No Logo

by Naomi Klein

  From El Paso to Beijing, San Francisco to Jakarta, Munich to Tijuana, the global brands are sloughing the responsibility of production onto their contractors; they just tell them to make the damn thing, and make it cheap, so there’s lots of money left over for branding. Make it really cheap.

  Exporting the Nike Model

  Nike, which began as an import/export scheme of made-in-Japan running shoes and does not own any of its factories, has become a prototype for the product-free brand. Inspired by the swoosh’s staggering success, many more traditionally run companies (“vertically integrated,” as the phrase goes) are busy imitating Nike’s model, not only copying the company’s marketing approach, as we saw in “No Space,” but also its on-the-cheap outsourced production structure. In the mid-nineties, for instance, the Vans running-shoe company pulled up stakes in the old-fashioned realm of manufacturing and converted to the Nike way. In a prospectus for an initial public stock offering, the company lays out how it “recently repositioned itself from a domestic manufacturer to a market-driven company” by sponsoring hundreds of athletes as well as high-profile extreme sporting events such as the Vans Warped Tour. The company’s “expenditure of significant funds to create consumer demand” was financed by closing an existing factory in California and contracting production in South Korea to “third party manufacturers.”8

  Adidas followed a similar trajectory, turning over its operation in 1993 to Robert Louis-Dreyfus, formerly a chief executive at advertising giant Saatchi & Saatchi. Announcing that he wanted to capture the heart of the “global teenager,” Louis-Dreyfus promptly shut down the company-owned factories in Germany, and moved to contracting-out in Asia.9 Freed from the chains of production, the company had newfound time and money to create a Nike-style brand image. “We closed down everything,” Adidas spokesperson Peter Csanadi says proudly. “We only kept one small factory which is our global technology centre and makes about 1 percent of total output.”10 (See Table 9.1, Appendix.)

  Though they don’t draw the headlines they once did, more factory closures are announced in North America and Europe each week — 45,000 U.S. apparel workers lost their jobs in 1997 alone.11 That sector’s job-flight patterns have been equally dramatic around the globe. (See Table 9.2, Appendix.) Though plant closures themselves have barely slowed down since the darkest days of the late-eighties/early-nineties recession, there has been a marked shift in the reason given for these “reorganizations.” Mass layoffs were previously presented as an unfortunate necessity, tied to disappointing company performance. Today they are simply savvy shifts in corporate strategy, a “strategic redirection,” to use the Vans term. More and more, these lay offs are announced in conjunction with pledges to increase revenue through advertising spending, with executives vowing to refocus on the needs of their brands, as opposed to the needs of their workers.

  Consider the case of Sara Lee Corp., an old-style conglomerate that encompasses not only its frozen-food namesake but also such “unintegrated” brands as Hanes underwear, Wonderbra, Coach leather goods, Champion sports apparel, Kiwi shoe polish and Ball Park Franks. Despite the fact that Sara Lee enjoyed solid growth, healthy profits, good stock return and no debt, by the mid-nineties Wall Street had become disenchanted with the company and was undervaluing its stock. Its profits had risen 10 percent in the 1996–97 fiscal year, hitting $1 billion, but Wall Street, as we have seen, is guided by spiritual goals as well as economic ones.12 And Sara Lee, driven by the corporeal stuff of real-world products, as opposed to the sleek ideas of brand identity, was simply out of economic fashion. “Lumpy-object purveyors,” as Tom Peters might say.13

