Greedy and powerful American companies not content with using economic inequality to devastate working- and middle-class Americans are now using their clout to fight efforts in China to combat economic inequality there. They want to keep wages low there so they can drive wages down here and everywhere else.
The leadership of the Chinese Communist Party that values a "harmonious society" has awakened to the need to combat economic inequality. Workplace exploitation to keep wages very low creates high profits for the new Chinese ownership class. The latest annual China Rich List revealed 500 Chinese nationals worth at least $100 million. The first China Rich List, published just eight years ago, counted only 50 Chinese worth over $6 million.
As to working-class Chinese, in 2005 there were 87,000 "mass protests" inside China involving over four million workers, up from just 10,000 protests in 1994. As Robert J. Rosoff noted in The Chinese Business Review: "The rights of Chinese workers are routinely violated. Workers are often required to work far more than 40 hours a week, have few days off, are paid below the minimum wage, and are not paid required overtime. Improper deductions from wages are common. Some Chinese workers must pay a large sum of money as a 'deposit' to their employer, and they may have to pay a 'recruitment fee' in order to be hired. These payments can prevent workers from leaving jobs where their rights are violated. Physical abuse of workers, and dangerous working conditions, are also common."
A workers "revolt" has Chinese officials deeply worried. A generation ago, the leadership of the Chinese Communist Party abandoned the "class struggle," embraced the market, and declared that "to get rich is glorious." Now the communist leadership sees widening inequality as chief among the "contradictions and problems that impair social harmony." An analyst with the China Foundation for International and Strategic Studies said recently, "Know well that it is dangerous when the disparities and differences become too wide to be bridged, and threaten to disrupt the social fabric."
Too bad U.S. political leaders don't seem to feel the same way about growing American economic inequality.
Big-time American corporations are threatening to shut down their extensive Chinese operations should China's top officials adopt a draft new law that increases labor rights for Chinese workers. Get it? We are now exporting the worst aspects of our capitalist system. Amazingly, Wal-Mart, Nike, and other major U.S. companies currently generate two-thirds of the products China exports to the rest of the world.
The draft new law emerged this past spring, in a surprising move to start narrowing the widening "disparities and differences" now quite visible in China. Chinese officials unveiled a "Draft Labor Contract Law" and openly asked for public comment on it. It offers Chinese workers what the international union rights group Global Labor Strategies calls a "modest" package of workplace job protections. It would give workers more of a right to negotiate over workplace policies and procedures. But the proposal does not "provide Chinese workers with the right to independent trade unions with leaders of their own choosing and the right to strike," said the group. Though it would apply to all companies in China, its focus is on foreign-owned companies and the suppliers to those companies.
China Labor Watch, a pro-labor group, said it "welcomes the new labor contract law that the Chinese government is drafting. The proposed new law includes specific stipulations to protect Chinese workers' rights. It emphasizes the role of the All China Federation of Trade Unions (ACFTU), the official labor union affiliated with the Communist Party, strengthens the power of the law enforcement agencies and raises penalties on labor law violations. The new labor law, if passed, will provide greater protection for Chinese workers."
From a New York Times article: "I don't know about the labor law," said Zhang Yin, an 18-year-old migrant who washes dishes in Shanghai. "During the three months I've been here, my boss has delayed the salary payment twice. I want to quit."
Who got really upset over the draft law? U.S. corporations have gone nuts. Along with The U.S.-China Business Council that represents 250 US companies doing business across all sectors in China, the American Chamber of Commerce in Shanghai, a powerhouse that includes 150 Fortune 500 companies, including Dell, Ford, General Electric, Microsoft and Nike, is fighting the new law. The Chamber filed 42 pages worth of objections to the draft law. They communicated a not-so-veiled warning. The adoption of the new labor standards said the Chamber just might "negatively impact" China's "appeal as a destination for foreign investment." This shows what crap the grand position of American companies that the American corporate presence in China is building a respect for basic democratic values. American companies want low wages more than they want democracy in China.
