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Although
capitalism has always been a global system, the international integration of
production and finance and our dependence on cross-border activities seems
greater than ever before. At the risk of oversimplifying, we now have a world
system within which Latin America, Africa and the Middle East specialize in the
production and export of primary commodities, increasingly to East Asia. East
Asia operates as the world's manufacturing hub, exporting final products to the
developed capitalist world, especially the United States. And the United States
specializes in providing the finance that underpins the international
production system and developed capitalist country consumption.
While this global system has done
little for popular well-being, elites have clearly profited. As the Wall
Street Journal reports:
“According to a new report by Boston
Consulting Group out today, the number of millionaire households in the world grew by
12.2 per cent in 2010, to 12.5 million. (BCG defines millionaires as those with
$1-million or more in investible assets, excluding homes, luxury goods and
ownership in one's own company).
“The U.S. continues
to lead the world in millionaires, with 5.2 million millionaire households,
followed by Japan with 1.5 million millionaire households, China with 1.1
million and the U.K. with 570,000. Singapore leads the
world in ‘millionaire density,’ or the percentage of millionaires, with 15.5
per cent of its population now millionaire households.
“The most important trend, however,
is the global wealth distribution. According to the report, the world's millionaires
represent 0.9 per cent of the world's population but control 39 per cent of the
world's wealth, up from 37 per cent in 2009. Their wealth now totals
$47.4-trillion in investible wealth, up from $41.8-trillion in 2009.
“Those higher up the wealth ladder
also gained. Those with $5-million or more, who represent 0.1 per cent of the
population, controlled 22 per cent of the world's wealth, up from 20 per cent
in 2009.
China's Unique Position
This growing concentration of wealth is increasingly underpinned by the
globalization process itself. Corporate mobility creates a framework within
which governments compete for investment by offering the most attractive labour
conditions possible. That translates into a race to the bottom in terms of
majority living and working conditions.
China provides an excellent example. China plays a critical role as the
final assembly platform for East Asia's export driven growth. As the Asian
Development Bank explains:
“there is the cluster of highly interdependent, open, and
vibrant economies in East Asia and Southeast Asia that include the NIEs, the
PRC, and the more advanced countries of ASEAN. With the PRC at the center of
the assembly process and with exports going mainly to the U.S. and Europe,
production in and trade among these economies have been increasingly organized
through vertical specialization in networks, with intense trade in parts and
components, particularly in the Information, Communication and Technology (ICT)
and electrical machinery industries.”
China's unique position is highlighted by the fact that it is the only
country in the region that runs a deficit in components trade, and whose
exports are overwhelmingly final products. It is this unique position that has
enabled China to increase
its share of world exports of ICT products (such as computers and telecom
equipment) from 3 per cent in 1992 to 24 per cent 2006, and its share of
electrical goods such as semiconductors and semiconductor devices) from 4 per
cent to 21 per cent over the same period. Of course, these are not truly
Chinese exports, but rather exports assembled/produced in China. Foreign corporations are responsible for approximately 60 per cent of
all Chinese exports; their share is 88 per cent for high-tech goods.
All this production has generated real wealth for some Chinese. As the BCG
study highlights, China now hosts the third greatest number of millionaires and
is closing fast on Japan for the number two position. But what is happening to
the manufacturing workers in China that produce the goods consumed by people in
other countries?
Loss of Jobs Globally
Perhaps most surprising, according to a new study by the
Bureau of Labor Statistics (BLS), the actual number of manufacturing workers in
China is on the decline. That's right. China is not stealing jobs from anyone.
The globalization process is erasing jobs everywhere, including in China, the
“world’s workshop.”
The BLS drew upon official Chinese statistics to create a consistent
employment series. They found that the sum of manufacturing employment in urban
enterprises and manufacturing employment in township and village enterprises
(TVEs) provided the best estimate for the total number of Chinese manufacturing
workers. As the last two columns of table 1 below show, the absolute number of
manufacturing workers in China has declined from a peak of 126.09 million in
1996 to 112.63 million in 2006. The total drops even more dramatically in the
following two years but that is largely because the Chinese government decided
to drop self-employed workers from the TVE manufacturing employment series
beginning in 2007.
Thus, despite becoming the workshop of the world, there has been no increase
in the total number of Chinese workers employed in manufacturing. That means
the enormous increase in manufacturing production has been underpinned by an
increase in the capital intensity of production and, perhaps even more
importantly, a significant increase in the pace of work and length of the work
week. In terms of the latter, the BLS reports that some 25 per cent of urban
manufacturing workers were on the job between 41-48 hours a week and 35 per
cent worked more than 48 hours a week. Work hours are generally longer in the
TVEs. No wonder that we have seen a dramatic increase in labour struggles in
China.
The BLS also estimated the hourly
compensation of Chinese manufacturing workers. It is worth emphasizing that the
figures in the table 4 below represent compensation, which means wages plus all
social benefits. Moreover, they are in nominal terms, which means that they are
not adjusted for inflation. This is critical because inflation in China has
been substantial. Some researches believe that Chinese workers suffered a
decade of wage stagnation until 2002. That means that the nominal compensation
increases shown in the table below may well reflect both wage catch-up and
higher costs for an unchanged package of social benefits.
As the table shows, after several
years of significant gains, Chinese manufacturing workers now earn an average
of only $1.36 per hour. In relative terms, Chinese hourly labour compensation costs in 2008 are
roughly 4 per cent of those in the United States. They even remain
considerably below those in Mexico.
What is especially significant about the above is that China
is the world's star economic performer.
If Chinese workers are finding their manufacturing jobs disappearing and their
compensation limited, no wonder that workers in other countries are facing
serious challenges.
We don’t have a broken system. Rather we have a
system that works very efficiently to enrich an ever smaller number of people.
Those people think that it is working just fine. •
Martin Hart-Landsberg is Professor
of Economics and Director of the Political Economy Program at Lewis and Clark
College, Portland, Oregon; and Adjunct Researcher at the Institute for Social
Sciences, Gyeongsang National University, South Korea. He writes regularly at Reports from the
Economic Front.
