Osborne extols virtues of China while students work for nothing

While chancellor George Osborne and London mayor Boris Johnson are busy selling off UK infrastructure to Chinese capitalists, they want us to abandon what they claim are outdated attitudes about the country. The trouble is, the new reality about China is almost as bad.

Speaking on the BBC on Monday morning, the chancellor said: "I think there is a bit of a British attitude which treats China as a sweatshop on the Pearl River. One of the things I'm trying to do this week in China is to change British attitudes to China...this is a country that is right at the forefront of medicine and high-tech and computing and high-tech engineering and all of that."

It’s also a country that is right at the top when it comes to appalling labour conditions and intense exploitation of the country’s workers. Beneficiaries, naturally, include the major transnational corporations like Foxconn and Apple.

Foxconn, the world's biggest contract electronics maker, has just admitted that unpaid student interns worked shifts at a factory in China. Last year, the corporation owned up to hiring underage interns at the same unit.

Reports suggest that upwards of upwards of 1,000 China-based Xi’an Institute of Technology students may have been forced to work on an assembly line unpaid, assembling Sony’s PlayStation 4. They were warned they wouldn’t get credits for their course unless they played ball.

The Taiwanese-based corporation makes parts for major retailers, most notably for Apple’s iPhone. Workers are often housed in dormitories and are subjected to intense pressure at work. After a spate of suicides at its Shenzhen factory, Foxconn put up nets to catch falling workers. Sick, or what?

And just today, the US-based China Labor Watch (CLW) accused US-headquartered toy corporation Mattel over a series of violations at supplier factories in China, including failure to pay overtime. The campaign group put the value of what it called “wage theft” at the six factories at between $8 million and $11 million annually.

“One of the most alarming findings was the various methods – many illegal – that Mattel’s factories use to reduce their workers’ due wages and benefits,” it said. “Mattel’s factories achieve cost reductions through the degradation of labour conditions ... Workers at the bottom of the system are forced to bear the brunt of this burden.”

In July, CLW published an investigative report detailing the labour violations of three factories of Pegatron Group, a major supplier to Apple.  Average weekly working hours in the three factories probed by CLW were approximately 66 hours, 67 hours, and 69 hours, respectively. Workers were forced to sign forms indicating that their overtime hours were less than the actual levels.

CLW executive director Li Qiang said, “Our investigations have shown that labour conditions at Pegatron factories are even worse than those at Foxconn factories. Apple has not lived up to its own standards. This will lead to Apple’s suppliers abusing labour in order to strengthen their position for receiving orders.”

Chinese workers have been fighting back against super-exploitation. Chinese private-sector wages rose 14% in 2012, following similar increases the year before. While this still leaves workers way behind average earnings in Japan, Europe and North America, the increases were still enough for the Wall Street Journal  to warn its readers that this could “hurt business profitability and export competitiveness”.

So it’s on to the next venue for super-exploitation. Countries such as Bangladesh, Cambodia and Vietnam are seen as alternatives as global clothes retailers look beyond China. Marks and Spencer, for example, has more tripled its staff in Vietnam over the past three years.

So chancellor Osborne, the sweatshops are simply moving countries. No doubt you will be visiting them in due course, extolling their virtues while turning a blind eye to what’s really going on in the factories. ConDem business as usual.

  

Paul Feldman

Communications editor

 

Corporate freebooters always put shareholders first

Popular anger against tax avoiding transnational corporations like Starbucks, Amazon, and Google is rising fast as government spending cuts accelerate. Now Rupert Murdoch’s Sun is beating its drum against Npower.

A petition from 38 degrees reveals that the energy company manages to pay no tax in the UK, avoiding an estimated £108 million bill by sending its profits through a shell company registered in Malta.

According to tax expert Richard Murphy, Npower borrows money from RWE, its German owner, and then pays the interest on the debt to the Maltese company – Scaris. It’s a legal scam that allows Npower to record a loss in the UK.

The Sun says “foreign” companies are buying up British assets, and more of “our” hard-earned money is heading abroad. This is deliberately misleading, nationalist rubbish.

Profits come from the hard work put in by millions of ordinary people all over the world, many employed in dangerous conditions, who are paid as little as employers can get away with. They end up in the managed wealth funds of shareholders located wherever they can find the most tax-efficient homes. That’s the normal operation of the 21st century capitalist economy

Corporations exploit competition between governments. During the Blair/Brown New Labour governments, business taxes were driven down to attract investment. Last month, Tory chancellor George Osborne announced plans to cut the corporate tax rate to 20%, the lowest in the G20 group of advanced economies. Treasury minister David Gauke, said ominously: “We must recognise that we are in a global race. There will be economies that succeed and those that fail.”

