|Central American University - UCA
Number 296 | Marzo 2006
Maquilas, Fast Food, Casinos, Cells: Serpents in Paradise
Three stories of Nicaraguans employed by transnational franchises show how local management vices serve the system’s global strategy, how tropicalizing the transnationals multiplies the perverse effects of today’s global capitalism.
José Luis Rocha
Over a century ago, in his novel Hard Times, Charles Dickens described the thoughts of the businessman Bounderby: “Now, you have heard a lot of talk about the work in our mills, no doubt. You have? Very good. I’ll state the fact of it to you. It’s the pleasantest work there is, and it’s the lightest work there is, and it’s the best-paid work there is. More than that, we couldn’t improve the mills themselves, unless we laid down Turkey carpets on the floors. Which we’re not a-going to do.”
In the foreign investment paradise In today’s Nicaragua, Mr. Bounderby speaks through the National Development Plan (PND), that 454-page brick containing the government’s strategy to put us on the road to economic growth, presenting foreign direct investment as the recipe for everyone living happily ever after. The investment strategy, one of the PND’s key elements, starts on page 86, and promises new and better jobs, the transfer of technology and management know-how, and increased exports, adding that foreign investment will thus directly influence the country’s economic and social development. Amen.
The government has been faithful to its creed and foreign investment has been growing in Nicaragua. In 2002 it totaled US$170 million, a 16% increase over 2001, with telecommunications companies heading the growth. The free-trade assembly plants for re-export, known as maquilas, are another expanding foreign investment sector. Their exports jumped from $37 million to over $596 million between 1994 and 2004, while their job creation rose from 3,432 to 60,000 in the same period. At the beginning of that period there were 14 maquilas; by May 2005, 82 were registered with the Nicaraguan Central Bank.
It seems like a perfect equation: more investment and more companies equals more jobs and more exports. But does that in turn equal greater well-being or a promising future? Not necessarily. The way these corporations operate, their legal profit-maximizing subterfuges and, more generally, the new labor market tendencies resulting from their strategies are all well documented in their countries of origin. Although some of the PND’s architects have studied in US universities, where such findings by business administration specialists abound together with futurologists’ texts, not one of the PND’s 18,000 lines of text details the relationship transnationals establish with their suppliers and employees, as if it were of little importance. In point of fact, it’s critically important. For the most part, their management model promises little to either workers or businesses—particularly those with limited negotiating power—which is a condition the transnationals look for in the countries where they invest. Basic honesty and technical efficacy dictate that the PND should contain an analysis of the effects these corporations investing in Nicaragua have had on worker-owner relations in industrialized countries.
To correct the record, I offer some of these effects here, based on the findings of Ulrich Beck, Eric Schlosser and Jeremy Rifkin. I use Michel Foucault’s method, starting with the most local and specific manifestations of power then working up to their connection with the domination established in national legislation. Based on three real stories, I’ll move from the everyday swindles that the law facilitates, or at least doesn’t hinder, to the rights that the legislation either structurally denies or abusively concedes to the powerful, in line with global trends. I’ll try to show how local management vices serve the system’s global strategy and how the tropicalizing of global labor market trends and recycling of transnational management techniques into the management model applied by Nicaraguan businesspeople multiply capital accumulation’s perverse effects.
Elena Chávez:After a brief spell as an unpaid intern in the Ministry of Natural Resources and the Environment, Elena Chávez found a job in a textile maquila, run by a severe and punctilious US version of Mr. Bounderby. Because Elena’s health was not so robust, she was lucky that her high school diploma and year of computer operator studies landed her a post in charge of final inspection. She earned 1,000 córdobas a month in return for standing up for over 12 hours checking 10 bundles of 20 pants each, making sure that the hem was perfectly sewn, the edges weren’t ragged, the zipper wasn’t damaged, the clasps and buttons were firm and the labels, pockets and waistband were up to the brand name’s standards. The factory was very small and poorly ventilated, with 15 sewing machines in a 24-square-meter space. Time was strictly clocked: half an hour for lunch, no breaks and toilet visits timed. The girls were subjected to a pregnancy test before being hired. While the shift was 10 hours, overtime was mandatory every day, including Saturdays. Sitting down earned you punishments and reprimands. After three months, Elena fell ill with the classic symptoms caused by the high temperatures and the lint-saturated air inside the plant: a cough, catarrh and hoarseness.
Welcome to the free trade zone
The “Elenas” of a century and a half agoA century and a half ago, at the height of the industrial revolution in Manchester, Engels described the situation of other “Elenas” in his work, Condition of the Working Class in England. He mentioned that the most frequent abuses were exposure to extremely high temperatures and often dangerous chemicals, pressure to increase the rhythm of work, exposure, wage penalties for coming to work even a few minutes late, requiring permission to use the toilet and a general atmosphere of tenseness, intimidation and fear:
“Any one who sits down, say upon a window-ledge or a basket, is fined, and this perpetual upright position, this constant mechanical pressure of the upper portions of the body upon the spinal column, hips and legs, inevitably produces the results mentioned…
“…there are some branches of factory-work which have an especially injurious effect. In many rooms of the cotton and flax-spinning mills, the air is filled with fibrous dust, which produces chest affections, especially among workers in the carding and combing-rooms. Some constitutions can bear it, some cannot; but the operative has no choice. He must take the room in which he finds work, whether his chest is sound or not…
“…[The operative] must eat, drink, and sleep at command. For satisfying the most imperative needs, he is vouchsafed the least possible time absolutely required by them…”
The abuses of today are clones almost exactly matching those of yesterday. We’re advancing towards the past because of the elites’ miniscule capacity for innovation. Their managerial style resorts to old mechanisms that have amply and ruthlessly demonstrated their profitability. Jon Bilbao Ercoreca’s excellent book, El impacto de la maquila en una zona campesina [The impact of the maquila on a peasant zone], recently published in Nicaragua, describes situations in the Nicaraguan town of Sébaco very similar to those listed by Engels in 1845: humiliation, physical mistreatment, suppression of relations between workers, anal-compulsive control of time, insults, physical violence, sexual harassment, illnesses…
Mass unemployment:How did we reach such extremes in an age when we’re supposed to be harvesting the labor conquests of the industrialized countries and of previous eras? In exactly the same way as in the past. The same way the mechanized textile industry in late 18th-century England first left the spinners and weavers unemployed by selling cheaper clothes then absorbed their labor, the garment maquilas first forced local seamstresses out of business, then offered this expanding labor supply routinized jobs on the sewing machines in their sweatshops. The junk economy also helped this labor shift: huge packs of used clothing from the United States, with styles and brands associated with the American way of life, knocked aside the simple items offered by the seamstresses, which the holy market valued at a price too close to their production costs.
