With renewed interest in deglobalization – at least in discourse if not reality – the debate over free trade remains primarily focused on its economic consequences. Some argue that free trade is responsible for increasing overall economic growth and lifting poor workers out of poverty, while others maintain that most of the gains were captured by small number of large companies, exacerbating economic inequality.
However, this purely economic focus overlooks an important political transformation that accompanied free trade in developing countries: in pursuit of open economies, many democracies engaged in brutal repression to crack down on labor union resistance. In the process, they unleashed dynamics that now threaten the survival of democracy itself.
Consider Argentina, which transitioned to democracy in the early 1980s and opened its economy in the early 1990s. On August 17, 1989, a bomb exploded in the Ford Falcon of Saúl Ubaldini, the leader of Argentina’s main labor union federation, Confederación General de los Trabajadores (CGT), shattering the windows of the CGT headquarters. “For us,” asserted a longtime CGT organizer, “it was the government.” Thirty years later, Ubaldini’s assistant explained, “Saúl knew, and I saw it in his eyes. He knew he was going up against something big, something that wanted to shut him up.”
What Ubaldini faced was a set of neoliberal economic reforms proposed by Argentina’s new President, Carlos Menem. From 1983 through 1988, Ubaldini’s CGT had launched thirteen general strikes against similar reforms proposed by Raúl Alfonsín, the country’s previous President. Those strikes paralyzed the economy and stopped the reform process, all while cementing the CGT as one of the dominant social forces in Argentina.
His successor would not be so easily dissuaded. When Menem announced his intentions to open the Argentine economy, the battle lines were clear. As one Argentine journalist explained, the Menem administration “will have to destroy the CGT as a major factor of power if it is to succeed in its aims of setting out new rules for the economic game.” Menem quickly ousted opposition union leaders, broke strikes with the military, and ultimately banned a general strike before slashing Argentine tariffs by more than 40 percent.
Halfway around the world, a similar dynamic was playing out in India. In the mid-1980s, Prime Minister Rajiv Gandhi announced privatization and trade policy reforms that triggered widespread general strikes from India’s labor unions. Gandhi, like Argentina’s Alfonsín, ultimately gave in to labor opposition and gave up on his economic reforms. But in the early-1990s, India’s newly-elected Prime Minister, Narasimha Rao, would propose a similar package of reforms with his New Economic Policy. And like Argentina’s Menem, Rao unleashed a campaign of brutal repression to squash labor union opposition.
Instead of car bombs, India’s unions faced the explosive impact of “preventive arrests,” which the government used to prevent workers from picketing during general strikes. On June 16, 1992, over ten million Indians joined a nationwide general strike in opposition to Rao’s reforms. But before strikers could enter the streets, 25,000 union members nationwide were arrested and imprisoned. When a union member died in police custody, union leaders denounced “the unprecedented repression” by the government.
All those imprisoned were released without charges, but when unions launched another general strike ten months later, the government again preventively arrested more than 10,000 union members to limit the strike’s scale. Like Menem, Rao’s pursuit of repression was effective, and with the opposition contained, he lowered India’s tariffs by more than 50 percent. Once again, a democratic government violated workers’ basic freedoms to pave the way for free trade.
This mix of labor repression and free trade has had devastating impacts that have far outlasted these leaders’ terms in office. Labor repression weakened labor unions, lowered wages, and worsened income inequality. And by enabling trade liberalization, it also unleashed market forces that caused millions of layoffs that further diminished labor unions. Trade did create new jobs in exporting sectors, but these low-skilled jobs were rarely unionized, and never replenished unions’ lost power.
Further, the decline of unions then reduced their ability to perform key pro-democracy functions. Historically, unions have fought for greater voting access, mobilized workers into politics, and increased voter turnout – in particular, among minorities and the poor. Their diminished ability to deliver higher wages and economic equality has left society increasingly vulnerable to mobilization around racism, xenophobia, and other exclusionary ideologies.
The result has been an open door for far-right parties that threaten to dismantle democracy around the developing world. In Argentina and India, for example, the decline of unions has increased working class support for far-right parties. Argentina’s Liberty Advances party made big gains in last year’s congressional elections, while India’s Prime Minister Modi and his Bharatiya Janata Party have eroded electoral accountability such that many experts no longer consider the country a democracy.
Crucially, a silver lining can be found in the recent strengthening of labor movements globally. The pandemic’s focus on essential workers increased support for labor unions around the world, and growing recognition that labor unions increase workplace safety may help revitalize unions just in time to defend against the rising threats to democracy. In Argentina, the pandemic catalyzed domestic workers – who represent eight percent of the country’s workforce – to form a new union to fight for higher wages and safer working conditions.
Hope can also be found in the climate crisis, which has led to growing demands for a “just transition” to a green economy. As the International Labor Organization declared in 2015, “transitions to environmentally and socially sustainable economies can become a strong driver of job creation, job upgrading, social justice and poverty eradication.” The basic idea is to develop a “policy feedback loop” between government climate action and stronger unions.
Following this strategy, democratic governments around the world are increasingly turning to industrial policy to spur public and private investment into domestic green industries. When such government support is combined with incentives for employers to collectively bargain with workers, climate action can bolster the overall labor movement even as unions in the fossil fuel industry are weakened by decarbonization.
In turn, unions committed to a just transition are partnering with broader social movements to defend democratic governance and demand further climate action. A recent report by Brazil’s main labor confederation, for example, argues that a just transition will require a “strong anti-neoliberal platform,” government investment in domestic industries, less reliance on imported technology, and a continued struggle for democracy.
In the United States, a similar hope that investment in green industries would simultaneously fight climate change and income inequality drove proposals for the Green New Deal. The Biden Administration’s Inflation Reduction and CHIPS Acts are important steps toward that ideal, even if additional labor reforms are needed to ensure that this government spending actually strengthens unions.
Ultimately, as we debate the future of the global economy, we must remember that labor unions are crucial players in safeguarding the rights promised to all of us by democratic governments – and that these rights of the many are far more important than the lopsided economic gains that free trade can deliver to a few.