The United States of Business Appeasement

Calling on Americans and Congress to support his job creation plan, President Obama insisted that the country not be in a “race to the bottom.”

But despite Obama’s appeal, it seems we’re already in a race to the bottom—and we’re winning, at least compared to other democracies.

During his address on the American Jobs Act last week, the president followed his call for a review of government regulation with an important caveat: Regulation, and labor rights, should not be tossed aside in the name of economic growth.

He told viewers:

But what we can’t do—what I won’t do—is let this economic crisis be used as an excuse to wipe out the basic protections that Americans have counted on for decades. I reject the idea that we need to ask people to choose between their jobs and their safety.

I reject the idea that we have to strip away collective bargaining rights to compete in a global economy. We shouldn’t be in a race to the bottom, where we try to offer the cheapest labor and the worst pollution standards.

The term “race to the bottom,” coined by former Supreme Court Justice Louis Brandeis, refers to competition between states or countries to have the most business-friendly regulations—including poor labor rights and anemic environmental standards—in order to attract trans-state (or trans-national) corporations. While tariffs insulated economies from this form of competition, the advent of free trade has pitted the United States against other manufacturing sites around the world, including China and India.

At least, if you believe the conservative outlook, which also posits that this downward spiral in labor rights and environmental standards is a good thing.

For his part, the president isn’t wholly resisting this spiral. Obama’s speech came six days after he blocked the implementation of new smog control laws, belying any commitment to preserving environmental regulations. He cited the struggling economy, ignoring the great return on investment into clean air: The Clean Air Act generated $1.3 trillion in savings in 2010, a 26-to-one benefit-to-cost ratio.

On labor issues, the U.S. needn’t descend far to compete with China and India—among the economically advanced democracies, the U.S. is already winning the race to the bottom in a few key areas:

• The weakness of organized labor. According to a Freedom House report [PDF], the U.S. stands alone in its lack of a strong union movement: “The ability of workers to join trade unions and engage in collective bargaining has been gradually restricted through legislation, regulatory decisions, and court verdicts.” Particularly at fault are state Right-to-Work laws, which have led to corporate evasion of unionized workforces in 22 states.
• Lack of laws that improve working conditions. A 2010 Center for American Progress report found that U.S. workers reported more work-family conflict than other industrialized democracies, in part because the U.S. is the only country not to offer paid maternity leave.  The U.S. also does not guarantee paid sick days or overtime limits—and is again alone in not guaranteeing paid vacation days—while American workers are more productive and spend more time at work than their peers abroad.
• Effective corporate tax rate. While not the absolute lowest, the U.S.’s effective corporate tax rate is lower than that of Brazil, India, and China, our frequently-cited economic competitors. It is also much lower than the statutory corporate tax rate, due in part to massive loopholes.

How much further must our labor rights fall in order to compete with the supposed behemoths of China and India? It’s difficult to imagine a healthy democratic government functioning alongside an economy grossly unequal in both resource distribution and power.

The U.S. is home to some of the least labor-friendly laws in the democratic world; our environmental standards, too, leave much to be desired. Sacrificing labor rights and regulations to the capricious god of economic growth is anathema to the maintenance of America’s strength, and President Obama is absolutely right to reject the prevailing race-to-the-bottom narrative of the some conservative legislators.

We’re already “winning” the race to the bottom. It’s time to start climbing back up.

Shay O'Reilly is a reporter with Campus Progress. Follow him on Twitter @shaygabriel.

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