The process of global economic integration is broadly driven by market forces, in particular the competitive price pressures to reduce costs, but the actual events of industrial movement depend crucially upon political transactions - irregular deals that often offend the reigning principles of free-market enterprise. When a multinational corporation seeks to shift production to low-wage labor markets, a process of political bargaining ensues with the governments competing for the new factories. Concessions are offered, deals are made, investment follows.
Given the worldwide thirst for economic development and the abundance of willing governments, these political arrangements are now so commonplace that almost everyone regards them as normal. The multinational companies usually have the leverage to stipulate terms for their capital investments, but the leverage is reversed in some important cases and nations can dictate terms to the firms.
A corporation's power is naturally strongest if it is dealing with a small, very poor country desperate for industrial development. The terms typically involve special political favors not available to others in commerce: state subsidies, exemption from taxation, government suppression of workers, special status as export enclaves free of import duties.
With these protective benefits, commerce is able to leap across the deepest social and economic divisions, bringing advanced production systems to primitive economies, disturbing ancient cultures with startling elements of modernity. Governments of developing nations may be nervous about the cultural disruption, but they usually suppress doubts and dissent. Starting from positions of weakness, the poor states hope this exchange will start them on an upward track toward higher levels of industrialization and an escape from general poverty. Some are succeeding in those terms and with spectacular results; many others eagerly offer themselves as the new greenfields for migrating production.
Even successful nations discover, however, that a basic insecurity lingers in their economic advance. A prosperity based on the strategies of multinational corporations remains hostage to them. If a country manages to graduate from low-wage status and establish a self-sustaining industrial base, its achievement may become permanent. But the very process of moving up also threatens to drive away the global investors. If capital does eventually move on, a relationship intended to be a mutually rewarding symbiosis may prove to have been parasitic.
An ironic and debilitating form of global convergence is under way between rich and poor: a global jobs auction. The irregular political leverage that commerce first employed in the weak countries is now being applied to the wealthy and powerful as well, especially the United States. Multinationals are, in effect, conducting a peripatetic global jobs competition, awarding shares of production to those who make the highest bids - that is, the greatest concessions by the public domain. If a poor country like Malaysia grants public favors to capital in exchange for scarce jobs, then so will Ohio or Alabama.
In the industrial zone at Petaling Java outside Kuala Lumpur, a line of dingy blue buses began delivering workers for the 2 P.M. shift change at the Motorola plant. Motorola's blue logo was visible from the freeway, along with some other celebrated names of electronics like Canon, Sanyo, Panasonic and Minolta. Its factory looked like a low-slung office building facing an asphalt parking lot that was bordered by palms and giant yews. The white facade was temporarily decorated with dozens of red paper lanterns and gilded banners in honor of the Chinese New Year. Above the front entrance, a billboard invited workers to enter the "Motorola 10K Run," winners to compete at the US Austin marathon.
The arriving workers passed through glass doors and headed down a long gleaming corridor toward the changing room, past the library and health center and an automatic banking machine. All of them were women, and most were young, small and delicate by American standards. They were dressed in the modesty of Islam -flowing ankle-length dresses, heads and shoulders draped by the Muslim tundjung, silken scarves of pale blue, orange and brown. A few wore the fuller, more conservative black veils that closely framed their faces like pale brown hearts and encased the upper body like shrouds.
"Good afternoon, ladies." Roger Bertelson, Motorola's country manager, was showing me around, and the two of us towered above the stream of women. They passed by, eyes down, ' barely nodding. Bertelson had brush-cut hair and a sunny American forwardness, like a taller version of Ross Perot. He was explaining the "I Recommend" board on the wall, a display covered with snapshots of employees who had made successful suggestions.
"We had to change the culture," Bertelson said, "because the Malay home does not encourage women to speak out. The daughter is supposed to have babies and take care of her husband. The idea was to break down the resistance to speaking out. We use positive reinforcement, just like you would work with schoolchildren. First, convince them that you are going to listen to them. Then have them stand up before their peers for recognition."
The automatic teller machine also disturbed the culture. "We had to change the pattern," he said. "She had to go home and tell her father: 'I'm not going to bring my money home in a pay envelope any more. It's going into the bank.'"
Farther along the hallway, the women passed by a collection of Norman Rockwell paintings - warm, nostalgic scenes of American life - each accompanied by an inspirational aphorism in English. "People Will Take Note of Excellent Work." "You'll Be Prepared for Anything with Enthusiasm." "What We Say Is as Important as How We Say It." It was hard to know what meaning these homey American images might have in this setting.
