Global Labor Strategies: Egypt and the Problem of Government-Controlled Labor Movements

Two previous posts described an unanticipated wildcat upheaval by 27,000 Egyptian textile workers in Mahala El-Kobra last December and its historical background [link to come]. This piece looks at Egypt as an example of a wider pattern: How U.S. and other global corporations utilize government-controlled unions created by authoritarian nationalist regimes even as they claim to be liquidating the legacy of those regimes in the interest of economic freedom.

From the 1930s through the early 1950s, worker organizing in Egypt was often violently repressed, but many established independent unions that conducted collective bargaining negotiations with employers.

The picture changed radically after a group of military officers led by Gamal Abdel Nasser seized power in 1952. Nasser placed all unions under the authority of the General Federation of Trade Unions (GFTU). He also nationalized large parts of Egyptian industry and made union membership mandatory for public sector workers. But the officials and program of the GFTU were subject to government control; as Stanford University historian Joel Beinin put it, “trade unions effectively became part of the state apparatus.”

In 1991, Egypt signed an Economic Reform and Structural Adjustment Program agreement with the IMF and World Bank. Since then Egypt has moved from nationalization and state regulation to privatization and neo-liberalism. Private sector control of cotton spinning moved from 8 percent to 58 percent in the private sector from 1992 to 2000. But the basic structure of labor relations remained unchanged.

The only legal labor union in Egypt is still the GFTU. It has 4.8 million members in 23 unions with more than 2000 local committees, mostly in such public sector industries as textiles, chemicals, building materials, and transportation. But the primary function of these organizations is to provide healthcare, other social services, and entertainment; the affiliates for professionals like doctors and lawyers also provide a base for political parties. These “unions” do little bargaining with employers. According to Business Today Egypt, the GFTU has never backed a strike by its members.

One of the few independent labor organizations in Egypt is the Center for Trade Union and Workers’ Services, founded in part by leaders of sitdown strikes at the Iron and Steel Co. in Helwan in 1989. According to Kamal Abbas, director of the Center, few workers know what their legal rights are on the job, and there are few resources to defend those rights. Despite limited resources and periodic government harassment, the Center tries to fill the gap.

According to Abbas,

“We have huge union institutions that are simply ineffective.”

“In order to measure the effectiveness of an organizational authority, you have to measure how connected it is with its members or how much does it represent them; how democratic is it? What we see today is most of the 23 leaders . . . are past the age of retirement, and, without exception, all are NDP [the ruling National Democratic Party] members.”

According to Egypt’s Land Center for Human Rights, the presidents of 17 out of 23 unions were unanimously nominated and approved in the 2001-6 term.

The head of the GFTU responds to this criticism:

“Why should we force our syndicates to have elections when their members can agree within themselves on who is best to lead?

A journalist’s account of the union elections in late 2006 found that the ruling NDP party took 22 out of 23 seats on the Federation Council, with one representative from an allied party. It quotes Rahma Refaat of the independent Center for Trade Union and Worker Services that they were

“the worst elections conducted throughout the history of the Egyptian trade union movement. . . . Thousands of (would-be) candidates were barred from running in these elections – they were barred by their general unions, security apparatuses, workplace administrations, and by other (well connected) candidates.”

She added,

“With the NDP’s domination over the country’s trade unions, the ruling regime and its businessmen allies, are now able to ensure that privatizations of public sector enterprises will be approved by the upper echelons of the union leadership; while simultaneously ensuring that workers’ strikes in opposition to privatization will remain unauthorized and illegal.”

In response to the pressures of globalization, Egypt passed a new labor law in 2003. A study by International Market Insight [] described the law as

“revamped to correspond to market liberalization and grant greater rights to employers.”

The new law gives any group of at least 50 private sector workers the right to form a local committee at their workplace and register with the GFTU union of their industry. But it does not protect their jobs. According to an article in Business Today Egypt, “More often than not, they are fired immediately.”

(Ironically, the article states says that Egyptian private sector workers face challenges to unionization, “unlike union systems in the US and Europe.” A recent study, however, found that one-fifth of US workers who try to organize unions lose their jobs.)

