Query

While China is no longer the "pure" communist system that the Soviet Union was, most people need government permission to take a job or to move. Thus, the government can perpetuate any number of jobs with very bad pay or working conditions simply by "drafting" people to fill them and not allowing those people to look for or accept better jobs.

If you say that that situation doesn't exist, by all means, let's investigate.

But if you admit that it exists, but assert that it is not slave labor, then you are merely splitting hairs in a way I do not consider to be useful or even honest.

I worked in China for one of the state aircraft manufacturers. The factory had thousands of employees who considered themselves well paid. If they did not like the job and had a better offer they usually took it. (We lost several great engineers from the program that I was working on.)

The problem with looking at wages was that it did not have much to do with the total compensation rate. For example, employees got company provided housing. My former administrative assistant, who is now in charge of one of the Airbus programs, has a 130 square meter (around 1,400 square feet) flat on the fifth floor of a fairly sturdy new building. The company paid half of the cost of the building and pays for more than 90% of the utility bill. It also hands out sugar, tea and other goods on a regular basis to employees at no direct cost to them. Daycare services are provided for employees as is health care.

When American activists talk about how cheap Chinese labour is they fail to account for the total compensation cost and for the after tax purchasing power of workers. My assistant and her husband seemed to have no trouble living well. They ate out several times a week because well prepared food was very cheap and convenient. They wore very nice clothing, paid $40 a pop for their son's weekly piano lesson and were able to take occasional vacations. In one corner of the flat stood a decent sounding upright piano and the flat had a 50 inch LCD television set as well as two personal computers. These items were purchased in cash with savings by the family.

I have been back to China twice since my term ended. Every time I have been impressed by the steps taken by the Chinese people. While there is still a great deal of terrible poverty in the countryside most people that live in the cities and have jobs tend to have decent lives when compared to their parents and grandparents.

I am also impressed by the work habits and overall skill sets that the Chinese bring. If I walk the assembly line in Boeing and ask the workers to name the standards that apply to their work I will get many blank stares and quite a few wrong answers even though the workers are perfectly competent and good at doing their jobs. When I look at the tools I will find some that have expired. I will also find a number of employees whose certification has run out and needs to be renewed. That will not happen in China very much. The workers will be very familiar with the standards and will carry with them booklets that show the certification requirements for every tool and job.

The Chinese workers will usually be better skilled and will work much harder. And many of the control systems will be much more robust. Where I found difficulties is with misunderstandings due to a lack of precision with the language. If Chinese are working on products designed by Westerners some of the translations will sometimes be off because the people who wrote the specifications were sloppy with their use of the language.

Overall I find that my experiences confirmed that both sides of the China debate usually get things wrong. Chinese workers are not as poorly compensated as many in the West imagine and their purchasing power tends to be higher than most Westerners imagine. That said for some of the lowest skilled jobs the compensation levels are low because Chinese workers have to compete against foreigners who are paid much less. And while there is crushing poverty in some areas the amount of wealth and the lifestyles enjoyed by many ordinary middle class Chinese can be much higher than many in the West imagine.

Do you think, seth, that GE sent technicians, engineers, and production specialists to China to guide them through the start-ups and beyond? I betcha they did, and it shows. China's climb to quality will much shorter than Japan's was because we all know more now than we did in 1946.





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Given GE, I wouldn't put it past them to do that. They still end up with junk.

The decline in quality is compared to the products they replaced, such as those made in First World countries.

Well seth,

To have a decline then they must have had a peak, did we miss the peak, was it so low that no one noticed?

Yet you claimed they have never had a peak, so how could they have a decline?

No, my friend, the Chinese are following the same order of progression the Japanese did. China is a huge country without a huge population, we both know that. Within that economy there is room for a lot of junk and at this point it is trinket stuff; but, there is also a lot of room for quality goods and there is a lot of that. The Chinese didn't wake up one day and decide to make toasters for GE, throw together a shop, and start sticking parts together.

