Reports from the Economic Front

The Asia Times Online calls it “‘Occupy’ with Chinese Characteristics.” Whether Chinese activists identify with the Occupy Movement is unclear.  What is clear is the growing activism of:

a confrontational vanguard of young people – high school students and twenty-somethings (collectively known as “after 80s” and “after 90s” for their birth years) who appear quite happy to mix it up violently with the cops and cadres.

The most recent confrontation took place on July 28^thin Qidong.   Qidong, as the Austalian Socialist Alternative explains,

is located on an estuary of the Yangtze River; across the way stands China’s biggest city, Shanghai. The Yangtze River Delta is one of China’s richest regions, but high speed economic development has come at the cost of severe environmental destruction. For example, more than half of coastal areas in Jiangsu province (where Qidong is located) are categorised as “seriously polluted zones” by the Ocean and Fishery Bureau. The main source of pollution is the industrial wastewater illegally discharged by corporations.

The Chinese government wants to build a new pipeline that would take wastewater from a special economic zone near Shanghai to a major Qidong fishing port on the Yellow Sea.  The pipeline would serve a paper mill and nearly completed pulp plant, both of which are owned by a large Japanese multinational, Oji Paper Company of Japan.  The people of Qidong don’t believe Chinese government claims that the wastewater will be safe and have voiced opposition to the pipeline since 2009 when the government first proposed its construction.  

THE RESISTANCE MOVEMENT IN ACTION

Here is a report from a Japanese newspaper about what happened in Qidong:

About 5,000 people filled the streets in central Qidong before 6 a.m., when the rally began. The protesters began chanting, “Protect the environment” against the dangers posed by a plan for a drainage pipeline into local waters.

But less than 10 minutes later, the crowd broke through a row of police officers blocking the main street and started marching toward the city government building 1 kilometer away. The demonstrators became louder after they reached the building.

Several minutes later, they pulled down the steel gate and swarmed over the premises.

About 2,000 occupied the inner courtyard, several thousand on the street in front of the city government building and many others in nearby structures overlooking the building, bringing the total of protesters to more than 10,000.

Here are some pictures that help to give a feeling for the day’s events:

This was, as Socialist Action describes, a well planned action:  

In order to stop this disastrous project, small-scale protests had been occurring since June, but were suppressed by the local government with various means. When China’s summer school holiday began in July, many students in Qidong decided to help build a bigger protest movement. They used social media to spread the information, but also produced many leaflets “To the people of Qidong” and distributed them in shopping centres and other public spaces. . . .

Big banners of petition with countless signatures were carried in the middle of the column, saying “Resolutely Resist Oji Paper Discharging Wastewater at Qidong”. Organisers equipped with megaphones led the chanting: “Opposing Oji Paper, defending our home!” A teenage woman, holding an anti-pollution t-shirt with her mother, marched proudly in the front of the contingent. More people arrived. The demonstration was growing like a rolling snowball.

People were taking photos from the roadsides and posting them online. Within hours, the news of Qidong had spread like a wild fire nationally. . . . Some shops offered free bottled water and bread to the protesters as support.  A 70-year-old woman reproached the cops: “These kids are doing the right thing, don’t disrupt them.” Most of the police personnel who arrived in the morning were local residents, whose families would be affected by the pollution as much as the protesters, so they generally sympathised with the cause. Moreover, they were heavily outnumbered so could not stop the protesters anyway!

Outside the municipal building, the protesters demanded that the government stop Oji Paper from building industrial wastewater pipes. The officials rejected the demand with the excuse that the government would have to pay a great amount of compensation to the company if they cancelled the project. The response enraged the crowd and thousands of protesters stormed the building. They surrounded the party secretary (the highest government official in a city) and asked him to wear an anti-pollution T-shirt. On his refusal the protesters stripped him naked and chased him around.

Large quantities of poker cards, condoms, expensive cigarettes and imported wine were found in those officials’ offices. These things were displayed on the roadside as evidence of government corruption.

The outcome, as reported by Asia Times Online, was a victory for the demonstrators:

The announcement posted on the Qidong municipal website on July 28, the same day as the demonstrations, stated:

After careful considerations, the Nantong City Government has decided to halt the implementation of the Nantong Large-Scale Project for Expelling Standards-Meeting Water into the Sea in Qidong.

An electronic billboard in Qidong displayed a less nuanced, more crowd-pleasing message on the same day, even as demonstrators were gathered in the city center:

After careful consideration, the Nantong City Government has decided to cancel this project for ever. 

MOVEMENT BUILDING

The Qidong protest was no isolated event.  For example, it followed the three day June struggle in Shifang (in Sichuan province, Southwest China) to halt the construction of a copper smelter.  According to Asia Times Online,

In Shifang, activists among a crowd of several thousand attempted to bumrush the municipal government building, but were repelled in a police action that turned into something of a police riot. The result was dozens of serious injuries inflicted on agitators, demonstrators, and hapless bystanders alike, and a marked swing in national popular sympathy toward the demonstrators.

Despite the repression, the activists did succeed in forcing the government to cancel the project.  Socialist Action notes that the Shifang action was itself inspired by:

a 100,000-strong demonstration in Dalian (in Liaoning province, Northeast China) last year, which compelled the local government to promise to move a chemical plant. . . . 

From Dalian to Shifang, then to Qidong, young people dominated. They used social media to organise their actions, their enthusiasm to agitate the masses and their bodies to fight the cops. Many of them were born after 1989, but they have inherited the spirit of Tiananmen Square. Such a generation of youth are not only active in environmental struggles, but also in the strikes taking place in the factories of Pearl River Delta, in the land rights uprisings occurring in the villages of Guangdong, in the battles against police brutality that occur in every city on a daily basis.

There is a lot going on in China that is not reported in this country.  While there is indeed labor repression there is also resistance fueled by the desire of many Chinese to change the direction of their country. Rather than seeing ourselves locked in some kind of zero sum economic competition with China, we should be looking to connect with Chinese activists, sharing experiences and strategies.  After all, we also are in desperate need of a change in direction.