The ace up the maquilas’ sleeve
But while all the changes in England followed successive, increasingly stunning technological discoveries, the changes in the lifestyle and working culture of Nicaraguan maquila operators are caused merely by exploitation of the unemployment levels and by cultural and institutional mechanisms having nothing whatever to do with progress: impunity, despicably harmful labor legislation and the gradual bloodletting permitted by law and an ineffective Labor Ministry.
Unemployment provides the cornerstone of this system, which captures employees overqualified for the requirements of the jobs assigned them. Elena Chávez had a high-school diploma while some of the seamstresses and supervisors studied at university for several years. This cornerstone is buttressed by the threat of dismissal and the immediate squelching of any unionizing initiative. The high worker turnover is only possible thanks to a great reservoir of the unemployed.
Criminal sociology expert Alessandro Baratta wrote that social de-classing and competition between employed and unemployed workers is essential to the logic of accumulation. The maquilas have an ace up their sleeves: there will always be an unemployed person willing to take the post of a sick, tired, discontented or subversive worker.
There is no doubt that the maquilas have fattened our exports. But they have also increased our imports. For each dollar exported in maquila products in 2004, we paid 72 cents in imported articles to make the maquilas work. In 2004 the value of the transformation into finished articles was $167 million. At the rate of 1,200 córdobas a month for 13 months (including the country’s mandatory “13th month” bonus) for 60,650 employees, the maquilas spent just over $54 million on wages. This left $112.5 million to pay executives and cover other costs…. The rest was profit.
Technology transfer? Thanks to the training she received in the maquilas, Elena learned to check the clothes she buys more meticulously for defective sewing. Will this prove useful to the country? Could we attribute it to the “managerial knowledge” category promised by the National Development Plan?
Elena C: After several months unemployed, Elena Chávez received an enviable job offer: serving food in a US transnational fast-food franchise we’ll call “Gringo Donuts.”
Welcome to “Gringo Donuts”
It is no secret that franchises are subjected to strong pressure: they have to pay a quota, maintain quality and buy determined products. They pay for the use of a brand name. The franchise industry has been rapidly expanding ever since McDonald’s discovered it was more profitable to sell hamburger stands than to sell hamburgers. McDonald’s, Burger King and Tricon Global Restaurants Inc.—which owns Taco Bell, Pizza Hut and Kentucky Fried Chicken—already employ 3.7 million people around the world in 60,000 establishments and reportedly open a new fast-food restaurant every two hours.
These companies have followed the model described by US sociologist Jeremy Rifkin, who wrote in 2000 that service companies had started distributing their business formulas to local businesspeople along with their brands, charging a percentage of the sales volume generated as a user’s rights fee. The new idea, he explained, is not to mass-produce products but to produce concepts of mass use. Big enterprise rents out a concept for which the franchisee must pay a very high price.
Let’s take a look at how a mediocre tropical franchisee, trained in the foreman system and in licensed petty theft, goes about fulfilling his obligations to the franchiser. In her one brief interview with management, Elena was told she would not be given a contract because she was starting a three-month trial period. “They promised me eight-hour shifts,” she recalls, “and a salary of 1,200 córdobas. On the first day I worked from 8 am to 12 at night. ‘That must be part of the trial,’ I thought, but it continued the next day and then for a whole week, including Saturday and Sunday. ‘Why do we have to work so late?’ I asked. ‘That’s how the work is here,’ they told me. So I asked for a work schedule and they scheduled me from 7 am to 12 at night for three months. They never gave me a day off. Four times I had to pay 50 córdobas to cover a cash shortage, even though I wasn’t in charge of the cash register.”
“My job was to clean the floor, wash the plates and serve doughnuts, juice, soft drinks, coffee and chocolate. At the end of the shift they gave us 20 córdobas for a taxi and we had to make up the difference. A manager called by phone or turned up for 15 minutes once a week. Sometimes took home leftover doughnuts... And there were a lot left over: almost 12 trays of 24 doughnuts each night because the place was always empty. Some days only six customers came in. But we often couldn’t take the doughnuts because it was prohibited. They were thrown out and poor kids came to collect them. They say that’s how it is in the United States. What a sin.
“When the boss came with the pay, he said he didn’t recognize my name and that I was on a trial period so my pay would come through the following month. That happened every month. I resigned and the boss refused to see me to pay me my wages. Others quit as well and weren’t given their severance pay or overtime. They had received their wages but weren’t on contract either. How could we afford a lawyer? Everybody said we had no proof.”
