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Connections: China, My Grandmother, and Walmart
February 21, 2004
By Kerry Calvert

An associate at a company that I do contracted work for just returned from a business trip to China, where he attended corporate strategy meetings and visited one of the plants the company is operating on the mainland. In the past these meetings have been held in Europe or the US, but since the company has been reinventing itself in China for the last 2 years, there was a need to hold the event closer to the new center of mass.

I was anxious to speak with my associate about his observations, to balance his first hand experience with what I have been reading with great interest for the last couple of years. In addition to his experience, I have two other friends in the furniture business that import their products from China, and one has recently spent a week visiting various factories and seeing the conditions under which his products are made.

My interest in what is happening in China is twofold. I am a software engineer, with BS and MS degrees in Engineering and have spent 25 years in this field. Within a couple of months, my employment contract will end, and I find myself with skills that are simply not needed in the marketplace in the US. I am also the father of 12 year old daughter, and I am trying to figure out what guidance I can give to her for preparing for a future, while at the same time struggling with what I can possibly do to provide for my family.

The relevance of China to me is that my current (and last surviving) customer is in the final stages of firing its engineers, after having closed down most manufacturing and moved the factories to China. All of my other customers have gone bankrupt, or sent their work overseas. To believe Republican rhetoric, I have made the wrong career choice, should have seen this coming, and itís not the governmentís responsibility to see that I am able to find work.

Well, I entered the industry at the dawn of the introduction of the PC, an unbelievably successful technology that has utterly changed the nature and productivity of communications throughout the world. The associated industries went from 0 to 100 billion over the last 25 years. I was a pioneer in the industry, yet still went back to school to get an advanced degree to enhance my competitiveness. I have been working on cutting edge technology for my entire career, and today I am on the bleeding edge of digital media.

So let me concede that even though we have been talking about industry moving overseas for 30 years I didnít take it seriously enough to leave a field that was expanding exponentially and changing monthly. I was deluded into thinking that what we were doing was innovative and highly profitable. I thought that there would be significant security, cultural, and time-to-market issues that would prevent companies from exporting research and development wholesale. For those of you real old-timers that were around 4 years ago during the dotcom boom, the words I just used were the central mission statement of many a business plan that was funded by the same Republicans that now say I should never have been in this neighborhood.

But I digress. The point of this essay is not to rehash what has happened and what mistakes have been made. Right now, I have to be focused on my familyís future.

The challenge that many of us face is "What next". Where is there a frontier that needs 21st century pioneers, blacksmiths, or hard goods merchants? My answer is I donít know. And that is where China comes back into my story.

There are a lot of complicated facts, arguments, and consternation surrounding the nature of the flight of companies overseas. There has been a lot of discussion on Democratic Underground about these issues, and each of the Democratic presidential candidates has a proposal for government action designed to stem the flow. It is difficult to sort through it all, as those of you engaged in the debate are well aware.

But my associates that have visited China have related some very simple observations that speak volumes, and for me bring some clarity to the challenge ahead. These simple data points tell a much bigger story than trade policy and economic statistics ever will.

The factories that my friends visited were outside of the major urban centers. These factories were in "mini-cities" that consisted of the central factory, and few other buildings or shops. The workers in these factories live in high rise dorms that are attached to the factory. As you drive down the access roads, these factory towns spring up with some regularity.

When you drive into the city, you see clothes hanging out of virtually every window in the dorms. My friends deduced correctly that these people do not have access to laundry facilities, and were using their windows as clothes dryers. They were surprised to find out that these outdoor dryers were also the workers closets! These dorm rooms are very small and narrow slots with 4 beds to a room. There is no additional space for storage, so they hang the clothes outside.

The workers in one factory were predominately teen-aged girls and young women that were recruited from the surrounding area. They are paid 30 cents per hour, and provided with food from the factory cafeteria. There is a recreational center in the dorm, but there were no other signs of public access facilities or privacy areas. And here is the kicker. These jobs are coveted.

This struck a chord with me as it reminded me of a story my grandmother told me about her days as a migrant worker in Texas and Oklahoma in the late 1920ís and early 1930ís. As she and my grandfather would travel from camp to camp looking for work, they endured extreme hardship, sleeping in their model T. A real luxury was to find a camp that had spare room in a tent. When you rolled into a camp there were typically more hungry faces than work, and to get work you had to impress the crew boss. She had that far away stare on her face when she told me that some women in the camp would often exchange sexual favors so their husbands would be selected for the work crew. She didnít say so, but I knew that she had endured that. She said simply, "Those were hard times, and people had to do whatever was necessary to eat."

And that is what the Chinese, and Indians, and Vietnamese, and others are facing in this global economy. They are living in cramped quarters with strangers and no place to hang their clothes earning just enough money so that they can feed their families.