The Pew Research Center recently published a report titled “Pervasive Gloom About the World Economy.” The following two charts come from Chapter 4 which is called “The Causalities: Faith in Hard Work and Capitalism.”

The first suggests that the belief that hard work pays off remains strong in only a few countries: Pakistan (81%), the U.S. (77%), Tunisia (73%), Brazil (69%), India (67%) and Mexico (65%). The low scores in China, Germany, and Japan are worth noting. This is not to say that people everywhere are not working hard, just that many no longer believe there is a strong connection between their effort and outcome.

The second chart highlights the fact that growing numbers of people are losing faith in free market capitalism.  Despite mainstream claims that “there is no alternative,” a high percentage of people in many countries do not believe that the free market system makes people better off.

GlobeScan polled more than 12,000 adults across 23 countries about their attitudes towards economic inequality and, as the chart below reveals, the results were remarkably similar to those highlighted above.  In fact, as GlobeScan noted, “In 12 countries over 50% of people said they did not believe that the rich deserved their wealth.

It certainly seems that large numbers of people in many different countries are open to new ways of organizing economic activity.  This is a hopeful development.

Contemporary capitalism, driven by the competitive pursuit of private profit, tends to produce a stream of innovative goods and services. Of course this drive for private profit generally ensures that these goods and services will be the ones that are most likely to satisfy the desires of those with the greatest purchasing power.  Less appreciated is the fact that this pursuit of private profit also tends to promote production processes that are based on exploitative work conditions.  A case in point: Apple products.

Much has been written about Apple’s international production system, in which components produced in Japan, South Korea, Germany and the United States are sent to China, where a Taiwanese company, Foxconn, employs hundreds of thousands of Chinese workers to assemble them into final products like the ipad and iphone.   

Much has also been written about the brutal labor regime employed by Foxconn.  What follows are some extracts from a recently published study by Pun Ngai and Jenny Chan on work conditions at Foxconn (Global Capital, the State, and Chinese Workers: The Foxconn Experience, Modern China, 38:4, 383-410).  

While getting ready to start work on the production line, management will ask the workers: “How are you?” (你好吗). Workers must respond by shouting in unison, “Good! Very good! Very, very good!” (好, 非常好, 非常好). This militaristic drilling is said to train workers as disciplined laborers. Production quotas and quality standards are passed through channels down to the frontline workers at the lowest level of the pyramid.  

Workers recalled how they were punished when they talked on the line, failed to keep up with the high speed of work, and made mistakes in work procedures. Several women workers attaching speakers to MP3-format digital audio players said,  

After work, all of us—more than a hundred persons—are made to stay behind. This happens whenever a worker is punished. A girl is forced to stand at attention and read aloud a statement of self-criticism. She must be loud enough to be heard. Our line leader would ask if the worker at the far end of the workshop could hear clearly the mistake she made. Oftentimes girls feel they are losing face. It’s very embarrassing. Her tears drop. Her voice becomes very small. . . . Then the line leader shouts: “If one worker loses only one minute [by failing to keep up with the work pace], then, how much more time will be wasted by a hundred people?” . . . .  

Factory-floor managers and supervisors often give lectures to production workers at the beginning and the end of the work day. After working a long shift of a standard 12 hours (of which four hours are illegally imposed, forced overtime), workers still have to stand, for often 15 minutes to half an hour, and listen to speeches, although the content of such meetings remains the same: the management evaluates the production target of the previous shift, reminds workers of the tasks they need to pay special attention to, and reiterates work rules and regulations. Workers know too well that branded electronic products are expensive and there is no margin for mistakes. Several workers at a mobile phone assembly workshop commented,   

We get yelled at all the time. It’s very tough around here. We’re trapped in a “concentration camp” (集中营) of labor discipline—Foxconn manages us through the principle of “obedience, obedience, and absolute obedience!” (服从, 服从, 绝对服从). Must we sacrifice our dignity as people for production efficiency? . . . .  

Foxconn likes to point out that workers have signed written “agreements” for overtime. This agreement is meaningless since workers enjoy no effective protection from being fired for refusing overtime. While the mandatory overtime work in China stipulated by the Labor Law is 36 hours per month, most of the Foxconn workers usually have 80 hours of overtime work each month. In our interviews, workers described “exhaustion to the point of tears.” In our summer 2010 questionnaire survey, more than 80 percent of the 1,736 respondents had “four days of rest or less in a month” during the peak seasons. Our findings are highly consistent with that of the 5,044-person survey conducted by the Shenzhen Human Resources and Social Security Bureau in the same period: 72.5 percent of the Shenzhen Foxconn workforce put up with excessively long working hours to earn extra income (Diyi caijing ribao, June 17, 2010). . . .  

Workers said that after the basic wage was increased to 1,200 yuan in June 2010, a clear increase in production was scheduled and production intensity increased. A group of young workers at the Shenzhen Guanlan factory responsible for processing cell phone casings said, “Production output was set at 5,120 pieces per day in the past, but it has been raised by 20 percent to 6,400 pieces per day in recent months. We’re completely exhausted.”  

The biggest Longhua factory could produce as many as 137,000 iPhones in a 24-hour day, or more than 90 a minute, as of September 2010 (Bloomberg Businessweek, Dec. 9, 2010). Management used stop-watches and computerized industrial engineering devices to test the capacity of the workers and if workers being tested were able to meet the quota, the target would be increased day by day until the capacity of the workers reached the maximum. Another group of workers at the Kunshan factory commented, “We can’t stop work for a minute. We’re even faster than machines.” A young woman worker added, “Wearing gloves would eat into efficiency, we have a huge workload every day and wearing gloves would influence efficiency. During really busy times, I don’t even have time to go to the bathroom or eat.”   

Foxconn claimed that production workers who stand during work are given a ten-minute break every two hours but our interviewees said that “there is no recess at all,” especially when the shipment is tight. In some departments where workers nominally can take a break, they are not allowed to rest if they fail to meet the hourly production target. Working overtime through the night in the electroplating, stamp-pressing, metal-processing, paint-spraying, polishing, and surface-finishing units is the toughest, according to workers interviewed.  

