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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 it’s not the government’s 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 didn’t 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 family’s 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 don’t 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 1920’s and early 1930’s.
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 didn’t 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 friends’ travels
in China. There was a WalMart and a Sam’s 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 Sam’s 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 China’s 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 company’s 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 world’s 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, wouldn’t
that create potential for other extravagant items like furniture,
garbage cans, and ceramic knick-knacks? Isn’t 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. CEO’s 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. You’d 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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