Do you think, seth, that GE sent technicians, engineers, and production specialists to China to guide them through the start-ups and beyond? I betcha they did, and it shows. China's climb to quality will much shorter than Japan's was because we all know more now than we did in 1946.

(I think)

seth, you seem to be like the Walmart haters, you got your mind made up and that is it. So be it, bless you brother.

for some reason all the html features are not working in the comments sections. Sometime italics, blockquotes, bold etc. work and at other times they don't.

Posted by: vidyohs | May 13, 2009 6:19:02 AM





Unfortunately their decline in quality does exist, should you pick up about any product designed to replace a First World counterpart. Whether you see it in electronics or cars, the best they do is knockoffs. Unlike Japan, they have not even made so much as a step towards quality; they have about 30 years and junk is still their way of manufacturing.

It is something that cannot be ignored. They're using quantity and slave labor to crowd out quality and prosperity.

"Hereditary slavery was established by force of law, so it could only be abolished by force of law."

Yeah right Martin! If it could be proved that slavery was economically unsustainable over free labour then it would have been phased out long ago simply out of necessity.

No. All sorts of inefficient state enactments exist and have existed for time immemorial without being phased out. Proving the inefficiency does not persuade statesmen to phase them out. Statesmen phase them out only if statesmen themselves benefit from phasing them out.

There's a humourous tale that the South were going to phase out slavery because it was becoming unprofitable in an increasingly Industrial Age.

That's exactly what Helper advocated in the The Impending Crisis, before the war. Rowan Helper was a Southerner and not very correct on the race question in modern terms, but he opposed slavery in the South for economic reasons. His reasoning was very Ricardian. He argued that slavery depressed Southern land values.

I was born and raised in Mocksville, N.C., like Helper, so I studied this subject in school. One of my high school history teachers wrote a history of our county that discussed Helper.

Helper was more than a local figure though. His work was widely read and very influential among abolitionists including Lincoln, even though Helper was later dismissed as a racist by modern historians, though he was no more racist than Lincoln.

It's humourous of the same calibre that some Japanese revisionists claimed there was a secret movement to surrender during World War 2 before the Atomic Bombs were dropped.

Helper's book was not a secret, and neither was the debate. It's a matter of historical fact.

Daniel Kuehn: "but it also puts American firms at a competitive disadvantage."

Does it? Doesn't it just mean that plants located in nations which do not subsidize production are at a disadvantage? Most American firms can relocate plants to other low cost nations willing to subsidize production.

So what if subsidies from the Chinese government are a competitive advantage for a few Chinese manufacturers? Those subsidies have not stopped the growth of U.S. based manufacturing. The 2008-2009 recession stopped that growth temporarily. But U.S. manufacturing GDP reached an all time high in 2004. And then again in 2005. And then again in 2006. And one more time in 2007.

John Dewey -

RE: "If the Chinese government is subsidizing the production of goods for export, doesn't that imply a gift from China to U.S. consumers? Isn't the standard of living of U.S. consumers raised at the expense of the standard of living of Chinese citizens? Don't the "advantages" simply belong to U.S. consumers?"

Certainly the advantages accrue to consumers - but it also puts American firms at a competitive disadvantage.

And by pointing out the advantages garned by Chinese firms from subsidies, I don't mean to write off subsidies completely. I think some state subsidization is worth while, particularly in areas such as basic research.

"Hereditary slavery was established by force of law, so it could only be abolished by force of law."

Yeah right Martin! If it could be proved that slavery was economically unsustainable over free labour then it would have been phased out long ago simply out of necessity. There's a humourous tale that the South were going to phase out slavery because it was becoming unprofitable in an increasingly Industrial Age. It's humourous of the same calibre that some Japanese revisionists claimed there was a secret movement to surrender during World War 2 before the Atomic Bombs were dropped.