Of course, Foxconn’s brutal production process owes much to Apple’s demands.  Apple has ultimate responsibility for and control over the entire production process and it continues to subcontract with Foxconn because the company has proven its ability to ensure maximum output for minimum cost.  John Smith, in another recently published article (“The GDP Illusion: Value Added versus Value Capture,” Monthly Review, 64:3, 86-102), highlights the nature of the relationship between Foxconn and Apple as follows:

Meanwhile, in what one study called a “paradox of assembler misery and brand wealth,” [Foxconn] profits and share price have been caught in the pincers of rising Chinese wages, conceded in the face of mounting worker militancy, and increasingly onerous contractual requirements, as the growing sophistication of Apple’s (and other firms’) products increase the time required for assembly.  While Apple’s share price has risen more than tenfold since 2005, between October 2006 and January 2011 [Foxconn’s] share price slumped by nearly 80 percent.  The Financial Times reported in August 2011 that “costs per employee [are] up by exactly one-third, year-on-year, to just under $2,900.  The total staff bill was $272 million: almost double gross profit . . . rising wages on the mainland helped to drive the consolidated operating margin of the world’s largest contract manufacturer of electronic devices . . . from 4-5 percent 10 years ago to a 1-2 percent range now.”  

While hundreds of thousands of Chinese workers carry the burden of direct assembly under the direction of Foxconn, Apple itself employs tens of thousands of U.S. workers to directly sell its final products in the United States.  Although conditions differ greatly in the two countries, and the two workforces have vastly different responsibilities, there are noticeable similarities between the conditions faced by both groups of workers–in particular, their relatively low wages, their long work hours, and the intensity of their work.  A New York Times story captures the situation well in its article titled: “Apple’s Retail Army, Long on Loyalty but Short on Pay.”  What follows are some extracts from the article:  

About 30,000 of the 43,000 Apple employees in this country work in Apple Stores, as members of the service economy, and many of them earn about $25,000 a year. They work inside the world’s fastest growing industry, for the most valuable company, run by one of the country’s most richly compensated chief executives, Tim Cook. Last year, he received stock grants, which vest over a 10-year period, that at today’s share price would be worth more than $570 million. . . . 

Managers often tell new workers that they hope to get six years of service, former employees say. “That was what we heard all the time,” says Shane Garcia, a former Apple Store manager in Chicago. “Six years.” But the average tenure is two and a half years, says a person familiar with the company’s retention numbers, and as foot traffic has increased, turnover rates in many stores have increased, too. Internal surveys at stores have also found surprising dissatisfaction levels, particularly among technicians, or “geniuses” in Apple’s parlance, who work at what is called the Genius Bar. Apple declined requests for interviews for this article. Instead, the company issued a statement:

“Thousands of incredibly talented professionals work behind the Genius Bar and deliver the best customer service in the world. The annual retention rate for Geniuses is almost 90%, which is unheard-of in the retail industry, and shows how passionate they are about their customers and their careers at Apple.”

That 90 percent figure sounds accurate to Mr. Garcia, who quit last July after four years with the company, overwhelmed by the work and unable to mollify employees and customers alike. Plenty of technicians do, in fact, like their jobs, which vary around the country, and which pay in the range of $40,000 a year in the Chicago area. Many technicians, though, wanted to leave but were unable to find equivalent work, according to Mr. Garcia and other former managers, in part because of the weak economy. . . .

Kelly Jackson, who was a technician at an Apple Store in Chicago, was thrilled when she was hired two years ago. But she said she was even happier when she quit a year later, having found the work too relentless and the satisfactions too elusive.

“When somebody left, you’d be really excited for them,” says Ms. Jackson, who now works at Groupon. “It was sort of like, ‘Congratulations. You’ve done what everyone here wants to do.’” . . .

Arthur Zarate, who joined Apple in 2004 and later worked as a technician at the store in Mission Viejo, Calif., says his training left him with a sense of ownership and pride. For a while, he loved the job, in large part because it delivered the simple and gratifying sense that he was helping people. There were time constraints on technicians — 20 minutes per customer — but because the store was rarely swamped, he usually had more time than that.

“My customers knew me by name,” he said. “That was a big deal.”

He had already begun to sour on the job when in 2007, he said, his store began an attendance system whereby employees accumulated a point for every day they did not come to work; anyone with four points in a 90-day period was at risk of termination.

“It was a perfectly good idea, but the thing that was terrible is that it didn’t matter why you couldn’t come to work,” Mr. Zarate said. “Even if you had a doctor document some medical condition, if you didn’t come to work, you got a point.” . . .

To meet the growing demand for the technicians, several former employees said their stores imposed new rules limiting on-the-spot repairs to 15 minutes for a computer-related problem, and 10 minutes for Apple’s assortment of devices. If a solution took longer to find, which it frequently did, a pileup ensued and a scrum of customers would hover. It wasn’t unusual for a genius to help three customers at once.

Because of the constant backlog, technicians often worked nonstop through their shift, instead of taking two allotted 15-minute breaks. In 2009, Matthew Bainer, a lawyer, filed a class action alleging that Apple was breaking California labor laws.

“State law mandates two 10-minute breaks a day,” Mr. Bainer said. “But geniuses had these lengthy queues of customers that made it all but impossible for them to stop even for a few minutes.”

The lawsuit was denied class certification in June of last year. Mr. Bainer pursued the matter in separate lawsuits and achieved what he described as “very favorable settlements” for 10 plaintiffs.

Not long after the class-action lawsuit was filed, a technician named Kevin Timmer who worked at the Woodland Mall store in Grand Rapids, Mich., noticed an added step when he logged onto a computer to punch out of work.

“This window popped up and it said something like, ‘By clicking this box I acknowledge that I received all my breaks,’” Mr. Timmer recalled. “The rumor was that was because some guy in California had sued.”

Mr. Timmer said he and other technicians in the store clicked the box even when they didn’t take any breaks. It wasn’t because management insisted they stick around. It was that any down time would slam already overburdened colleagues with even more work.