  To correct the situation, in September 1997 the company announced a $1.6 billion restructuring plan to get out of the “stuff” business by purging its manufacturing base. Thirteen of its factories, beginning with yarn and textile plants, would be sold to contractors who would become Sara Lee’s suppliers. The company would be able to dip into the money saved to double its ad spending. “It’s passé for us to be as vertically integrated as we were,” explained Sara Lee CEO John H. Bryan.14 Wall Street and the business press loved the new marketing-driven Sara Lee, rewarding the company with a 15 percent jump in stock price and flattering profiles of its bold and imaginative CEO. “Bryan’s shift away from manufacturing to focus on brand marketing recognizes that the future belongs to companies —like Coca-Cola Co. —that own little but sell much,” enthused one article in Business Week.15 Even more telling was the analogy chosen by Crain’s Chicago Business: “Sara Lee’s goal is to become more like Oregon-based Nike Inc., which out-sources its manufacturing and focuses primarily on product development and brand management.”16

  In November 1997, Levi Strauss announced a similarly motivated shake-up. Company revenue had dropped between 1996 and 1997, from $7.1 billion to $6.8 billion. But a 4 percent dip hardly seems to explain the company’s decision to shut eleven plants. The closures resulted in 6,395 workers being laid off, one-third of its already downsized North American workforce. In this process, the company shut down three of its four factories in El Paso, Texas, a city where Levi’s was the single largest private employer. Still unsatisfied with the results, the following year Levi’s announced another round of closures in Europe and North America. Eleven more of its North American factories would be shut down and the total toll of laid-off workers rose to 16,310 in only two years.17

  John Ermatinger, president of Levi’s Americas division, had a familiar explanation. “Our strategic plan in North America is to focus intensely on brand management, marketing and product design as a means to meet the casual clothing wants and needs of consumers,” he said.18 Levi’s chairman, Robert Haas, who on the same day received an award from the UN for making life better for his employees, told The Wall Street Journal that the closures reflected not just “overcapacity” but also “our own desire to refocus marketing, to inject more quality and distinctiveness into the brand.”19 In 1997, this quality and distinctiveness came in the form of a particularly funky international ad campaign rumored to have cost $90 million, Levi’s most expensive campaign ever, and more than the company spent advertising the brand in all of 1996.

  “This Is Not a Job-Flight Story”

  In explaining the plant closures as a decision to turn Levi’s into “a marketing company,” Robert Haas was careful to tell the press that the jobs that were eliminated were not “leaving,” they were just sort of evaporating. “This is not a job-flight story,” he said after the first round of layoffs. The statement is technically true. Seeing Levi’s as a job-flight story would miss the more fundamental — and more damaging —shift that the closures represent. As far as the company is concerned, those 16,310 jobs are off the payrolls for good, replaced, according to Ermatinger, by “contractors throughout the world.” Those contractors will perform the same tasks as the old Levi’s-owned factories —but the workers inside will never be employed by Levi Strauss.

  For some companies a plant closure is still a straightforward decision to move the same facility to a cheaper locale. But for others —particularly those with strong brand identities like Levi Strauss and Hanes —layoffs are only the most visible manifestation of a much more fundamental shift: one that is less about where to produce than how. Unlike factories that hop from one place to another, these factories will never rematerialize. Mid-flight, they morph into something else entirely: “orders” to be placed with a contractor, who may well turn over those orders to as many as ten subcontractors, who —particularly in the garment sector —may in turn pass a portion of the subcontracts on to a network of home workers who will complete the jobs in basements and living rooms. Sure enough, only five months after the first round of plant closures was announced, Levi’s made another public statement: it would resume manufacturing in China. The company had pulled out of China in 1993, citing concerns about human-rights violations. Now it has returned, not to build its own factories, but to place orders with three contractors that the company vows to cl
osely monitor for violations of labor law.20

  This shift in attitude toward production is so profound that where a previous era of consumer goods corporations displayed their logos on the façades of their factories, many of today’s brand-based multinationals now maintain that the location of their production operations is a “trade secret,” to be guarded at all costs. When asked by human-rights groups in April 1999 to disclose the names and addresses of its contract factories, Peggy Carter, a vice president at Champion clothing, replied: “We have no interest in our competition learning where we are located and taking advantage of what has taken us years to build.”21

  Increasingly, brand-name multinationals —Levi’s, Nike, Champion, Wal-Mart, Reebok, the Gap, IBM and General Motors —insist that they are just like any one of us: bargain hunters in search of the best deal in the global mall. They are very picky customers, with specific instructions about made-to-order design, materials, delivery dates and, most important, the need for rock-bottom prices. But what they are not interested in is the burdensome logistics of how those prices fall so low; building factories, buying machinery and budgeting for labor have all been lobbed squarely into somebody else’s court.

