Tuesday, March 30, 2010

Is trade with China benefiting the majority of Chinese people?

Or is it an unintended effect of the "one child" policy? Or a combination of the two?

and will this just lead to production being moved to countries with cheaper, more repressed work-forces if we don't change our trade policies?

And can we get a balance between liberal trade, socialist protections and environmental issues that will affect us all?

Migrant workers in China - have they and the majority of Chinese people begun to benefit from trade with China - and if so is it only or partly because of the 'One Child' policy?

In the past i’ve claimed that trading with China was benefitting neither the majority of Chinese people nor the majority of people in ‘developed’ countries like those of the EU.

It seems I’ve been proven at least partly wrong, though only partly, since this only seems to be the case in Southern China so far - and because the causes may be as much or more the 'one child policy' and jobs created temporarily by the Chinese government- as much as trade. So far there's no sign of greater democracy, an end to the torture, or an end to the jailing of dissidents or execution without fair trial in China. As some of my relatives pointed out to me wages in parts of Southern China are increasing, working hours have come down to something similar to most EU countries and factories now have a shortage of workers though. 

BBC World Service reports confirm this. Some workers laid off during the credit crisis or who went home for the long Chinese New Year holiday never returned to the factories in the cities, but set up their own small businesses instead – and some of them are making much better wages than they were in the factories. However in much of China unemployment remains high and wages remain low - and many of the jobs created by the Chinese government are temporary and many be ended once the effects of the credit crisis end.

The shortage of workers is likely to lead to more increases in wages and better working conditions to try to attract workers back though - and each generation of workers is better educated and demands better wages.

This has happened despite the lack of democracy in China, despite the lack of trade unions independent of the governing party and despite some terrible exploitation of workers in some factories in the past.

My relatives run their own companies and were initially forced to turn to Chinese firms as suppliers in order to compete with other firms that had already done so, but visited their suppliers’ factories and demanded changes or else switched to different suppliers if workers were badly treated. Their actions may well be one of the driving forces behind improvements in wages, hours and working conditions (if others have done the same – either for moral reasons or to avoid losing business to those who can show they only use suppliers who treat employees well), with increased demand and migrant workers starting their own small businesses back in their home villages (with the Chinese government giving new small businesses three years without taxes to become established) probably being another.

This is all great news and the opposite of what I’d expected – and brings hope that democratisation may follow from this, though i still think EU governments and the US should be making new trade deals with the Chinese government conditional on allowing independent trade unions, allowing opposition parties, independent candidates and free speech and on an end to the practice of sending dissidents and trade unionists to jail, lunatic asylums or ‘re-education centres’.

However it also seems to be at least partly due to China’s one child policy leading to economic growth and demand for workers exceeding population growth – the opposite of the situation in most ‘developing’ countries where lack of welfare payments for the ill and unemployed and high infant mortality rates caused by hunger, poverty and lack of clean water and health care lead to most couples having lots of children in the hope that some will survive and in order to support them when they are ill or old. The one child policy is a success in that sense, but has involved some extreme brutality, with many forced abortions and even killings of babies after birth – and some opponents of the policy being jailed or sent for ‘re-education’ to lunatic asylums.

The question is whether China’s improvements in wages and working conditions are an exception to the rule caused by it’s unique one child policy or an example of a general pattern of the majority benefiting from more trade, or whether it’s some combination of the two.

(I can’t claim any personal moral high-ground here as, while i do buy often buy fair-trade tea and bananas, i’ve also bought lots of things on ebay without having any idea where they were made or what wages and working conditions were like for the people who made them – and some arrived with ‘Made in China’ stamped on them)

Nor is everyone in China living well as a result of economic growth – the BBC also reported on 10 migrant workers living in a public toilet – and large numbers of peasants have been forced off their land with minimal compensation and no choice to make way for property developers building houses for sale to those who have benefited. A 2007 property law change did not affect land ownership, giving peasant farmers little legal redress. This suggests that at least some migrant workers are still suffering as the ‘under-class’ Amnesty International described in a 2007 report (and shortages of workers had already begun in 2006)

So far there is no evidence of democratisation nor of any slowing in the jailing, torture and execution of dissidents or Tibetan or Uighur separatists in China. Executions also remain common, often after unfair trials and with confessions extracted by torture.

