Corporations Secede from US for Cheap Labor

Texas is staying put, but corporations are shifting their workforces out of the country

By Roger Bybee

Leading Republican presidential contender and Texas Gov. Rick Perry caused a sensation last year a salvo of comments raising the prospect of the Lone Star State seceding from the United States. Perry was merely expressing an attention-grabbing level of hostility to the federal government, the source of vast subsidies and fat contracts that his corporate sponsors would never sacrifice.

But an overlooked from of secession is gaining momentum: Corporations are seceding from American workers, institutions and communities.

Iconic corporations like General Electric (GE) and General Motors (which once called itself the Heartbeat of America”) have not only seceded by shifting much of their workforce to low-wage tyrannies offshore like Mexico and China, but they have repudiated Henry Ford’s strategy of paying living wages in order to boost the buying power of US consumers. GM has eliminated about 85% of its production workforce in the US since 1990, with the Obama Administration’s virtually unconditional bailout of GM resulting in a doubling of their vehicles produced in Mexico and other foreign sites. Ford Motors conducts 62% of its production overseas, and has cut nearly 50% of its US workforce in the past five years.

By orchestrating the passage of three NAFTA-style investor-rights agreements with South Korea, Colombia and Panama, which passed Congress Oct. 12, President Barack Obama is promoting the loss of more US jobs to low-wage sites overseas. He’s also protecting Panama’s status as a tax haven for US corporations and money-laundering center for drug traffickers, leaving untouched the Colombian elite’s murderous war against unionists and opening up US laws and regulations to challenges from foreign corporations.

US wages are being driven down (in inflation-adjusted dollars) to 1973 levels as employers wage war against unions and take advantage of high unemployment by reducing pay rates. The United States has devolved into a state of such extreme inequality that Citibank analysts described the country as a “plutonomy” where the super-rich thrive regardless of the fate of the bottom 90%. In this new hierarchy, “There are rich consumers, few in number, but disproportionate in the gigantic slice of income and consumption they take,” the Citibank economists wrote. “There are the rest, the ‘non-rich’, the multitudinous many, but only accounting for surprisingly small bites of the national pie.”

The richest 1% now takes home 23.5% of all US income, more than the bottom half of those on the bottom half of the economic ladder. And as the US consumer market is losing a substantial chunk of the middle class, the wealthiest 10% now account for roughly 50% of all consumer spending. Buying power among the vast majority is so weak that Wal-Mart has begun selling smaller rolls of toilet paper for consumers cutting back on every possible area of spending.

In this context, even stridently anti-worker CEO Lee Scott of the down-market Wal-Mart expressed support in 2005 for a higher minimum wage: “We can see first-hand at Wal-Mart how many of our customers are struggling to get by. Our customers simply don’t have the money to buy basic necessities between pay checks.” Proctor and Gamble, among many other firms, has adjusted to this diminished buying power by introducing lower-cost product lines.

Other CEOs take a global view and see no problem. Frank Emspak, professor emeritus of the University of Wisconsin’s School for Workers and founder of the Workers Independent News radio show, notes: “There are 6 billion people in the world, and even in relatively poor nations like Brazil, China, India and Mexico, you have 10% of the population — the elites — capable of buying products from the United States.

“That means roughly 600 million consumers overseas. So there is much less reliance on the U.S. domestic market and maintaining high wages so people can buy what U.S. corporations make. “

In the past, the corporate class would have fought to strengthen America’s troubled public schools, rationalize a dysfunctional healthcare system and repair a crumbling infrastructure. Today, corporations see little immediate return on such investments of tax dollars and corporate leadership. For example, General Motors pays $4 an hour more per worker in the US than across the Windsor River in Canada simply due to the costly and profit-driven healthcare system.

In the early 1990’s, GM actually supported a Canadian-style Medicare-for-all healthcare system for the US.

But as GM continued cut its healthcare costs by relocating more and more jobs outside the US — both to nations like Canada with efficient national healthcare plans, and to low-wage tyrannies like China and Mexico where healthcare benefits are largely neglected.