If you think it’s completely irrational to accept work under such conditions, try being unemployed for a couple of months with no income at all. Elena’s work record could be summed up as running from junk contracts to garbage without a contract. The Gringo Donuts franchiser reduced his costs by exploiting a path cleared by unemployment and a verbal hiring culture because employees are willing to accept a casual, unilateral agreement in a country where broken words are common even in declarations of probity by politicians starting out on their public sector careers.
From straw boss to franchiserAs a result of this verbal hiring culture, a management inspired by straw-boss tactics and the impossibility of getting any satisfaction from a justice system that now operates exclusively as an instrument through which Daniel Ortega gathers more power, Nicaragua is an extreme—if not entirely exceptional—case of exploitation in the fast-food industry’s world franchise system.
What are Nicaraguan franchisers like? They vary a lot. Sometimes it’s the likes of Alfredo Pellas, who has millions to invest and if needed can fall back on soft loans from his own Central American Bank or get his bonded warehouse to issue a low-interest certificate backed up by barrels or cases of his own Flor de Caña brand rum then trade this certificate in for cash through his stock exchange post. In other words, he can afford to pride himself on his “corporate responsibility.” But “Polidecto Parajón,” who just inherited US$300,000 from his late grandmother can also obtain a franchise. Both may have the same moral status, but the financial factors conditioning them will be completely different. Mr. Parajón won’t be able to invest much in publicity or wait very long for the company to start showing a profit. The small scale of his business imposes high unit costs and the repayment of a bank loan would strangle him. And then there’s the franchisers’ worst nightmare: responding to quality requirements.
French fries and low wagesFred Turner, a McDonald’s executive, gave his company’s production system an attention to detail that has become the model for other chains in the sector. In 1958, he designed a 75-page operating manual for the company in which he specified almost all of the necessary steps and requirements: the hamburgers must be placed on a broiler forming six perfect lines; the French fries must be exactly seven millimeters thick… According to US journalist Eric Schlosser, author of the classic bestseller Fast Food Nation, McDonald’s latest operating manual has ten times as many pages as the original and weighs almost two kilograms. Known in the company as “the Bible,” it contains precise instructions about how different apparatuses should be used, what each item on the menu should look like and how employees should treat the customers. Any franchisers that disobey the norms could end up losing their franchise.
are the order of the day
These strict rules create standardized products and increase total revenue, but they imply a quality requirement that’s tough to satisfy in small-scale economies. Maintaining it forced Gringo Donuts to throw 288 doughnuts in the garbage every day.
The McDonald’s Corporation demands that its fran-chisers religiously follow its guidelines on food preparation, purchasing and storage of inputs and other details. It even specifies the size of the pickles and the circumference of the paper cups. But it leaves open the question of wages, opting for a laissez-faire approach in this respect. Not one employee of the roughly 15,000 McDonald’s in the United States and Canada is represented by a union. One Canadian newspaper editorial asked if anyone “has talked about a McUnion,” and answered, “Not if he wants to keep his McJob.”
Neither Elena nor any of her colleagues were in a union. Unions may have shrunk by half in the United States, but the situation in Nicaragua is far more serious. Here the unions have disintegrated and lost membership at galloping rates. German sociologist Ulrich Beck has stated that the neoliberal utopia is a form of democratic illiteracy, and it’s precisely what is being created in Nicaragua, making our country very fertile ground for labor flexibility and the deregulation of the labor markets.
Fast food fed by young workersThe Nicaraguan Gringo Donuts franchiser is probably someone with Mr. Parajón’s financial limitations. Under so much pressure—finances, doughnut quality and franchise standards—he reduces his costs by exploiting the weakest area, the only one he has real control over: labor. Something similar happens in the United States: although not as savagely, US franchisers also resort to labor exploitation, very much facilitated by the labor segment from which they take their employees.
No other industry has been so dominated by teenagers as the US fast food industry. Two thirds of fast food stand employees and even some bosses are under 20. The predilection for this labor segment is nothing more than its willingness to accept low wages and part-time shifts adjusted to the client flow. As here, the fast food industry there isn’t looking for stable, well-paid, trained labor, but rather untrained rotating workers resigned to a low income. But the business is even more profitable here: you don’t need to hire part-time workers because the company never pays overtime, no institution forces the issue and no employees dare exert any pressure.
Furthermore, the same incredibly detailed rules make the workers even more interchangeable. According to Schloesser, even in the United States management no longer depends on its workers’ skills because, because the operating system and the machines now take care of performance. The jobs have been “de-skilled” and can be filled at a much lower cost. As a result, the US fast food industry can now depend on recently arrived immigrants and other marginalized workers. The immigrants don’t even need to speak English, they only have to know the names of the items on the menu; it’s enough to speak McEnglish.
There as here, even the most basic employee training is excluded, upsetting all the National Development Plan’s forecasts. According to Schlosser, training is often limited to the most basic issues—such as learning to come to work on time—for people who can barely read, whose lives have been chaotic or who have been isolated from mainstream society.
Zero training and continuous turnoverMr. Bounderby can write whatever he likes in the National Development Plan about technology transfer, but it is an irrefutable fact that investors from fast food companies have been quite determined to avoid investing in training. They even prefer to spend in other areas. Jerry Sus, the main equipping systems engineer at McDonald’s suggested making intuitive equipment, in such a way that it’s easier to do the work well than to do it badly. The easier it is for the workers to use, he argued, “the easier for us not to have to train them.”
Another top executive went even further, suggesting that if the equipment only allows one process, barely any training is needed. Another topped it off by suggesting basing things as much as possible on photographs of the items on the menu, and keeping any instructions very simple, written—in both Spanish and English—for a fifth grade student to understand. Schlosser states that the agreement made in a meeting of fast food cooperate executives was to attain zero training. Such a business paradise is only possible in countries such as Nicaragua, where our ministers roll out the red carpet for this kind of business mentality.