The other question is whether the improvements in wages and conditions in China will continue, expand to benefit the whole population and gradually improve standards of living and bring democracy worldwide (as classical liberal theory would predict) or whether the largest firms will now move production to places like Nicaragua, Thailand, Haiti and Honduras where US-backed military coups (with civilian fronts for public relations reasons) have crushed previous democratically elected governments’ attempts to improve wages and conditions for the majority (as socialist theories would predict). Some might argue that this is part of the process of levelling up involved in international trade, but in fact wages in these countries have fallen massively due to repeated military coups and US sanctions and conditions on aid. This supports the socialist argument that ‘developed’ governments are operating a policy of backing coups and dictatorships and using their aid and trade deals to create new pools of cheap labour.

The BBC’s News 24 has had some lamentable TV news reporting on Thailand, with pro-democracy protesters giving blood and then pouring it in front of the parliament building as a protest at the military coup which used ‘constitutional measures’ to replace the elected government, followed by the killing and jailing of protesters reduced to ‘what a bizarre way to protest’ by one BBC anchor, though at least the report did mention an alliance between the wealthy and the military and that most of the protesters were from the poorer majority. The BBC News website is better, but doesn’t mention that the judgements that Thaksin Shinawatra’s government had committed electoral fraud and acted unconstitutionally were made by a Supreme Court purged and reconstituted by the military junta, under a new constitution written up by a majority of appointees of the military junta, which also allowed elected MPs to switch party – allowing the new government to co-opt some members of Shinawatra’s party. The new constitution gave immunity from prosecution to everyone involved in the coup – and the new government has extended that immunity to cover security forces involved in torture and extra-judicial killings through executive decrees.

(Shinawatra had declared the power to rule by decree in late 2005. I don’t know nearly enough about Thailand to know whether this was due to political violence and coup attempts by his opponents, or if it was the main cause of the coup. What is certain is that Shinawatra was democratically elected – and that the new government has never been democratically elected but largely installed by the military, just as the new constitution was installed by the military – and that both Shinawatra’s and Abhisit Vejjajiva’s supporters have beaten, shot and sometimes killed one another’s supporters and police and soldiers – and equally that police and soldiers have killed some of them)

Migrant workers and asylum seekers from Thailand have been beaten, deported and killed under Shinawatra, Abhisit and the Thai military – another parallel with China where, until the recent shortage of them, Chinese migrant workers were frequently jailed for ‘vagrancy’. People who have fled the much worse oppression and hunger in North Korea also continue to be refused asylum and deported by the Chinese government (much like many genuine asylum seekers to the UK). The widespread belief in all countries is that deporting as many asylum seekers as possible as ‘illegal’ and ‘fraudulent’ will help avoid citizens being put out of work by them. In reality it allows the most unscrupulous employers to employ people made ‘illegal’ without having committed any real crime – and to pay them below the minimum wage, because if they go to the authorities to complain they will be deported. In the unlikely event that all immigration (by asylum seekers and migrant workers) was made illegal production would simply move to where the cheap labour was. The only way to avoid that would be protectionism or else improving the wages of the poorest abroad by making future trade deals conditional on improvements in their wages, democratisation etc,

Given the fact that i seem to eventually have been proved at least partly wrong on China at least in terms of wages and working conditions for a large minority – and possibly the majority - i don’t know the answer - though i suspect most Chinese would have suffered less and benefited sooner from trade treaties with more conditions attached (and still could) -but it would be as wrong to claim that free trade always benefits everyone (as one of my former lecturers used to claim – in what he would have called a ‘crude analysis’ had anyone else made such a sweeping statement) as it would be to claim that trade and investment are always harmful.

