This post is really a continuation of a conversation that started here with my post about China’s recent weaponization of space, and continued over at Knight in Dragonland’s site. Now I’m bringing it back over here because my response is essentially a new post in and of itself.
To set this up, I’m going to quote liberally from one of Knight’s recent comments because what he says is a defense of cheap overseas labor that I’ve heard many times:
Companies are going to utilize cheap labor to reduce costs, whether it’s in China or someplace else. Those workers are breaking down the doors to get those jobs because they pay many times more than they could make anywhere else in their country. Its not like those laborers will skip down the road to Shangri-La if the “evil†multinationals go away. More likely they’d end up begging on the street, picking through garbage dumps or selling their children for prostitution.
Transfers of labor save more than “a few dollars.†They save BILLIONS of dollars. A company can employ many Chinese laborers for what it would cost to employ one American, and the income for those workers often increases several-fold over what they could earn anywhere else in their own county. At the cost of one American job, 5, 10 or even 20 foreigners can vastly improve their income and the quality of life for their family. That’s what happens most often when jobs travel to cheaper labor markets … one American makes 20% less, but now ten foreigners can send their children to school and feed their entire extended family.
Do some companies take advantage of the desperation of poor foreigners and abuse them? Of course. Should those companies be held accountable? Of course. But we need to tread cautiously. Sometimes our well-meaning outrage at these “deplorable†working conditions ends up sending hundreds of workers to the streets to beg because now they have no job at all.
If I may summarize, the arguments given above basically boil down to these points: (1) We’re doing them a favor because these workers would be worse off without this labor we make possible, and (2) we must have cheap labor to keep our economy going. These arguments are not unique to Knight. I’ve heard them from many of my friends, read them in magazines, heard them propounded on TV, etc.
But I don’t buy them. I don’t accept them. I think they’re dehumanizing. I think they’re nothing more than a rationalization to help us assuage our guilt over the treatment of Chinese workers and other workers like them.
While these arguments try to paint a pretty face on Chinese labor, the truth is not so rosy. Take a look at China Labor Watch or the Congressional-Executive Commission on China report (2005) and judge for yourselves. Or read this from the 10/15/2006 San Francisco Chronicle (emphasis mine):
“The exploitation here is getting harsher”, said Han Dongfang, a union advocate with the China Labor Bulletin in Hong Kong. “On one hand we have better laws than ever. But in reality, there is no enforcement.”
Activists who try to promote change face harsh reprisals. About 35 labor activists are languishing in Chinese prisons, according to human rights groups. Pang Qing Xiang, who spent nine months in prison for organizing unpaid workers in his factory, said detainees are routinely abused.
“To them we were nothing,” said Pang, 60, who is from northeastern Liaoying province. “Certainly not people who had a right to demand anything, not even pay. When I told them work without pay is slavery, they just laughed.“
On September 4, 2005, Li Qiang wrote in the Seattle Post-Intelligencer:
Last year, total U.S. trade with China reached $231.4 billion. Of this, $196.7 billion consisted of imports from China. The reality of these imports is that they arrive on the backs of millions of Chinese workers. These workers labor six days per week (seven during peak season), 13 hours per day, for as little as 35 cents per hour. They do not have pensions or Social Security; they do not have unemployment or medical insurance. By the time they reach age 40, they start having difficulty keeping up with the heavy workload. Soon, they are left with nothing….
Rapid economic development has greatly increased demand for the consumption of energy, which has led to overexploitation in small coal mines and oil fields. To reduce the production cost, such exploitation often takes place with cheap labor and without safety measures. This condition has caused frequent safety incidents. Many lives of mining workers were lost. The cheap energies produced in this way are consumed in industrial production, particularly in export-oriented manufacture industry, which is another reason why products made in China are so cheap in the international market.
The Telegraph reported just a few days ago on 548 slave laborers — 38 of them kidnapped children — who were rescued in the Henan and Shanxi provinces of China. The article concludes, “But workers’ rights and safety continue to take second place to the need for increased economic output. China’s labour laws stipulate a 40-hour working week and that no one under the age of 16 can work in a factory, but local officials habitually turn a blind eye to poor working conditions. Fifteen-hour days are commonplace for the workers in the factories of Guangdong that turn out everything from clothes and toys to MP3 players. At the same time, China’s mines are the deadliest in the world. Last year, 4,746 miners died in accidents.”
