Nike in Indonesia

...It is a system in which people, their political and civil rights denied, are treated as inhabitants of global markets rather than citizens of nations...

...What could account for such a dramatic increase in a locally produced product, I wondered...

...Siti Hartari Tjakra Hardaya, the chair of the prominent contractor P.T...

...Workers from Pou Chen told me that their earnings had been seriously eroded by inflation and that it was getting worse every day...

...Recent events, however, give little reason for hope...

...DISSENT / Fall 1998 POLITICS ABROAD kilometers from their villages...

...Indonesia has maintained a "security approach" to labor relations, keeping the military on strike-breaking duty in defiance of a 1994 agreement with then–U.S...

...Hasan's Astra International is now the fourth largest producer of Nike shoes in the world...

...the subsequent shortage in local markets drove up the price...

...I had called her shortly after her return from Asia...

...Even then, one disgruntled contractor tried to recoup the five dollars per month by doing away with an "attendance bonus...

...For the last several years I have published a modest newsletter called Nike in Indonesia, in the hope that collecting and sharing detailed information about a single corporation's operations in a single country will help to reduce that company's "wiggle room" and create enough public pressure to force meaningful change...

...Knight is adamant about holding the line on wages...

...Garuda Indawa—was totally zeroed-out by Nike's man in Jakarta, Tony Nava...

...She deemed the working conditions exemplary...

...According to Lily Purba, an activist I have worked with for years, the rupiah's slide made it more profitable to export the cooking oil...

...Heti, who also works in the sprawling Pou Chen complex, said she was glad that she chose to live in the workers' dormitories there, because she has heard stories of young women who have been threatened by thuggish landlords for late rent payments...

...Filmmaker Michael Moore had information that Nike contractors had been granted exemptions from this modest increase, and he sprang this question on the clueless CEO in time for Knight to send a directive to the Jakarta office...

...And despite the high hopes of this past spring, President Suharto's fall has not brought any serious liberalization...

...Despite these headaches, contractors can do quite well for themselves...

...Her approach, in fact, was roughly analogous to tactics employed by Indonesian environmental groups in the 1980s...

...He cited a report from the field by Jill Ker Conway—the best-selling author, first female president of Smith College, and paid member of Nike's board...

...Before the crash, some were reported to be earning over three dollars profit per pair of shoes...

...She is desperate to send some money to her parents in nearby Cilegon, since the drought has made their farming work a break-even enterprise...

...Worse still is the news that Nike's orders continue to be sluggish, so that only two of the fifteen factories are working overtime...

...The pain has not been evenly distributed: Read notes that Suharto crony Bob Hasan (aka Thee Kian Seng) has barely been touched...

...The workers, she said, "didn't seem intimidated...

...Early this summer, in the depths of Indonesia's economic crisis, I visited shoe factories in Tangerang and Serang—industrial boom towns about an hour's drive west of Jakarta...

...This has always been the toughest issue for Knight: his contention that "the Market" has set these wage levels, despite the fact that the army fires rubber bullets at striking workers and labor inspectors are bribed to overlook various schemes to cheat workers...

...It is prominently featured on the World Bank's Web site and is available in paperback for $23.95...

...One trade publication calls Indonesia "a buyer's paradise" because the buyers know all of the costs of production and can use this knowledge to benefit from contractors' price cutting while competing for big orders...

...Representatives from over a dozen of the biggest names in apparel were there: Nike, Eddie Bauer, Levi Strauss, Liz Claiborne, Reebok, and others...

...Nike's contractors, meanwhile, care little about the shoe giant's public relations problems...

...a medium-sized factory can crank out about four hundred thousand pairs per month...

...Call it market authoritarianism...

...The bonus was partially restored...

...With that pledge, Indonesia was able to keep the prized special tariff treatment of the Generalized System of Preferences (GSP...

...Phil Knight and his minions—former ambassador Andrew Young included—insist that Nike is doing a good job of enforcing its Code of Conduct, a sensible-sounding set of rules for contractors making Nike shoes and apparel...

...In July, the military publicly threatened to "cripple" the independent labor movement led by Muchtar Pakpahan...

...Nike president Thomas Clarke said last year, "You never overpay for things that are good...

