From the "Rust Belt" to the Border:
One Electronics Factory Moves South
Introduction
First Stop: Camden, New Jersey
Second Stop: Bloomington, Indiana
Third Stop: Ciudad Juárez, Chihuahua, Mexico
Transformations: Buying Power and Everyday Life
IntroductionA factory stands closed and empty in Bloomington, Indiana. For almost six decades, women and men worked behind its doors to produce radios and televisions that made RCA a well-known brand name. But since the late 1960s, the market for the products they made has changed dramatically. In these years, the number and quality of jobs at the factory has been gradually falling. Factory management had threatened to close several times, each time laying many workers off, before finally shutting the plant down in the spring of 1998. "You’ve worked hard all your life and thought you had a good job," one laid-off worker said, "and it doesn’t seem to mean a lot, that’s what bothers most of us."
This story is just one of thousands like it from the last twenty years. Across the industrial heart of the United States, many factories have moved away or shut down. Once wealthy, the area has been nicknamed the Rust Belt. Many different explanations have been offered. Some just shrug their shoulders, saying this is the way competition is. Others talk about the aggressive policies of foreign governments to promote their companies. For them, the blame is with the lack of U.S. government policies to protect local companies. Some charge U.S. workers with having grown lazy, earning too much for low-quality work. Still others blame the loss of factories on the selfish decisions of the companies that owned them.
But one of the most common answers to this problem has been to blame foreigners. First, in the 1970s, many blamed unfair competition by foreign companies for the weakness of U.S. companies. Then, as U.S. companies themselves began to move their factories outside of the U.S., others turned from blaming foreign companies to blaming foreign workers.
It was free trade that made it possible for foreign companies –or U.S. companies making products overseas– to sell foreign-made products cheaply in the U.S. Free trade lowered taxes (called tariffs) charged on imported goods. Up until the 1940s, many industrial products made in the U.S. had been protected by high tariffs. This made it hard for a foreign company to make a product elsewhere and sell it in the U.S. Even if the foreign company could make the product as cheaply as a U.S. company, it still had to pay an expensive tariff; to sell a product in the U.S., a foreign company had to make it much cheaper than its U.S. competitor. With free trade, this became much easier.
The North American Free Trade Agreement has further lowered tariffs between the U.S., Mexico and Canada. While agreement was being debated, many feared that this would make it even easier for foreign factories to compete with U.S. factories. This would force U.S. plants to close or move overseas. Ross Perot, who was running for President of the United States, campaigned against NAFTA. He suggested that all the agreement would produce would be a "giant sucking sound," as Mexico swallowed jobs and factories from the north. Mexican workers would work harder for less, and this would hurt U.S. workers unfairly.
Indeed, the RCA factory did move to Ciudad Juárez, Chihuahua, Mexico. And workers there are paid less and worked harder than workers in Bloomington. But as we will see, Mexican workers are hardly to blame for this. And this was not the first time the plant had moved: it had come to Bloomington years before from Camden, New Jersey. When it came to Bloomington, it was because workers there could be worked harder and paid less than in Camden. The Camden workers probably had felt the same way about the workers in Bloomington who "stole" their jobs, all those years ago, as the Bloomington workers felt about the workers in Ciudad Juárez..
During the campaign, Ross Perot and an aide wrote a book against NAFTA. On the back cover was a picture showing modern U.S.-owned factories –much like the RCA plant in Juárez– in the midst of an apparently run-down and dirty shantytown in Tijuana, another city along the border. The picture suggests that the factory caused the shantytown: if there were no NAFTA, there would be no factory. And if there were no factory, there would be no shantytown. If conditions there are inhuman, Perot suggests in his book, this is partly the fault of the Mexicans who put up with it.