Companies prepared to spend millions to buy technology that avoids investing in training also appear to have absolutely no scruples about receiving juicy subsidies from the US government to “train” their workers. Two successive tax-deductible federal job opportunity programs have subsidized the fast-food chains up to $2,400 to train each new badly paid worker they hire. In 1996, the US Department of Labor charged that 92% of those new workers had part-time jobs, had received barely any training and got no social benefits. But the Department of Labor’s pressure was less than that exerted by the powerful National Council of Chain Restaurants and its supporters in Congress. In 1996, the program was renewed and subsidies totaling a cool $385 million were again provided for training.
Still not satisfied, the restaurants resorted to underhand tactics to multiply the subsidies. As they only had to hire a worker for 400 hours to get the subsidy, the companies accelerated their personnel turnover, firing workers who had just reached their first 400 hours of work and hiring new ones in their place. The annual worker turnover rate in fast food establishments in the United States is somewhere between 300% and 400%. Schlosser states that the typical fast food worker quits or is fired every three or four months. Turnover levels are perhaps even greater in Nicaragua, although here it is to avoid the most basic employers’ obligations, such as overtime payment and even payment of the basic wage, as in Elena Chávez’s case.
Minimum wages in the land of mega-salariesIn the United States, the fast food industry lives off low wages, an indispensable part of their business plan. It pays minimum wage to a larger proportion of workers than any other industry. Schlosser explains that between 1968 and 1990, the years in which the fast food chains expanded most rapidly, the real value of the US minimum wage dropped by nearly 40%. At the end of the nineties, though the real value had recovered somewhat, it was still 27% less than at the end of the sixties. As this situation still doesn’t satisfy the restaurant owners, their pressure groups are seeking to abolish the federal minimum wage, even though raising it by one dollar would only add 2 cents to the cost of each hamburger. The solution has been immigrant labor. Pete Meersman, president of the Colorado Restaurant Association, is promoting a federal program to import foreign workers to fill low-paid jobs.
In Nicaragua, no such program is needed; with no contracts, any complaint leads to immediate firing. The Nicaraguan minimum wage is effectively zero, so it can’t get much more profitable than that unless people can be made to pay to work, as happened to Elena Chávez. Given that she had to cover part of her late-night taxi costs and to chip in to cover any losses at the till, by the time she quit after several months, she was out of pocket a net 875 córdobas (over $50) for the privilege of working all those hours for a fast-food franchise.
And overtime? In this area as well, the fast food industry has pulled a fast one. In the United States, few employees in this industry have the right to work overtime, let alone claim it, with 90% of them paid an hourly wage and only working when needed. The head of each branch makes sure nobody works over 40 hours a week, precisely to avoid paying overtime. This system pleases the managers, although to reduce labor costs they have to abuse their employees’ rights. The workers are forced not to register overtime even though they start their working day before and end it after the “official” shift, because it only begins when the restaurants are cram packed. Taco Bell has been sued on various occasions for this kind of practice, which tends to work best when the employees are immigrants who don’t know their rights, are afraid of losing their job and/or are undocumented so can’t take legal action because their situation would come to light and expose them to possible deportation.
Before bragging about attracting this kind of business, the Nicaraguan government should have informed itself about their practices, taken measures to protect potential employees or, at the very least, sounded less optimistic about its impact on quality of life and its “technology transfer.” Instead, Finance Minister Mario Arana appeared in the media selling Nicaragua as a country with an overwhelming comparative advantage: its low wages. Could this be the same Mario Arana who said it would be impossible to live off a salary of $3,500 a month when top Bolaños government officials were threatened with salary cuts? Surely he could have extended his logic to conclude that Nicaragua urgently needs the comparative advantage of the lowest-wage Cabinet in Central America rather than the most extravagant, as is currently the case.
Nicaragua is a goldmine for this kind of foreign investment. The heads of each establishment require no real intellectual powers to reduce costs because the absence of formal contracts and the reduction of contracts to verbal promises invalidates any possibility of a formal lawsuit or even timid complaints. And so long as the labor minister remains a mere decoration in our government Cabinet, businesses’ “happy hour” will continue unabated. A few years ago, during the inauguration of McDonald’s, the first to return since the 1979 revolution, President-elect Enrique Bolaños said Nicaragua was removing its loincloth. The problem is we were left naked.
Ivan D: Iván D. studied computer systems, spending four years traveling across Managua to get from his house to the university. He finally graduated, with the hope of working in the maintenance and administration of computer networks, but after several months waiting in the ever-growing line of the unemployed he got a job in one of the hundreds of cyber cafés that are sprouting up on the capital’s street corners and even starting to become part of the landscape in some small Nicaraguan towns. He was responsible for ten machines in a small locale. Bored and not at all satisfied with the wages, a newspaper ad caught his eye: “Casino requires computer system chief.” He applied and two days later they called him. They told him there was no computer system, but they wanted him to manage a CCTV system to monitor clients and employees in the games area. He accepted because the $220 a month on offer was considerably higher than the $134 he was earning in the cyber café.
Welcome to the “Cyclops” casino
Seated for eight hours at a time, he controlled 60 cameras—some fixed and others mobile with a zoom—through 12 monitors, never taking his eye off them, even to eat. He had to look for anomalies, dealer errors and violations of procedures, then send reports to the management. “That casino,” he recalls, “has six operators, because the surveillance included the safe, the money counting, the cash desk and the tables. There was no rest. They brought us our food so we could eat while we were watching the screens. We weren’t allowed to mix with the other employees because we were undercover agents. We knew the full names of all the employees but they didn’t know us. One of us was sacked for having a relationship with a cashier when they were seen together in a public place away from the casino. There were many anomalies. Each surveillance operator sent three reports per shift and the bosses didn’t mull things over. One cook was fired just for giving an extra hot dog to a client who might have been his friend.”