  And the real job-flight story is that a growing number of the most high-profile and profitable corporations in the world are fleeing the jobs business altogether.

  The Unbearable Lightness of Cavite: Inside the Free-Trade Zones

  Despite the conceptual brilliance of the “brands, not products” strategy, production has a pesky way of never quite being transcended entirely: somebody has to get down and dirty and make the products the global brands will hang their meaning on. And that’s where the free-trade zones come in. In Indonesia, China, Mexico, Vietnam, the Philippines and elsewhere, export processing zones (as these areas are also called) are emerging as leading producers of garments, toys, shoes, electronics, machinery, even cars.

  If Nike Town and the other superstores are the glittering new gateways to the branded dreamworlds, then the Cavite Export Processing Zone, located ninety miles south of Manila in the town of Rosario, is the branding broom closet. After a month visiting similar industrial areas in Indonesia, I arrived in Rosario in early September 1997, at the tail end of monsoon season and the beginning of the Asian economic storm. I’d come to spend a week in Cavite because it is the largest free-trade zone in the Philippines, a 682-acre walled-in industrial area housing 207 factories that produce goods strictly for the export market. Rosario’s population of 60,000 all seemed to be on the move; the town’s busy, sweltering streets were packed with army jeeps converted into minibuses and with motorcycle taxis with precarious sidecars, its sidewalks lined with stalls selling fried rice, Coke and soap. Most of this commercial activity serves the 50,000 workers who rush through Rosario on their way to and from work in the zone, whose gated entrance is located smack in the middle of town.

  Inside the gates, factory workers assemble the finished products of our branded world: Nike running shoes, Gap pajamas, IBM computer screens, Old Navy jeans. But despite the presence of such illustrious multinationals, Cavite —and the exploding number of export processing zones like it throughout the developing world —could well be the only places left on earth where the superbrands actually keep a low profile. Indeed, they are positively self-effacing. Their names and logos aren’t splashed on the façades of the factories in the industrial zone. And here, competing labels aren’t segregated each in its own superstore; they are often produced side by side in the same factories, glued by the very same workers, stitched and soldered on the very same machines. It was in Cavite that I finally found a piece of unswooshed space, and I found it, oddly enough, in a Nike shoe factory.

  I was only permitted one visit inside the zone’s gates to interview officials —individual factories, I was told, are off limits to anyone but potential importers or exporters. But a few days later, with the help of an eighteen-year-old worker who had been laid off from his job in an electronics factory, I managed to sneak back to get the unofficial tour. In the rows of virtually identical giant shed-like structures, one factory stood out: the name on the white rectangular building said “Philips,” but through its surrounding fence I could see mountains of Nike shoes piled high. It seems that in Cavite, production has been banished to our age’s most worthless status: its factories are unbrandable, unswooshworthy; producers are the industrial untouchables. Is this what Phil Knight meant, I wondered, when he said his company wasn’t about the sneakers?

  Manufacturing is concentrated and isolated inside the zone as if it were toxic waste: pure, 100 percent production at low, low prices. Cavite, like the rest of the zones that compete with it, presents itself as the buy-in-bulk Price Club for multinationals on the lookout for bargains —grab a really big shopping cart. Inside, it’s obvious that the row of factories, each with its own gate and guard, has been carefully planned to squeeze the maximum amount of production out of this swath of land. Windowless workshops made of cheap plastic and aluminum siding are crammed in next to each other, only feet apart. Racks of time cards bake in the sun, making sure the maximum amount of work is extracted from each worker, the maximum number of working hours extracted from each day. The streets in the zone are eerily empty, and open doors —the ventilation system for most factories —reveal lines of young women hunched in silence over clamoring machines.