At the changing room, the women removed shoes and veils and proceeded to the gowning room across the hall. A few minutes later they emerged cloaked in ghostly white jumpsuits, wearing surgical masks and hooded bonnets. They looked like otherworldly travelers, more chaste than they would appear in the most severe Islamic garments. At the air shower, blasts of purified air cleansed them of any remaining particles of dust. Then they entered the sealed operations room, where the rows of complex machines and monitors awaited the next shift.
Once inside, the women in space suits began the exacting daily routines of manufacturing semiconductor chips. They worked in a realm of submicrons, attaching leads on devices too small to see without the aid of the electronic monitors. Watching the women through an observation window, Bertelson remarked: "She doesn't really do it, the machine does it."
The manufacturing process for semiconductors literally bounced around the world. Larger silicon wafers that included the circuitry for multiple chips had been designed and fabricated back in the States (or perhaps in Scotland, where the industry had also located a major production base). Then the wafers were flown by 747 to Malaysia (or perhaps Singapore or the Philippines or elsewhere in Asia) for final assembly - sawed into individual chips, wired, tested and packaged. The finished chips were shipped back to North America, Asia and Europe to become the functional guts of TV sets, computers, cars, portable phones, missile control systems and countless other products.
The spectacle of cultural transformation at Motorola was quite routine -three times a day, seven days a week - but it conveyed the high human drama of globalization: a fantastic leap across time and place, an exchange that was banal and revolutionary, vaguely imperial and exploitative, yet also profoundly liberating. In the longer sweep of history, the social intrusions of modern technology might be as meaningful as the economic upheavals. Motorola and the other semiconductor companies settled in Malaysia have managed to unite the leading edge of technological complexity with shy young women from the kampong, rural villages where destiny was defined as helping peasant fathers and husbands harvest the rice or palm oil.
At lunch in the company cafeteria, Bertelson and his management staff talked about the complexity. "We improve our productivity 15 percent a year, that's company policy," he said. "We have a road map for each one of our operations that calls for a 10x improvement by the year 2000, by automating and by improving worker efficiency. We will do that."
Malaysian production was not exempt from the same steep "learning curve" that drove price competition throughout the global industry, a standing assumption that costs and prices will fall by roughly 30 percent every time the volume doubles. To defend market share, every producer must continuously squeeze out more waste and imperfection or develop the new materials and production methods that could keep up with the curve. "Our technology, the miniaturization, is growing so fast that we really need to get the human element out of the process as fast as we can," Bertelson said.
Around the lunch table Bertelson's department managers looked like a visionary's ideal of multicultural cooperation. Chinese, Malay, Indian, black, yellow, pale brown, Christian, Buddhist, Muslim, Hindu. The only white guys were Bertelson and a Scottish engineer named Dave Anderson, hired from Singapore. Longinus Bernard, an Indian from Johore whose father had worked on colonial estates, described the early days in 1974 when Motorola started up. "We were so small, everybody knows everybody," he said. "It was really - how do you call it - a good feeling."
Hassim Majid, manager of government affairs, explained how the racial diversity had been achieved. "We were advised by the government to play an active role in restructuring the ethnic composition of the company," he said. "We were told to hire x number of Malay people like me, Chinese and Indians, just like your affirmative action in the United States. Motorola did well in meeting the government requirement."
The Kuala Lumpur operations, Motorola's largest outside the United States, had 5,000 employees, 80 percent Malay and 3,900 ladies, as the managers called them. The company had plans to double this facility, though not its employment. It represented one of the ripe anomalies of global economic revolution: while conservative ideologues in America fiercely contested the threat of multiculturalism, conservative American corporations were out around the world doing it. In the global context, the preoccupation of American politics with race and cultural superiority seemed ludicrous, out of touch and perhaps also dangerous.
At night, downtown Kuala Lumpur looked a little like a theme park celebrating post-colonial Asian prosperity. Some important buildings were fancifully lit with streamers of sparkling lights, giving outline to an eclectic collection of architecture. The clock tower of an old British administrative building was reminiscent of Westminster, but with oriental grace notes. The railway station looked like a Moorish fantasy imported from some other colonial outpost, as indeed its design was. Dozens of modern office towers formed a dense cluster that dwarfed remnants of the past. The city's oldest mosque, Bandaraya, one of its pale domes in collapse, sat at the foot of the thirty-story Bank Bumiputra.