How can anyone read these reports and not have compassion on these people? These are people we’re talking about. People with flesh and blood. Can we really, honestly sweep this away by stating “oh, yes, that would be a horrible human rights violation here, but there, well, that’s good over there.” Is human suffering somehow different if it happens in China than if it occurs in the U.S.? Does the value of human rights change with the cost of living? That’s essentially what these arguments suggest.
I think the arguments given in support of Chinese labor are weak for another reason, and that is because they’ve been made and debunked before. There was a time when the “cheap labor” that Americans sought to justify was slave labor. I don’t say this flippantly, nor am I trying to be carelessly incendiary — I’ve thought long and hard about this, and I see a very serious, clear parallel. Pro-slavery arguments from the time of the Civil War often talked about how slaves benefited from the benevolence of their masters, and how this was superior to the working conditions in the northern factories. They also talked about how slaves were content with their servitude, and used this as a defense for continuing the institution.
Ever read the Declaration of Causes of Seceding States? It’s interesting that Texas used the “we’re doing them a favor” argument. Take a look at this quote (emphasis mine):
…the servitude of the African race, as existing in these States, is mutually beneficial to both bond and free, and is abundantly authorized and justified by the experience of mankind…
And the Mississippi declaration explained how this labor was the underpinning of their economic system:
Our position is thoroughly identified with the institution of slavery — the greatest material interest of the world. Its labor supplies the product which constitutes by far the largest and most important portions of commerce of the earth. …These products have become necessities of the world, and a blow at slavery is a blow at commerce and civilization.
I would contend that the arguments made in 1861 to defend slavery are the same arguments being made today in 2007 to defend cheap overseas labor, and that the arguments are no less morally repugnant now than they were then.
Rev. John G. Fee had this retort in 1851 in response to those who claimed they bought their slaves as “an act of mercy” that kept the slaves from enduring “cruel treatment”:
Carry your mercy a little further, as the primitive Christians used to do, and let him or her have their entire liberty—their “inalienable rights.” Though you may have rescued him or her from the robber’s bands, that does not justify you in continuing to be a robber, a withholder of the “inalienable rights” of man. You are doing the same thing, in quality, that the former master was doing; the quantity of suffering is a little diminished.
I think this is directly analogous to the situation in China. If you think that the labor we provide is somehow helping them, consider that they still are being robbed of their inalienable rights. The quality of what we’re doing is the same as what they would experience without our trade, but the quantity of suffering may be “a little diminished.”
Perhaps a former slave can teach us a little something about “cheap labor” and put those words into proper perspective for us. His name is Frederick Douglass (1818-1895), and he bore the scars of slavery, both physically and symbolically. He was “cheap labor,” as we so callously call it, and he had this to say about it:
Cheap Labor, is a phrase that has no cheering music for the masses. Those who demand it, and seek to acquire it, have but little symapthy with common humanity. It is the cry of the few against the many. When we inquire who are the men that are continually vociferating for cheap labor, we find not the poor, the simple, and the lowly; not the class who dig and toil for their daily bread; not the landless, feeble, and defenseless portion of society, but the rich and powerful, the crafty and scheming, those who live by the sweat of other men’s faces, and who have no intention of cheapening labor by adding themselves to the laboring forces of society. It is the deceitful cry of the fortunate against the unfortunate, of the idle against the industrious, of the taper-fingered dandy against the hard-handed working man. Labor is a noble word, and expresses a noble idea. Cheap labor, too, seems harmless enough, sounds well to hear, and looks well upon paper.
But what does it mean? Who does it bless or benefit? The answer is already more than indicated. A moment’s thought will show that cheap labor in the mouths of those who seek it, means not cheap labor, but the opposite. It means not cheap labor, but dear labor. Not abundant labor, but scarce labor; not more work, but more workmen. It means that condition of things in which the laborers shall be so largely in excess of the work needed to be done, that the capitalist shall be able to command all the laborers he wants, at prices only enough to keep the laborer above the point of starvation. It means ease and luxury to the rich, wretchedness and misery to the poor.
Cheap labor is, in a word, exploitation. No matter how you want to try to justify it or rationalize it, it’s nothing but a euphemism for exploitation. And its acquisition is nothing of which we should be proud. The U.S. should not have normal trade relations with China until they comply with international labor standards and improve their human rights record.
