Labour Pains (7) – The Great Reversal

by Glen

We’ve all heard the scenario, right? North American companies say wages and benefits are too high in Canada and that they have to move to places like China to stay competitive. They offer only two scenarios for their Canadian workers: accept drastic pay cuts or get ready for us to pull out of your country as we search for the bottom line. We actually don’t know quite how to handle such a decision; it all appears so inevitable.  We might not agree with draconian cuts, but on the other hand we don’t wish to lose businesses from Canada either. The race to the bottom is on.

Unmentioned in all of this have been developments within China itself revealing that threaten to turn such short-term corporate thinking on its head.

Call it the “Great Reversal.” The almost manic desire of Western manufacturers to move their production to Asia meant cheaper goods for Canadian citizens on the one hand, but labour decline and market unrest on the other. While wages were spiralling down in Canada, they were increasing steadily in China. That has meant that the appealing bottom line of moving operations half a world away isn’t as lucrative as it was.

It was inevitable that with its open market reforms China’s middle-class would rise. That it has done so this quickly has caused Western manufacturers to rethink whether it was such a smart move to abandon their historic operations in Europe and North America. With rising wage demands in China and other parts of Asia, plus transportation costs, the rise of Chinese currency, and problems related to quality control, firms are now considering moving back home. While it’s true that such movement is happening with smaller to medium-sized firms like fashion design, larger corporations are themselves taking a second look. Despite their best lobbying efforts (difficult in the Chinese context), the government nevertheless engineered a rise of the minimum wage by 22% on average due to citizen demand. The corporations weren’t pleased.

General Electric, unhappy with minimum wage increases happening in the developing world, has moved production of its water heaters and fridges back home and hired new workers to satisfy demand. The big difference? Where it paid its workers $25 an hour on average before it packed up and left, and has now hired new workers willing to take $15 an hour.

So let’s be clear what’s happening. Companies fed up with labour wage constraints in the West moved operations to the East, where they are now fed up with labour wage constraints and moving back home. The irony would be delicious if it weren’t for the devastating times faced by the labour force. Such companies are now treating Chinese workers as they manipulated Western labourers.

Where does this all end? In industries like heavy machinery and the automobile sector there is a movement afoot among Western companies to “bring them home” – all in the name of competition. Certainly they will demand the lowest wages possible for their new workers but their freedom to move around the world in search for cheap labour is painting them into a capitalist corner. Just as corporations seek the bottom line, citizen-workers desire higher standards of living. It is a war that is about to consume our century and it should be moot. Our world has never seen such wealth. Corporations have never been so loaded, nor have they ever enjoyed the predominant influence over politics that they do at present. Why then the persistent penchant for attacking civil servants, cutting pensions, fighting for doing away with severance pay and wage freezes? Aren’t these their very customers? Is it not their ability to spend their wages on products and investments that trigger corporate growth? Is capitalism not at its best when it creates its own customers by wealth creation in a sustainable fashion? The Chinese are now able to afford such products because of a higher standard of living and North American and European companies handle all that by leaving – an ever-devolving cycle.

All that can come from this is a growing resentment and the enforcing of class warfare. Is this the way we seriously want to go? Researchers remind us annually that there is enough food grown on this planet to feed all of the world’s population, despite the desperate hunger we see in places like Africa. It doesn’t happen because the delivery mechanism is flawed. In some countries like America, only five mega-food companies handle an alarming 90% of all food production and delivery. The resources are there; the willingness to make the system work are not, most often because of corporate greed and citizen penchant for cheap products.

At some point we will comprehend the futility of all this and understand that capitalism is yet an economic mechanism that can still create its own future while provided needed goods and services at affordable prices. We’ll learn that all workers, whether in China, the U.S., or here, have the same inherent desire for a decent standard of living and that they have every right to expect one. Governments will come to acknowledge that favouring a corporate bottom line merely pitted Canadians against one another and countries against each other in ways that are unhealthy. And in the end, both citizenship and capitalism will have to correct themselves. It’s just a shame that workers in places like Caterpillar in London have to be the fodder for that awakening.