The procedures are very well regulated: a machine repairman can’t open a machine without an internal security supervisor and a machine supervisor present; cashiers can’t handle transactions worth over $300 without supervision and security guard approval. All these details are very well designed. The only things missing are a training policy and employee opportunities. Iván D. knew that if he stayed in that job he’d never get a pay rise or the chance to apply for a major position. The fact that he only had one day off a week—randomly assigned for two-week periods but excluding Saturday or Sunday, making it just as variable as the shifts themselves—frustrated his plans to continue studying. He never had holidays in December or at Easter, which prevented him from celebrating with his family and friends, while the abundance of night shifts further distanced him from those closest to him.
A novel element: Like the US fast food sector, casinos employers look for young single people. It would be impossible for a married man with a family life to keep up that kind of work rhythm. Staff turnover is thus very high, but it doesn’t matter because the labor market has a ready supply of replacements. Unemployment is the cornucopia that spews out overqualified young people for the tasks the casinos assign them. The casino that employed Iván only hires young people with university degrees and four years of professional experience. It even requires knowledge that isn’t part and parcel of every degree, such as computer network management and programming in various languages. But it doesn’t give these people important posts or wages. The top jobs are assigned to foreigners—Chileans, Peruvians, Americans and Puerto Ricans—who earn $2,500 to $6,000 a month.
No personal contact among employees
The total lack of technology transfer and restricted human relations fit the same managerial pattern: the employees are just another acquired tool for the process; no investment whatever is made in their personal development or in the quality of their working life. In the absence of any managerial evolution, the computers and sophisticated surveillance systems produce no personal advances. It’s once again possible to apply what Engels concluded about 19th-century England: “The relation of the manufacturer to his operatives has nothing human in it; it is purely economic. The manufacturer is Capital, the operative Labor. And if the operative will not be forced into this abstraction, if he insists that he is not Labour, but a man, who possesses, among other things, the attribute of labor-force, if he takes it into his head that he need not allow himself to be sold and bought in the market, as the commodity ‘Labor,’ the bourgeois reason comes to a standstill.”
Following that ideological and management pattern, foreign investment simply purchases the existing capacity—at a very low price—without investing in it. But in the case of the maquilas and the casinos, it does introduce a novel element: the suppression of personal contacts, of human relations between workers and consumers and among different types of employees. Everything becomes more impersonal. The elimination of client-producer relations, widely instituted in Europe since the industrial revolution, is relatively new in Nicaragua and minimizes the possibility of social mobility. Furthermore, the prohibition of relationships among employees hinders workers’ rituals that express their socialization and make it possible to build a union consciousness. Now there are no conversations: everybody concentrates on their own fabric, their own machine, their own computer, their own isolated work, which allows only fleeting contact. It’s a question of reducing to zero any alliances, unions, conspiracies or subversive social capital, which all starts with a shared word.
Pablo Téllez: Let’s take a look at a case where foreign investment has put Nicaragua at the cutting edge of the most advanced management. Pablo Téllez studied agronomy at the National Agrarian University, then worked in the Nicaraguan Institute of Agricultural Technology (INTA) for a couple of years and even represented a prestigious university in the National Council of Universities. But unemployment is always ruthlessly stalking. Finding himself on the street again, he took a job as a “residential cell phone salesperson” for a powerful telecommunications transnational I’ll dub ”Easy Ring.”
Welcome to “Easy Ring” cell phone sales
The initial deal didn’t seem too bad: he wouldn’t get a basic salary or social security, but would receive 4,000 córdobas a month to cover the depreciation of his vehicle and fuel costs plus a $20 commission per fixed and mobile telephone placed. He would receive nothing if he didn’t hit 70% of the monthly goal of 20 cell phones, but even if he topped 160% (32 phones) the payment limit was $640.
The Easy Ring manager soon cottoned on to the fact that Pablo and his colleagues were always achieving the ceiling in sales so decided to redefine the rules of the game. The 160% limit would be worth $1,200 but the 100% was increased to 15 cell phones and 15 fixed units, with 30 lines registered in a prepay plan. With great effort, the resident salespeople reached the new goal, but this again only led to less commission for more work. Every time they reached the new mark, Easy Ring readjusted the sales table, demanded a higher target and lowered the ceiling on commissions. The annual contract they signed at the beginning was useless.
A few months later the management contrived to drastically slash its costs. It suddenly hired 80 new salespeople and bussed them to different kiosks in the country’s cities. We’re going to invade Chinandega! We’ll saturate Granada with cell phones! Without warning, Easy Ring stopped providing the 4,000 córdobas for vehicle depreciation and fuel costs. Anyone who didn’t want to use the bus had to assume their own transportation costs. The situation became even more difficult when the manager decided that each salesperson had to remain in his or her kiosk and couldn’t attend new requests in other parts of the city. If the assigned kiosk was in a bad area, you had to use you own vehicle and work overtime to reach the goal.
The one salvation was the reactivation of canceled lines. These involved less costs for Easy Ring because they didn’t involve providing new telephones, for each of which it paid a $40 subsidy. Satisfied with this saving, Easy Ring paid a generous commission of $7 per reactivated line… until one of the managers reduced it to $1.80. With the market now saturated with telephones, reactivations had become an important source of commissions, but the new sales table established that 300 lines would have to be reactivated to obtain $540. Subtracting travel costs, the net salary was depressing to say the least.