“We were all in the trenches together,” he said. “Nobody wanted to leave.”

With time limits, several former employees said, came another change at their stores. Technicians had always been able to spend a few hours of their shift in the repair room, providing a little away-from-customers time. In many stores, that ended. Walk-in demand for tech help was so great that when the bar was open, management at these stores decreed, it was to be staffed by any technician in the building. Repairs that could not be done at the bar would wait. As a result, the late shift in the repair room at these stores ended not at 10 p.m., but at midnight. . . .

In recent years, the level of unhappiness at some stores was captured by an employee satisfaction survey known in the company as NetPromoter for Our People. It’s a variation of a questionnaire that Apple has long given to customers, and the key question asks employees to rate, on a scale of one to 10, “How likely are you to recommend working at your Apple Retail Store to an interested friend or family member?” Anyone who offers a nine or 10 is considered a “promoter.” Anyone who offers a seven or below is considered a “detractor.”

Kevin Timmer said the internal survey results last year at the Grand Rapids store were loaded with fives and sixes.

“We discussed it in a monthly meeting and our manager had tears in her eyes,” Mr. Timmer recalled. “She said something about how humbling these results were, that they want to fix any problems, that her door is always open, and so on.”

Similar figures were found in Chicago.

“By then,” Mr. Garcia said, “it wasn’t a surprise to upper management because it was clear that many geniuses wanted to leave. There was a ceiling. It wasn’t a glass ceiling because everyone could see it.”

Mr. Garcia would eventually quit Apple, and walk away from a job that paid a little more than $40,000 a year, when stress-related health issues sidelined him long enough to put his job at risk. He had no doubts that the company would easily find a replacement. 

While Apple is no doubt a trend setter, it is far from unique.  Most of our leading firms continue to rely on harsh labor conditions and appear determined to maintain them.  And while many recent technological innovations do enrich our lives, we should not forget that different social relations of ownership and production would likely produce different innovations, including ones that might well add far more to our quality of life and collective human development than the ones currently celebrated.

Apple products continue to enjoy high praise for their performance and appearance.  Largely ignored are the oppressive conditions experienced by those workers that produce them.

China Labor Watch has just released a new report on ten factories producing Apple products in China, including a Foxconn plant. It found that labor violations “are still common at Foxconn but also that these violations are rampant throughout Apple’s supply chain.  In fact, conditions can be even worse at other Apple suppliers, including the Riteng factory in Shanghai.”

More specifically, according to the China Labor Watch press release, investigators found the following problems to be common in the ten factories:

Excessive Overtime:  The average overtime in most of the factories was between 100 and 130 hours per month, and between 150 and 180 hours per month during peak production season, well above China’s legal limits.

In most factories, workers generally work 11 hours every day, including weekends and holidays during peak seasons.  Normally they can only take a day off every month, or in the peak seasons may go several months without a day off.

Low wages compel workers to accept long overtime hours.  Most of the factories pay a basic salary equal to the minimum wage stipulated by the local law (around $200/month), so low that workers have to work long hours to support themselves.

Workers are exposed to a variety of dangerous working conditions. Workers in all the factories reported safety concerns such as metal dust and hazardous working environments.

All too often, workers find the food offered in the factory cafeterias unsanitary.  Their housing conditions are frequently overcrowded, dirty, and lacking in facilities.

Most workers are not familiar with unions and their function. They have little ability to push for reasonable working conditions.

Some factories do not pay for workers’ social insurance, work injury insurance, and other insurance required by law.

The report also noted serious problems with the use of dispatched labor.  For example, China Labor Watch’s report: 

revealed that the biggest problem overlooked by Apple in their Social Responsibility Reports, is the prevalent use of dispatched labor in their supply chain.  Except for Foxconn in Shenzhen which transferred all dispatched workers to direct-hire status in 2011, all other investigated factories overused dispatched labor, including Jabil in Shenzhen where dispatched labor made up almost 70% of the workforce.  Of note:

1.   Factories can use dispatched labor to employ people short-term without having to pay severance compensation.

2.   Factories can use dispatched labor to shift responsibility for worker injuries onto another party.

3.   Factories can use dispatched labor to prevent workers from organizing into unions or establishing democratic management systems.

4.   Factories can reduce other forms of worker compensation, and thus their labor costs, by hiring dispatched labor. For instance, when companies contribute to social insurance programs for dispatched workers, they pay a smaller percentage or sometimes do not sign up workers at all. Their labor costs can be reduced by 10% to 15% in this way.

5.   Dispatched workers have no limitation on the amount of overtime that they work. Some have to work more than 150 hours of overtime every month.

6.  Dispatched workers often have to pay sizable fees to the dispatching agency.

China is widely celebrated as an economic success story.  And it is as far as GDP, investment, and export growth is concerned.   However, as we know well from our experience in the United States, such economic indicators often reveal little about the reality of people’s lives.  In China workers are subject to intense working conditions with a disproportionate share of the benefits of production going to a top few.   For example, as Bloomberg News notes:  

The richest 70 members of China’s legislature added more to their wealth last year than the combined net worth of all 535 members of the U.S. Congress, the president and his Cabinet, and the nine Supreme Court justices.

The net worth of the 70 richest delegates in China’s National People’s Congress, which opens its annual session on March 5, rose to 565.8 billion yuan ($89.8 billion) in 2011, a gain of $11.5 billion from 2010, according to figures from the Hurun Report, which tracks the country’s wealthy. That compares to the $7.5 billion net worth of all 660 top officials in the three branches of the U.S. government.

The income gain by NPC members reflects the imbalances in economic growth in China, where per capita annual income in 2010 was $2,425, less than in Belarus and a fraction of the $37,527 in the U.S. The disparity points to the challenges that China’s new generation of leaders, to be named this year, faces in countering a rise in social unrest fueled by illegal land grabs and corruption.

“It is extraordinary to see this degree of a marriage of wealth and politics,” said Kenneth Liberthal, director of the John L. Thornton China Center at Washtington’s Brookings Institution.  “It certainly lends vivid texture to the widespread complaints in China about an extreme inequality of wealth in the country now.”  