On the scale of tax-optimising accounting tricks used by all corporations, Npower’s £108 million hardly registers. The Netherlands – a key destination for the profits of many corporations operating in Europe - attracted $3.5 trillion of inward investment in 2012

However, just $573 billion ended up in the “real” Dutch economy.

The rest found its way into “special purpose entities”, the finance and holding companies often designed to help businesses avoid tax. In tiny, Luxembourg an amazing $2.28tn came into the country disguised as investment but just $122bn – 5% - entered the real economy.

If these huge, incomprehensible numbers make your head spin, let’s just focus on one well-known name to shed some more light on the murky activities of corporate freebooting.

Yesterday, despite holding $145 billion in spare cash, and having no debt at all, Apple sold the largest amount of bonds ever issued by a non-bank company. The corporation borrowed $17 billion from investors on the debt market to be repaid in periods up to 30 years. So why did one of the world’s most successful companies decide to get into debt?  

It turns out that Apple is under pressure from its shareholders, who are anxiously watching the precipitous 45% decline in the company’s value over the last seven months. The plan is for Apple to drive its value back up, not by investing in new production, but by increasing dividends – giving more of the profits to shareholders, and buying back a proportion of their shares to make those remaining more valuable.  

Apple doesn’t want to use its cash to do that because $105 billion of its $145bn is parked outside the US, and repatriating it would incur US taxes. Better to use borrowed capital - and the additional tax sweeteners that borrowing attracts. Microsoft is doing the same.

So the profit-maximising logic of capitalist production actually requires the most successful companies to avoid tax, borrowing from one set of gamblers to keep the favours of another.  

Meanwhile, in the Foxconn sweatshops of China, workers assemble the latest iPad, for a relative pittance. And workers making clothes for Western corporations in Bangladesh are killed when their poorly-built factory collapses. Tax avoidance is only an aspect of a system that is rotten to its core.

Gerry Gold

Economics editor

Corporate murder in Bangladesh

Cheers went up yesterday among the exhausted rescuers at Rana Plaza factory in Dhaka, Bangladesh. It had just been announced that six factory owners had been arrested.

So far 380 garment workers, mainly women, are known to have died in the rubble of that huge building, where 3,000 people were working at the time of its collapse.

The worst ever factory disaster in Bangladesh’s history has shocked people around the world, including those who wear clothes purchased at Primark, Benetton and Walmart, which used the factory. Matalan and Bonmarché are also appear to be connected with the New Wave Style company, the largest employer in the Dhaka building.

Many share the desire to make those who profit from employing cheap labour by making people work under such lethal conditions pay for their crimes. But – and there are several buts –  will punishing these men put an end to the crude and cruel exploitation of human labour that takes place day in and day out, not only in Bangladesh but throughout the world?

And how could this murder – and it is a kind of murder – happen so soon after the fire at the Tazreen factory last November, also in Dhaka, in which 112 people died?  Why was nothing done after that?

The factory owners at Rana Plaza insisted workers should return to work even after safety engineers warned that huge cracks in the building’s walls were evident. They were told they would be docked three days pay for every day they were absent.

In the wake of these events, many shoppers feel complicit in the suffering of those in the Bangladeshi rag trade. Are we wearing “blood clothes”, they ask?  Calls for consumers to boycott companies like Primark are widespread. Ethical buying is said to be the solution.

Like so many others, London Evening Standard fashion editor Karen Dacre calls for “consumer power” to force changes in the clothing industry. That sounds good. But how can you tell how a company treats its workers? And who is responsible for auditing conditions?

Responsibility Outsourced, a report by major US trade unions, is deeply critical of the companies and organisations that are supposed to monitor how workers are treated. The Ali Enterprises factory in Pakistan in which 260 workers died in a fire last year, had just earned its certification from the non-profit social auditing group, Social Accountability International.

In the report, which is dedicated to murdered garment workers leader Aminul Islam, the unions are deeply critical of social audit firms, including the Fair Labour Organisation which monitors the Foxconn plant that supplies Apple. FLA gets money from corporates such as Apple and Nestlé.  