So now I support slavery? Wow. You really were ticked about that McCarthy comment, weren’t you, C.J.?
I’ll have more to say later, but basically your argument boils down to the idea that we shouldn’t trade with ANY Third World nation because they don’t pay their workers American-equivalent wages and have American-style working conditions? That is a truly impossible set of criteria. And if we can’t trade with dictatorships, then we lose the vast majority of the world’s oil supply. I guess we could still trade with Canada, Western Europe, Australia and Japan.
Wow. I’m sure THAT wouldn’t collapse the entire world economy and make the Great Depression look like a walk through the candy store.
Maybe we could still feed ourselves … we do have a great agricultural infrastructure. Of course we couldn’t run the tractors to harvest the crops, so nevermind. We’d be starving and cold. All of us. Great …
That’s the logical conclusion of this protectionist line of thinking. That would drive down the standards of living for EVERYONE, here and in China. Great plan.
It’s not so black and white, C.J.
It may not be black & white Knight, but it isn’t OK to exploit these people so that the USA CEO types can have 8 figure incomes, drive Bentleys, vacation in exotic tropical locations and receive millions more in bonuses and stock options. I’m sure the money their businesses are making isn’t going into anyone’s pockets but their own. Its turned from being in business to being in greed.
Actually, we don’t need cheap labor. Management WANTS it, in the sort term, because it puts a few more bucks in their pockets. In the long run, depressed wages means fewer people to buy the goods being produced. As a libertarian, I’m not arguing for price controls, wage controls or anything. I am arguing that U.S. corporations cannot be allowed to be in any kind of partnership with a business or government that practices outright slavery, which is something that is proven every day to be happening in China. Slavery is specifically outlawed in the U.S. Constitution, and Congress has the power to pass laws to enforce this, but our shelves are sticked with slave-made merchandise.
Knight, clearly it’s impossible for me to discuss this subject without it coming across as a personal attack. All I can say is that I don’t intend it as such. I don’t believe you support slavery and I wasn’t trying to say that you do. I’m trying as best I can to evaluate the pro-cheap-labor arguments and articulate why I think those arguments are wrong. In my mind, I’m attacking the philosophy, not individuals. I don’t know how to better express that, but if you have any suggestions, let me know.
I have two points:
First, I think an awful lot of Americans don’t realize what conditions in Chinese factories really are like — they see the Potemkin factories and believe. They don’t know these places make Triangle Shirtwaist look like a model of relaxed labor with excellent safety standards. They don’t know that rape and sexual assault are management perks for male managers in female factories. Paying regionally-appropriate wages in third-world factories THAT MEET FIRST-WORLD SAFETY STANDARDS is not inappropriate and is not necessarily exploitative (in fact, paying first-world wages in a third-world factory sometimes destabilizes the local economy). But when safety and environmental standards are lower than they are in the first world, we are quite LITERALLY saying to these people, “Your lives are worth less than American lives. They deserve protection from danger. You do not because you are worthless.”
Second, Billy is right on: Ford was smart to pay his workers high wages because THEN THEY COULD AFFORD TO BUY FORDS. A working class that has no purchasing power isn’t good for any economy in the long run. And it makes me DARN nervous that an awful lot of the US doesn’t make any STUFF. We make and attempt to sell IDEAS, and the trouble is who will buy ideas when they don’t have food? To whom are we selling iPods and Tom Hanks movies except the first world? The third world sells us useful things, then we sell ourselves useless things, and they don’t want our things because our things are expensive and useless.
Rockin’ post, CJ.
CJ, I love the last sentence of your post.
I agree that we should strive to hold American companies’ overseas ventures to the same standards of pollution, working conditions, etc. as they’d have to maintain in the US.
To Knight: To paraphrase, you said that we can’t enforce good working conditions (and the like) for imported goods because then we’d be prevented from tapping much of the world’s petroleum resources. I say damn right! If the externalities of dirt-cheap oil are costly enough (in a way that isn’t currently accounted for in market prices), it’s absolutely the right thing to start looking elsewhere for energy.
CJ is right on target. And, as I said previously, this “cheap labor”, “free trade” and open borders policy will reap and frightful harvest, just like slavery did. As was once said, there is no free lunch. You have to pay now or pay later.