Growing numbers of Chinese workers and farmers have been engaged in workplace and community struggles in opposition to corporate and government policies, especially those designed to intensify the privatization, deregulation, and liberalization of the Chinese economy.  The number and determination of participants in these struggles has forced business and government leaders on the defensive.  

Recently, the People’s Daily ran an editorial calling for renewed commitment to “reform” in an attempt to shore up support for the government’s neoliberal policies.  The editorial appears to have triggered growing discussions and debates on and off the internet among academics and activists about alternatives. 

One concrete outcome from these discussions and debates is a 16 point proposal which was developed collectively and recently published on the Red China website; it has gained significant support.  The following is an English translation of the proposal by the China Study Club at University of Massachusetts, Amherst.   Reading it provides a window into political developments in China and also highlights the similarity of struggles in China and the United States.  

A SIXTEEN-POINT PROPOSAL ON CHINA’S REFORM  

1. That the personal and family wealth of all officials be publicized and their source clarified, and all “naked bureaucrats” be expelled from the Party and the government. (“Naked bureaucrats” refer to those officials whose family lives in developed countries and whose assets have been transferred abroad, leaving nothing but him/herself in China.)  

2. That the National Congress concretely exercises its legislative and monitory function, comprehensively review the economic policies implemented by the state council, and defend our national economic security.   

3. That the existing pension plans be consolidated and retirees be treated equally regardless of sector and rank.  

4. That elementary and secondary education be provided free of charge throughout the country; compensation for rural teachers be substantially raised and educational resources be allocated on equal terms across urban and rural areas; and the state assume the responsibility of raising and educating vagrant youth.  

5. That the charges of higher education be lowered, and public higher education gradually become fully public-funded and free of charge.   

6. That the proportion of state expenditure on education be increased to and beyond international average level.   

7. That the price and charge of basic and critical medicines and medical services be managed by the state in an open and planned manner; the price of all medical services and medicines should be determined and enforced by the state in view of social demand and actual cost of production.   

8. That heavy progressive real estate taxes be levied on owners of two or more residential housings, so as to alleviate severe financial inequality and improve housing availability.

9. That a nation-wide anti-corruption online platform be established, where all PRC citizens may file report or grievance on corruption or abuse instances; the state should investigate in openly accountable manner and promptly publicized the result.   

10. That the state of national resources and environmental security be comprehensively assessed, exports of rare, strategic minerals be immediately cut down and soon stopped, and reserve of various strategic materials be established.  

11. That we pursue a self-reliant approach to economic development; any policy that serves foreign capitalists at the cost of the interest of Chinese working class should be abolished.  

12. That labor laws be concretely implemented, sweatshops be thoroughly investigated; enterprises with arrears of wage, illegal use of labor, or detrimental working condition should be closed down if they fail to meet legal requirements even after lawfully limited term for self-correction.   

13. That the coal industry be nationalized across the board, all coal mine workers receive the same level of compensation as state-owned enterprise mine workers do, and enjoy paid vacation and state-funded medical service.  

14. That the personal and family wealth of managerial personnel in state-owned enterprises be publicized; the compensation of such personnel should be determined by the corresponding level of people’s congress.   

15. That all governmental overhead expenses be restricted; purchase of automobile with state funds be restricted; all unnecessary traveling in the name of “research abroad” be suspended.   

16. That the losses of public assets during the “reforms” be thoroughly traced, responsible personnel be investigated, and those guilty of stealing public properties be apprehended and openly tried.    

A January 22, 2012 New York Times story, The iEconomy: How U.S. Lost Out on iPhone Work, has been getting a lot of coverage.   The article makes clear that Apple and other major multinational corporations have moved production to China not only to take advantage of low wages but also to exploit a labor environment that gives them maximum flexibility. The following quote gives a flavor for what attracts Apple to China: 

One former executive described how the company relied upon a Chinese factory to revamp iPhone manufacturing just weeks before the device was due on shelves. Apple had redesigned the iPhone’s screen at the last minute, forcing an assembly line overhaul. New screens began arriving at the plant near midnight.

A foreman immediately roused 8,000 workers inside the company’s dormitories, according to the executive. Each employee was given a biscuit and a cup of tea, guided to a workstation and within half an hour started a 12-hour shift fitting glass screens into beveled frames. Within 96 hours, the plant was producing over 10,000 iPhones a day.

“The speed and flexibility is breathtaking,” the executive said. “There’s no American plant that can match that.”

The article highlights these conditions to make the point that manufacturing is not coming back to the United States because these conditions cannot be replicated in the United States. 

One aspect not stressed in the article is that many of the labor policies described are actually against the law in China and contrary to Apple’s own claims about its labor standards.  See William K. Black’s analysis here.

If you are interested in a more detailed picture of just what goes into making Apple products so profitable you should listen to or read the transcript of a This American Life radio segment which aired in January.  The segment is based on a Mike Daisey performance in front of a small audience.  Mike is a self proclaimed technology geek who just adores Apple products.  At least that was before he visited the Foxconn (Taiwanese multinational corporation owned) factory located in China in which many Apple products are assembled.  The program discusses the labor conditions at Foxconn and other similar multinational corporations operating in China.

These multinational corporations have helped make China the world’s top exporter of manufacturers, both overall and of high technology goods more specifically.  China’s share of world exports of information and communication technology products (such as computers and office machines; and telecom, audio and video equipment) has grown from 3 percent in 1992 to 24 percent 2006, and its share of electrical goods (such as semiconductors) from 4 percent to 21 percent over the same period.  Of course, while these exports are officially recorded as Chinese exports, approximately 60 percent of all Chinese exports and 85 percent of all Chinese high technology exports are produced by foreign companies operating in China.

The issue here isn’t one of China stealing manufacturing jobs from the United States or other developed countries.  According to the U.S. Bureau of Labor Statistics, total manufacturing employment in China actually fell by over 9 million over the period 1994-2006, from 120.8 million to 111.61 million.  Total urban manufacturing employment, which would include most foreign operations, declined sharply from 54.92 million to 33.52 million. 