The argument is tinged with racism. But it is also logically false. In blaming poverty on the factory, it does not consider what things were like before the factory arrived. In fact, although the factory may pay low wages, those wages are much higher than what many Mexican workers had earned before. And what looks to Perot like an impoverished shantytown is actually prosperous by Mexican standards. Many of the houses are made of brick, and have second or even third stories, with cars parked out front. These workers are not starving wretches, but people trying hard to make a better life for themselves and their families.
But Perot is not completely wrong. The Mexican workers are not paid anything near what U.S. workers had earned for the same job. While they are doing their best, they will never be able, with current pay, to achieve the living standards of U.S. workers. Back in the U.S., the children of people who used to work in the factory will not be able to get a factory job that pays as well as their parent’s. North and south, the possibilities for moving up seem to be shrinking.
It is ironic that this sense of shrinking possibilities are connected to one of the most dynamic forces in the modern world, industrial production. The products now put out by the factory in Juárez have an enormous market, and seem to be present everywhere: televisions and VCRs. How could it be that a factory always producing cutting-edge consumer products –first radios, then electronics– could be failing to provide its workers with a way ahead? And how could it be that an invention made in the U.S. –the transistor, which made small radios and televisions possible– could seem to turn against workers here?
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CamdenRCA came to Camden in 1929 because the city –across the river from Philadelphia– was close to rail and river transport, and because it was cheap. As the President of the company told the local Chamber of Commerce that year, "the industry… can only grow if we can build cheaper here than elsewhere." For several years, Camden offered just that advantage, as 10,000 workers churned out the radios that filled America’s homes. These radios were the pride of workers, and the joy of buyers, bringing the world to their living rooms every night. But at the wages they were paid, those workers could not afford radios themselves, or even enough food. It was the Great Depression. While they were happy to have a job, many resented the constant cuts the company made in their wages, which has started out low in the first place.
Workers at other places in the country had begun organizing for change. Especially promising were the new industrial unions, which brought together and represented all the workers in the factory, from janitors to assembly workers. Up until now, most existing unions were set up to represent skilled workers in a particular craft, like the people who ran drills. But with the industrial unions, everyone could be represented, which made some workers and the company nervous. This talk of unions, the company felt, would just cause trouble among workers, make production less efficient, raise costs, and generally make it more difficult for the company to do business. They refused to even consider allowing the workers to join the union.
In the mid 1930s, with the country still struggling with the Depression, the industrial unions staged a series of spectacular strikes. President Roosevelt had not supported them at first. But he saw a chance and pressed a law making it easier to form a union and requiring companies to deal with unions where they existed. The Electrical Workers union jumped at the chance in Camden. After being defeated in their first attempt to form a union, they tried again with the benefit of the new law. RCA threatened individual workers. If workers formed a union, the company threatened, the factory would leave. The struggle was long and bitter, first to form a union, and then to force the company to recognize it.
There were several strikes. One strike lasted several months, demanding that the company to give workers pay increases it had agreed to. A government arbitration board ruled in favor for the union. But the victory would prove bitter.
The company’s response was swift and sharp: within two years after the union victory, it began pulling out. In 1940 the new plant was opened in Indiana. Government contracts during the war kept some jobs in Camden, but when the war came to an end, workers found their jobs had left for good. By 1953, only 700 of the 10,000 jobs at the factory were left.
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BloomingtonWhile the move to southern Indiana came earlier and more dramatically than for other companies, this was part of a broader national trend. Thousands of industrial companies began to move out of the industrial center of the Northeast and Midwest. Beginning with defense companies during the Second World War, new factories were set up in places that had seen few before, from California to North Carolina. Most of these factories went to the South and Southwest, although some like the RCA plant went to parts of Midwest states that had no factories.