"This is really two steps backward after three steps forward," said Kenneth Tung, Asia-Pacific director of legal affairs for the Goodyear Tire and Rubber Company and a legal adviser to the Chamber.
Interestingly, workers have set up unions at all 66 Wal-Mart outlets in China that have 33,000 workers, beginning what a Chinese union official described as a wider campaign aimed at other foreign companies. Meanwhile, Wal-Mart has successfully kept out unions at its U.S. stores. Chinese labor leaders have now targeted Eastman Kodak and Dell for unionization. "By opposing a labor contract reform law that would elevate labor and human rights standards," noted Global Labor Strategies, "American and other foreign corporations are aggravating the very conditions they claimed they would ameliorate." Exactly! The group also made the point that the U.S. corporate attack on the draft code - if successful -- will "hurt not only Chinese workers, but workers around the world who are put into competition with them." Keeping wages low in China, in other words, is part of corporate globalization's intent to drive down wages in industrialized countries! Will the new Chinese labor code go into full effect as early as next year? That depends, says Global Labor Strategies, in part on how much pressure American labor groups can place on U.S. corporations to "reverse their opposition to the draft labor code." Sure. Just look at how powerful American labor groups are here. If the Democraps take over the House, is this something they will pay attention to? Will our political leaders stand up and fight for workers' rights in China because it helps American workers? Or will they avoid this situation like the plague for fear of offending their corporate supporters that want slave wages everywhere? Without strong American action, the global race to the bottom for labor wages will speed up. Class warfare is bubbling up. Will the Democraps take the side of workers?
www.delusionaldemocracy.com
Joel S. Hirschhorn is the author of Delusional Democracy - Fixing the Republic Without Overthrowing the Government (www.delusionaldemocracy.com). His current political writings have been greatly influenced by working as a senior staffer for the U.S. Congress and for the National Governors Association. He advocates a Second American Revolution, beginning with an Article V Convention to propose constitutional amendments. He is Chair of the Independent Party of Maryland.
The process you are describing in China is inevitable and of course positive. But the key to this development is economic expansion in the first place. China's peasants have been taken from their non-productive agricultral occupations and have put in factories. Their work effort has created wealth and the accompanying economic inequality. After tasting and seeing what can be accomplished and obtained in an urban lifestyle, it was only a matter of time for the workers to insist on a fairer share of the pie and for the government to respond. That hasn't happened in the US because the workers obviously have a greater share of the pie in the first place and they don't yet fully realize what has been happening to them. The "take-backs" by the wealthy have been cleverly incremental. The interesting question is why there ever was a brief period of relative economic equality for workers in the US during the 50's, 60's and 70's. I regard it as part of an overall strategy to defeat the global communist idea but other interpretations are certainly possible.
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Patrick Coony (0 articles, 0 quicklinks, 0 diaries, 6 comments)
on Thursday, October 19, 2006 at 1:42:37 PM
I like your explanation of why there was a long period of more equitable economic distribution of income and wealth here in the good old USA. Another factor was that there really was a time when U.S. companies saw themselves as American companies; the development of multinational corporations and globalization have removed any "patriotism" by our U.S. based companies. The growth of Wall Street/financial sector influence on corporate management also was a negative factor. Yet another factor has been the sharp decline in labor unions. Finally, the influence of corporate interests on the federal government only got worse over time, so that our government stopped seeing its role as protecting working- and middle-class Americans; instead, it protected and advanced the Upper Class whose economic interests are tied more closely to corporate profits. So let's see what Dems in power decide to do....
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Joel S. Hirschhorn (126 articles, 31 quicklinks, 58 diaries, 509 comments)
on Thursday, October 19, 2006 at 3:00:02 PM
As far as globalization goes, surely you don't believe that somehow Americans and other first world citizens are more deserving of the benefits of economic progress than are the citizens of second or third world countries. We should champion economic progress everywhere. Does third world advancement negatively impact first world workers? Not really overall. The main thing that is happening is that workers who were never productive have become productive. That makes us all richer depending how the pie is split. Presently first world workers receive the benefits of third world low cost labor in many different ways.