By the river, the old central market hall had been renovated into artisans' stalls and tourist boutiques, with a US fast-food franchise nearby that sold "Prosperity Burgers." In the early evening, young professionals from the office towers gathered at the outdoor cafes for beer or tea. One night I watched six Malay boys entertaining the sidewalk patrons with an acrobatic hip-hop routine that seemed straight out of Compton, California, the lyrics in Bahasa.
On the headquarters building of the state-owned television station, the Malaysian national imperative - "2020" - was spelled out in huge red lights two stories high and framed by two glittering butterflies. The full slogan, "Wawasan 2020," appeared frequently around the city and was otherwise embedded in everyday consciousness. It stood for the shared "vision" of what Malaysia intended to become: a self-sufficient industrial nation, with an economy that will grow eight times larger by 2020, with a people who will be, as Prime Minister Mahathir Mohamad often emphasized, "psychologically subservient to none."
To that end, the government in the last decade force-fed the development of a national car, the Proton Saga, a smart-looking sedan that relied heavily on Mitsubishi of Japan for design and components, but now claimed 70 percent local content. Mahathir rode in one with "2020" on the license plate. Proton was selling 102,000 cars a year at home and abroad, and has spawned an infant components industry. It was moving into Vietnam with a co-production venture, and a second national car, the Kancil, named for a small jungle deer, was planned with Daihatsu.
The essence of "Wawasan 2020" was rapid growth - 7 percent a year, every year for the next twenty-five years - and government industrial strategies to foster homegrown industries and a new middle class of talented managers and professionals. Per capita income was supposed to quadruple by 2020. Mahathir talked somewhat airily about launching ventures in telecommunications and aerospace, forming industrial consortia with Asian neighbors like Indonesia or Thailand that could become freestanding rivals to the most advanced economies.
That was the plan. It sounded improbably optimistic, even for thc dynamic economies of Southeast Asia, and grandiose in some elements. But Malaysia had earned its self-confidence. Since 1971 its economy had expanded yearly at about the same phenomenal pace: GNP rose from 13 million ringgits in 1971 to 123 million twenty years later. Per capita income had exploded from an impoverished level of $410 a year to more than $3,000. In more basic terms, Malaysian life expectancy increased in two decades from 62.3 to 70.5 years.
In some ways Malaysia was the best-case illustration of globalization, though it was also unrepresentative because its development was more mature than others and the country was quite small, only twenty million people in territory the size of Florida and Georgia combined. The spectacular growth occurred under a one-party regime that Mahathir had led for nearly fifteen years. [...]
Malaysia, in order to secure its status as a major export platform, had offered the semiconductor industry, among other things, a lengthy holiday from taxes. Plants in the economic zones were given "pioneer" status for five to ten years. That meant no taxation on earnings in the country, exemptions from import duties and other forms of state subsidies. These tax holidays would eventually expire, but could be renewed and extended if a company made new investments. Other tax breaks kicked in later.
A more controversial benefit was the government's guarantee that electronics workers would be prohibited from organizing independent unions. Though organized labor functioned with some freedom in other sectors, including electrical manufacturing, the government decreed that the goal of national development required a union-free environment for the "pioneers" in semiconductors. The original restriction, supposedly temporary, was regularly protested by groups of workers, but nearly twenty-five years later the ban was still enforced. It now covered not just semiconductors but every other electronics product as well, including at the Japanese firms, which, unlike the American firms, were unionized at home.
Whenever the labor rights issue arose, leading companies professed not to care one way or the other, but the same message always got delivered to the government: unions will jeopardize investment. The government always backed off. On one occasion in the 1980s a delegation from American companies warned the minister of labor: "If unionization is forced upon them, some companies that are already operating here will close down their local operations while others would cease to continue investment, thereby moving to obsolescence."
In 1988, pressured by complaints from the AFL-CIO and the threat of trade sanctions, the labor minister announced an opening. Given thc robust growth in Malaysia's electronics sector, he was lifting the restrictions and would recognize a new national union of electronics workers. Five hundred workers gathered from Kuala Lumpur factories to begin an organizing drive. A few days later a delegation from the Malaysian-American Electronics Industry Association met with the labor minister to express their disappointment. Simultaneously, US executives collared Mahathir at a trade conference he was attending in New York. The policy change was rescinded. The labor minister retired.
