Wal-Mart's Union

The second in a series of dispatches from China

Well, I went to my first unionized Wal-Mart; unfortunately it had to be in China for the experience.

Three decades ago, with over 800 million people in farming and state-owned enterprises aging, China initiated a series of economic reforms. They chose to do what Russia failed to do: open itself to the idea of investment and what went along with it.

In opening its market, China made investment king -- and other than political stability -- it trumped all other considerations.

Today the Chinese government is feeling more and more confident in its dealings with multinational corporations, or Foreign-Owned Enterprises (FOEs). Once FOEs became a necessary and revered source of investment, they could do no wrong.

For big business, despite all their claims of wanting to promote democracy, the 1.3 billion-person Chinese market plus a dominant and stable government was too hard to resist in this new era. So throwing 20th century values to the wind, the corporate money rolled in, particularly along the eastern coast.

The financial capital Shanghai (and China's New York) constructed as much office space as Manhattan in 2005 alone. Half of the world's concrete was poured in China last year. By the 2008 Olympics, 110 new hotels will open for business in Beijing.

And last month, I said month, China reported a $10 billion trade surplus.

Wal-Mart simply overplayed their hand.

The Chinese Constitution allows workers the right to have unions by simply applying for recognition. The union tried to find, as they would say, "harmonious relations" with management, but Wal-Mart rebuffed them as they have unions everywhere. For two years the All-China Federation of Trade Unions (ACFTU) made efforts to organize workers, and Wal-Mart still resisted - that is, until the government and the union joined forces.

The workers stepped forward and Wal-Mart was "persuaded" to allow the workers' desire to be recognized. Today there are 16 stores organized, and growing interest in the union.

It's a huge signal not only to Wal-Mart, but also to multinational corporations and FOEs that investment was once supreme, but stability, workers, and the rule of law is now getting more attention. The ACFTU believes it will go from 30-40 percent union recognition in the private sector to 80-90 percent by 2008.

Today's lesson is that a more confident China is willing to set the rules on investment, and no employer is big enough to ignore them.

Tomorrow - what does this mean for the workers?