Workers also have no right to bargain over wages or working conditions; employers have the right to unilaterally set conditions of employment. Legal strikes are virtually impossible. According to Business Today, workers wishing to strike must win approval from a two-thirds majority of their union board, inform the owner ten days in advance, and state in writing how long they intend to strike. Even then the prime minister can ban the right to strike in sectors declared “strategic.”

Low wages and labor suppression are now serving as means to lure capital to Egypt from other third world countries. Indeed, as Business Today Egypt put it, some economists argue that companies “are attracted to Egypt specifically for its cheap labor.”

Under a deal brokered by the U.S., Egypt has now set up special “qualified industrial zones” for foreign corporations. They can export products duty-free to the U.S. if they include a minimum percentage of Israeli content. Two million square meters were allocated to Turkish companies, and Turkish corporations have been quick to utilize them. As one news report put it succinctly, “Turkish textile industrialists defined Egypt where the monthly labor cost is only $60 and energy cost is one-third of Turkey as a base in order to avoid the competition with China and India.”

A January 11, 2007 dispatch from the industry website fibre2.fashion states that more than fifty enterprises have moved already from Turkey to Egypt:

“With the growing competitive pressure from Asian giants like China and India, many Turkish companies moved their production units to Egypt which offers lower labor and energy costs.”

One of the architects of Egyptian economic “reform” has been BearingPoint, formerly KPMG Consulting. At the end of 2005, the U.S. Agency for International Development awarded BearingPoint a four-year, $124 million contract to help “implement a broad program of economic, financial, and private sector reform in Egypt.” Its purpose is to “reinstate a private sector oriented economic model across a wide range of industries and government-owned or supported institutions.”

BearingPoint is an interesting choice to shape the future of Egypt’s economy. According to the article “Shock and oil: Iraq’s billions and the White House connection” in the British newspaper The Independent, “Across the world, BearingPoint has become, thanks to USAID funding, a part of the US government’s strategy of spreading free-market reforms to developing countries and America’s allies.” It is receiving $240 million for work in Iraq to introduce policies “designed to create a competitive private sector.” It recently helped draw up the new Iraqi hydrocarbon law which, according to The Independent, “will give Western oil companies a large slice of profits from the country’s oil fields.”

BearingPoint is in deep trouble with AID for work setting up Iraq’s new currency; according to AID’s independent inspector, “BearingPoint’s extensive involvement in the development of the Iraq economic reform program creates the appearance of unfair competitive advantage in the contract award process.” According to the Center for Responsive Politics, its employees gave $117,000 to the 2000 and 2004 Bush campaigns and also donated heavily to three members of the House of Representatives’ defense subcommittee. In 2005 it paid $1 million to Washington lobbyists.

What kind of expertise are Egypt and the other countries BearingPoint “helps” on behalf of AID getting? The company has failed to file its last six quarterly reports with the SEC. In an annual report to the Securities and Exchange Commission for 2005, filed only in November, 2006, the company said its ongoing failure to file timely reports over the past two years could lead the New York Stock Exchange to “begin proceedings to delist our common stock.”

While “privatization” has been portrayed as establishing the rigors of market competition around the world, the story of BearingPoint suggests that it may be as much about corruption, freebooting, and the politicization of the “free market.” Indeed, such corruption has been a major theme in strikes against privatization both in Egypt and in countries around the world.

The pattern of official trade union organizations controlled by the government was widespread throughout the third world, not only in Egypt but, for example, in China and Mexico. These were generally instituted by communist or authoritarian nationalist regimes. But even as the governments of these countries have shifted to the baldest neo-liberalism, they have retained their established system of labor movement regimentation. And that system has been happily utilized by the agents of globalization, who have been more than willing to use them to hold down labor costs – no longer in the name of national development, but of the “freedom” of the global free market.

5 Comments

This is a great article and really helped me appreciate the background of the Intifada now going on in Egypt. The US and Israel will pay lip service to democracy in Egypt, but meanwhile they will continue to hire corrupt agencies like Bearing Point and the lack of decent wages and the right to strike and organize will drive people into religious parties which offer a social support system. The same thing has happened in Israel where privatization and inequality have made people turn to parties like Shas for a sefety net.

Posted by: Dansofaer | February 05, 2011 at 09:34 AM