Flexibility and outsourcing:Easy Ring applied the new cost reduction management techniques Jeremy Rifkin describes in his book The Access Era. He explains how companies obtain various advantages by outsourcing or subcontracting certain operations involved in their businesses. By doing so, the businesses use suppliers that can offer ample services at lower costs due to their specialized capacities, and reduce their own need to buy expensive equipment. He also points out how, like leasing, outsourcing provides companies the flexibility needed in highly changing markets, where products have increasingly shorter life cycles. According to Rifkin, over 146,000 US companies are dedicated to the business of outsourcing or subcontracting.
A perverse system opposite to maquilas
Although Rifkin refers to subcontracting companies, his observations are equally valid for the relationship between Easy Ring and Pablo Téllez. While the company was cutting its costs based on an agreement that stripped Téllez of many of his rights, it gradually maneuvered him into a situation in which he assumed more and more of those costs. In other words, the Easy Ring mega macro-business transferred many of its costs to the Pablo Téllez micro-business. In a system quite the opposite of the maquilas, where the panoptic eye guarantees productivity and Ford’s production line is fully applied, Pablo Téllez hires himself out to a company that owns his time without having to keep tags on him all day. Pablo not only sells his physical labor, knowledge and time in order to make sales, but also his social capital—his vehicle and house. Not only that, he sacrifices any recognition of his length of service and his right to vacations and social security. Vacations and seniority act as wage multipliers, which Easy Ring considers an avoidable cost.
Nobody on the payroll or in a unionIt’s a win-win situation for the company. While vacations and illnesses reduce cell phone sales, they also reduce the commissions it has to pay. Universities do something similar with the system of hourly-paid lecturers, whom they pay 40% less than a teacher on the payroll and avoid having to make pension payments. On top of this, the lecturer isn’t eligible for sick benefits, so a class not taught is a class not paid. Would university authorities act the same if vice-rectors were paid by the hour, deans at piece rates and departmental heads according to goals accomplished?
Source: Nicaraguan Institute of Statistics and Censuses.
Source: Nicaraguan Central Bank, Economic Indicators for June 2005 (taking 1996 as the salary baseline year and 1994 as the consumer price index baseline year).
Many companies are effectively transferring risks, which has significant consequences. According to Beck, spatial de-concentration means that the earnings of “sovereign” (i.e. independent, commission-earning) workers can run parallel to the privatization of their physical and psychic health risks. With the decentralizing of different forms of work, public control of labor protection norms is eluded and the costs of their infringement (or non-application) end up shouldered by the workers.
As we’ve seen, one of Easy Ring’s goals is precisely to avoid social benefits and labor protection norms through such spatial de-concentration. At the same time, it employs a very profitable strategy of having no fixed assets, forcing suppliers to absorb the costs of constantly upgrading telephone equipment that is becoming obsolete with increasing speed. As if these blows were not enough, it forces each seller to deposit $1,000 with Easy Ring for the telephones placed under their charge.
Rifkin sees more malicious purposes of the outsourcing model in another field, arguing that it has become the tool of choice for business leaders seeking to weaken organized labor. By contracting services outside of union-related trades, or contracting firms with a non-union workforce to administer their services, the companies avoid collective bargaining agreements. Extrapolating this idea, it wouldn’t be unfair to say that Easy Ring fumigated all malignant union germs through its form of contracting. In fact, the sellers aren’t even on its payroll. They are all service suppliers who can stop providing them whenever they want—and who it can stop from providing them whenever it wants. The outsourcing model thus produces social insipidity.
A mix of 19th-century practicesEngland’s industrial revolution developed a proletariat, which in turn developed a consciousness of its class interests and learned how to organize. What kind of workers are being created in the maquilas, strip clubs, fast-food franchises and casinos? What kind of Nicaraguans are these jobs, these forms of optimizing capital, creating?
with postmodern 21st century ones
This creation is a two-way process. On the one hand, these companies select a certain kind of worker, giving some the chance to work and excluding others. This artificial selection encourages the reproduction of the qualities that benefit capital: docility and ignorance or renunciation of labor rights, etc. The system vomits out the unadapted, the subversive and the sick. Making free with Sandino’s words, we can ironically state that “Only the submissive workers will reach the end… and still have a job!” On the other hand, the companies also mold their workers, imposing conditions—work style, controls, etc.—to which the workers must adapt in order to keep their position. Only those who let themselves to be so molded and are able to move between 19th- and 21st-century management styles will occasionally be absorbed by foreign investment.
This implies transformations in Nicaraguan workers’ lifestyle and in the kind of employee they must become as a consequence of the working conditions foreign investment establishes. And those transformations are based on existing possibilities. As if the transnational executives had innate anthropological abilities, they seem able to detect Nicaraguan vices—the oral culture, the absence of contracts, the disinclination to take legal action, ignorance of labor legislation and a national management model in which the arbitrary and omnipotent hacienda foreman is still the management prototype—and exploit these “domestic” cultural mechanisms as global resources from which to extract the greatest possible profits. We thus become a mixture of the oldest and most postmodern management practices, including methods from the industrial revolution right up to the most novel system of labor flexibility and cost outsourcing, from the panoptic gaze of the factory to individual sovereignty exploited by remote control.