The factory in Bloomington would become an anchor of local industrial development. It was the first. By the late 1960s, dozens more had followed or opened nearby, often to provide parts to the RCA plant. When the factory came to Bloomington in 1940, it was a godsend. Southern Indiana was hilly and made for poor farming. The only other work available was in limestone mines, and a few furniture factories. Before the Depression, local supplies of limestone were already running out, and the furniture market was in trouble. A few years later, in the mid-1930s, much of the population was in desperate straits. When the factory opened, local unemployment was at almost 25%. The factory paid 23 cents an hour, less than half what it had paid in Camden, but more than the best jobs locally. One worker later remembered, "Work was hard to get…. And you were just happy to get a job."In Bloomington, the job was making radios. There were various tasks to be done in putting a radio together: first, assembling and soldering together all the wires and vacuum tubes that made up the working parts of the radio, then making the wood cabinet that would house it, and finally putting them together. Putting together the wires and tubes was a simple matter, but it demanded precision. Everything had to be done the same way every time, and everything had to be exactly right. The assemblies moved down a production line, with each worker repeating the same task over and over again. One worker said it was "so tedious it makes you feel like you’ve lost your mind." Making the cabinets was a little better, because there was more variety and the work was a little less repetitive.
In the late 1940s, scientists at Bell Laboratories discovered the transistor. This would radically change how radios and other electronics were made. Radios no longer needed large cabinets and enormous tubes. They could be ten, or a hundred, times smaller. Within a few years, the single, large, expensive radio that most Americans had bought for their living rooms had been replaced by several much smaller and cheaper radios. In many houses, there was a radio for each member of the family.
But another large appliance took radio’s place in the living room: the television. Bloomington was involved in making black-and-white televisions from early on, and it would later be one of the first U.S. factories producing color TVs as well. These were more complicated than radios had been. But the basic overall idea was the same. First the electronic "guts" were put together on a line, then the cabinet was built, and finally the two were put together.
From the beginning, the United States was the largest world market for televisions, and the RCA plant at Bloomington produced for that market very well. But beginning in the early 1960s, TV manufacturing in the U.S. would entire into a long decline. In 1966, there were 110,000 workers making TV, but by 1970 there were only 70,000, by 1981 there were 45,000, and by 1992, only 20,000 workers were left. What happened?
Many blame the Japanese. In the early 1960s, the U.S. government began to lower tariffs. Imported Japanese TVs, made by workers who were paid one-sixth American wages, flooded the market. Japanese workers prospered –a decade later, they were paid two-thirds of what Americans earned– but American workers suffered as their factories shut down. Eager to lower wage costs to compete, and now able to produce for the U.S. market from almost anywhere without having to pay high costs, American companies took their factories elsewhere. First they took the simplest, cheapest products; later on, more expensive goods would join them. By 1971, 91% of radios, 54% of black-and-white TVs, and 18% of color TVs were made overseas.
Within the factory, the kind and pace of work changed dramatically. This can be seen in an enormous increase in productivity, which meant that fewer workers could produce more. The average amount of goods each employee produced every hour, calculated in dollars, increased by about half from 1958 to 1967, but then expanded massively, more than tripling, between 1967 and 1977.
In Bloomington, this meant working harder for less; many workers remember those years as a time when the company just started the production line moving faster, and they had to run to keep up with it. When RCA had first come to Bloomington, it had learned its lesson from Camden and allowed a union into the factory –a quiet, calm union that mostly agreed with the company. The first time there was trouble was in the mid-1960s, as RCA was feeling foreign competition and pushing workers hard. They protested. When there protests were ignored, they went out on strike. After a few more protests, the company began to feel like its authority was undermined and look around for a new plant. But the move away from Bloomington would be long and gradual. As one worker put it, "they just sort of snuck it out one line at a time."
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Ciudad JuárezAs in Bloomington three decades earlier, the factory that opened in Juárez in 1968 was a pioneer. There were few factories in the city which sat across the border from El Paso, Texas. During Prohibition, when alchohol was illegal in the United States Juárez been a place for U.S. citizens to drink and gamble. The U.S. Consul described it as "a mecca for criminals and degenerates from both sides of the border." The local economy had broadened since then, but it was still a border town whose prosperity was due mostly to cross-border trade. Since the closing of the U.S.-Mexico border during the Depression, and through the two decades of restricted legal immigration under the bracero program, Juárez had become an important place for Mexicans waiting to cross into the United States.
