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The Fair Labor Standards Act of 1938 and Entrenched Inequality Between Nations

[ 20 ] April 27, 2013 |

During the discussion around my piece calling for international safety standards at the workplace with real enforcement teeth that could implicate American corporations subcontracting with unscrupulous employers, a reader suggested I read Augustine Sedgwick’s March 2012 article in International Labor and Working-Class History. Entitled “‘The Spice of the Department Store’: ‘The “Consumers’ Republic,’ Imported Knock-Offs from Latin America, and the Invention of International Development, 1936–1941,” Sedgwick gets at how U.S. labor law has entrenched unequal standards between nations.

The Roosevelt Administration made sure the Fair Labor Standards Act of 1938 would not cover foreign manufacturers importing goods to the United States. There was a fight over which version of the FLSA would pass. The Roosevelt Administration’s bill, originally sponsored by Senator Hugo Black before his Supreme Court appointment, applied it domestically only, but a House bill introduced by William Connery of Massachusetts eliminated the word “state” from the bill, which would have opened the door to international standards on any product imported into the United States.

Roosevelt pushed hard to squelch Connery’s bill because his administration saw a Latin America developing under U.S. corporate leadership as a good long-term strategy to rebuilding the American economy coming out of the Great Depression. The administration saw inequality as an inherent part of the international economy necessary for profit and thus had no problem writing legislation that encouraged the production of consumer goods for the American market overseas, even if they were produced in conditions that could lead to violent worker revolts. In fact, the exporting of violent worker revolt was a central administration strategy of the FLSA.

Black’s bill won out. The FLSA did a lot of good for workers in the United States, establishing a national minimum wage, overtime pay, and eliminating most child labor. Current minimum wage hikes are essentially revisions to the original FLSA.

The effect of all this on Latin American nations and their workers was highly mixed. It did start the process of industrialization for many nations that wanted to move away from agricultural economies. In order to manage the newly industrialized labor force, governments created social welfare programs that provided benefits to working-class people. On the other hand, it led to increased inequality and significant social dissent that fueled the rise of the Latin American left in the 1950s. Moreover, Sedgwick argues that the American creation of its consumers’ republic was intricately tied with American imperialism in Latin America, at first during the so-called Good Neighbor Policy years and especially in the Cold War.

Sedgwick doesn’t get into working conditions per se or the specifics of how this plays out in individual nations, but we see how the U.S. built significant pieces of the modern globalized economy during the late 1930s. The FLSA intentionally codified differences in labor in order to promote American corporate investment overseas and inexpensive consumer products for Americans. At the time, this was at least predicated on the idea of the American working class growing in consumer power and wealth. So for Americans at least, this program worked pretty well for forty years or so. But by the 1970s, that half of the equation seemed dispensable and instead American corporations simply moved all production to nations with cheap labor under an unequal system long promoted by the American government.

This helps elucidate the present, with downward pressure on wages and working conditions in the United States and dying workers in Bangladesh. I recommend reading Sedgwick’s article if you can, which you should be able to do if you have access to most any university library system. If you don’t, sorry. The academic journal system is somewhat less than ideal for disseminating relevant knowledge to the general population. And we know what happens to those who undermine that system.

  • I recommend reading Sedgwick’s article if you can, which you should be able to do if you have access to most any university library system. If you don’t, sorry.

    Actually, according to h t t p://, “More than 150 Public Libraries in more than 35 countries participate in JSTOR”; naturally JSTOR does not list those libraries on that page (or anywhere I can find easily). That’s a tiny number, but non-zero; it does include the New York Public library (as I know independently of that page). Whether any or all of those libraries have JSTOR subscriptions that cover the journal in question is another thing I don’t know how to determine.

    • Vance Maverick

      Most people will probably ask not “what public libraries can I use it through?” but “can I use it through my own library?” In my own case (San Francisco) I recently found that I can. It’s on a list of “databases”, in a drop-down on the front page of the site.

      (But the most recent 5 years of that journal aren’t accessible through JSTOR, so, out of luck.)

  • Ronan

    What do you think of the argument that the interests of labour in the North are strongly oppossed to development in the South (and by extension labour in the South) and that a genuinely influential labour movement in the US would stymie growth globally?

    • Ronan

      ..actually I think youve answered that question in this post and I read it too quickly

    • Well, I think it’s really complicated and would probably be more comfortable answering smaller parts of a broken-down question. I would broadly say that I don’t think the two interests are per se opposed but their certainly are cases where they might be.

  • shah8

    This does seem to tie in with the thesis in Yanis Varoufakis’ The Global Minotaur.

