Foxconn, the giant Chinese manufacturing company, is expanding worldwide, not only into poorer regions of China but also into Brazil, India, Mexico, Malaysia, central Europe and, in the not-too-distant future, the United States. With 1.4 million workers in China alone, it is the world’s second largest employer, behind Walmart.
Foxconn suicide nets (Bloomberg News)
The company, whose headquarters are in Taiwan and largest operations are in China, is famous for asking its stressed-out workers to sign pledges to not commit suicide and for putting up suicide nets to catch workers jump out of the windows of its tall dormitories.
Ross Perlin, writing in the current issue of Dissent magazine, says there are good reasons for this. Work schedules of 12 hours a day and 50 hours a week are common, he said, with up to 100 hours a week during peak production. He said that wages average $1 to $2 an hour.
Although the company continues to be plagued by wildcat strikes and suicide threats, working conditions have improved slightly, as a result of audits by Apple Computer, a major customer, and a tight labor market in China, Perlin wrote.
But there is a limit to possible improvement. He quoted an analysis that said only 1.8 percent of the price of an iPhone goes to manufacturers in China, while Apple gets 58.5 percent and the rest goes to manufacturers of high-end components. He didn’t quote the source of these figures, and I suspect they are exaggerated, but I agree with his overall point. Profit margins of companies such as Foxconn and other Chinese suppliers are razor-thin, and they can succeed only by operating on a huge scale while keeping costs, including wages, to a minimum.
Perlin said that Foxconn and Apple symbolize the long-standing relationship between the United States and the economies of eastern Asia, including Japan and South Korea as well as China.
[It is based on] a series of dyads: American consumption and Asian labor, American innovation and Asian manufacturing, American debt and Asian savings, American power and Asian acquiescence. In its latest form—the co-evolution of Silicon Valley and China’s Special Economic Zones, particularly in information technology and alternative energy—it can be summed up in the words, engraved on nearly every Apple product: “Designed by Apple in California, Assembled in China.”
via Dissent Magazine.
This economic relationship has existed for a long time, but it can’t go on forever. It depends on us Americans being relatively rich, and over time it makes us relatively poorer.
There are at least two ways it can come to an end. One is that the United States government stands up for U.S. workers and does what the Japanese, South Korean, Chinese and many other governments do, which is to allow access to the nation’s market only on condition that the company make a positive contribution to the nation’s productivity. Currently the U.S. government is on the opposite course. From Reagan through Clinton to Obama, successive administrations have sought to lock the United States into international trade treaties precisely intended to prevent member governments from asserting national interests against global corporations.
The most likely ending is that we Americans eventually cease to be able to earn enough or borrow enough to be a worthwhile market for Chinese goods. If and when that happens, the question becomes whether the USA will take down the economies of eastern Asia with us. Maybe by that time they will have developed a middle class large enough to be a market for their own goods, after having moved their manufacturing operations to Africa or some other poorer part of the world. Or maybe they or we will have found a better path, in a way I can’t presently imagine.
Click on Chinese Workers Foxconned for Ross Perlin’s full article in Dissent Magazine, which has other articles on China in the Spring 2013 issue.