As to your comments regarding the reasons for the surge in economic inequality over the last three decades, your observation about Wall Street's influences may well be correct although I suspect that had those same influences existed in the 60's, they would have been sharply regulated and things like pensions would have been protected. As to the declining influence of labor, remember that our country has a long history of brutal opposition to organized labor, tempered only by bi-partisan pro labor legislation occurring in the late 40's and early 50's. There are plenty of legislative reforms urged by organized labor today which would curtail the current dismantlement of our organized labor system in the private sector - but they don't have a chance politically.
So we get back to the basic question, why were the 50's and 60's a period of a very progressive tax system, a much fairer labor system, and of generous pension systems? One explanation is that it was a period of where workers had more political power, but that doesn't really seem true. In theory, workers have more political power today where primary elections as opposed to back-room conventions select the Presidential candidates. My thesis again is that the wealthy have always called the shots and that a relatively affluent working class existed in the 50's, 60's and 70's as a bulwark against Communism. Not only here, but especially in Europe.
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Patrick Coony (0 articles, 0 quicklinks, 0 diaries, 6 comments)
on Thursday, October 19, 2006 at 4:31:59 PM
"As far as globalization goes, surely you don't believe that somehow Americans and other first world citizens are more deserving of the benefits of economic progress than are the citizens of second or third world countries. We should champion economic progress everywhere. Does third world advancement negatively impact first world workers?"
Yes, it certainly does. The aggregate demand necessary for the production of those 3rd world workers to be sold comes largely from 1st world countries, not the 3rd world countries themselves. American wages finance large amounts of the sale of 3rd world production. If American jobs continue to be shipped to 3rd world countries, American workers won't have the aggregate income to buy 3rd world production.
The only reason this substitution of 3rd world workers for American workers has continued is because American workers have been able to increase their spending through increased borrowing, while real aggregate American labor/consumer income has declined. Had it not been for this astronomical increase in debt-financed consumer spending by American workers and consumers, there would not have been sufficient aggregate demand to create jobs in these 3rd world countries.
Had American consumers been limited to spending income only, these 3rd world workers would not have experienced the employment gains from export increases to the United States. And the American Corporate traitors who've laid off American workers and replaced them with 3rd-world workers would not have made the exorbitant profits they've made during the Bush years.
American workers and consumers have historically created the largest consumer market in the world from the money and aggregate demand financed by their wages. That market has helped finance employment and profit growth in domestic industry, as well as foreign import dependent industry. As American jobs are lost to outsourcing, the demand for workers declines, as well the number of Americans employed. The decline in demand for workers, along with the decline in the number employed, reduces aggregate American labor income. It reduces the amount of income Americans have to purchase production. It reduces the demand for production, as well as the demand for labor to provide that production.
The end result is reduced employment and wages of American workers. Without the recent compensatory increase in consumer borrowing, the American economy would have collapsed outright.
Production of goods will not continue without sale of production. And sale of production will not continue without the spendable wealth to purchase that production. As job loss continues, and real wages decline further, the income needed to purchase production will decline as well.
American consumers, and the market they've created, have been sustained largely on money borrowed from home equity loans and refinancings. Real median disposable income for American workers has increased a little over 1% annually under Bush. This will not support a 2.5% to 3.0% GDP growth indefinitely. Eventually the real estate/borrowing bubble will collapse, and consumer spending will shrink to a level equal to their income, or maybe even less.
The more jobs we lose to 3rd world workers, the more consumer income will be lost, and the more American consumer spending & aggregate demand will depend on borrowed money, rather than wages. As the housing bubble continues to deflate, the less Americans will be able to sustain their spending through borrowed money.
We can't have it both ways with cheap labor. We can't outsource American labor income to foreign countries and increase wage-financed consumer spending. Someone needs to buy American production. And it takes spendable wealth to do so. With stagnating wages, American consumers cannot continue to increase the spending necessary for economic growth. Borrowed money has bridged this gap over the short-run. But it cannot continue to do so in the long-run.
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