When he thought he was getting a bargain deal, my dad would say it was cheap at twice the price. It’s a saying that could apply to the price of labour in China, which is embarrassingly cheap, even when a worker manages to double his salary.
That’s what happened after a recent series of hard-fought landmark labour disputes at a couple of China’s biggest multinational employers, Honda and Foxconn. But when you are earning next to nothing, twice that amount is still uncomfortably close to nothing. Foxconn, a huge international electronics manufacturer, pays starting wages of $130 a month.
These issues came to mind when I watched Hu Jintao get the full red carpet treatment during his visit to Barack Obama’s Washington last week. The Chinese leader enjoyed a rare private dinner at the White House after a 21-gun welcome to the US capital with the pomp and pageantry usually reserved for those from whom one desperately wants something.
It’s a sad spectacle when the so-called leader of the free world gets down on bended knee before the world’s most undemocratic regime. In this case, the Obama administration is looking to China’s massive system of state capitalism to help kick-start the anemic US economy by letting its currency rise and allowing more imports from the US. China’s incredible growth rates point the way to the economic future. So say the experts, anyway.
Even though China’s economy routinely posts growth rates up to 10%, the adage above still applies. The Chinese economic system is far from a model to emulate, as many Western propagandists would have us believe. Even after two years of punishing economic recession, the US economy is light years ahead of China’s. The Gross Domestic Product, or the value of all goods and services produced in a year, amounted to $46,381 for every American in 2009. The GDP per capita in China was $3,735, placing it 97th among the world’s nations. (Canada’s economy, meanwhile, produced value equivalent to $45,657 for every Canadian.)
The problem for Western economies is not that China puts up artificial barriers to imports from other countries’ goods and services while it benefits from international free trade protection for its own products, though that is true. The real problem is that China uses its highly developed system of state repression to keep the price of its labour force artificially low.
And that’s a far bigger reason the US is in long-term decline than the relative strength of the yuan against the US dollar. By shipping production and the jobs that go with them to low-wage economies like China’s, the American business community is only creating the conditions for its own decline. People need an income to consume the goods businesses produce.
Reading the business community’s own literature makes this paradox abundantly clear. Just check the language in an article published in the International Journal of Commerce and Management “to help managers of multinational corporations (MNCs) in making location decisions.” China, the article concluded, “is easier for MNCs to conduct business in because of the current lack of enforcement of the labour laws.”
According to Obama, however, this kind of griping is now old news. With the Chinese dictator at his side at the White House, Obama told journalists that we should “break out of the old stereotypes that somehow China is simply taking manufacturing jobs and taking advantage of low wages.”
It may be an old stereotype, but it’s an old stereotype that has the advantage of being true. And while Obama voiced a few vague platitudes over increasing respect for human rights, business observers don’t think the notion of labour repression is out of date. The Reuters news agency quoted a researcher at New York’s Standard Chartered Bank, who noted that the tut-tutting over human rights is just a sideshow.
“I think for internal (US) consumption you have to make some noise,” said the researcher. “I don’t think it matters much in practical terms. Many other things matter more than the exchange rate. You would need an enormous move in the exchange rate to offset the cost advantage that China enjoys from low labour.”
Despite the repression, Chinese workers are beginning to fight back, as the series of strikes at Honda and Foxconn factories demonstrated. As a British Chamber of Commerce representative in Shanghai noted, the heightened labour militancy shows that China’s workers are increasingly unwilling to accept bottom-of-the-barrel wages or the militarized discipline that are feature of Chinese factories like Foxconn’s.
Ironically, China’s one-child policy is helping shift the balance of power toward workers. China’s workforce is aging, and despite a labour force that numbers 835 million, the country must now import workers to help maintain its own economy. This trend will only accelerate over the coming years.
Even with this glimmer of hope, however, the Chinese model of labour relations will be slow to evolve. Indeed, it isn’t even restricted to China. In Zambia, where Chinese firms have invested heavily in the mining industry, two Chinese mine managers were arrested last week for shooting 13 mineworkers during a labour dispute at the Chinese-run Collum Coal Mine last October. That could be construed as progress, I guess: until now the managers had ignored repeated summonses to appear in court.
What does all this have to do with us? Everything. How long can we continue exporting jobs and importing cheap goods along with the anti-democratic attitudes toward the people who produce the stuff we consume? As the ailing US economy demonstrates, it’s only when people are working and making a decent wage that a economy – and a society – can be healthy. Looking for help, as Obama appears to be doing, from a corrupt system that thrives only because of vicious state repression will not turn out to be a bargain for the desperate American president.