John Pollak:

Slavery exists anytime one man owns the labor of another person. What you define is Chattel slavery, where the slave owner does direct the tasks of the slave, however, slavery also exists where one man regularly takes all or some portion of the income/labor of another.

If a slave-owner allows the slave to choose his own tasks (to maximize his comparative advantages), and even to perhaps keep a portion of his product so that he works harder, it seems to me that the slave is still a slave.

And if we take free men and attach to their labor like this until it is indistinguishable from taking slaves and granting them these incentives, then they are all slaves just the same.

I have a problem of principles maintaining that we are slaves to the state here, and then pretending that the Chinese are not slaves simply because they choice.

Similarly, your basic lib should have a problem of principles maintaining that low-paid Chinese are slaves since they have the same choice that we have, except that liberals don't actually have principles -- and so, they are allowed to be completely hypocritical.

I have no problem with free trade, but trade is not free for all of the reasons discussed.

But, at the end of the day, slavery was abolished by force of law and not merely 'phased out' by market forces.

Hereditary slavery was established by force of law, so it could only be abolished by force of law.

"Second, do you really believe that slaves (as defined above) would be desirable operatives in manufacturing plants?

As badly as the junk is made, they don't care as long as they meet their numbers. The same stuff that gives you this slave labor is what gave us melamine in milk, declining quality in electronics, and multinationals an escape from the First World.

Posted by: sethstorm | May 13, 2009 3:22:22 AM"

What you're saying here makes no sense, sethstorm, when you're talking about making products for consumption in open markets.

The stuff made in China may have been poor in the beginning, just as the stuff made in Japan was poor when it began its march up the ladder after WWII; but it got better very rapidly. Yes we do import a lot of trinket style junk from China, but my blender, coffee pot, clock radio, etc. etc. is just as good as any made here or in Europe.

The Chinese can not afford to allow their products to be "junk" that will ruin any markets they get into. The only time a nation or manufacturer can get by producing junk is when they are operating in a closed market where they control every aspect of that market, from raw materials to final customers, such as the old Soviet Union could do.

As for the old wimpy excuse, "I have no choice", it is garbage. We always have a choice in what we do. We may not like the choices, we may be afraid to make the choice, the choices we make may result in terrible pain, suffering, and possibly death; but, we always have a choice.

If the Chinese government is subsidizing the production of goods for export, doesn't that imply a gift from China to U.S. consumers?

Yes. Why would I support these forcible "gifts" from Chinese people to U.S. people? The Chinese are poorer.

Isn't the standard of living of U.S. consumers raised at the expense of the standard of living of Chinese citizens?

In the short run, it might raise U.S. consumption, but I'm not sure about the longer run, because malinvestment can result. Sure, we buy cheaper Chinese goods today, but if the monetary manipulation distorts the comparative advantages, the resulting economic organization could be only temporary and could require painful readjustment later.

I feed my cat every day, but if I stop feeding her and other people also stop feeding her, she has a much tougher time feeding herself now, because she lives deep in an artificial environment largely devoid of her natural feeding opportunities. That's malinvestment from her perspective, even if she doesn't live long enough to regret it.

Note that we in the U.S. could be the fat cats in this analogy. I'm not suggesting that we don't benefit from the subsidized consumption in the short run.

Don't the "advantages" simply belong to U.S. consumers?

No. Both advantages and disadvantages flow in both directions, and on balance, we can both be poorer than we might otherwise be.

Are you objecting to federal government deficits, Martin?

Yes, I object to most of what the federal government does, so its power to create money while creating taxpayer obligations without fully and frankly acknowledging what it does is a problem.

What difference does it make who buys federal government debt?

Who buys the debt makes little difference to me, but I don't take the debt as granted. It's a policy that I may oppose. Furthermore, it's a fact that another state may game the debt creation in the way that Chinese authorities do.

Suppose the Chinese government bought debt of U.S. corporations and someone else bought the U.S. government debt. Would that bother you less?

