by Naomi Klein
490 pages. $17.00
When the young Canadian woman modestly handed me her book, with the quiet dedication “to Walden, with respect and solidarity,” little did I know that I was receiving a stick of dynamite.
Before our meeting at the World Social Forum in Porto Alegre, Brazil, I had, of course, heard of Naomi Klein and had read somewhere that her No Logo was fast becoming the anthem of the anti–corporate globalization movement. But nothing had prepared me for the dizzying intellectual experience of going through the book.
No Logo is compelling, but it's not an easy read. Reading Klein is like serving alongside a skilled commander who relentlessly probes the enemy's many defenses to locate the principal point of vulnerability. And just when the reader thinks Klein has identified the key to the defense, she reveals that this is only one episode in unraveling the dynamics of contemporary capitalism. This is deconstructive writing at its best, the product of a first-rate, restless mind that is not satisfied with drawing a solitary insight or two from her material.
Klein's analysis has its flaws, and these are not insignificant. But before I point these out, I want to unpack the gems, for they are priceless.
The age of the brand
Klein's essential point is that capitalism in the age of globalization is the age of the brand, the logo. Logos are everywhere, staring at you during your most private moment in the john; invading once clearly delineated public spaces like schools; becoming, like the Nike swoosh, the centerpiece of athletic and cultural spectacles. We live in a “branded world” where taste, cultural standards, and ultimately even values are increasingly defined by megabrands like Nike, whose swoosh has come to represent the ultimate in athletic style and whose slogan, “Just Do It,” identified Nike with the assertion of individuality.
The age of the brand witnesses the evolution of a new relationship between the producer and its product. Originally, brands were meant to assure the quality of the product; today the brand has detached itself from the product to become, instead, the selling point. Klein distills this insight into one gem of a paragraph that's worth quoting in full:
“Many brand-name multinationals are in the process of transcending the need to identify with their earthbound products. They dream instead about their brands' deep inner meanings—the way they capture the spirit of individuality, athleticism, wilderness or community. In this context of strut over stuff, marketing departments charged with the managing of brand identities have begun to see their work as something that occurs not in conjunction with factory production but in direct competition with it. ‘Products are made in the factory,' says Walter Landor, president of the Landor branding agency, ‘but brands are made in the mind.' Peter Schweitzer, president of the advertising giant J. Walter Thompson, reiterates the same thought: ‘The difference between products and brands is fundamental. A product is something that is made in a factory; a brand is something that is bought by a customer.' Savvy ad agencies all have moved away from the idea that they are flogging a product made by someone else, and have come to think of themselves instead as brand factories, hammering out what is of true value: the idea, the life-style, the attitude. Brand builders are the new primary producers in our so-called knowledge economy.”
Klein unsparingly deconstructs brand after brand: Levi Strauss, Starbucks, Pepsi, McDonald's, Wal-Mart, MTV, Tommy Hilfiger—to name just a few. But her bête noire is Nike, and its CEO, Phil Knight, emerges as the book's antihero.
Just brand it!
Nike began as a firm identified with a “high-tech” sneaker that was popular during America's jogging craze in the ‘60s and ‘70s. It was not until the mid-‘80s—after the jogging mania subsided and Reebok cornered the market in trendy aerobic sneakers—that Phil Knight pushed the transition of Nike from sneaker producer to lifestyle promoter to “essence of athleticism.”
First, Nike signed on Michael Jordan to personify the Nike spirit. While Nike rode the shirt tails of Jordan's basketball success to become a superbrand, it simultaneously turned Jordan into a global superstar with a stunning advertising campaign.
Then Nike went on to become a force in professional sports. It bought the Ben Hogan Golf Tour and renamed it the Nike Tour, and it set up a sports agency of its own to represent athletes in contract negotiations, not only with team owners but also with other corporate sponsors. Nike even created Africa's first Olympic ski team for the 1998 Winter Olympics in Nagano.
The third step for Nike was to “brand like mad,” meaning stamp the Nike swoosh on all clothing connected with sports: track suits, T-shirts, bathing suits, socks. And the aim of all this? “By equating the company with athletes and athleticism at such a primal level,” asserts Klein, “Nike ceased to merely clothe the game and started to play it. And once Nike was in the game with its athletes, it could have fanatical sports fans instead of customers.”