In 1964, the United States ended the bracero program, which had brought a total four and a half million Mexicans to work temporarily in the United States over the previous twenty-two years. At the moment the program ended, there were still 180,000 Mexicans in the U.S. under the program. They were brought back to the border and left there. Three years earlier, the Mexican government, long concerned that the border had closer ties to the United States than to Mexico, had begun a program to develop the border region and "integrate" it with the nation. Industrialization was central to this scheme. But little had been done yet when the U.S. dumped thousands of workers on the border. Scrambling for a solution, the Mexican government hit upon a way of attracting factories overnight, rather than waiting years for the border economy to grow.
"Our idea," a Mexican government official said in 1965, "is to offer an alternative to Hong Kong and Puerto Rico for free enterprise." As his comment suggested, other areas had already become attractive to American companies. But both Hong Kong and Puerto Rico had something Mexico did not. As colonies (in the case of Puerto Rico, a commonwealth) of powerful countries, there had a special attraction for industry. Goods produced by factories would still be considered locally-made, and not have to face higher tariffs. Mexico’s solution was called "in-bond manufacturing": raw materials would be brought across the Mexican border, turned into a finished product in a Mexican factory, and then brought back across the border for sale in the United States. Under this special arrangement, companies could sell their products at U.S. prices, but pay their workers much lower Mexican wages. "A few small factories came first," a local business leader recalled, "Then came RCA in 1968, and that was the breakthrough, the first big company, a household name."
When RCA came to Juárez, it started out slow, with 200 workers, to see how Mexico would work. Before settling on Juárez, the company had also considered setting up a factory in Ireland, Portugal, Singapore, or Taiwan. But the site soon grew to suit it, and in the industrial park around the RCA factory –the largest industrial park in the world– other companies built factories as well.
Just as when RCA first arrived in Bloomington, the factory came to Mexico paying more than other local wages, but much less than it had paid at its previous site.There was a change, however. In Bloomington, the factory had employed women and men for a long time, on steady contracts: many of the workers still there when the factory left had been working for twenty or thirty years at RCA. This was a result of both company policy and, perhaps more important, of the efforts of the union to guarantee seniority, and to make sure that the first people hired were the last fired. At Juárez, there was also a union, at least on paper, but most workers hardly knew it existed. The union set no seniority rules. On the contrary, the company set strict standards for hiring young, unmarried women, and if the women had children, turned twenty-five, or worked more than five years for the company, they were out of a job. As it happened, the company did not often have to apply this standard: most workers only stayed two or three years. And while the company would have to relax its standards as more factories came and competed for workers, the factory would always have very high turnover.
The employment opportunities for women were an important part of the "mission" of the maquiladoras, or in-bond manufacturing plants, in Mexico. "We have brought the second industrial revolution to the Mexican-American border," one manager announced, "We are again transforming the world by bringing progress to all people, but especially to women." During the debate on NAFTA in 1992, many critics claimed that hiring women workers was just an attempt to lower wages further, and that women were subject to special abuse by foremen and unjust treatment, as suggested by the rules that laid them off if they got pregnant.
Both sides, however, failed to see that the importance of women in these manufacturing jobs was not new. Most of the workers at Camden had been women; at first, the overwhelming majority of workers at Bloomington had been women. Later on, more men had been employed at Bloomington, but women were always at least half the workforce. In Mexico, the factory started out nearly all women; over time, as RCA found it harder to attract workers, more men came to work there.
In all three cases, moreover, women had been placed in the most monotonous, least well-paid positions, doing routine assembly on the line. The cabinet making jobs, for example, had almost always been male. Supervisors in all three plants were also mostly men. But the ability to earn their own wages was important to many women, in providing for their families and, at times, establishing independence for them.