No. The Chinese government is not unique, and I don't blame the Chinese government for gaming the U.S. government's counterproductive gaming of the U.S. government's monetary authority. I blame the U.S. government for that.

I also believe that Chinese gaming of exchange rates harms Chinese people, possibly even to my benefit, at least in the short run. In the longer run, I'm not sure, because the Chinese state policy, along with the U.S. state policy, can lead to malinvestment.

The Chinese have some comparative advantage, vis a vis the U.S., even if U.S. monetary authorities do not sell entitlement to U.S. tax revenue to Chinese monetary authorities while Chinese authorities give Chinese currency to U.S. consumers to encourage Chinese exports.

The comparative advantage is a separate issue and has no bearing on the merit of these policies. I have no problem with free trade.

I'm not one that sensationalizes the Chinese labor force by calling it "slave labor"

No, that's calling a spade a spade. It is wage slavery, and conditions do make for the cause. The "willingness" is only there by technicality; choices made from there are only made via force of practicality.

Despite the claims to the contrary, what is occurring in China is slave labor. The Chinese government provides the control and the means for multinationals to do as they wish.

An individual may be a slave with a lot of free time, a soft comfortable collar, and a long light strong leash; but when the taker has all the options on when any or all of that changes, and the individual no options.....baby, the individual is a slave.

Describes China to near-perfection. By matters of practicality, they are forced to take such work; no other work exists for which they can choose as an alternative. Thus those conditions do qualify as slave labor.

Second, do you really believe that slaves (as defined above) would be desirable operatives in manufacturing plants?

As badly as the junk is made, they don't care as long as they meet their numbers. The same stuff that gives you this slave labor is what gave us melamine in milk, declining quality in electronics, and multinationals an escape from the First World.

Surprise! Surprise! Very low working conditions need not qualify someone to be a 'slave'. Indeed the complaint that being working poor amounts to 'wage slavey' has met with obvious scepticism. But then in <a href="
http://en.wikipedia.org/wiki/Slavery_in_ancient... rel="nofollow">Ancient Rome
, slaves could live in a way that was downright terrible to being given a great deal of responsibility and life of relative comfort. But, at the end of the day, slavery was abolished by force of law and not merely 'phased out' by market forces.

P.S. I don't why 'tax slavery' has any right to merit than 'wage slavery'. Both are irrelevant but heart-tugging terms.

Vidyohs support the notion that paying taxes is 'slavery'. Gee, didn't see that the coming . . . yeah right!

daniel kuehn: "I imagine state subsidies play a role in giving Chinese firms certain advantages"

If the Chinese government is subsidizing the production of goods for export, doesn't that imply a gift from China to U.S. consumers? Isn't the standard of living of U.S. consumers raised at the expense of the standard of living of Chinese citizens? Don't the "advantages" simply belong to U.S. consumers?

Don, et.al.,

John has this right.

"What you define is Chattel slavery, where the slave owner does direct the tasks of the slave, however, slavery also exists where one man regularly takes all or some portion of the income/labor of another.

I make the distinction because a certain level of taxation (especially income tax) is in fact slavery. We may disagree on where the line is (90%? 75%? 60%? 33?) but at some point slavery exists here too. As good libertarians, we must keep in mind that we are at some level slaves of the state.

Posted by: John Pollak | May 12, 2009 5:58:53 PM"

However, John seems reluctant to say it like it is, so I'll do it for him, you, and myself.

The condition of slavery is created anytime any portion (percentage), even 1%, of an individual's fruits of labor is taken without his express voluntary and willing agreement or contract. Period, end of story.

When the taker has the option of what percentage is taken without voluntary agreement, and when it is taken without voluntary agreement, a fulltime condition of slavery is created.

An individual may be a slave with a lot of free time, a soft comfortable collar, and a long light strong leash; but when the taker has all the options on when any or all of that changes, and the individual no options.....baby, the individual is a slave.