In fact, China’s growth has generated few decent employment opportunities for urban workers, regardless of their employment sector.  The International Labor Organization did an extensive study of urban employment over the period 1990 to 2002.  Although total urban employment increased slightly, almost all the growth was in irregular employment, meaning casual-wage or self-employment—typically in construction, cleaning and maintenance of premises, retail trade, street vending, repair services, or domestic services.  More specifically, while total urban employment over this thirteen-year period grew by 81.7 million, 80 million of that growth was in irregular employment.  As a result, irregular workers in China now comprise the largest single urban employment category. 

The issue here isn’t even one of China versus the United States.  It also isn’t one of dictatorship versus democracy.  Rather it is one of capitalism’s logic.  Said simply, large multinational corporations and their allies in both the United States and China have successfully created a global system of production and consumption that gives them maximum freedom of operation.  It is this logic that keeps pushing more free trade agreements, attempts to create more flexible labor markets, and more attractive conditions for business investment, both here and in China.   And it is this logic that needs to be challenged on both sides of the Pacific. 

Europe is experiencing a growing economic crisis.  Tragically, the recent meeting of the 27 European Union nations in Brussels produced an agreement, which if ratified, is bound to make things worse.

Growing numbers of European countries are running large national budget deficits which their governments are finding increasingly difficult to cover through borrowing.  According to the New York Times, “Euro zone governments have to repay more than 1.1 trillion euros, nearly $1.5 trillion, of long- and short-term debt in 2012, with about 519 billion euros, or $695 billion, of Italian, French and German debt maturing in the first half alone.”  The Wall Street Journal provides the following national breakdown:

The danger is that some European governments will be unable to secure the funds required to pay their debts.  Such defaults would threaten the financial stability of a number of large European banks, which are major holders of government bonds, and eventually the U.S. financial system because of the close ties between many large European and U.S. financial institutions.

At the Brussels meeting, government leaders agreed to raise some $270 billion and give it to the IMF which is supposed to use it provide loans to those governments in need, with its usual austerity conditions attached, of course.  The leaders also agreed to speed up the introduction of a new European rescue fund that would do much the same.  This determination to impose austerity on European workers stands in sharp contrast to another agreement. According to the New York Times, “The leaders sent an important signal to the bond markets by scrapping a pledge to make private investors absorb losses in any future bailout for a euro nation.” 

The leaders rejected what would have been the most useful action—empowering the European Central Bank to directly buy government bonds, much like the Federal Reserve does for the U.S. government.

The leaders did approve two major long term policy initiatives.  As the Wall Street Journal explains:   

After a marathon session of negotiating that started Thursday and ran until early Friday morning, the leaders emerged with two principal achievements: Euro-zone members who run outsize government deficits will face automatic penalties, and all governments will put balanced-budget procedures of some form in their national laws.

Germany had wanted this limit on government borrowing made part of the EU constitution, thereby giving EU institutions the authority to enforce it.  It was unsuccessful in achieving its goal only because of UK opposition; such major changes require unanimous approval on the part of all 27 member countries.  As a result, the other 26 leaders have agreed to implement this “fiscal stability compact” by winning approval for it in each of their respective national parliaments.

This fiscal stability compact reflects the continuing belief of European political leaders that the current crisis was caused by runaway government debts and can only be contained through adoption of a balanced budget amendment.  This is precisely the argument being made by conservatives in the United States.  And it is just as wrong headed in Europe as it is in the United States.

Paul Mason, the economic editor of Newsday put it well, saying:

I can only add at this stage that, by enshrining in national and international law the need for balanced budgets and near-zero structural deficits, the eurozone has outlawed expansionary fiscal policy. . . .

It has done what the US Republicans would like to do – and if you think about it, it has made what Gordon Brown did, and what Barack Obama (and indeed Wen Jia-bao) is doing illegal. 

The result, if it works will be stability. It is hard to see how it promotes long-term growth.

Mason is probably overoptimistic that such a policy will even prove able to ensure stability.  As for the claim that the current crisis is the result of out-of-control deficits, take a look at the chart below:

As you can see, Spain and Ireland, two of the countries with the biggest debt problems, were actually running strong surpluses before the crisis.  On the other hand, Germany was in violation of the Euro zone agreement to keep yearly budget deficits below 3% of GDP from 2001 to 2005.  Not surprisingly, once the crisis hit, almost every country was forced into running large deficits.  Said differently, in almost all cases, large budget deficits are the result of the crisis not the cause.     

In short, pushing austerity will produce a deeper economic downturn, resulting in bigger government deficits and a worsening debt problem.  As the economist Kevin O’Rourke explains:

One lesson that the world has learned since the financial crisis of 2008 is that a contractionary fiscal policy means what it says: contraction. Since 2010, a Europe-wide experiment has conclusively falsified the idea that fiscal contractions are expansionary. August 2011 saw the largest monthly decrease in eurozone industrial production since September 2009, German exports fell sharply in October, and now-casting.comis predicting declines in eurozone GDP for late 2011 and early 2012. . . .

What is needed to save the eurozone in the medium term is a central bank mandated to target more than just inflation – for example, unemployment, financial stability, and the survival of the single currency. . . . This will require a minimal fiscal union; a full-scale fiscal union would be better still. Yet none of this was on the summit’s agenda.

Europe’s current approach to its crisis is crazy, and one can only hope that few if any national parliaments will endorse it.  I suppose there is some reason to be optimistic.  As the Wall Street Journal reports:

One particular complication is the bid to make sanctions automatic. It recycles an idea that the euro zone rejected in October 2010. At that time, the European Commission, the bloc’s executive arm, proposed that penalties for violating the fiscal rules be automatically imposed; unless the countries voted affirmatively to block them, they’d stand.

The longstanding rules work the other way around. Penalties are imposed only if countries vote for them. That led to the ignominious spectacle, in 2003, of France and Germany each breaking the deficit ceiling and each voting against condemning the other, killing enforcement efforts.

