November 26, 2000
In a sense, Connecticut has been a part of the global economy since the first Native American bartered the first beaver pelt to the first visiting European fur trader. The Connecticut colony was settled as part of Britain’s colonial empire; it fought a revolution in large part over issues of international trade. Connecticut reached its industrial acme in the 20th century as a global exporter of manufactured products.
But the past couple of decades have seen the emergence of a new global economy very different from that of the past. Today’s globalization is not primarily about trading goods and services between countries. Rather, it is about corporations and money moving around the world with less and less restriction. And that is having a profound influence on us here in Connecticut.
I first became aware of this new form of globalization 20 years ago while working on a study of brass workers in Connecticut’s rapidly de-industrializing Naugatuck Valley. One of my collaborators said we needed to discuss the impact of the global economy on the then collapsing brass industry. I said that was ridiculous- we were doing a local project, and the global economy was completely irrelevant.
Gradually, I realized how wrong I was. Many of our local brass companies had actually become subsidiaries of global corporations. (American Brass Co., for example, became a subsidiary of Atlantic Richfield.) They bought these local companies, then milked them, downsized them, and sold or closed them. Factories in which local people had invested their labor for generations had become little more than number on distant computers.
My education was further advanced by a neighbor who had worked for many years in a manufacturing company. She told me that the company had built a plant in Mexico, then used its Mexican plant to put pressure on its remaining workers in Connecticut. It replaced regular workers with temporary ones; put unlimited demand son managers and senior workers it retained; allowed health and safety problems to proliferate; and let quality deteriorate. Workers were afraid to even talk about what was happening because the company constantly threatened to move the remaining jobs to Mexico.
Between 1989 and 1999, Connecticut lost more than 116,000 goods-producing jobs. The losses continue despite today’s apparent boom. Just from December 1998 to December 1999, Connecticut lost 6,300 manufacturing jobs because of cutbacks at Electric Boat, Sikorsky Aircraft, Hamilton Sundstrand and Stanley Works and reorganized at Pratt & Whitney.
But job mobility is not just a question of factory workers. Insurance companies, Connecticut’s among them, have shifted large amounts of their work via satellite hookup to Ireland, Barbados, India and other low-wage countries. This has helped make possible the massive mergers and downsizings that have decimated Connecticut’s insurance work force.
More mysterious than the global movement of jobs is the global movement of money. I learned something about this in the early 1990’s, when I was helping draw up legislature to aid economic development in Connecticut’s poor cities. That was the time of frenzied excitement about “emerging markets” in the Third World. Speculative investment was surging into countries such as Indonesia and Thailand (soon to be the center of the Asian economic collapse).
At the same time, Connecticut found that small businesses were going under in its cities because banks and other investors were pulling their money out of local investment and sending it to the emerging markets.
The result was Connecticut’s memorable “credit crunch.” Shrinking and closing businesses meant fewer jobs, reduced tax rolls and deteriorating communities.
Now, of course, money is pouring into the United States, including parts of Connecticut, form all over the world. The stock market boom has helped generate a boom in Fairfield County.
But who is to say that this is not just one more speculative “bubble economy,” subject to international capital, flows that we now know can go in both directions?
Although the proponents of today’s globalization maintain that it is raising all boats, that has not been Connecticut’s experience. From the late 1980’s, the real income of families in Connecticut’s bottom fifth fell by 26 percent- a loss of $6,160 per year per family. The real income of the next-to-bottom fifth declined by 17 percent, a loss of $7,505 per family.
Indeed, as Connecticut’s economy supposedly boomed, 60 percent of the state’s families experienced declining real incomes. Some 40,000 more Connecticut children live in poverty today than in 1989. Meanwhile, the real income of the top fifth of families increased by $26,140- more than the entire income of the bottom fifth.
Unfortunately, the same mobility of corporations and money is affecting people all over the world. Global competition not only pits workers in the United States against workers in Mexico; it pits workers in Bangladesh against those in China. Only a small, wealthy minority reap the benefits. (The net worth of the world’s 200 richest people increased from $440 billion in 1994 to more than $1 trillion in 1998, while the number of people living on less than $1 dollar a day increased sharply.) The results have been protested from Seattle to Prague.
Connecticut has been part of a global economy for more than 400 years. No doubt it will continue so for a long time. That’s all the more reason to ask the question: What kind of global economy do we want?