Instead of the national union, the government offered a weaker alternative, company-by-company "in-house unions." When workers organized one at Harris Electronics, the twenty-one leaders were fired and the new union evaporated. The French-owned Thomson Electronics, which had acquired elements of the old RCA from General Electric, inherited a factory with a union with three thousand members. It closed the plant and moved to Vietnam.
Bruno Petera, a forty-two-year-old supervisor at Harris and one of the union organizers who lost his job, thought the union movement would eventually persevere, regardless of the obstacles, as Malaysians became more confident about themselves. The nation was building not only a new middle class, but also a new working class. In time, he said, people would object to their own powerlessness.
"Once you meet your material needs, you want the dignity," Bruno said. "The dignity to ask a question, to file a complaint, to speak for yourself. It will happen, little by little. Nothing is given free without a struggle." [...]
The strategy of pursuing rapid growth was more plausible when only a limited number of Asian nations were pursuing it, but it became less so as the poker game was widened to take in many more players. Malaysia was now surrounded by struggling nations engaged in a fierce competition for capital, for any industries that would move them up the ladder.
Malaysia's economic vulnerability had two dimensions. First, the domestic shortage of labor put upward pressure on wages at all skill levels, despite one million foreign workers brought in temporarily from Indonesia and elsewhere. If wage levels were allowed to rise too rapidly, it would drive capital elsewhere. Yet reformers on the other end of the global system in America and Europe were pushing in that direction: campaigning for labor rights in countries like Malaysia in order to foster rising wages that might lessen the downward pressures on high-wage nations and also increase worldwide consumer demand for everyone's products.
In Malaysia, the low wages were frankly regarded as a national asset. Mahathir complained about the Western intruders: "They know very well this is the sole comparative advantage of the developing countries. They know that all the other comparative advantages - technology, capital, rich domestic markets, legal framework, management and marketing network - are with the developed countries."
Those qualities of advancement were the other dimension of Malaysia's vulnerability: the frustrating struggle to acquire higher levels of technological development for the domestic economy. The threat was crisply summarized in a December 1993 economics report cabled from the US Embassy: The "concern is waning foreign interest in Malaysia as a site for investment, especially in high-tech, capital intensive industries .... The issue is technology transfer. Unless Malaysia manages to attract increasingly sophisticated manufacturers, it risks getting caught in a medium-tech trap, finding itself saddled with a low-growth industrial base."
The poker game continued, but on a more sophisticated level. American companies like Motorola and Intel were regarded as cooperative players because they were locating software design centers in Malaysia and spreading technological competence to the local population. The Japanese, on the other hand, "are very, very difficult," Anwar said. "No technology transfers, no locals hired for management, no research centers. The Americans are very different."
Malaysia's supposed "comparative advantage" of cheap labor did not help much in the advanced fields. Malaysian engineers with master's degrees were in overabundance and cost only one fourth of US engineers. But the Indian engineers in Bangalore were twice as cheap as the Malaysians. There were too many bidders for too few jobs.
"These guys are competing for the best airports," Jeffrey Garten remarked in Washington. "It sounds crazy, but this is going to boil down to infrastructure and which country provides the most convenient modern airport for businesses."
In broader outline, the political insecurities of a Malaysia were not as different from Alabama or Ohio or industrial countries in general as people in those places wished to imagine. All were stuck in different aspects of the same poker game. The global revolution put labor wages in play, but it also put governments in play. The shift in power that drove the irregular bargaining was eroding the public realm, as well as private incomes, and stimulated a race to the bottom: lower wages, lower taxes, less accountability. To borrow an old cliche from the ideology of laissez-faire capitalism, the multinationals were freely pursuing beggar-thy-neighbor politics.
That debilitating process would continue until nations found the sovereign means to confront the marketplace or collaborated on asserting new terms for how commerce was allowed to function. Or the process would continue until the system broke down, destabilized by its own freewheeling behavior.
In the meantime, the major powers, led by the United States, promoted further liberalization of the global trading regime, encouraged the competence of their own multinationals and promoted the objective of greater globalization. Increasing numbers of citizens were unconvinced. The US government, among others, lacked a coherent, concrete vision of how this globalization was expected to benefit the general population.
The Malaysian government at least had its own "Wawasan 2020," a concrete plan for what the nation intended to become. Americans might ask, What was the American wawasan?