  • cpinva

    interesting. i was not aware of this aspect of the development of US labor law. i am not convinced, however, that improving the lot of people in the US requires that people elsewhere be oppressed. this isn’t a zero-sum game by necessity, but rather by design. it seems to me (granted, i’m not the student of labor history that dr. loomis is) that this situation, having been artificially created, can be uncreated, but will require that all of us, north and south, work together. this, of course, is the very last thing the corporotocracy wants.

  • I don’t know if I agree with the description of motives – certainly, the fact that many of the same folks developed the Atlantic Charter, the Four Freedoms, and the UN Declaration of Rights doesn’t really jibe with “The administration saw inequality as an inherent part of the international economy necessary for profit.”

    • Anonymous

      Most of the administration were capitalists and capitalism in many of its forms does seem to require some segments to be kept down (or left unemployed) to get profits

    • Vance Maverick

      I don’t know about motives, but there’s absolutely a tension between the goals of fairly shared prosperity within one country and across the world — particularly when that one country is so dominant.

    • See the works of Gilbert Rist on development. He argues that the whole idea of development was invented in the post-war period to maintain the economic inequalities formed during colonialism since it was apparent that colonies would soon be getting formal nominal political independence. That is the whole field of western development economics emerged as a way of keeping former colonies as providers of raw materials and importers of processed goods. “Development” was never meant to lead to any type of real economic independence for former colonies in Africa.

      • Ronan

        “That is the whole field of western development economics emerged as a way of keeping former colonies as providers of raw materials and importers of processed goods.”

        It’s been a while since I read it but I remember him making a more subtle argument? That the institutions that push development, do so in a very, specific, general way (development along the romanticised ‘western’ trajectory) and in the context of a specific US hegemonic order(globalising markets and making ‘development’ dependant on opening your economy to those markets) and that ‘development’ as a concept hides more than it clarifies, as it allows only one way of developing your economy/society (integration into global markets on US terms etc)
        I think there’s a lot to it, (and a lot of it has been said before) but it’s a little over the top

        • Ronan

          actually, you cant do something in a ‘very, specific, (AND) general’ way .. i dont think

      • Ronan

        I read your blog as well by the way..was meaning to ask, you seem to read a lot of Zed Books, is that due to the way they sell their books throughout Africa? (Their African section seems to be quite popular/well respected, what do you make of it?)

        • A large selection of Zed books are available at the bookshop (EPP Books I think) at the Legon Mall (which only has four stores) across from the university. The all sell for 10 cedis ($5.00). Zed is just about the only non-fiction publisher available at that bookstore. The selection for crime novels and childrens’ books is considerably more varied.

  • Anon21

    I’ll grant you that in 2013, a system of U.S. global labor standards inspectors is at least conceivable. (I’d be curious on whether leftists in developing nations would actually care much for that solution, though.) It’s blindingly obvious that in 1938, the United States had no capacity to inspect factory conditions in South American factors, and that there was no possibility of it developing that capacity. So the Connery approach was fated to be basically symbolic for their conceivable future if it had passed.

    • I think it was blatant protectionism on his part. He represented a district heavy in textile factories and wanted to discourage capital migration.

  • Gareth Wilson

    So what’s the counterfactual like? Let’s say Latin America had to comply with US labour laws for 75 years. What would it look like now?

    • It is very hard to know. There is a reason historians don’t try and do anything other than determine what actually did happen and why.

  • Basic worker rights (safety and dignity) should be considered human rights and should be pursued on that basis. There does not need to be a discussion as to whether US or any other regulations apply worldwide. A reasonable guarantee of physical survival in the workplace (within the natural aspects of the job – firefighters, police, military, crop dusters vs apparel workers) should not be a question or a topic of discussion among civilized people. Nor should that reasonable guarantee be a point of negotiation between labor and management in any country or industry.

    Unfortunately, communism diverted/perverted that evolution of human rights regarding the workplace into an evil that capitalists (well meaning and abusive alike) could use as the ‘consequences’ of supporting worker rights.

    There seem to be two (at least) counterproductive postulates that are accepted by global society right now:

    1. Corporations are people, but more equal than people, since they have all of the rights and privileges but are not accountable, because they aren’t considered people for criminal behavior,

    2. Corporate profits are more necessary to world order than worker or consumer claims on safety and health, and certainly superior to any worker claims on compensation.

    Until society learns to constructively curb corporate power (start with stripping their ‘rights’ as people away) the gap between the 1% and the 99% will continue to widen. Until the 99% understand that allowing dead workers in Bangladesh to be considered part of the ‘cost of doing business’ and not a crime against workers everywhere, they won’t understand why their jobs are outsourced, their income lags productivity gains, etc. More easily said than done, obviously.

    When the ‘hard’ crimes go unpunished, the ‘soft’ crimes are committed with impunity.