Mass-produced insecurityWhat professional destiny awaits these workers after a decade in such jobs—assuming they last that long? For a start, we’ll have mass-produced public insecurity due to the labor uncertainty, absence of social security and wages that are falling in real terms. All three people interviewed for this article—and the many more they represent—felt like they were walking a tightrope when they were working at these jobs, which they accepted out of extreme necessity, due to the rapid staff turnover they witnessed. With the exception of the casino, there was no mention of social security. Government employees continue to have significant weight in the coverage provided by the Nicaraguan Social Security Institute (INSS), although this has dropped from 28.11% in 1994 to 10.39% in 2005, because the overall number of contributors increased by 81% and the number of government employees decreased by 33% due to the net loss of almost 19,000 employees during the same period.
Other sectors are obviously providing more contributors, but is foreign investment among them? It would appear not if the stories mentioned here are anything to go by. In any case, the increase in maquila workers between 1994 and 2005 (58,495) doesn’t even cover the growth of the economically active population (EAP) between 2000 and 2001 (85,100). Even if all maquila workers were given social security, INSS coverage would still be very low. And as many of the new sources of employment are similar to those mentioned here, the percentage of INSS coverage is falling both relative to the EAP and to the privileged group that actually has jobs.
You’d better not get sick...Nicaragua has always had extremely low social security coverage. Without wishing to be pessimistic, it is possible to predict that the coverage will keep on falling thanks to junk contracts, junk work devoid of contracts and informal employment. The staff turnover in the casinos, fast-food franchises, maquilas and telecommunications industry could contribute to the collapse of the social security system. Analyzing Germany’s case, Ulrich Beck wrote that some expensive social plans should be drafted in the long-running negotiations. For Beck, new products mean new business organizations and therefore the closure of some plants and opening of others. This could be avoided or at least minimized, he argued, if the risk pattern of open world markets is transferred to (or translated into) the regulated risks of open labor organizing and employment. Regulating risk leads to a de-standardized, fragmented and plural system of underemployment with highly flexible, temporally and spatially decentralized and deregulated forms of work.
First private enterprise and then the state transfer their risks to the workers as individuals. Let Elena Chávez and Pablo Téllez cope the best they can. And they’d better not get sick, because as Peter Maiwald satirically observed, the worst case in the social market economy is an employee in need of care. It’s just not very profitable for the others. Capitalism is young and hates the ailing and the frail. The sick are anti-capitalist and a real nuisance to the company, while those even sicker are terrorists who are jeopardizing jobs. Anyone on their last legs is improperly exploiting the social safety net and the business community’s good will. And as paying salaries to the sick leads to socialism, away with paying their salary!
Worker turnover and the absence of contracts is a body blow to social security, as is the privatization of social services. In Nicaragua, the private social security medical enterprises gobble up a large part of the funds of contributors who never avail themselves of the deficient and bureaucratic services offered, and there’s no chance that the resources from contributors who don’t generate costs will be used to subsidize medicines for those who can’t afford them or to increase the wages of the public sector health personnel, which are far more urgent and justified possibilities.
No stability but maximum flexibilityPublic insecurity is also fueled by the low wages. The arrival of more maquilas hasn’t increased real wages in the manufacturing industry. Why should it since Mr. Bounderby can smugly see that Nicaragua has an almost inexhaustible supply of job-seeking workers? Between 2001 and 2005, 40 new maquilas opened for business, increasing the number of people employed by maquilas from 35,565 to 61,927. But the nominal wage in the manufacturing industry as a whole rose by just 55 córdobas (1.67%). In telecommunications, the average salary rose by 144.50 córdobas, (3.57%). And we’re talking about the whole manufacturing and communications sectors, from managers down to peons, and everyone knows that average increases aren’t equally distributed.
Meanwhile, inflation rose dramatically during this period, with the consumer price index shooting up 30%. Wage increases were insignificant, in no way corresponding to the price increases. The salaries of manufacturing employees have only 66.3% of the buying power they had in 1996 while wage workers can only acquire 58% of the goods and services they could that year. But it’s a whole different picture with the professionals, whose consumer lifestyle is going from good to better, although not quite as markedly as the workers’ consumption is going from bad to worse. The managers who design systems to avoid costs in the fast food chains, reduce costs in the maquilas and casinos and turn the screws in cell phone companies by upping targets undoubtedly receive juicy salary rises. All these wage trends were weighted and denounced in 1995 by Belgian researcher Joris Ghysels in his study “Employment in Nicaragua: how the current crisis is being generalized for the year 2002.”
The situation appears to be deteriorating and the employment promised by foreign investment isn’t improving many indicators or auguring stability. Company-employee links are weak as the companies have to be very flexible and volatile, meaning that they could fly off to other countries at any moment in search of lower wages, laxer labor legislation and lesser taxes. The owners’ obligations only include flexibility, never stability. Beck said businesspeople are demanding “flexibility” everywhere; put another way, they want to be able to fire their workers more easily. For Beck, ‘flexibility’ also means that the state and the economy pass on their risks to individuals. Today’s contracts are mainly short-term and more easily rescindable (or “renewable” as they prefer to put it).
A wave of fear These business behaviors have legitimized various forms of elegant criminality that are welcomed as manna from heaven by the National Development Plan, but which in all justice should be penalized. If the National Police did as many patrols and round-ups in companies to ensure the fulfillment of owners’ obligations as they do in margi¬nalized neighborhoods, and if the sensationalist TV news programs de¬dicated a spot to white collar¬ crime, then crimes more numerous and far more remunerative than those in Ma¬nagua’s Eastern Market and the Reparto Schick neigh¬bor¬hood would soon be uncovered. Tax law expert Julio Francisco Báez, told envío, “I’d like to be labor minister for a month. I’d personally go supervise the free trade zones for 30 days and you can be sure I’d close 90% of them, because the right to work, which is the most noble right, is violated left right and center and in a thousand ways there.”