No one has a right to one iota of a miniscule minute portion of anything I create. They can try to sell me on citizenship, goods, services, and we might strike an agreement under which I would agree to fork over some money to access the advantages I see in their proposals; but screw 'em if anyone thinks I am going to go back down on my knees and take the collar again.

Now any of you out there can wring your hands and tell me I am over the top and I am shooting from the hip, or any other wimpy excuse that refuses to recognize you're true condition; but you can save it until you can refute the simple 1, 2, 3, wham nail it down logic.

And, please, someone tell me about the vote, I need a good laugh.

And yes, contrary to the propaganda pushed on us by the 60s movements, placid, willing, and productive slaves did exist on the plantations and were profitable for their owners. Logic tells you that this is true by the very fact that slave owners replaced old or dying slaves with new ones, and expanded their stables as they expanded their fields. What business man is going to invest in "labor" that he knows will not be profitable or productive?

BTW, I can't bring myself to believe that anyone of this changed because the setting was a factory instead of a field.

Oh, and tell me again about that vote. LOL

martin brock: "Chinese monetary authorities may value entitlement to U.S. tax revenue, but I don't value U.S. authorities selling it to them."

Are you objecting to federal government deficits, Martin? What difference does it make who buys federal government debt? Suppose the Chinese government bought debt of U.S. corporations and someone else bought the U.S. government debt. Would that bother you less?

Of course, another factor lowering wages in China is U.S. immigration policy, and that's a statist interference in free trade as well.

Of course, another factor lowering wages in China is U.S. immigration policy, and that's a statist interference in free trade as well.

Treasury notes ARE something China needs, what with its under-developed financial sector and all.

Chinese monetary authorities may value entitlement to U.S. tax revenue, but I don't value U.S. authorities selling it to them.

Wages are lower in China not only because of lower productivity but because, as Martin Wolf points out in "Why Globalization Works," the opportunity cost for labor now in China is so low -- mostly on farms, where the return to labor is minuscule.

I'm sure that's true, but the exchange rate is pegged, and price fixing does distort markets.

Do you have any evidence to back this up, or are you in the habit of presenting your assumptions as though they were facts?

Of course, my statements reflect my assumptions. Must I precede every sentence with "I think" or "In my opinion" to make this point explicit. Isn't it obvious enough?

I have the evidence of the pegged exchange rate. You can address the point, or you can ignore it as you have. That's up to you.

It is my understanding that there is quite a bit of actual slave labor in Chinese prisons and prison camps. It probably doesn't affect China's overall manufacturing output all that much, but it certainly shouldn't be overlooked when discussing the ethical implications of trading with China.

At the risk of prompting more public self-stimulation (self-stimulus?) from M. Brock, can I point out...

"If we don't start producing something the Chinese need soon, they'll stop trading their currency for dollars at a discount and buying Treasury notes with the dollars."

Treasury notes ARE something China needs, what with its under-developed financial sector and all.

Can't think of it off the top of my head, but there is interesting work out there concluding that slave labor was just as productive at manufacturing as it was at agriculture.

But what I've read suggests that it wasn't very productive at agriculture. In his pre-Civil War study of the Southern economy, The Impending Crisis in the South, Hinton Rowan Helper uses an essentially marginalist analysis to argue that Southern land values are depressed, compared with Northern land values, by the low productivity of slave labor.

While not physically threatened by their government, the currency peg does represent at least a form of indentured servitude to the extent that it results in a net redistribution of wealth away from labor into Chinese government coffers.

"Slave labor, accurately understood, exists only when a human being is owned by another human being, and the owner forces his slave to work at tasks chosen by the owner, with the slave having no real say in the matter or ability to resist."

Don, I appreciate the point that you are making in this post, but your definition of slavery is not accurate. Slavery exists anytime one man owns the labor of another person. What you define is Chattel slavery, where the slave owner does direct the tasks of the slave, however, slavery also exists where one man regularly takes all or some portion of the income/labor of another.

