http://www.commondreams.org/views03/0812-03.htm
Published on Tuesday,
August 12, 2003 by CommonDreams.org
Globalize That: Capital Flight to China
by Seth Sandronsky
What do you get when
companies shift factories from high-income
countries to low-income countries? The answer is capital flight.
This is today's global marketplace. Just ask a top Wall St. economist.
"For more than
a decade, the vigour of Chinese export growth
has come far more from the deliberate outsourcing strategies
of western multinational companies than from the rapid growth
of indigenous Chinese companies," wrote Stephen Roach, the
chief economist of Morgan Stanley, in the Aug. 7 Financial
Times.
Currently, U.S. companies
such as Du Pont, General Electric
and General Motors are employing Chinese workers to produce
a range of commodities. And these corporations are profiting
handsomely in the process, an article in the same edition of
the FT reported.
Mr. Roach further noted
this trend of capital flight to China
is "a by-product of the struggle for competitive survival
by high-cost producers in the industrial world." Presumably,
workers of "high-cost producers" enjoy weekends off,
meal
breaks and paid holidays, a drag on the bottom lines of
big businesses based in the U.S.
As market competition
has forced employers to seek lower
cost workers, "communist" China has emerged as a preferred
point of production. We thus see capital fleeing from investors
in the E.U., U.S. and Japan to China. In turn, Chinese workers
from rural areas are entering the global wage-labor market.
Crucially, their commodity of labor-power, especially those
of manufacturing workers, is less costly than that of U.S.
workers.
This trend, in turn,
has helped to increase the wage gap
in the American labor market. "Virtually all economists
recognize that the availability of low cost manufactured
goods from developing nations has been one of the factors
contributing to the growth in wage inequality between college
and non-college educated workers," wrote Dean Baker, an
economist with the Center for Economic and Policy Research.
The developing nation
leading the way in producing low-cost
commodities for the global market is China. Thus Chinese workers
are super-exploited. In this way, investors from rich nations
get higher profits and more market share. Otherwise, they lose
one or both to business rivals.
Meanwhile, the wages
of manufacturing workers in America
are being further depressed by job losses. This trend has
continued during the administration of President George W. Bush.
U.S. manufacturing
employment has "declined continuously
since July 2000," the Labor Dept. reported this July.
In that month, 71,000 manufacturing workers were thrown
out of a job. "Since its most recent peak in July 2000,
manufacturing employment has fallen by more than 2.6 million,"
the Labor Dept. reported this June. In June 2003, U.S.
manufacturers cut 56,000 jobs.
Think that capital
flight is only affecting these
American workers? Think again.
"And then there's
the ominous trend of sending
higher-skilled jobs overseas to low-wage places
like India and China, an upscale reprise of the
sweatshop phenomenon that erased so many U.S.
manufacturing jobs over the past quarter century,"
wrote Bob Herbert on Aug. 7 in the New York Times.
First, blue-collar
workers in the U.S. lose their
jobs to capital flight. Subsequently, the trend of
job loss from firms shifting work abroad is reaching
into the ranks of America's "upscale" white collar workers.
Perhaps this will spur a new class consciousness among
those who work in offices and are now facing a tenuous
job future. We will see about that.
Socially, what has
happened as capital has fled the U.S.?
The number of Americans locked up in jails and prisons
has quadrupled since the mid-1970s. Thus the 2,166,260
people now being held in U.S. jails and prisons (and
invisible in Labor Dept. reports) are not on the outside
earning wages. Significantly, the rising inmate population
in which blacks are over-represented is partly a response
to the crisis of profitability and weak demand for hiring
workers in America's manufacturing sector.
Social life (who gets
by, how and why) in the U.S. during
the past 25 or so years has been driven by the changed
relations of economic and political power between America
and other rich nations. Americans' improved living standards
after World War II ebbed as big businesses in Germany and
Japan began to take market share and profits from their
U.S. counterparts.
The Vietnam War was
a watershed time for American society
in more ways than one. Then, the profitability crisis
(too many products for too few buyers on the world market)
began in the manufacturing sector, as author and scholar
Robert Brenner has written.
Big business in the
U.S. responded by attacking unions
and New Deal/Great Society social spending that protected
the working class from the market. More recently, the
cutting of social spending as U.S. investment capital
scours the globe for higher rates of return has been
called "globalization."
On one hand, the term
can conceal more than it reveals,
shedding little light on the part that ordinary people
play in maintaining the global system each day they
go to work. On the other hand, the sober business logic
of capital seeking lower labor costs worldwide is hard
to miss.
Capital flight to China
a case in point. The goods made
by Chinese workers now on the shelves of your local
Wal-Mart are proof of that. Based on U.S. government
estimates, Wal-Mart "sourced about $10 billion worth
of goods from China last year," the Aug. 7 Financial
Times reported. On a related note, the same retailer
is the biggest private firm in America, paying its
nearly 750,000 female employees working as "sales
associates" $6.10 an hour, on average, according to
the National Organization for Women.
Meanwhile, the needs
of capital to expand are equated
with decision-making processes in the rich nations.
As Mr. Roach wrote, "A high-cost industrial world has
made a decision that it needs China-based outsourcing
to ensure competitive survival."
Well, has capital flight
to China flowed from a popular
mandate led by the American people? Were there elections
across America supporting the flight of U.S. capital
to China?
I don't remember them.
Do you?
What do we think about
globalization? And how does
globalization make us think?
Seth Sandronsky is
a member of Sacramento Area Peace Action
and co-editor of Because People Matter, Sacramento's progressive
paper. He can be reached at ssandron@hotmail.com.
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