Now, having identified Nike with sports, Knight is moving to bring the swoosh to new frontiers like entertainment, where he is about to launch a swooshed cruise ship. The latest marketing doctrine motivating Nike and other successful brands is that profitability lies in creating “synergy.” Simply dominating an industry is no longer enough. The brand must expand laterally into other dimensions of existence, from sports to entertainment to school to culture, Klein argues. “If music, why not food, asks Puff Daddy. If clothes, why not retail, asks Tommy Hilfiger. If retail, why not music, asks the Gap. If coffee houses, why not publishing, asks Starbucks. If theme parks, why not towns, asks Disney.”
It was not only size that motivated the megamergers of the 1990s, says Klein. America Online's merger with Time, Viacom with CBS, Disney's purchase of ABC—all these and more were driven by the desire to enclose the consumer's waking life within the brand. Thus the fiercest fights are no longer between warring products but “between warring branded camps that are constantly redrawing the borders around their enclaves, pushing the boundaries to include more lifestyle package.”
The switch from selling a product to selling a branded lifestyle takes place in a market dominated by the “youth demographic”—hence the importance of being “cool.” And “cool,” Nike and Tommy Hilfiger discovered, resides in the black ghetto. So the megabrands cloned ghetto wear, test-marketed the styles among poor young blacks in America's inner cities, then spun them off into the white middle-class youth market.
But what the admen saw as innovative marketing, Klein sees as a parasitic relationship. And what the brands did to cultural expressions of youth alienation and revolt—punk, hip-hop, fetish, and retro—they also did to feminism, gay liberation, and multiculturalism. That is, they turned anti-establishment themes into promotional hits for the brands. Nike even offered Ralph Nader $25,000 to hold up an Air 120 sneaker while saying, “Another shameless attempt by Nike to sell shoes.” Nader refused.
Fleeing the factory
The shift from product marketing to brand marketing has relegated manufacturing to a subordinate role in contemporary capitalism. By contracting out production to nameless producers kept on a tight leash, the megabrand innovators saved money that could be plowed back into marketing the brand. “Traveling light” came into vogue, that is, shedding your own factories, cutting your workforce, and passing the dirty task of production to fly-by-night Taiwanese or Korean operators moving from one Asian export processing zone to another.
Some of the book's most poignant pages describe the lives of globalization's laborers: nonunion, horribly underpaid, permanently “temporary” female workers in the export processing zone of Rosario, Cavite, in the Philippines. Here the illusion of the benefits of foreign investment for developing countries is dashed to pieces by the reality of young lives wasting away in factories that are more like prisons; of wages so low that most of the workers' pay is spent on shared dorm rooms, transportation, and basic sustenance; of government officials so scared of investors leaving for Vietnam or China that they offer the footloose subcontractors all sorts of tax breaks and dare not allow unionism.
Again, Nike led the way. Shedding its factories in the North, Nike transferred its production to sub-contractors, who proceeded to do the dirty work of squeezing wages, institutionalizing forced overtime, and preventing union organizing. For the same subcontractor to churn out Nike sneakers along with Adidas and Reebok sneakers was not unusual. When confronted with accusations of exploiting labor, Nike, Adidas, and Reebok would wash their hands of responsibility, saying that these are matters to be resolved between the subcontractor and the workers.
What goes around comes around. What Nike and the other megabrands did to workers in the South, they also did to the young workers selling their products in the North: they eliminated permanent employment, did away with benefits, and paid them minimum wage. Many functions that were once performed in house by permanent employees have now been contracted out wholesale to temp agencies, which, Klein says, “have become full service human resource departments for all your no-commitment staffing needs.”
The new mantra for the street-smart CEO comes from Tom Peters: “You're a damn fool if you own it.” And the apotheosis of the age is the CEO for hire, like “Chainsaw” Al Dunlap. Paid millions in salary and stock options to put a corporation back in the black, his first act in office is usually slashing the workforce.
But any student of social movements could have told the wonder boys of brand capitalism that the combination of invasive advertising, cultural piracy, casualization of the labor force, and desertion of communities would create resistance, and that it would spur a backlash even among the very people whose taste, style, and values the megabrands had labored so hard to mold: the young.
In a series of well-publicized David-versus-Goliath confrontations in the 1990's, public opinion tilted the balance towards the Davids. Nike confronted the global anti-Nike campaign, and Nike blinked. Shell and Greenpeace fought at close quarters over the Brent Spar oil-drilling site in the North Sea, and Shell retreated. McDonald's sued two environmentalists in London for libel and ended up crying uncle.