Trade union and labour activists know that factories are not going to police themselves and are rightly calling for binding agreements. But even after a binding agreement was developed by labour organisations, Wal-Mart and Sears not only refused to sign but refused to pay compensation to the Tazreen victims.

But, while the report avoids saying so, it is the capitalist system itself which is the real murderer. As it notes: “While this globalised business model continues to provide vast profits for companies, it comes at a tremendous cost to working people and to the economies of many of the poorest nations.”

Human labour is simply another commodity to be bought and sold, at the cheapest price going. That’s why manufacturers moved into Bangladesh in the first place. The Rana Plaza was just one of the 5,500 factories Bangladeshi rag trade factories where the average monthly wage of the three million workers is around £25 per month. Clothing production accounts for 82% of Bangladesh’s GDP, a huge rise since 1985.

Companies must seek out the cheapest labour possible to out-do their competitors. No amount of consumer boycotting or regulation will abolish that underlying imperative. As one Bangladeshi union organiser told the BBC: "You buy one get one free - but it's not really free."

The global corporations will always find willing accomplices, whether it is in Bangladesh, China, Brazil or in Britain in their search for profits. Moving on from an economic system driven by greed and profit is the biggest priority of all.

Corinna Lotz

A World to Win secretary

Wages plummet in global race to the bottom

Despite massive state intervention, including two interest rate reductions and huge injections of credit, the Chinese economy has been unable to withstand the consequences of global overcapacity.

The  contraction in China’s immense, globally-significant manufacturing sector is recorded by two, complementary  measures. HSBC, the global financial conglomerate, measures activity in the smaller, private firms, and its index has been in contraction territory for ten months in a row.

Last month the official government-maintained measure of manufacturing activity, focussing on big state-owned firms which have been heavily supported by government spending on infrastructure, fell to a lower-than-expected 49.2 in August.

The impact of the growing Chinese downturn is being felt sharply in the United States. In August, manufacturing activity shrank for the third month in row. The Purchasing Managers’ Index recorded that new orders – an indicator of future demand –  fell to 47.1 from a reading of 48 in July.

Anything above 50 indicates expansion. Below 50 means contraction. August’s figure is the lowest since the depths of the post-crash recession in April 2009.

Looking deeper we discover that In the US manufacturing comprises only 12% of economic activity, and its continuing growth has been founded upon a drive to lower wages.  

Millions of relatively well-paid skilled jobs were lost following the crash as unemployment soared to be replaced by a much smaller number of low-paid workers in the service sector.

A new report from the National Employment Law Project shows that companies in the United States eliminated about 8.1 million jobs after the recession began in late 2007. The economy has since recovered only about 3.3 million of those jobs, starting in early 2010..

During the recession, employment losses occurred throughout the economy, but were concentrated in mid-wage occupations. By contrast, during the recovery, employment gains have been concentrated in lower-wage occupations, which grew 2.7 times as fast as mid-wage and higher-wage occupations. Specifically:

• Lower-wage occupations were 21%  of recession losses, but 58% of recovery growth.
• Mid-wage occupations were 60% of recession losses, but only 22%  of recovery growth
• Higher-wage occupations were 19% of recession job losses, and 20% of recovery growth.

In the US unemployment benefits cease after 23 months and many workers either disappear off the employment statistics altogether or are forced into low-paying jobs. James Paulsen, chief investment strategist at Wells Capital Management sums it up very bluntly: “The cost of labour is very cheap,”

Whilst cheap labour is good for short-term profit, which is reflected in the results of US corporations in particular, in the longer term it adds another twist to the downward spiral. This is because the decline in real incomes, which is being felt throughout the world, results in weaker demand.

According to Ethan Harris, co-head of global economics research at Bank of America Corp in New York, the proliferation of “very distressed workers” hurts consumption, which, he estimates is likely to increase just 1.5% in the next six quarters.  

But the drive to lower wage costs is just as relentless as the global manufacturing contraction and workers in the US and Europe face further attacks in the competitive drive to the bottom.

Foxconn Technology Group's is the main manufacturer of Apple products like the hugely successful iPads and iPhone, and Apple became the world’s most valuable company ever in August surging to $624 billion in market value.

The company has been criticised for factory conditions in China resulting in a series of deaths and suicides. Foxconn is now investing $10 billion in Indonesia where manufacturing wage costs are 60% percent of China's. Just think of that the next time you use an ubiquitous Apple product.

Gerry Gold

Economics editor