  In other parts of the world, workers live inside the economic zones, but not in Cavite: this is a place of pure work. All the bustle and color of Rosario abruptly stops at the gates, where workers must show their ID cards to armed guards in order to get inside. Visitors are rarely permitted in the zone and little or no internal commerce takes place on its orderly streets, not even candy and drink vending. Buses and taxicabs must drop their speed and silence their horns when they get into the zone —a marked change from the boisterous streets of Rosario. If all of this makes Cavite feel as if it’s in a different country, that’s because, in a way, it is. The zone is a tax-free economy, sealed off from the local government of both town and province —a miniature military state inside a democracy.

  As a concept, free-trade zones are as old as commerce itself, and were all the more relevant in ancient times when the transportation of goods required multiple holdovers and rest stops. Pre—Roman Empire city-states, including Tyre, Carthage and Utica, encouraged trade by declaring themselves “free cities,” where goods in transit could be stored without tax, and merchants would be protected from harm. These tax-free areas developed further economic significance during colonial times, when entire cities — including Hong Kong, Singapore and Gibraltar —were designated as “free ports” from which the loot of colonialism could be safely shipped back to England, Europe or America with low import tariffs.22 Today, the globe is dotted with variations on these tax-free pockets, from duty-free shops in airports and the free banking zones of the Cayman Islands to bonded warehouses and ports where goods in transit are held, sorted and packaged.

  Though it has plenty in common with these other tax havens, the export processing zone is really in a class of its own. Less holding tank than sovereign territory, the EPZ is an area where goods don’t just pass through but are actually manufactured, an area, furthermore, where there are no import and export duties, and often no income or property taxes either. The idea that EPZs could help Third World economies first gained currency in 1964 when the United Nations Economic and Social Council adopted a resolution endorsing the zones as a means of promoting trade with developing nations. The idea didn’t really get off the ground, however, until the early eighties, when India introduced a five-year tax break for companies manufacturing in its low-wage zones.

  Since then, the free-trade-zone industry has exploded. There are fifty-two economic zones in the Philippines alone, employing 459,000 people —that’s up from only 23,000 zone workers in 1986 and 229,000 as recently as 1994. The largest zone economy is China, where by conservative estimates there are 18 million people in 124 export processin
g zones.23 In total, the International Labor Organization says that there are at least 850 EPZs in the world, but that number is likely much closer to 1,000, spread through seventy countries and employing roughly 27 million workers.24 The World Trade Organization estimates that between $200 and $250 billion worth of trade flows through the zones.25 The number of individual factories housed inside these industrial parks is also expanding. In fact, the free-trade factories along the U.S.— Mexico border —in Spanish, maquiladoras (from maquillar, “to make up, or assemble”) —are probably the only structures that proliferate as quickly as Wal-Mart outlets: there were 789 maquiladoras in 1985. In 1995, there were 2,747. By 1997, there were 3,508 employing about 900,000 workers.26

  Regardless of where the EPZs are located, the workers’ stories have a certain mesmerizing sameness: the workday is long —fourteen hours in Sri Lanka, twelve hours in Indonesia, sixteen in Southern China, twelve in the Philippines. The vast majority of the workers are women, always young, always working for contractors or subcontractors from Korea, Taiwan or Hong Kong. The contractors are usually filling orders for companies based in the U.S., Britain, Japan, Germany or Canada. The management is military-style, the supervisors often abusive, the wages below subsistence and the work low-skill and tedious. As an economic model, today’s export processing zones have more in common with fast-food franchises than sustainable developments, so removed are they from the countries that host them. These pockets of pure industry hide behind a cloak of transience: the contracts come and go with little notice; the workers are predominantly migrants, far from home and with little connection to the city or province where zones are located; the work itself is short-term, often not renewed.