What gives these campaigns their power is the vulnerability of the brand. If a corporation made a shoe that outperformed its competitors, then activists would have a hard time prying customers away no matter what the labor or environmental practices of the company. But when the product is a logo—that opens the door for undermining the carefully cultivated cool imagery by exposing corporate practices. Activists are learning that despite their limited financial resources, they can successfully take on the corporate giants. A corporation that has invested billions in its logo can afford to take substantial steps to protect its image and will capitulate when campaigns threaten their image and the demands are feasible.
By the late 1990s, such campaigns were merging into a real global anti-corporate movement, one that was highly political but, unlike the old left, decentralized, pluralist, nonhierarchical, intensely net-worked via the Internet, and uncompromising.
“When I started this book,” writes Klein, “I honestly did not know whether I was covering marginal atomized scenes of resistance or the birth of a potentially broad-based movement. But as time went on, what I clearly saw was a movement forming before my eyes.” Written before the Seattle Uprising that brought down the WTO Ministerial in December 1999, No Logo was prophetic.
But manufacturing matters!
No Logo is brilliant but flawed. At every opportunity, Klein reminds us that in today's capitalism, manufacturing has yielded the place of honor to marketing. But she pushes this insight a bridge too far.
Marketing differentiates otherwise similar products in the light industrial, retail, and service sectors. But once you get to the technology-intensive sector, manufacturing matters. Intel, for instance, functions like an old-fashioned brand. It does not denote a distinctive lifestyle like the Nike swoosh does; it signals that you are using state-of-the-art chips.
As in earlier eras of capitalism, the edge in production today is provided by superior capital resources, monopoly over high technology, and control over markets. Market dominance is not simply a function of good marketing. It is dependent on generating the capital resources that give the firm a lock on cutting-edge technology that it can translate into a superior product. Light industry, retail, and entertainment are critical sectors of the economy, but they dance to the tune of the revolutions in the techno-manufacturing sector.
Even in light industry, the focus on marketing instead of production is actually a defensive move stemming from developments at the level of production. The move from pushing the product to flogging the brand came after Asian producers began to swamp the US market with imports that were not only cheap but damn good.
Moving upmarket and leaving the lower end to the Asians and other developing country producers provided only temporary relief, since it was only a matter of time before the Asians could match the Northern firms in design and quality. Unlike the smaller garments and textile firms that sought to save themselves by pushing their governments to limit Asian imports via quotas, the megabrands, seeing that this was dead-end solution, chose an innovative defense: subcontract your production to the brutally cost-effective Asian producers but keep them in line by tightening up on “intellectual property rights” and securing the passage of draconian international legislation protecting the brand.
Thus the importance of the Agreement on Trade-Related Intellectual Property Rights (TRIPs), the centerpiece of the General Agreement on Tariffs and Trade/World Trade Organization (GATT/WTO). The TRIPs section on the protection of trademarks could easily have been drafted by Levi Strauss or Nike lawyers. So it is surprising that while Klein includes scattered comments on copyright laws, she fails to systematically examine the relationship between the emerging needs of the megabrands and the US government's push for the incorporation of TRIPs into the WTO agreement.
The most critical section of TRIPs is actually not the section on trademarks, but the section on patents. Patents on process technologies lie at the heart of high-technology manufacturing. TRIPs provides a generalized minimum patent protection of 20 years. It radically increases the duration of protection for semiconductors or computer chips. It institutes draconian border restrictions against products judged to be violating intellectual property rights. And it places the burden of proof on the presumed violator of process patents—a noteworthy reversal of the innocent-until-proven-guilty principle.
TRIPs was meant to protect the low-tech Nikes and Tommy Hilfigers, but it was intended most of all for the Microsofts, the Pfizers, and the Monsantos. These knowledge-intensive manufacturers are the drivers of the US economy. Monopoly is their game, and the WTO's TRIPs agreement is their medium.
Innovation in the knowledge-intensive manufacturing sector—in electronic software and hardware, biotechnology, lasers, optoelectronics, liquid crystal technology, and many other industries—has become the central determinant of economic power in our time. And when any company in Asia and other parts of the developing world wishes to innovate, say in chip design or software, it necessarily has to integrate several patented designs and processes, most of them from electronic hardware and software giants like Microsoft, Intel, and Texas Instruments. As a result, Koreans and others have swallowed a bitter pill: exorbitant multiple royalty payments to what has been called the American “high-tech mafia” keeps one's profit margins low while reducing incentives for local innovation.
