A report on Mitt Romney, outsourcing and near slave labor in China

Global-Tech: Betting Against American Workers – Institute for Global Labour and Human Rights.

China — a labor cost savings bonanza?

Not really, according to Yves Smith:

For some time, we’ve argued that outsourcing and offshoring were overdone. For manufactured goods, direct factory labor is typically only 10% to 15% of final product costs. Even if you get significant savings there, the offsets are increased shipping, inventory, and managerial/coordination costs (which serves as an excuse to transfer savings on factory workers to the top brass). In addition, extended supply chains also entail higher risks. I’ve had executives and senior managers in various industries tell me that there internal estimates of the savings from outsourcing weren’t compelling, but senior management went ahead on the (typically correct) assumption that investors would approve.

But even in the cases where the outsourcing cost savings were significant, the idea that American wages were way out of line with Chinese wages and the only future for American workers was grinding wages lower and lower to compete with China has been oversold. Various writers, including yours truly, pointed out that China’s wage advantage would not hold indefinitely even if it managed to keep its currency peg (which, separately, it hasn’t; the change to a currency basket has over time resulted in appreciation against the dollar).

The reason? China’s much higher inflation rate would over time reprice labor in nominal terms at home, which with a currency peg (or the current dirty float) would translate into real increases to foreign buyers. To put it more simply, double digit inflation over time would be tantamount to a currency revaluation.

Despite popular (and worse, pundit and media) perceptions otherwise, China no longer enjoys a labor cost advantage in many areas.

In fact, the United States has recently seen an increase in manufacturing investment. Why, then, do we so often hear American pundits attacking off shoring American capital when capital is now flowing back to the United States? The issue also has a political component:

Despite the fact that this trend is well under way, we’re certain to hear a steady diet of haranguing from neoliberal economists about how American workers have to suck it up and accept even lower wages. What’s driving falling real wages is poor domestic economic policies, namely, the mismanagement of the post crisis period. Japan warned the US early on that the biggest mistake it had made was not forcing its banks to recognize losses. But we ignored their lesson and are in the process of suffering what may turn out to be a lost decade. Time to blame the real perps, our bank enablers, rather than the poster bad guy, the Chinese wage slave.

Michał Kalecki expected blunders like this (.pdf) from the capitalists and their foot soldiers. We should never lose sight of the fact that capitalism is not an intrinsically rational economic system. The opposite is true.

Dean Baker compares the United States and China

The United States as #2 – Al Jazeera English.

China races to the top while the United States races to the bottom.

A wounded GE launchs a self-denfense propaganda campain

Writing for In these Times, Roger Bybee reports that General Electric was both shocked and troubled by reports which showed that the transnational corporation earned billions in profits in 2010 but paid no income taxes. Bybee then critical analyses some of GE’s propaganda pieces, showing them to be whitewashes meant to cover a realities GE would want to remain hidden. Those realities: GE exports jobs from the United States, attacks unions and union wages and benefits, invests in China, and, implicitly, avoids public accountability.

Click on the GE logo to experience the web version of this propaganda campaign.

Quote of the day

Andrew Leonard wrote:

There’s no getting around the hard truth: right now, there is no such thing as an “ethical smartphone.” Or, for that matter, an ethical flat-screen TV, digital camera, or any kind of personal computer.

Labor abuse offshore is hardly a new phenomenon. It is not strongly correlated to the production of digital technology in the Far East. Nor, for that matter, is labor abuse unknown onshore (see, for instance, this, this, this, etc.). Worker’s suffer abuse because they are exploitable
commodities and because some employers seek to extract well-above average value from the worker’s they use. The abuse often enables these super-exploiters to take this above-average value from their workers.

If Leonard or anyone else wants to purchase ethically defensible goods, they might find during their research that their lives are thoroughly compromised by the objects they consume. And, as I have already pointed out, this is not a new problem. It is a feature specific to capitalist and imperialist economic systems.

Quote of the day

Paul Craig Roberts addresses the looming American attack on Iran:

In my judgment, the US government’s war preparations are driven by three factors.

One is the neoconservative ideology, adopted by the US government, that calls for the US to use its superior military and economic position to achieve world hegemony. This goal appeals to American hubris and to the power and profit that it serves.

A second factor is Israel’s desire to eliminate all support for the Palestinians and for Hezbollah in southern Lebanon. Israel’s goal is to seize all of Palestine and the water resources of southern Lebanon. Eliminating Iran removes all obstacles to Israel’s expansion.

A third factor is to deter or slow China’s rise as a military and economic power by controlling China’s access to energy. It was China’s oil investments in eastern Libya that led to the sudden move against Libya by the US and its NATO puppets, and it is China’s oil investments elsewhere in Africa that resulted in the Bush regime’s creation of the United States Africa Command, designed to counter China’s economic influence with US military influence. China has significant energy investments in Iran, and a substantial percentage of China’s oil imports are from Iran. Depriving China of independent access to oil is Washington’s way of restraining and boxing in China.

What we are witnessing is a replay of Washington’s policy toward Japan in the 1930s that provoked the Japanese attack on Pearl Harbor. Japan’s bank balances in the West were seized, and Japan’s access to oil and raw materials was restricted. The purpose was to prevent or to slow Japan’s rise. The result was war.

A war with China — that’s truly change we can believe in….

Roberts continues by asking:

We, as Americans, need to ask ourselves what all this is about? Why is our government so provocative toward Islam, Russia, China, Iran? What purpose, whose purpose is being served? Certainly not ours.