I make the distinction because a certain level of taxation (especially income tax) is in fact slavery. We may disagree on where the line is (90%? 75%? 60%? 33?) but at some point slavery exists here too. As good libertarians, we must keep in mind that we are at some level slaves of the state.

It's obvious to me why you are posing these old questions again now, because of the need to clear your conscience. If the Chinese workers are in fact slaves or resemble slaves then venerable American businesses that pay their workers well or at least better than the Chinese sweatshops do, can't compete with slave-like labour and deserve to be "protected" or "bailed out," from their competitors and your self-worth won't allow that to be the case. You demand to prove that the Chinese are more industrious, more efficient, more productive. You just know that the Chinese workers are betterer at growing shoes, purses, and electronics, and the American worker by contrast wants life on easy street and is lazy and coddled by unions and welfare programs in comparison. You are wrong of course and your inner self knows it or you wouldn't be bring up this trite tripe right now. Perhaps the Chinese workers are automatonic Borgs that have sold thier soul to the company store in order to make ends meets and avoid homelessness and starvation. They shouldn't be comforted by the fact that have a lot in common with most workers here and around the globe, or that some workers work under even worse conditions or for even less pay.

Wages are lower in China not only because of lower productivity but because, as Martin Wolf points out in "Why Globalization Works," the opportunity cost for labor now in China is so low -- mostly on farms, where the return to labor is minuscule.

wages are not lower simply because Chinese productivity is lower

Do you have any evidence to back this up, or are you in the habit of presenting your assumptions as though they were facts?

Whether or not any Chinese are "enslaved", lower wages account for the cost advantage, and wages are not lower simply because Chinese productivity is lower, though it is lower. Wages are lower, also because mercantilist proprieties engineered by the Chinese state deliberately depress consumption in favor of investment to stimulate development.

The currency peg is only the most obvious example. China simply gives Chinese money to U.S. consumers to purchase Chinese goods, because China wants Chinese factors organized to produce what the U.S. consumes, because the U.S. is further down a developmental path that China wants to emulate.

That was the policy in the past anyway. I'm not sure the U.S. really is further down a path that China wants to follow anymore. Maybe the Chinese will follow us all the way to the aircraft carriers and luxury hotels in skyscrapers, but I doubt it.

If we don't start producing something the Chinese need soon, they'll stop trading their currency for dollars at a discount and buying Treasury notes with the dollars. We can produce things they need. That's not a problem. But will we produce these things while our own lords of propriety order more aircraft carriers and luxury hotels in skyscrapers? That's the question. It's not up to them. It's up to us.

Daniel,

I believe that you're referring to Fogel's and Engerman's 1974 book "Time on the Cross." They showed in that book that slavery on southern plantations was not as inefficient as many previous researchers argued. But the slaves in the south were used overwhelmingly in agriculture, not manufacturing.

I suspect that slavery was a relatively efficient means (for non-slaves!) of growing certain crops, such as cotton. Of course, no matter how efficient, slavery is morally wrong and totally unjustifiable.

But I doubt that slaves would be efficient workers in factories. (Would you want slaves to have access to your multi-million dollar machines? Would you trust slaves, say, to perform well at the quality control that is a must for modern manufacturing?) I'm sure some research has been done on this topic, but at the moment I cannot now recall where it might be found.

Don -

Can't think of it off the top of my head, but there is interesting work out there concluding that slave labor was just as productive at manufacturing as it was at agriculture. This research focused on the American south and concluded that we shouldn't necessarily assume that slavery would have "died out naturally". Not sure how well that literature has held up over time, but just thought you might be interested - I can try to track it down if you want.

I'm not one that sensationalizes the Chinese labor force by calling it "slave labor" - I imagine state subsidies play a role in giving Chinese firms certain advantages, along with a host of other things that could probably be criticized about the Chinese system. But I wouldn't call it slave labor either.