28.6.11

PRICE SCISSORS CUT BOTH WAYS.  For years, Chinese labor markets offered manufacturers the right mix of low wages and low skills.  No longer.
Worker anger is evident across Guangdong, which has been hit this month by a wave of strikes.  Hundreds of migrant workers fought police in Chaozhou in the eastern part of the province.  In the middle of the month, in the industrial center of Dongguan, 2,000 employees struck a plant owned by Japan’s Citizen Watch to protest long working hours and low pay.

And in Zengcheng, the “Blue Jeans Capital of the World,” thousands of migrant workers rioted after government-hired thugs knocked down a pregnant 20-year-old itinerant vendor.  For three days, migrants overturned official vehicles and set fire to government buildings.
Sure, there are High Concept explanations.
In general, modernizing societies are almost always unstable, especially after periods of sustained prosperity.  As Alexis de Tocqueville noted, the French Revolution followed an unprecedented economic advance and discontent was most evident in those parts of France that had seen the most improvement.  Unfortunately for China’s Communist Party, these trends from Europe’s 18th century also played out in Asia’s 20th, particularly in the Confucian society of South Korea two decades ago and in Chinese-dominated Taiwan a little later.

To make matter worse for themselves, China’s recent leaders have replicated all the conditions under which protests flourish.  They have, without this being their intention, adopted policies that have widened the wealth gap, denied the appearance of justice, and promoted runaway corruption.  At the same time, Hu and his predecessor, Jiang Zemin, tried to make their rule appear benign, thereby lessening fear in society.  So workers in today’s China, more angry and less afraid, are now assertive and defiant.
Their defiance has the support of the Invisible Hand.
Employees these days have much more bargaining power.  Back at the Simone factory in Panyu, management said it would fire those who did not return to work.  That threat used to be effective, but not now.

Why not?  For several years, Guangdong has been short of help.  Some residents have become relatively well-off and no longer need mind-dulling employment in factories, something evident in Shenzhen, the booming city bordering even-more-prosperous Hong Kong.

Moreover, China’s workforce is starting to level off.  Sometime between 2013 and 2016—and probably at the earlier end of the range—the number of the country’s workers will peak and then begin to decline.  That will leave employers in Guangdong scrambling for migrants, who now prefer jobs closer to their homes in interior China.  That’s one reason why Foxconn, operating the world’s biggest factory in Shenzhen, is locating facilities in inland provinces.
Now the commissars have two problems. First, low wages are still a signal of low productivity, the hardest workers being just off the farm notwithstanding. Second, as competition for workers bids up wages, backward bends the supply curve.

Leon Trotsky's acolytes have different plans for China.
Even a local social explosion in Zengcheng—known as the “Jeans capital”—has reverberated throughout the world. The satellite city of Guangzhou produces one third of the world’s jeans, for some 60 different international brands. Zengcheng is only one of many manufacturing “capitals”, each specialising in a single commodity, mainly for export.

Broader industrial unrest in China would have far-reaching ramifications for international corporations, ranging from German machine exporters to the mining giants in Australia and Brazil. General Motors now produces more cars and trucks in China than in the US and Walmart is dependent on China for most of its cheap consumer goods. Apple’s iPhones and iPads are made by huge sweatshops run by Foxconn. Foreign-owned subsidiaries directly employ 16 million Chinese workers, with many millions more involved in complex supply chains for transnational corporations.

The angry protests of rural migrants in Zengcheng were sparked by the rough handling of a pregnant woman by local security guards. Underlying the incident, however, were sharpening social tensions produced by soaring prices for food, housing and other essentials. The wage rises won by workers last year in a series of strikes that began at a Honda plant have been completely eroded by inflation.
Comrade Trotsky suggests that China is the Middle Kingdom of bubbles.
In an online survey in March, the Global Times found that that 94 percent of respondents regarded themselves as “marginalised” by the current social order. Typical of those who voted “yes” was one person who declared that China was “a heaven of the rich, while the poor are bitterly struggling for employment, housing and survival.” In one way or another, this seething social discontent in China will eventually find its expression in a mass movement against the Stalinist regime in Beijing.

In Europe and the US, having bailed out the banks and major corporations, governments are now imposing the huge debts incurred in the form of drastic austerity measures. Terrified at the prospect of rising unemployment and discontent, the Chinese regime responded to the global financial crisis by providing massive stimulus packages and opening the credit floodgates to keep the economy growing at a frenetic pace. These policies were never sustainable in the long term. Already Beijing is applying the credit brake that will inevitably lead to a slowing economy, rising unemployment and wider unrest.

If there is one lesson that Chinese workers should to learn from the protests in the Middle East, Europe and the US, it is that no amount of pressure is going to force the regime in Beijing to make any fundamental changes.
Perhaps the Final Crisis of Capitalism is at hand. On the other hand, perhaps cheap Chinese labor is yet another scarce resource, whose price will be bid up the same way any other price is.

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