In the meantime, governments in Europe, much like in the United States, continue to defend the very economic structures and patterns of economic activity that led to the current economic mess while demanding that working people pay the costs.  What a nightmare.

The US economy faces a number of challenges—among them a lack of job creation and an ever-growing trade deficit. Many policy-makers believe that encouraging business innovation is the best response to these particular challenges. Sounds plausible but experience suggests otherwise.

The best example of why simply encouraging business innovation is not the answer for our employment and trade problems is Apple and its iPhone. 

The iPhone was introduced in 2007 and has been incredibly successful.  U.S. sales soared from 3 million units in 2007 to over 11 million in 2009.  Global sales topped 25 million in 2009.

While the iPhone is designed and marketed by Apple, almost all the phone’s components are produced by foreign companies operating outside the United States.  These components are then shipped to China where Foxconn, a Taiwanese company, oversees their assembly and their export to the United States and other countries.  As a result, the iPhone generates few jobs in the United States.  

Two economists, in an Asian Development Bank working paper, examined the iPhone 3G production process in some detail.  The table below, taken from their study, highlights the main suppliers and the costs of the components they produce for a single phone.  Most of the components are supplied by Japanese, South Korean and German firms, although there are also some U.S. suppliers (although who knows where they actually produce their compnents). 

The total component cost of an iPhone in 2009 was $172.46.    Workers in China assemble the iPhone, but because their wages are low the assembly cost per phone (labeled manufacturing costs in the table below) is quite small, only $6.50 a phone.  The total production cost per phone is $178.96.

Because the iPhone is assembled in China all sales in the U.S. mean an increase in Chinese exports (even though the phone is largely composed of inputs produced outside of China) and an increase in U.S. imports.  In 2009, China exported more than $2 billion worth of iPhones to the United States.  Thus, the iPhone, because of the Apple’s production strategy, also adds to the U.S. trade deficit.

Apple is not alone in embracing China as its production base.  China is now the world’s largest exporter of manufactured goods. And, as the chart below shows, the share of Chinese exports that are labled high technology is growing.  This trend has encouraged many analysts to claim that the U.S. is now locked in fierce economic competition with China. 

However, as we see next, more than 80% of China’s high technology exports are actually produced by foreign companies operating in China.  Moreover, these foreign companies have significantly increased their control over this production.  In 2002 foreign owned firms that were 100% foreign owned (which means that they had no Chinese partner) accounted for only 55% of Chinese high technology exports.  In 2009 they accounted for 68%.   

Why do so many transnational corporations choose to locate production in China?  The answer is obvious: profits. Apple again serves as a good example.  The table below, taken from the Asian Development Bank working paper cited above, shows Apple’s profit margin on the iPhone.  In 2009 it was a whopping big 64%.

Struck by the size of Apple’s profit margin, the authors of the Asian Development working paper considered whether the iPhone could reasonably be made in the United States.  As they note:

Those who support capitalism often do so by arguing that it is the most efficient system for promoting material and human progress.  Market competition, they claim, forces firms to produce the goods and services that people want and at the lowest possible cost.  Moreover, by making goods available to people at ever lower cost, competition works to expand the size of the market, enabling firms to take advantage of economies of scale and drive down prices even more.  The result is a virtuous spiral of progress.

Sounds good, but there are problems with this argument.  Among them, a false identity of profit maximization with efficiency as well as a one-sided understanding of the logic shaping the organization of production and its end product.

It is true that capitalists seek to maximize profits and those less successful will eventually be forced out of business.  However it is not true that the most profitable firms are necessarily the most efficient (at least in terms of how efficiency is commonly understood).  In other words success under capitalism does not guarantee efficiency.  In fact, it is likely that the most profitable firms are not the most efficient. 

In the sciences a process is said to be efficient if it produces the greatest output with the fewest inputs.  But that is not what capitalism promotes.  Capitalists seek to produce the most for the least cost, and the process of lowering cost normally involves use of labor regimes that increase the intensity of work.  In other words, capitalists will select the work process that ensures that workers have no choice but to work as hard as possible (thereby producing as much as possible) and normally, thanks to an associated deskilling, for the lowest possible wages.  The result is certainly favorable as far as profits are concerned (assuming sufficient demand).    

However, because the increase in output is achieved by increasing the input—in this case human labor—there is no basis to conclude that the work process is the most efficient even thought it will be the most profitable.  Regardless, it will be the work process chosen by capitalists.  This point highlights the class nature of capitalism.  Capitalists view labor as just another factor of production.  To them it makes perfect sense to maximize the intensity of its use.  But to those of us who work, there is a very real cost to the growing intensity and insecurity of labor that underlies and shapes the capitalist pursuit of profit. 

This discussion leads directly to the second problem.  All activity produces a joint product—a good or service as well as the human capacities, vision, and values of the producer.  As noted above, the pursuit of profit, which drives capitalism, generally leads capitalists to select a production process that truncates the potential of the worker; lower labor costs are achieved through the intensification and deskilling of work.   Thus, capitalism tends to promote a highly inefficient system of production if we take full account of its logic.   

This critique is not limited to some backward, declining sector of capitalist activity; it is applicable to the processes used to produce our most technologically advanced goods.  One example is the globalized production process used to make the popular Apple iPAD.  The following six minute video highlights working and living conditions for those who assemble the iPAD at the new Foxconn facilities in Chengdu, China.  The video was made by Students & Scholars Against Corporate Misbehaviour (SACOM), a Hong Kong-based labour organization, in March and April 2011, during a SACOM investigation of conditions at Foxconn (a Taiwanese transnational corporation).  

 [youtube] http://www.youtube.com/watch?v=V3YFGixp9Jw [/youtube]

I want to make two important additions to the video.  The first is that while SACOM appropriately calls for consumers to take action to force Apple and Foxconn to improve worker conditions, corporate social responsibility initiatives have generally proven to be ineffective.  The second is that the workers employed by Foxconn as well as other transnational corporations operating in China are far from passive.  They have engaged, in ever growing numbers, in increasingly militant workplace actions.  In our press their efforts are reported as threats to our price stability.  In reality we should celebrate, learn from, and support their organizing and actions.  More generally, their actions should encourage us to think carefully and critically about the kind of society we value and how best to build it.