...The workers had many complaints, some of which were the same that I'd heard from their predecessors in the early 1990s, when I was director of the AFL-CIO's Indonesia office: low pay, abusive treatment from supervisors, inadequate breaks, punishing production quotas...

...overtime earnings are needed to get above the bare subsistence level...

...Hungerford, Pullman's general manager, replied: "All I can say is that you can get all the men you require to do the work...

...Thus, in contrast with workers in many other developing countries, workers in the HPAEs are more likely to refrain from work stoppages and other disruptions and from lobbying the government for mandated wage increases...

...The surprise decisionCicih Sukaesih, one of the group, told me that she had just about given up hope that the court would ever render a verdict—came just after U.S...

...Finally, the World Bank embraces the obvious, stating that the prinicpal benefit of wage suppression is "higher profits" for private firms...

...Eighty-five years later, Nike CEO Phil Knight trotted out the same line to a crowd at the National Press Club, who had come to hear him talk about plans to improve labor conditions at contractors' factories in Indonesia...

...trade representative Mickey Kantor...

...Since the Indonesian rupiah began its fall—to between 20 percent and 25 percent of its mid-1997 value many have argued that Nike could insist that contractors pay workers at least half of the $2.46 a day they had been earning, instead of the current, DISSENT / Fall 1998 n 19 POLITICS ABROAD postcrash fifty cents a day...

...Contractors have been claiming huge losses and issuing predictions of imminent bankruptcies...

...Richard Read, a reporter for Nike's hometown newspaper, the Oregonian, has documented the impact of the twin blows Nike's contractors and workers have suffered during the past year: a reduction of orders because of Nike's inventory glut and the Asian economic crash...

...She freely admitted that she'd been on a Nike-guided tour, and that she had never before spoken with a factory worker in Asia...

...The enraged workers stormed out of the factory and marched four miles to the local parliament...

...Habibie...

...I FIRST CAME to Indonesia in the late 1980s, at about the same time Nike contractors began to arrive there...

...Increasing desperation on the part of workers slipping further into poverty, while making expensive shoes and apparel for export, may create enough heat to force a meaningful change...

...They were fleeing South Korea and Taiwan in the wake of those countries' successful prodemocracy movements...

...Although workers had received a 15 percent increase (eight cents a day) as part of Phil Knight's "National Press Club package," they pointed out that in the last six months inflation was 35 percent...

...He was responding to a reporter's question about why the company would pay $200 million for an endorsement deal with the Brazilian national soccer team...

...Berea Sportindo, complained to a Jakarta trade publication that Nike had insisted that its payments to contractors must decline by an amount concomitant with the rupiah's drop...

...sO THERE we have the core of the reigning orthodoxy for economic growth through global marketization in the developing world: antidemocratic, antilabor regimes suppressing wages to benefit private business and foreign investors...

...Though they had been contacted well in advance, not one agreed to meet a delegation made up of the officially sanctioned tradeunion federation and the illegal (at the time) Indonesia Prosperity Workers Union of Muchtar Pakpahan...

...On this visit I also spent time with a group of two dozen workers who had been fired by a Nike contractor in 1992...

...Only a month earlier, company spokesperson Jim Small, commenting on a twenty-cents-per-day increase in the Indonesian minimum wage, was quoted as saying, ". . . There's a concern what that does to the market—whether or not Indonesia could be . . . pricing itself out of the market...

...One important prisoner of conscience is Dita Indah Sari, a charismatic leader in her mid-twenties who interrupted her law-school studies in 1996 to counsel young workers— the vast majority of whom were girls rounded up from rural areas by labor contractors and delivered to factories that can be hundreds of 18...

...Staples like cooking oil had tripled in price...

...Since my assignment in Jakarta ended in 1992, I have kept in touch with many brave independent labor activists in Indonesia...

...Filial loyalty has clearly driven some of these young women to ignore their own health and well-being while divvying up a pittance with the needy at home...

...in late July he issued a decree banning political meetings or demonstrations of more than fifty people...

...As it happened, I knew something about Conway's report...

...The problem, of course, is much wider than just contractors producing for U.S.based multinationals...

...Nike, they say, uses its size to squeeze the lowest possible price out of them...