Even liberals such as Paul Krugman prefer this exploitation to the alternative, which is starvation. My grandmother would have agreed with Paul. Meanwhile the boardrooms in the US and Europe speak glowingly about how the lives in these countries are improving, and in the long run new markets will emerge that will be beneficial to us in the West.

So I offer another simple observation from my friendsí travels in China. There was a WalMart and a Samís Club in the area. The WalMart for the most part contained food, and was devoid of the electronics, housewares, toys, cosmetics, etc that you see in a typical store here. The Samís Club had electronics and other consumer items, and was the place that the factory managers, engineers, and business people would shop.

Even WalMart cannot put items on the shelves in China that the consumers there can buy other than food. This is true even when some number of the consumers already get food at their factory and should have disposable income. My guess is that the workers are sending the disposable income back to their unemployed relatives so they can purchase food. Even with Chinaís explosive growth over the last 10 years, they still have a huge unemployment problem.

What this says to me is that it is clear that these people will not represent a market for anything other than subsistence level products produced domestically for generations to come, barring a structural change in the labor/industry relationship. My grandparents never escaped poverty, but they were able to quit living in cars and tents when my grandfather got a union job that gave him a livable wage.

Chinese law mandates that large companies have unions. Of course, WalMart has managed to get an exclusion from this law. But these unions represent the companyís interest, not labor. So it seems highly unlikely that the tool (unions) that created the middle class in the West will be a player in this crisis.

The affect of the labor exploitation in China and other countries has gone beyond immoral and crude human tragedy. It has escalated to the point that it is destabilizing the entire world and creating the potential that we all end up on the bottom of the well again.

Once we start talking about solutions, all kinds of excuses, impossibilities, and realities spew forth, and we talk in circles until everyone is exhausted and we walk away with no resolution. Whoever takes over the Whitehouse in November will be challenged to do something. Even the best ideas I have heard are only band-aids that will not stop the hemorrhaging.

As I have said I am not an economist. But it seems to me that we either implement a simple solution, or be prepared to engage in violent conflict to wrest economic power away from the privileged few that are hoarding wealth into the smallest segments of the worldís population.

To me, the obvious solution is for the factories and the WalMarts to RAISE prices, and RAISE their labor costs. If people were paid enough to afford some wild extravagance like a one-bedroom apartment and a washer/dryer, wouldnít that create potential for other extravagant items like furniture, garbage cans, and ceramic knick-knacks? Isnít that market force supposed to be the lifeblood of capitalism?

Clearly the entire world cannot be set up as labor camps to produce products whose only buyers exist in the developed nations. If there is no product or service that 30 cent an hour labor can import, and no product or service that can be economically produced domestically, the buyers in these nations lose the ability to be buyers.

The mantra in the boardrooms today is that every CEO needs to reduce cost. This is exactly wrong. CEOís need to grow markets. They need to increase the top line (sales) numbers to increase profits. By taking cost out of labor they are shrinking markets. And they are doing this square in the face of billions of people that have an enormous market potential, but no capital by which to purchase. The only way that a majority of those without capital can become buyers is to have some means to exchange labor for capital. If capitalism is not going to implode and destroy itself chasing every smaller markets, it simply must reverse course and inflate the market. The potential demand is there. It is up to creative thinkers in government and industry to find ways to service the demand.

No CEO has the wherewithal to take on this global task. The unifying bodies of the governments must act to provide the underlying infrastructure and capital resources to effect such a change. Youíd think it make our corporate controlled government happy because with higher volumes and much larger markets for all sorts of basic human needs, every one, especially those inside the Beltway would get fabulously rich.

So how do I get from my impending career collapse, to outdoor clothes storage in Chinese factory towns, to my grandmother, to WalMart, back to my impending career collapse? Human endeavors are all about connections, often made with the thinnest of threads. I am thinking hard, and looking in all nooks and crannies for some connection that will let me translate my skills into something that somebody will be willing to pay for. I am fairly certain that I will have to move down the economic ladder. I am doing this because I don't see any creative thinkers that understand how to create or increase markets in the game, and I have to plan for the worst.

After all these years, I think I understand my grandmother much, much better. Although right now I am walking in her shadow, I am fearful that the day will come when I am walking in her shoes.

Nikita Kruschev once told John Kennedy that communism would dance on the grave of the capitalist, and that they would sell us the rope we use to hang ourselves with. The communists did sell us the rope Nikita, but it was the Chinese communists that did it. And WalMart is pulling on it so very, very tightly that you may be right in the end. Who would have ever guessed in 1962 that the destruction of a nuclear power could be brought about not by intercontinental bombers, but by a simple merchant from Bentonville Arkansas?

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