CJ: Bullseye!
Is Knight in Dragonland the one who says the USA must be held to a higher standard?
Keep in mind that the knight’s profession is one of the few with both formal quotas for foreign workers (amendment to the 96 budget), and informal ones (med schools keep admissions artificially low, med schools were even closed in the 1930s).
I haven’t had the time yet to really respond fully to CJ… there is a lot of good points he makes but there is also a great deal of chauvinism as well in his post and in the responses many of you make.
The central problem as I see it, lies somewhere else. The central problem is the strength of the dollar versus other currencies, particularly third world currencies. An apple is an apple but why does it cost say 50 cents here and a half cent there? It has everything to do with the rate of exchange. You can grow that apple there and it costs you half a cent. Then you ship it, paying duties and transit costs, leaving you still well below the 50 cent mark. Mark it up a little and your profit will be better. There is less incentive to grow apples here. Keep in mind those apples could be radios, tvs, computers, or automobiles.
We benefit from the strong dollar in the form of low interest rates. I would suggest that those low rates that you all bought your houses with are artificially low. They have become a means to subsidize our government deficit. The financial sector has benefited the most at the expense of domestic commoditized manufacturing. Sure businesses can get cheap loans too but it can be much more profitable to sink those dollars into overseas plants than domestic.
We are hurt by the strong dollar, in that there is less incentive to invest in lower skilled manufacturing domestically. As the skill sets improve abroad, that disincentive extends to higher skilled enterprises. Mind you the skill sets are improving in China, India and elsewhere.
What is the solution? Well first off free floating currencies are a must. China is slowly addressing this but perhaps not fast enough for domestic politics. Major retailers like Wal-Mart, who benefit a great deal have little incentive to change this imbalance. The second big move that can be made is to significantly raise prime interest rates. Naturally politicians will balk at this but we have a MASSIVE deficit with interest rates that do not reflect this problem. The third thing naturally is to bring down the government debt !! Lowering the debt will temper interest rates.
As a nation we can have viable domestic manufacturing and still have a powerful financial sector but are current policies do not reflect this. Current policies strongly favor financial interests. To continue down this path is reckless.
A suggested read is American Theocracy by Kevin Phillips. There are three themes in the book: oil, religious right, and finance. The finance section provides some good historical information regarding the roles of finance in the rise n fall of nations.
If the dollar were to weaken (meaning our dollars buy less of their currency), manufacturing would become more attractive here. Then we could compete on a more level playing field where productivity matters more than currency rates. We all know that America has some of the most productive workers in the world.
“The central problem is the strength of the dollar versus other currencies, particularly third world currencies. An apple is an apple but why does it cost say 50 cents here and a half cent there? It has everything to do with the rate of exchange. You can grow that apple there and it costs you half a cent. Then you ship it, paying duties and transit costs, leaving you still well below the 50 cent mark.”
I’m not sure this captures the central problem; the low costs of foreign labor have little to do with the exchange rate and a lot to do with lack of regulatory costs in the third world. (As well as a ease of “drafting” slave labor in some countries.)
Second, the apple is a bad example, because the apples COULDN’T be radios, TVs, etc., because food prices operate in a very different way than other prices; necessities fluctuate differently than luxuries; and commodities fluctuate differently than branded products.
The cost of the apple doesn’t have much to do with the exchange rate between Chile and the US; it has to do with what apple farm labor costs in Chile vs. the US, as well as a the general costs of running an apple farm in the US. A US apple farmer probably has to pay his broadband costs and his water bill. A Chilean apple farmer probably doesn’t have either; his “overhead” for maintaining his home is much lower because his standard of living is so much lower.
International food prices are also soooooo restricted but subsidies, treaties, duties and tariffs, and agricultural commodity inspection costs that they’re not particularly meaningful as a comparison for other less-regulated markets.
A small step is to get something like the Better World Shopping Guide: Every Dollar Makes a Difference. It grades various companies on their social and environmental responsibility, thus allowing the consumer to ‘vote with their dollars’ and avoid products made by slave labor. Other guides like it are available as well. Not buying a chocolate bar from a company whose suppliers use child labor might not make a huge difference, but it means that your hard-earned money doesn’t go to support something evil.