...Ten years later, just before the Indonesian rupiah crashed, the minimum wage had inched up to what the government designated as the poverty line...

...Former Chinese leader Deng Xiaoping pointed the way almost two decades ago when he told the Chinese people in a speech: "Ordinary people need not say too much...

...This unprecedented joint appeal itself was a measure of the desperate situation in which Indonesian workers find POLITICS ABROAD themselves...

...Suriani, an eighteenyearold who has worked for two years at the 20 n DISSENT / Fall 1998 Starwin factory, expressed relief that she was able to put in fifty-plus hours of overtime for each of the last several months...

...This was not the Nike-guided tour...

...Treasury Secretary Robert Rubin was pummeled by members of the House Banking Committee when he went to ask for supplemental appropriations for the International Monetary Fund...

...This restructuring, in the report's words, has "reduced the marginal benefit and increased the marginal cost of collective action...

...As long as the contractors are determined to maximize their take, no amount of tweaking or prodding on Nike's part is going to address the fundamental problem of an alienated workforce...

...When another Oregonian reporter asked a Nike official how it felt to be partnered with the number one golfing buddy of Suharto, he replied, "That's just how it works in Indonesia...

...JEFF BALLINGER is executive director of Press for Change, a consumer information organization that reports on worker rights issues...

...Much of it is laid out (nearly in blueprint form) in The East Asian Miracle, a 1997 report authored by thirty-six World Bank economists...

...One of the major issues on which he took heat was Indonesia's labor rights, or lack thereof...

...The entire setup invites abuse of workers and corrupt practices by officials in developing countries...

...There has been no attempt to suppress this study...

...The book hails the "High Performing Asian Economies" (HPAEs) and endorses the suppression of worker rights as a key component of their success...

...One contractor with no "connections"—P.T...

...The "security approach" to labor relations meant that activists such as Dita Sari had to be painted as dangerous radicals...

...DISSENT / Fall 1998 21...

...With the help of Tim Ryan, who runs the AFL-CIO's "Solidarity Center" office in Jakarta, this delegation went to the hotel meeting room where the BSR conference was being conducted, but they were again rebuffed...

...THE CURRENT crisis has put Nike in an unprecedented bind...

...Conway, who was seated on the dais with Knight, had reported that she'd observed over three hundred job applicants lined up outside an Indonesian factory that produced Nike sneakers...

...she was sentenced in early 1997 to five years' imprisonment for "sowing hatred...

...In the July issue of Consumer Reports, he was quoted as saying, "It's just totally and completely false" to suggest that Nike could afford a pay hike...

...Of the two dozen economists from universities and think tanks around the world asked to comment on the study, there was not one dissenting voice on the subject of suppressing labor...

...Most observers agree that the figure for this year will top eighty percent...

...The minimum wage then was less than a dollar a day—and 44 percent shy of what the Indonesian government itself said was required to meet the "minimum physical needs" of an adult...

...There has been little improvement under the new government of B.J...

...Just before Suharto fell, for example, the group Business for Social Responsibility convened a meeting in Jakarta...

...they should just keep their heads down and work hard...

...employers faced fewer demands from labor...

...Both points are largely irrelevant to the predicament Nike faces—it is operating in countries where workers have no protection and cannot organize free trade unions to improve wages and conditions...

...The first strike I became aware of at a Nike-producing factory was in 1988...

...it was sparked by a three-cents-per-day pay cut...

...These groups—along with the Indonesia Legal Aid Foundation—began to challenge the Suharto regime by organizing grassroots opposition movements...

...But since 1994 Indonesia has made a mockery of its promises, pushing striking workers back into factories at bayonet point and jailing independent union activists...

...They had just won a decision from the Indonesian Supreme Court ordering the contractor to put them back to work, with lost wages...

...This is the kind of margin that makes people sit up and notice...

...Knight adds that "incidents" are bound to happen with a worldwide workforce exceeding five hundred thousand...

...In Chapter 4, the study embraces what it calls the "Labor Trade-Off"—a key feature of which has been the abolition of trade-based labor unions and the creation of company- or enterprise-based unions...

...Her younger brother, still living at home, recently had to quit school and go to work in the market, carting vegetables...