Fifteen years after RCA arrived, the maquiladora industry was booming all around Juárez. From 150,000 employees in 1983, it grew to over 300,000 in 1987. But the benefits of this boom did not reach workers. An economic crisis in 1982 had caused the Mexican peso to drop to half its previous value: workers made the same money, but it only went half as far. Studies showed that this cheapening was the leading cause for all the new factories opening in Juárez after 1982. In most cases, companies had already decided to go overseas, and the drop in wages in Mexico pursuaded them to go there, rather than to Southeast Asia.
A 1992 study by researchers for the U.S. Congress concluded that nearly all of the difference in the production cost of a television in the U.S. versus Mexico –$385 vs. $305 dollars– came from a difference in wages. In the U.S., labor costs accounted for $90. In Mexico, they were $15.
With the coming of NAFTA, some experts on the border worried that the agreement would hurt maquiladoras. If all of Mexico could now produce for the US market, why locate factories just on the border? But while this explanation had some basis –Ford, Chrysler, and General Motors all built modern, top-of-the-line factories well inland of the border– the maquiladora area was very easily accesible to the United States, an enormous advantage. And with another economic crisis at the end of 1994 again causing the Mexican peso to drop to half its value, again cutting wages in half, companies continued to move to the border zone.
In 1995, RCA opened a new, state-of-the-art plant near its old one in Juárez. Unlike the other plant, which was after all just the production lines from Bloomington shipped south, this plant is entirely re-designed, with fewer workers and easier workloads. Perhaps it will be the future of workers in Juárez; perhaps that will be a happier future than the other plant, where a series of protests by workers over wages and conditions finally led that same year to the formation of an effective union. In either case, like the other RCA plant, this one will provide jobs for Mexicans but do little to encourage other Mexican factories to grow up around it. The costs and supplies that it buys from Mexico is less than 2% of its total input –in Bloomington, the factory had bought roughly 50% locally. RCA gives back very little of what it takes from Mexico, and it passes on even less.
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Buying Power and Everyday LifeA RCA manager suggested recently that "Mexico today is like we were in the forties and fifties."
In terms of efficiency, this is clearly not true. During the first years in Juárez, Mexican workers did produce only 70-80% of what U.S. workers did. But with time and new production techniques, they have become as fully efficient as U.S. workers. The new factory is proof of this. Not only are they equivalent to U.S. workers now, they are vastly more efficient than any workers were in the past. The trend towards greater production per worker has only increased.
But in terms of wages, the manager may be right. The low wages paid were further crippled by a massive drop in the value of the Mexican currency in 1994: just before the Bloomington factory closed, a worker there could make in a few hours what it took a Juárez worker a whole week to earn. A survey of wages and prices among autoworkers, who are better paid than electronics workers, found that in U.S. worker earned enough in 11 minutes to buy a gallon of milk; a Mexican worker had to work 146 minutes (two and a half hours) to buy the same milk. This level of buying power –two hours to purchase milk– is roughly equivalent to what workers once made in the United States.
To be more exact, the buying power of workers at Juárez is roughly equivalent to the buying power of workers at Camden, before the union came. While worker’s efficiency has increased vastly, their wages have fallen back to old levels, hardly changed from sixty years ago. This seems to be a great injustice.
There is, however, another side to the story: by producing far more for their wages, workers have helped to make the goods they produce cheaper for everyone. Nowhere is this more evident than in televisions. What began as a luxury quickly became a fixture of American, and then of Mexican, homes. Virtually all of the workers at Juárez have a television in their home, as well as other modern appliances. This is quite different than the old workers at Camden or early on at Bloomington, who had only gradually obtained these things.
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BibliographyMaps, quotes and information in this lesson have been taken from:
Jefferson Cowie, Capital Moves: RCA's 70-Year Quest for Cheap Labor (Ithaca: Cornell University Press, 1999)