What US dollar strength is mahkno talking about? The US dollar IS weak. The US dollar HAS weakened against other currencies over the last 5 years 18% to 30% depending on the currency.
China is right to keep a tight range on its currency. It saw what happened to Thailand in 1998 with their floating currency. Place some speculators in the market along with a manipulative central banker and there goes your economy. Maybe China should set up a currency board instead but it is doing just fine IMO.
As far as US interest rates, politicians have no say in increasing or decreasing interest rates. Only the Fed Open Market Committee and its chairman have that power. Raise rates now and along comes higher unemployment and possible recession. Rates remain relatively low helped by strong foreign investment into the US.
The federal deficit that some people love to banner has been in significant decline for over 18 months. It’s been written about in all the papers and on the internet. Read about it some time.
The rest of mahkno’s patchwork economic theory is equally erroneous if not simply laughable and I suggest to mahkno that he also play catch up on information before posting such inaccurate dialogue.
C.J. – man, do we have a failure to communicate lately or what? My “you think I support slavery” comment was meant to be tongue-in-cheek, but I forget sometimes that inflection doesn’t carry through on the internet. I didn’t take this post as an individual attack, and no apology is necessary.
Now, let me rebut …
Since China began instituting capitalist market reforms and opening its markets in the late 70s, the poverty rate in China has plummeted. In 1981, 53% of the population were impoverished. In 2001, only 8% were below the poverty line.
That’s an amazing turnaround for over a BILLION people in just 20 years. Not all of that can be linked to U.S.-China trade, of course – agricultural reforms in the ’80s contributed greatly. However, China is becoming an increasingly industrialized and urbanized society and increasingly dependent for their continued success on trade with the United States (we’re their largest trading partner), Japan and Europe.
Unfortunately coinciding political and legal reforms are only slowly materializing, but that is happening. Elections are starting to be held on the local level, and legal codes are being modernized and sometimes even fairly enforced. Too much still hinges on the local Communist Party official whose hand you have to grease, but change is happening.
I agree that these stories of abusive labor conditions – like the one of the Shanxi kiln workers shown in the picture above – are appalling and deeply concerning, and I hope human rights organizations continue to spotlight them and help bring the perpetrators to justice.
Just a reminder to everyone … that is what’s happening to the bosses at the Shanxi kiln where that picture was taken. A group of 400 fathers looking for their migrant laborer sons posted an open letter online, bringing official attention to the situation. In response, the laborers were freed and the Chinese government has arrested and charged five people who operated the kiln, and a local Communist Party official is under investigation for his connection to them. We’ll just have to see if they get a slap on the wrist or well-deserved punishment.
Back to my main point … while you can post all the anecdotes about slave-like labor conditions that you want, the cold hard facts are that the vast majority of Chinese (which means literally hundreds of millions of people) have seen enormous improvements in their standard of living over the last 20-30 years.
Just take a gander at the skyrocketing GDP numbers. 70% of that GDP is in the private sector. Per capita, with adjustments for purchasing power parity, China is now in the middle of the economic pack. Just 20 years ago, they were floating near the bottom.
Have some people been left out of that prosperity? Absolutely, but the same can certainly be said about our own capitalist system. Have some Chinese businesses and Communist Party officials taken advantage of the desperation of rural migrants and broken labor laws to maximize profits and succor bribes? Of course, but I can’t get past the numbers of Chinese – the absolutely overwhelming numbers – whose lives have improved VASTLY given our current trade relationship.
Let’s not forget that American consumers benefit from this relationship as well, and in many ways that’s not a bad thing. It helps keep costs low for American families on limited budgets. That’s why the evil Wal-Mart is so successful.
Newfound Chinese prosperity would be severely curtailed and maybe even reversed by any trade war or sanctions regime (depending on how tight and effective the stricture), and American consumer prices would increase, raising the specter of inflation. Such tactics would also serve to embolden hardliners within the Chinese government to even further clamp down on dissent – making China less prosperous AND with even fewer freedoms than are now enjoyed. Militaristic saber-rattling and “evil empire” / “Axis of Evil” rhetoric – especially when our armed forces are bogged down elsewhere and the the threat is essentially empty – produces the same result.
Is the current situation ideal? Absolutely not. But I’m not hearing any solutions here that wouldn’t make the situation much, much worse – for the Chinese people, for the American people, and for the interests of the United States.
