workers' union of Mazda is one of these. Mazda union makes no objection against the personnel reduction or unpaid overtime works. Under such circumstances, the local unions affiliated with the Hiroshima Prefectural Federation of Trade Unions took action in 1994, making objections against Mazda's outrage and calling to Mazda workers to join the fight. This is called the Mazda General Action.

Surprisingly, Mazda union prohibits workers from reading handbills made by a trade union whose policy is different from its own, and it keeps watch on workers so that they will not receive the handbills. Because of this, Mazda workers were not willing to join the Mazda General Action first, but every time we launched the action, more workers came to understand this effort, receive the handbills and answer the questionnaire. We can say that such a change represents the workers' anger against Mazda's too harsh maltreatment of workers and against the union that has made no objection to it.

(2) Study Meeting for a Democratic Promotion of Prefecture's Economy

While the efforts of the Mazda General Action were advancing, the necessity arose for the research and study for a democratic promotion of the local economy and for policy making based on such research and study. In February 1996, with the cooperation of researchers, the gstudy meeting for a democratic promotion of Hiroshima Prefecture's Economy" was set up, and two study sections, the Committee on Increased Purchasing Power and the Committee on the Promotion of Small- and Medium-Sized Enterprises were formed. The Committee on Increased Purchasing Power has held six study meetings so far to grasp the people's actual living conditions of the prefecture, to examine the actual situation of and how to improve the prefecture's medical service from the people's points of view, and to look into the actual situation of the prefectural finance and large-scale development projects. The Committee on the Promotion of Small- and Medium- Sized Enterprises has sponsored seven study meetings to this day to examine the actual situation of big business like Mazda, the corporation strategy of convenience stores and the question of deindustrialization of the prefecture's industry and industrial policy.

(3) Inauguration of a Standing gLabor Consultation Center"

In August 1997, the Labor Consultation Center of the Hiroshima Prefecture Federation of Trade Unions was set up as a standing body with three full-time staffs. On its inauguration, the Labor Consultation Center presented seven mottos:

1) to respond the demands at any moment based on the clients' position;

2) to keep perfect secrecy and free consultation;

3) to realize the client's demand in the movement;

4) to promote cooperation with the small- and medium-sized enterprises management;

5) to help the clients in organizing a trade union by offering information and promoting exchanges, cooperation and mutual aid activity;

6) to work for building authentic trade unions;

7) to propose a policy for the improved rights and working conditions of unorganized workers.

During the five days since its inauguration, workers brought twenty-six cases to the center (including eight interviews.) The consultations covered eight cases of dismissal, four cases of unpaid salary and overtime work, along with such issues as retirement allowance, paid holidays and industrial accidents. The fact that they brought many cases to the consultation center shows not only the severeness of the workers' conditions of the prefecture, but also workers' expectations toward the Labor Consultation Center.

(4) The Association for Establishment of Democratic Prefectural Government and the Gubernatorial Election

The Hiroshima Prefecture Federation of Trade Unions fought the gubernatorial election, as the key factor of the Association for Establishment of Democratic Prefectural Government. To realize a gclean, warmhearted democratic prefectural government" would play an important role in stopping deindustrialization, defending workers' employment and living, and protecting small- and medium-sized enterprises' business.

The Association put up Mr. Kokichi Fujita, the first president of the Hiroshima Prefecture Federation of Trade Unions as a candidate. He put up a good fight calling for a change of the prefectural government into one that ggives priority to people's living and welfare," and obtained 152,555 votes which represented 20.2 percent of the total vote cast (the poll was conducted on November 9, 1997.) Based on concrete facts, he thoroughly exposed the reality of the present prefectural government that gave preference to large-scale development projects in neglect of welfare. The residents of Hiroshima Prefecture were surprised to know the fact that the prefecture's budget for commerce and industry was extremely small compared to that of other neighboring prefectures. Fujita's attitude presented a striking contrast to that of his opponent, the incumbent governor, who completely evaded taking part in a political debate throughout the campaign, by using abstract slogans such as gbrilliant, livable prefecture Hiroshima." Fujita and the Association made the best use of the results of the study and discussion carried out by the above-mentioned Study Meeting for a Democratic Promotion.

Conclusion

The International Labor Section of the Japan Research Institute of Labor Movement

It is the International Labor Section of the Japan Research Institute of Labor Movement that takes charge of research and study for this annual report. Concretely, researchers taking part in the International Labor Section are the writers of the report. The annual report was first published as a periodical in 1994. We will publish the fourth report, the 1997 edition, at the end of this February.

The 1997 edition systematically set forth specific tasks for the labor movement in each country. At the same time, it focuses generally on the labor movement's resistance in each country against the multinationals' global expansion. About Asia and the Pacific region, it gives a detailed report on theworkers movement in South Korea, Vietnam, Australia and New Zealand. As to Western Europe, it probes deeply into the movements in such countries as Great Britain, Germany and France. Regarding the Western Hemisphere, it details the labor movement in three members' countries of the North American Free Trade Agreement.

In recent years, trade unions of different countries have started to send out their struggle's information on Internet. A variety of valuable information comes to the International Labor Section of our Institute. For example, Mexican Labor News and Analysis by Dan La Bots, an Internet information on Mexico where Japanese multinationals such as Sony have advanced, offers very useful information. Members of the International Labor Section translate such information from different countries into Japanese, make examination and evaluation on it, and then edit a report.

The International Labor Section of our Institute hopes to develop exchanges with trade unions, workers' organizations, other kinds of institutes, and individual researchers all over the world. @@@@@@