The likely upshot of all this is that Asian high-tech manufacturers like Samsung or even Acer will follow the lead of their low-tech brethren in textiles and garments and subcontract production from the Suns, the Apples, and the Intels. TRIPs enables the technological leader, in this case the United States, to greatly influence, if not determine, the pace of technological and industrial development in rival industrialized countries, the newly industrialized countries, and the developing world.
So manufacturing matters, and in this age of globalized production, monopoly of technology provides the critical edge.
What about overproduction?
Klein's focus on marketing instead of manufacturing also leads to quasi-metaphysical assertions. She claims that today's corporations aim “to transcend the need to identify with their earthbound products” that is the driving force of today's corporations. If marketing has become so fierce and innovative, it is because of the exacerbation, owing to globalization, of the old contradiction that marked capitalism from its birth: the crisis of overproduction or underconsumption.
Capitalism is marked by cycles of expansion and contraction. In the expansive phase, firms expect continuing profits, so they invest in capacity. Overinvestment or overcapacity results, leading to a crunch in profits. In the current cycle, profits stopped growing in 1997. With tremendous capacity all around, firms tried to offset the plunge in profitability by reducing competition. Though “synergy” may have been a motivation in some cases, as Klein claims, eliminating competition was the goal of the most important megamergers and mega-“alliances” of the last few years—the Daimler Benz-Chrysler-Mitsubishi union, the Renault takeover of Nissan, the Mobil-Exxon merger, the BP-Amoco-Arco deal, and the blockbuster “Star Alliance” in the airline industry.
The US computer industry's capacity is rising at 40 percent annually, far above expected increases in demand. In the auto industry, worldwide supply is expected to reach 80 million in the period 1998–2002, while demand will rise to only 75 percent of the total. As economist Gary Shilling puts it, there are “excessive supplies of almost everything.”
Overproduction or under-consumption is a function of consumer demand. So the more corporations try to increase their profits by limiting competition, the deeper grows the crisis, since limited competition translates into layoffs and the transformation of the workforce into part-time, temporary, free-lance, and home-based workers. This means cutting the very consumer demand that is needed to stimulate production.
Income distribution is another factor limiting demand and inducing overcapacity. While the US economy expanded in the 1990's, news reports focused on the tight labor market and record low unemployment levels. But it was not until around 1997 that real wages registered a slight rise after years of stagnation or decline. The massive restructuring to regain profitability that marked the 16-year period 1979–1995 forced the bottom 60 percent of the US labor force to work for progressively lower wages. By the end of the period, their wages had fallen by 10 percent.
The restructuring that is supposed to have made the US economy supercompetitive has combined the development of tremendous capacity with the worst distribution of income among the major advanced countries.
Another mechanism used by corporations to relieve the crisis of overproduction and profitability is opening up new markets. This drive has intensified in the last two decades, which have seen trade and financial liberalization pushed on Southern economies by the World Bank, International Monetary Fund (IMF), and the WTO. Yet, while liberalization has enabled transnational corporations to penetrate limited middle-class and elite markets, it has negated these gains by visiting greater impoverishment and greater inequality on the mass market.
The number of people living below poverty level globally increased from 1.1 billion in 1985 to 1.2 billion in 1998 and is expected to reach 1.3 billion this year. According to a UN survey, there are now 48 countries classified as least-developed countries based on the proportion of the population living in great poverty—three more than a decade ago.
If we use income inequality as a measure of comparative purchasing power, the picture is even clearer. A UN study of 124 countries representing 94 percent of the world's population shows that the top 20 percent of the world's population raised its share of total global income from 69 to 83 percent. Tremendous wealth among the few at the top, tremendous poverty among the billion at the bottom, and a middle stratum whose incomes are eroding or stagnant—this is the contradiction responsible for the overproduction, overcapacity, and underconsumption wracking the US-dominated global economy.
The Bretton Woods institutions (the World Bank and IMF) and the WTO, which have played such a critical role in this process of global impoverishment, hardly figure in Klein's rogues' gallery. Yet these institutions are the enforcers of the global rules that benefit the transnational corporations (TNC's). Anti-globalization activists are correct in arguing that delegitimizing them will translate into tremendous uncertainty for all TNC's operating in the South.