With this secessionist “solution” to its healthcare cost problem, GM remained on the sidelines during the ferocious healthcare debate that culminated with the passage of the insurer-centered Affordable Care Act in early 2010.

Similarly, General Electric, which like GM traditionally played a central role in shaping federal policy to meet the long-term needs of Corporate America for well-educated and healthy workers, also abstained from taking a stance in the healthcare debate. GE’s responded instead by moving more jobs overseas where healthcare costs are either minimal because of progressive government policies, or virtually non-existent because governments like China and Mexico are so solicitous of foreign investors that they impose virtually no social responsibilities like the provision of healthcare.

For its remaining domestic workers, GE forced a coalition of unions to accept high-deductible health-insurance plans that reduce the corporation’s costs but impose more risk and much larger deductibles and co-pays on their workers. The United Electrical workers union (, a member of the labor coalition at GE, warned its members:

“... numerous studies of these high-deductible plans ... reveal that employees forced into plans like Health Choice are “significantly more likely to avoid, skip, or delay healthcare because of costs” than those with more comprehensive insurance. ... What GE is really saying with Health Choice is that medical expenses are no longer primarily their responsibility, but that of GE employees,” the UE state. Nonetheless, with its power to threaten relocation of its jobs, GE was able to force acceptance of the high-deductible model.

Instead, CEOs are preoccupied with further lowering corporate taxes, with the latest campaign led by WIN America (which includes Adobe, Apple, Microsoft, Prizer, and the US Chamber of Commerce, among many others) calling for a “tax holiday” on at least $1 trillion in profits currently stashed outside the United States.

Jeffrey Faux points out in The Global Class War:

“The CEOs and principal owners of corporations who have disconnected—or are in the process of disconnecting—their fate from America’s, have no interest in paying more taxes to make the society they are abandoning more competitive.” Even Thomas Friedman—a cheerleader for deregulated corporate globalization—frets that corporate leaders no longer willing to play the heroic role he has championed.

“When I look around for the group that has both the power and interest in seeing America remain globally focused and competitive — America’s business leaders — they seem to be missing in action,” Friedman wrote in It’s a Flat World After All. “In today’s flatter world, many key U.S. companies now make most of their products abroad and can increasingly recruit the best talent in the world without ever hiring another American.”

The Wall Street Journal reported (4/19/11): “US multinational corporations … cut their work forces in the US by 2.9 million during the 2000s while increasing employment overseas by 2.4 million.”

General Electric embodies this profound withdrawal from US society. Current CEO Jeffrey Immelt serves as chairman of President Obama’s Council on Jobs and Competiveness, but GE has shifted its focus to hiring low-wage foreign labor and marketing to global elites.

Between 2004 and 2010, GE cut the number of US employees from 165,000 to 133,000. Meanwhile, between 1996 to 2010, GE’s number of off-shore workers rose from 84,000 to 154,000. GE has also virtually stopped paying federal income taxes that pay for public services, as have many other leading corporations. In 2010, GE piled up $14.2 billion in profits in 2010 — and then managed to gain an additional $3.2 billion in tax benefits from the federal government.

A coalition of Republicans and corporatist Democrats in Congress approved the free-trade deals with Panama, South Korea and Colombia on Oct. 12. The South Korea pact passed the House on a 278-151 vote, with more than two-thirds of Democrats voting no. The Panama agreement was approved 300-129, with Dems voting 123-66 against it. Colombia, the most controversial of the deals, passed on a 262-167 vote, with Dems voting 158-31 against it.

In the Senate, the Colombia deal was approved 66-33; Panama 77-22; and the Korean agreement 83-15.

Empowered by free trade deals, as Corporate America pledges allegiance to the profit-maximizing model of globalization, it will continue to secede from the Union, the end result will be lower wages, fewer jobs and less tax revenue and much less political support from powerful corporations for well-funded, efficient public institutions.

Roger Bybee is a writer and publicity consultant in Milwaukee. He edited The Racine Labor weekly for 14 years. Email

From The Progressive Populist, November 15, 2011

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