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Globalize
That: Capital Flight to China
by
Seth Sandronsky
August
12, 2003
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
Peace Action and co-editor with Because People Matter, Sacramento’s progressive
paper. He can be reached at: ssandron@hotmail.com.
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