Bursting the bubble?
Klein's neglect of the dynamics of production in the era of global capitalism is a blindspot that leads her to neglect the centrality of speculative capital. Nowhere in the book does George Soros, one of the two paradigmatic capitalists of our time (the other being Bill Gates), make an appearance. Alan Greenspan, the Asian financial crisis, the hedge fund Long Term Capital, the Citigroup merger, Robert Rubin, the “Wall Street–Treasury Complex”—these actors and events are either mentioned only in passing or absent.
Yet because of the crisis of overproduction and profitability in manufacturing, the US economy and the global economy are increasingly driven by finance and speculative activity, as analysts like Doug Henwood have pointed out. Diminishing returns to key industries have led to capital increasingly being shifted from the real economy to squeezing “value” out of already created value in the financial sector. They have also driven the liberalization of financial markets to allow the free flow of capital from one capital market to another in search of increasingly paper-thin advantages. And the IMF—about which Klein has little to say—has played a central role in eliminating the restrictions on capital movements in the Asian economies and other developing economies.
What resulted was essentially a game of global arbitrage, one played mainly by US financial operators. Hedge funds did simultaneous transactions in several markets, seeking to profit from the difference between nominal currency values and “real” currency values. Fund managers entered a market to engage in short-selling stocks, that is, borrowing shares to artificially inflate share values, then selling and hightailing it like the proverbial Natchez gambler. Attracted by high interest rates and fixed exchange rates, speculative investors brought their billions to fuel real estate and stock market bubbles that burst with the Asian financial debacle of 1997 and the Russian and Brazilian financial crises of 1998.
The interplay between speculative capital and high tech manufacturing firms is another key dynamic of finance-driven capitalism that Klein barely addresses. Increasingly, the relationship between Wall Street and the Silicon Valley/Seattle complex departed from the dynamics of the real economy. As overproduction drove out profitability in the “Old Economy,” the smart speculative set migrated to high-tech stocks. Here virtual capitalism took hold, based on the expectation of future profitability rather than on actual profitability, a dynamic exemplified by the rapid rise in the stock values of Internet firms that have yet to turn a profit, such as Amazon.com. Once future profitability rather than actual performance became the driving force of investment decisions, then Wall Street operations became indistinguishable from high-stakes gambling in Las Vegas.
The New Economy was essentially a speculative bubble that floated away from the Real Economy, with almost all players knowing that the bubble would burst at some point, but believing that somehow, unlike the rest of the herd, one would escape it by pulling out, having made a killing, in the nick of time. Not quite New Economy but not quite Old, the Nikes, Starbucks, and Barnes and Nobles were also sucked into the casino mentality, their direction being increasingly driven by mystical indicators—such as “shareholder value” and “earnings per share”—meant to give a scientific gloss to gambling behavior.
The bubble finally burst in the last few months, wiping out $4.6 trillion in investor wealth, a sum that, as Business Week points out, is half the US gross domestic product and four times the wealth wiped out in the 1987 crash. More important, the financial sector's ability to absorb investment that could not generate profits in the production sector has been shattered. Averted by speculative activity for about four years, the contraction—a deep one, it seems—has finally caught up with the global capitalist economy.
The culture of capitalism
Naomi Klein paints an unparalleled portrait of the culture of capitalism in the age of globalization. She also provides us with the best analysis yet of the rise of the anti–corporate globalization movement. She has, moreover, written an impressively insightful work on the dynamics of light manufacturing, the service sector, entertainment, and retail, where marketing has eclipsed manufacturing, where selling the product has given way to establishing the hegemony of the brand in the consumer's total lifestyle.
But the portrait is incomplete and one-dimensional. Nike and Tommy Hilfiger are not in the same class as Intel, Microsoft, Long-Term Capital, Cisco Systems, and Citigroup—the high-tech and financial giants that power the rest of the economy. Indeed, Nike and Adidas and Walt Disney ultimately dance to the tune of theWall Street–Silicon Valley complex. In the total economy, it is not “synergy” or brand imperialism that ultimately serves as the engine of change but the classical crisis of overcapacity in production leading to the hegemony of finance capital.
In sum, this is a book that is as brilliant as it is flawed. But then what great book isn't?