Isn’t labor flexibility a more overwhelming, costly daily attack on public security than robbery, larceny, assault or youth gang fights? The wave of terror generated by this uncertainty runs silently but destructively through many spheres of life. Shouldn’t this should concern the Labor Ministry? Shouldn’t Family Ministry officials consider this to be right at the heart of their mission since labor insecurity disintegrates families?
The hour of “business” unionsThe dishonest business practices of investors doing business in Nicaragua have already been widely publicized. For example, they were denounced by the National Labor Committee in Support of Human & Worker Rights in August 2005, when it revealed that Arnecom Auto Parts was paying its Nicaraguan workers just 37 cents an hour to manufacture automobile electronic systems that are exported to the United States. Arnecom is the product of a merger led by the Japanese transnational corporation Yazaki, which operates in 30 countries and contracts 90,000 workers. Five thousand Nicaraguans work in Arnecom’s plants making systems for Toyota, Nissan and Ford.
Two and a half years ago Arnecom started operating in León, promising its inhabitants a weekly wage of $50. It ended up paying 37 cents an hour ($18.72 a week). To avoid complaints, it created a union at the service of business interests and willing to neutralize any rebellious movement.
The creation of such “business” unions was facilitated by the new Labor Code growing out of a significant reform ten years ago that in the view of lawyer and labor law specialist Fernando Malespín was a significant blow to the unions. Under the pretence of promoting democracy, it allowed the formation of unions with a minimum of 20 employees (60% of a company’s employees were required previously), enabling the owners to organize innocuous unions that champion the owners’ interests. It’s no surprise, then, that maquilas tend to form such unions. In Arnecom the workers managed to form a union that truly defended the workers’ interests, but in July 2005 the company fired the recently elected union leaders by simply applying article 45 of the Labor Code to them: dismissal without justification.
Who would believe we actually had a revolution in this country? The revolution didn’t even change the Labor Code, which dated back to 1945. We pass from one boss to another, experiencing the different masks of despotism. But how did we reach these extremes at a time when we should supposedly be reaping the benefits of labor conquests won in the industrialized countries over a century ago? At one point we thought we were advancing towards the progressive recognition of workers’ rights. The industrialized countries appeared to be marking the way for the third world countries to follow by means of an inevitable social law. But today, we’re alarmed to see the reversal of the most basic conquests even in industrialized countries.
What future awaits us?The following is a desolate scenario, diametrically opposed to the National Development Plan because it contradicts its optimism and considers areas either unexamined by the plan, or whose destiny it fails to mention.
Costs and risks will continue to be transferred from the company to the worker. Each worker will become a micro-business selling his services to macro- and mega-businesses. And these atomized workers will have to assume most of the costs: working in the street, turning their house into an office, using their own means of transport, paying their own Christmas bonus and other social security payments and waiting for a stroke or the exhaustion of old age to force them into retirement. Capital will coordinate globally while labor will be increasingly individualized. In Nicaragua, the vinegary new model of labor flexibility and cost outsourcing will be stored alongside the very old wineskins containing the manager/foreman, businessperson/hacienda owner/rancher and investor/filibuster models.
These superimpositions and combinations are and will continue to express the coexistence of two capitalisms—that of the industrial revolution and that of labor flexibility and cost outsourcing—operating on different planes: one for the globalized who studied in Yale and another for the excluded who will be assimilated by the market only briefly. As Jesuit theologian and political analyst Juan Hernández Pico commented with respect to the work of Manuel Castells, “the role of work is being redefined, with a distinction between disposable ‘generic labor’ and the indispensable ‘self-programmable workers,’ with the key difference being education or the capacity to incorporate knowledge, information and methods to constantly redefine oneself. But two thirds of humanity has no access to an education.”
On both planes, trade and union organizations will have little if any influence. With or without foreign investment, even many professionals will become what tends to be referred to as “permanently temporary.” According to Ulrich Beck, the number of people in this condition in the United States rose to 800,000 in 1986 then shot up to 2.5 million by 1997. Estimates confirm that these “permanently precarious” employees represent 10% of the personnel in a fifth of all companies.
The number of less skilled workers will also continue to rise and their choice will be limited to junk employment or the street. The police will invest in repression and private security companies will prosper. Nicaragua currently has over 9,000 security guards, a number expected to reach 25,000 by 2010, when it will be common to see members of the elite flanked by bodyguards.
The state’s normative power in many spheres will continue to be held to ransom by the multilateral financing institutions and later circumscribed within borders defined by investors, with the right to form a union suppressed and any possibility of the state insisting that national products be used as inputs for the maquilas eradicated. The idea of a society based on solidarity—starting with the common social security pot—will be put to its final rest. Even institutions that call themselves alternative will apply labor flexibility. Universities will solve their financial crisis by contracting hourly-paid lecturers, which is the quickest way of loosening up contracts and outsourcing costs. It’s a future that will make Mr. Bounderby very happy indeed.
Breaking with such culpable resignationThere’s a lot to do if we are to break with our culpable resignation towards this seemingly inevitable management culture and business power, starting with asking what happened and is happening every day to make this kind of submissive labor available and ensure that it keeps multiplying. What is allowing this submission bordering on servility and how do the crumbs we receive relate to the panic of being rejected by a market elevated to the position of a capricious divinity hungry for holocausts? We won’t break free with irresponsible development plans that spurn the variables upon which society’s very survival depend. We’ll do it better following the lines proposed by Beck, who states that the conditions for a transnational democracy can only be created with the collaboration of a transnationally extended policy organized on the nation-state level with a responsible economy conscious of its political mission in the world society.
José Luis Rocha is a researcher at Nitlapán-UCA and a member of envío’s editorial council.