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November 27, 2004
Era Of Cheap Chinese Labor Coming To A Close

The abundance of impoverished rural Chinese formed the basis of China's economic boom over the past two decades, as the Communist regime brought cheap labor in trainloads from the boondocks to the cities, paying them pittances for exportable goods. Due to the extreme poverty of their home villages and the traditional respect for authority in Chinese culture, the workers dutifully and docilely produced tremendous amounts of material for sale all over the world, especially in America. The resultant economic expansion meant greater prosperity for China and a gradual relaxation of its tightly-controlled economy into more Westernlike, capital-based economy.

Now, the Washington Post reports that China may wind up a victim of its own success. The workers who once stoically endured any conditions for the hope of a reliable salary have suddenly begun conducting work stoppages and riots, turning the "worker's paradise" into a nightmare for the Communists:

Heralded by an unprecedented series of walkouts, the first stirrings of unrest have emerged among the millions of youthful migrant workers who supply seemingly inexhaustible cheap labor for the vast expanse of factories in China's booming Pearl River Delta.

The signs of newly assertive Chinese workers have jolted foreign and Chinese factory owners, who for the last two decades have churned out everything from Nikes to baby dolls with unbeatably low production costs. Some have concluded that the raw era in which rootless Chinese villagers would accept whatever job they could get may be drawing to a close, raising questions about China's long-term future as world headquarters for low-paid outsourcing.

"One dollar, two dollars, it used to be they didn't care," said Tom Stackpole, originally from Massachusetts, who is quality control director here for Skechers USA Inc. and has been involved in shoe manufacturing in southern China for a decade. "That has passed."

Workers no longer remain content to draw any salary at all, and they object to the slave environment in most government-run factories. In many such facilities, the workers must live in dormitories and then pay the company rent for their beds. It sounds remarkably similar to the work farms that replaced slavery in the mid-19th century here in the US. Workers lived on company land and were paid in company script, which could only be spent at company stores, which charged inflated prices in order to recoup as much of the wages as possible. Quitting the job meant eviction from the home -- as did strikes and other work actions.

China now has to decide what kind of economic and social structure it can allow. They brought in capitalism with limited legal protection for investors in order to ignite its long-diseased economy, probably thinking that they could easily control its spread and influence. American policymakers knew better, and eagerly passed most-favored-nation trading status for China over the objections of human-rights advocates. For years, it looked like a bad decision, as cheap labor and imports damaged the American economy, especially in the manufacturing sector.

Now, however, the workers in China have discovered that labor has a stake in the economy that simply did not exist before -- and that a refusal to man the factories carries significant political weight that had been unknown to them before. They want more money for their work, and more political and economic freedom to go with it. The Communists have long fed the workers the notion that the Maoist revolution signaled the triumph of the workers over the bosses; now the workers see that the Communists are the bosses and always have been:

The growing assertiveness of factory workers has posed a particular political problem for the governing Communist Party, which ideologically should champion poor laborers struggling against capitalist managers. But local governments have become shareholders in many of the factories, steering officials toward the management side of labor relations.

"The government is the largest boss in the area," said Liu Kaiming, a labor analyst and director of the Institute of Contemporary Observation in nearby Shenzhen. ...

[F]actory owners and workers in the Pearl River boom zone said the official union does little to represent labor, even in the rare cases when branches are formed, because it is a spinoff of local governments that own or rely on the businesses. In one factory, Liu recounted, the union head was both a management executive and a senior official in the local government.

The maintenance of free trade with China has the scales falling from the eyes of Chinese workers. While free trade may have hurt the US in the short run, we have mostly recovered from the blow, while the Chinese have just started to discover that a little freedom is an impossible measure: it either grows exponentially or dies altogether. Now that they have built the economy that communism could never deliver, neither option will be compatible with their autocratic rule. Either the government has to allow more freedom and individual choice to its people, or crack down and face the loss of overseas investment and a wide-scale worker revolt which could wipe out the government.

As in the Cold War, the economic front has proven to be the most devastating weapon in the American arsenal.

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Posted by Ed Morrissey at November 27, 2004 10:09 AM

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