Over 3000 participants from 183 countries are attending a two week UN sponsored climate gathering in Bonn, Germany.  The talks are supposed to help prepare the agenda for COP 17, or as it is more formally known, the 17th Conference of the Parties of the United Nations Framework Convention on Climate Change (defenders of the environment have renamed the meeting the Conference of Polluters) which will take place November 28 to December 9, 2011 in Durban, South Africa. 

The cost of climate inaction grows worse.  As the Earth Island Journal reports:

Last week, the International Energy Agency announced that emissions continue to increase unabated. Emissions released in 2010 were the highest in history, despite the economic recession. The report stated that the “prospect of limiting the global increase in temperature to 2 degrees Celsius is getting bleaker.”

The National Oceanic and Atmospheric Administration (NOAA) announced that the level of CO2 emissions released in May 2010 set another record high.

The COP meetings have three main goals, all of which remain far from satisfied:

• set emission reductions for developed and developing nations

• secure funding and technology to help developing nations adapt to climate change

• determine how to measure, report and verify emission reductions

The Kyoto Protocol is the only international treaty that has binding targets for reducing emissions.  It was adopted on December 11, 1997 and entered into force on February 16, 2005.  The implementation rules were adopted at COP 7, which was held in Marrakesh in 2001. The Protocol targets are only binding on developed countries (Annex I countries); there are no binding targets for developing countries.  The Annex I countries agreed to reduce their collective production of greenhouse gas emissions by 5.2% relative to the 1990 level over the period 2008 to 2012; their commitments are listed in the Protocol’s Annex B. 

Unfortunately, the Protocol does not include any mechanism for enforcing national action, which is one reason that overall emissions continue to grow.  Another reason is that some important polluters, like the United States, never signed the Kyoto treaty.

If no action is taken at COP 17, the Kyoto Protocol will expire.  Most developed countries appear content to let this happen.  At COP 15, held in Copenhagen, the United States led the charge for replacing the Protocol with a less binding agreement, one that included no specific emission reduction targets.  No progress was made at COP 16, which was held last year in Cancun.

Most third world countries–including the G77, Alliance of Small Islands States (AOSIS), the Least Developed Countries, the Africa Group, and ALBA–support a second renewal period as a step toward a strengthened treaty, one with enforceable national targets and a commitment by developed countries to pay climate reparations to those third world countries suffering the consequences of climate change. 

One argument made by the United States and other developed countries against a renewal of Kyoto is that the Protocol does not including binding targets on the third world, and third world countries like China and India are themselves now major producers of greenhouse gasses. 

A new study, one that acknowledges the importance of globalization, offers an important perspective on this developed country claim.  In brief, the study seeks to distinguish between emissions generated by production in a given territory and emissions generated in a given territory as a result of both production and consumption.  This is an important distinction because developed country transnational corporations have off-shored manufacturing activity to the third world.  This development has promoted a significant rise in third world emissions.  However, since an ever growing share of third world manufacturing production is exported to developed countries, the calculation of territorial based emissions overstates third world country responsibility and understates developed country responsibility.

As Glen P. Peters, Jan C. Minx, Christopher L. Weber, and Ottmar Edenhofer, the authors of the study, explain:

Despite the emergence of regional climate policies, growth in global CO2 emissions has remained strong. From 1990 to 2008 CO2 emissions in developed countries (defined as countries with emission- reduction commitments in the Kyoto Protocol, Annex B) have stabilized, but emissions in developing countries (non-Annex B) have doubled. Some studies suggest that the stabilization of emissions in developed countries was partially because of growing imports from developing countries. To quantify the growth in emission transfers via international trade, we developed a trade-linked global database for CO2 emissions covering 113 countries and 57 economic sectors from 1990 to 2008.

We find that the emissions from the production of traded goods and services have increased from 4.3 gigatonnes [Gt] CO2 in 1990 (20% of global emissions) to 7.8 Gt CO2 in 2008 (26%). Most developed countries have increased their consumption-based emissions faster than their territorial emissions, and non-energy-intensive manufacturing had a key role in the emission transfers. The net emission transfers via international trade from developing to developed countries increased from 0.4 Gt CO2 in 1990 to 1.6 Gt CO2 in 2008, which exceeds the Kyoto Protocol emission reductions.

Our results indicate that international trade is a significant factor in explaining the change in emissions in many countries, from both a production and consumption perspective. We suggest that countries monitor emission transfers via international trade, in addition to territorial emissions, to ensure progress toward stabilization of global greenhouse gas emissions.

The figure below, which comes from their study, compares the rate of growth in a number of variables.  It shows that “emissions embodied in trade,” which are emissions generated by the production of exports, has grown faster than population, GDP, and global CO2 emissions.  It also shows that the growth in “net emission transfers Annex B to non-Annex B,” which are emissions contained in exports produced in developing countries but consumed by or used in developed countries, has outstripped all the variables, even the growth in international trade.

Their study also included the following figure which shows the net change in territorial emissions over the period 1990 to 2008 along with the change in the net emission transfer between each country and developing countries.   The small orange star represents pledged emission reduction commitments.  

If we consider only territorial emissions, Europe actually came close to meeting its target reductions.  However, if we take into account the net emission transfers that come from consuming exports produced in the third world, Europe actually increased its emissions.  U.S. emissions grew territorially and again because of net emission transfers.  Looking at Annex B countries as a whole, we can see the important role that China plays as a producer and exporter of manufactured goods to the developed world.

The authors of the study conclude by noting that their work shows that “a significant and growing share of global emissions are from the production of internationally traded goods and services.”  This means that emission reduction cannot fairly or productively be approached solely through the use of territorial mandates.  We need to recognize that progress in achieving environmentally sustainable economic relations will require national changes that also confront and transform contemporary capitalist globalization dynamics.