Another good site for tracking the environment- and labor-related performance of major companies is Co-op America’s ‘Responsible Shopper’ program.
www [dot] coopamerica [dot] org/programs/rs/
(sorry for the non-link, but CJ’s software eats every actual link I try to post)
Here’s Ben’s link:
http://www.coopamerica.org/programs/rs/
Patrick,
By what prism are you judging whether the U.S. Dollar is weak? Versus the Euro that was introduced in 2002? Sure, the Dollar has weakened in the last couple years but that hardly leads to the conclusion that the Dollar is WEAK. Hardly. The Dollar is still THE reserve currency of nations around the world and major corporations. That is not the role of a weak currency.
You are correct regarding Chinese policy towards its own currency. Look carefully at what you say. What is correct for China may not be good for the U.S. economy. Should the U.S. castrate it’s domestic manufacturing capacity in an effort to ‘stabilize’ China? Which is worse a less stable China or a United States without the manufacturing capacity to defend itself or provide a foundation for our economy? That is a tough choice. I think there is room for some middle ground where domestic manufacturing can operate on a more level playing field where productivity matters more than currency valuation.
You are correct that the Federal Reserve operates largely independent of the legislative and executive branches. For the most part that is a good thing. The problem is we have this enormous debt ($8,813,764,402,186.40 as of 6/20 src: Treasury Dept.) that cannot be avoided yet we have a Federal Reserve that keeps trying to run from it. Perhaps we need a chairman with a different approach. At some point we do have to take our medicine. Do we wait for the market to do it for us painfully or can we control it to some degree? I think we can. Two things need to happen together, gradual rising of interest rates, to more accurately reflects that yes we are in way over our heads financially, and an aggressive approach to reducing the Debt!
You mention the problem of unemployment with higher interest rates… in a tie to immigration, don’t you think there would be less pressure to bring in illegals if unemployment was higher? Historically our unemployment rate is extremely low, much below what most economists would consider desirable or ‘normal’.
The deficit, yes the deficit has been reduced ever so slightly in recent months. Admittedly, the President has not gotten the usual kudos for an economy that seems to be doing fairly well overall. But BushCo’s deficit, despite its slight reduction, is still the HIGHEST of any President EVER. The deficit is just our annual positive or negative accounting of our budget. There still looms the DEBT which I gave a number to earlier. Not only do we have to reduce the deficit, but also the debt.
as a funny little side highlight… if you want to reduce the debt, the Treasury will gladly take your checks. Yeah, I wonder how many checks they get a year?
“How do you make a contribution to reduce the debt?
Make your check payable to the Bureau of the Public Debt, and in the memo section, notate that it is a Gift to reduce the Debt Held by the Public. Mail your check to:
Attn Dept G
Bureau Of the Public Debt
P. O. Box 2188
Parkersburg, WV 26106-2188 ”
Interesting link: http://www.treasurydirect.gov/govt/resources/faq/faq_publicdebt.htm#DebtOwner
I’ve read your entire responsorial post mahkno and with all due respect it is apparent to me that you really don’t know much about or have basic understanding of the subject which you are writing about. I could point out your errors from the dollar, euro, employment, the fed to the deficit but I am sure all I would get is another uninformed response tinged with politics.
But I will add that the Fed is set up as an independent (part governmental, part private) entity precisely for that reason. To keep the POLITICS OUT of money policy making. This is partially why Thailand fell in 1998. The politicians attempted to get the economy to fit their policy. It didn’t work.
If you think Alan Greenspan wasn’t playing politics or being influenced by politics, you are deluding yourself.
“uninformed response tinged with politics.”
Bring it.. I am sure the pot has few things to say to this kettle.
My “politics out” statement concerning how the Fed is set up is reference to the fact that the Fed makes policy decisions wholly on its own and without the approval, blessing or OK from either the congress or the executive branch. Neither has say or sway in any political way on how the Fed comes to its decisions. For example, neither branch can threaten witholding of funding because the Fed is financed independently and internally through its open market activities.
Greenspan, for the most part, performed very well as chairman but I can understand how some say he politicized the Fed during the latter years. But he played nice with Reagan for a year, Bush Sr. for 4 and Clinton for 8. Only when Bush Jr. came in did the politicians began to lay into him over his flip-flop tax cut stance.