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Johnson are busy selling off UK infrastructure to Chinese capitalists, they want us to abandon what they claim are outdated attitudes about the country.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

 

China's 'unsustainable'' economy weighed down by debt

Hopes that the continuation of China’s long boom will drag the rest of the developed capitalist world – the so-called advanced economies – back from contraction have been further dashed

The country’s part in the global economic spiralling slowdown was underlined yesterday when rating agency Moody’s joined Fitch in downgrading the country’s credit outlook. The downgrade from positive to stable was the agency’s response to the news that China’s growth rate has slowed to 7.7%, continuing the downward trend of the last two years.

News of the slowdown - greater than expected by market speculators who were banking on 8% or higher – reverberated around the world. Prices on the commodity and stock exchanges dropped sharply as demand for key inputs, including copper and oil, will fall.

Fitch downgraded its China rating last week. The agency sees warning signs in the massive expansion of credit from 130% of gross domestic product in 2008 to 200% in 2012. This is partly the result of the state’s huge investment in new cities and transport infrastructure, which was the response to the 2007-8 financial crash.

But the growth in credit is also the product of a hardly-regulated shadow banking industry offering “wealth-management” products to the minority of new rich who’ve benefited from China’s emergence as the world’s second largest economy.

The investment from abroad in search of cheap labour, which drew millions of Chinese into the workforce serving the profits of global corporations is now in decline as companies like Foxconn, which runs Apple’s assembly plants is looking elsewhere  in the world. Some corporations are even returning to the United States where real incomes have been driven down.

China’s state infrastructure programme, heavily promoted by former premier Wen Jia Bao, encouraged local administrations into spending way beyond their means in order to stave off the worst effects of the global crash, but he saw its limits.

"Another year of propped-up growth via state spending and a credit deluge would, we fear, push China dangerously close to proving Wen Jiabao correct - that the current economic model is 'unsustainable'," said Alistair Thornton, senior China economist at IHS Global Insight. "If something is unsustainable, at some point, it won't be sustained."

Despite the warning signs, China’s central bank has cut interest rates twice since June to reduce borrowing costs for businesses and consumers and increase lending.

And China is far from exempt from the continuing global slowdown. Yesterday the International Monetary Fund once again cut its forecast for world growth to 3.3% for 2013, from its January prediction of 3.5% whilst trying but failing to convince the markets that it remains upbeat about the future.

The IMF’s latest World Economic Outlook sees the eurozone as a whole contracting by 0.3%, the US slowing to 1.9% growth as the government slashes spending, but it also saw growth slowing in large emerging economies like Russia, China, Brazil and India.  

Summarising the latest set of global data, leading economics professor Eswar Prasad says: “The global economic recovery remains stuck below takeoff speed, unable to achieve liftoff and facing the risk of stalling.”          

Prasad’s warning that “politicians around the world continue to avoid tough structural reforms, instead relying on central banks to continue propping up growth”, implies a redoubling of the assault on living standards that has produced 60% unemployment among young people in Greece and Spain. 

Without these more vicious “reforms”, says Prasad, “policy and political uncertainty remain sources of drag that could prevent the world economy from attaining liftoff, raising the risk of a crash”.

On the day that UK unemployment rose by 70,000, you have to say that the “crash” Prasad warns about is a more likely outcome than “liftoff”.

Gerry Gold

Economics editor

It's the system, stupid

A sketchy deal on spending cuts which allow the US debt ceiling to be raised is no more than an acknowledgement that law-makers in even the world’s largest national economy can make little if any impact on the deepening crisis.

The credit ratings agencies whose pronouncements are treated as holy gospel say that the America’s AAA rating won’t last. And it’s easy to see why. US debt, already at a staggering $13 trillion, is forecast to rise without pause through to 2016.

As it does so, the cost of financing the debt will have to come out of current budgets, leading to further cuts in health and welfare benefits. Political turmoil in Washington, with Barack Obama looking increasingly like a lame duck, one-term president, only adds to the sense of crisis.

Stock markets nose-dived on news of the vague compromise which, like the UK Coalition’s savage austerity programme, is founded on false expectations of growth. Market speculators immediately turned their attention back to Europe, driving up borrowing rates once again for Italy, where Berlusconi has called an emergency meeting, and Spain, where prime minister Zapatero yesterday postponed his holiday to deal with the crisis.

Throughout the post-war period, the world economy grew as it had to if profits were to be maintained, but the global trend in the rate of that growth has been relentlessly downward. Throughout the period of globalisation a series of ever sharper, deeper and more extensive crises saw the rate plummet and then recover, but the recovery was always weaker than the crash.

During 2007/8, when a series of individual mortgage defaults undermined the extreme fragility of the global house of cards built from credit and debt, the growth rate threatened to turn negative for the first time. This prompted the panic which saw governments and central banks flood the world with more credit, which as debt has now rebounded with such devastating effect.

Sovereign debt quickly overtook private and corporate debt, and now all are in the same boat – with the rudder entangled in a net of credit default swaps, holed below the water line and sinking fast towards a collective default. The long-hoped for “return to growth” is just that – a hope.

Reports on manufacturing this week reveal that output is not just slowing badly in the US the world’s largest producer, but actually shrinking in China, the world’s second largest, and in the UK – the seventh largest.

The universal consequences of the crisis and attempts to fix it include inflation boosted by fantasy finance and unemployment as public bodies cut spending. Corporations respond in their usual ruthless way in a desperate bid to maintain profits.

Foxconn, the world's largest maker of computer components which assembles products for Apple, Sony and Nokia, is in the spotlight after a string of suicides of workers at its massive Chinese plants, blamed on harsh working conditions. The Taiwan-based company currently employs 1.2 million people, with

most of them working on the Chinese mainland.

The corporation’s classic response is contained in its plans to introduce a million robots to its production lines over the next three years to cut rising labour costs and improve efficiency. If it is successful, the products it turns out will be highly competitive, but will flood onto a declining market as the global economy slows further. And because labour is the source of all value, the rate of profit on the whole operation will shrink dramatically.

It’s just another example of the inescapable, contradictory logic that ensures that in the midst of a crisis – and this is unarguably the worst in the short history of capitalist society - any attempt to fix things has exactly the opposite effect. In the 1992 US presidential election campaign, Bill Clinton taunted his opponent with the phrase “it’s the economy, stupid”. Actually, it’s the system, stupid.

Gerry Gold

Economics editor