Certainly Haitians have not benefited from free trade, with falling wages and increasing poverty, hunger and starvation since the 1980s. Most Haitians don’t even get the pitiful minimum wage set by the government. Though public pressure in the EU and US has led those countries’ governments to offer to cancel Haiti’s debt you can be sure that these governments will still try to make debt forgiveness conditional on more ‘free market reforms’ and more privatisation of the few public services and nationalised industries still existing there. The US and EU governments frequently preach free trade to the poorest countries in the world, demanding they open their markets to exports from the US and EU. This is never reciprocated by the US or EU allowing imports from those countries into their own without any trade barriers – and it’s arguable that if it was it might well bring the majority down to the level of the poorest rather than level Haitians or Africans up to European levels.

The flood of first world imports has been most damaging to farmers in ‘developing’ countries, whose own government subsidies and protections from foreign imports have been eliminated due to ‘first world’ governments’ pressure, while the ‘first world’ continues to subsidise it’s farmers – with large scale ‘agri-businesses’ getting far more in subsidies than small scale farmers – and so subsidised first world food exports to these countries put many small farmers out of business. This, combined with pressure to grow cash crops for exports, has turned countries like Haiti from being self-sufficient in food to being reliant on first world imports, which much of their population can’t afford to buy. Increasing poverty and hunger is the result. (People in Malawi also starved due to IMF imposed policies in 2002, as did people in Argentina, a ‘Middle Income’ country, after World Bank and IMF imposed ‘reforms’, which the country only escaped due to the Iraq war increasing the price of oil and allowing Venezuela under Chavez to bail Argentina out)

It’s happened to some extent in China too, due to property developers and corrupt Communist party officials hiring thugs to kill peasant farmers or drive them off their land, the compulsory purchase of peasants’ land at a fraction of it’s actual value and the pollution of soil and water supplies by a poorly regulated industrial revolution. As a result China, while having considerably more bargaining power than small countries like Haiti, is having to import food from Latin America. This in turn leads to rain forests being cut down to grow soya beans, just as they have been for decades to grow

Nor is the process as simple as countries being levelled up to the point that everyone is comfortably off. In the US during the credit crisis surveys showed that % of people had missed meals regularly – and in some cases their children missed meals too, which would have an impact on the development of their minds and bodies as adults. Many millions have been homeless and living in tents. These kind of facts suggest the socialist argument that free trade, if unregulated and if not combined with a strong welfare state and public services, could level the majority down while benefiting only a minority.

There are certainly lots of possible benefits to free trade for the majority – as China now seems to be showing – but it can’t be assumed that these are guaranteed without a balance between free trade and regulation; between welfare, public services and profit; and between profit and environmental costs. While we are still using petrol, oil and diesel as our main fuels large scale trade also has environmental impacts which could lead to many millions losing enough water or food to survive, to them being made refugees by these shortages or by floods and sea level rises. Bio-fuels have been shown to be a poor solution to this in practice – many create more CO2 and other pollution in producing them than is saved by using them as fuel – and growing plants for bio-fuel rather than food has increased the price of food, leading to more hunger and starvation for the poorest (and also more global warming as rain forests are cleared to make money from exporting bio-fuels). (Of course without a policy to reduce the birth rate this food shortage might be much worse, though tax breaks for having less children would be a lot less brutal than forced abortions).

That’s why i believe that future trade deals between governments should include many conditions going beyond reciprocal access to markets.

The results are not determined just by letting companies ‘get on with it’, nor can we blame individual company managers for the system they operate in, just as it’s foolish to think that different bank managers would behave better if left in a deregulated financial market that punishes social responsibility and rewards short-term profit. Governments may have been lobbied by some of these companies, but governments are under no obligation to cave in to the worst companies and grant total de-regulation that allows the least responsible managers to be rewarded for their selfishness, while the most responsible are punished for not minimising costs at all costs. As my relatives have shown in their business dealings in China it is possible to behave morally and have concern for workers even in a relatively deregulated market, but it would be a lot easier and commoner in a market which was better regulated.

Sources by subject:

Migrant workers in China and the labour shortage

BBC News 26 Mar 2010 ‘Why migrant workers are shunning China's factories’, http://news.bbc.co.uk/1/hi/world/asia-pacific/8586672.stm

BBC News 22 Feb 2010 ‘China's Pearl River manufacturing hub 'lacks workers'’, http://news.bbc.co.uk/1/hi/business/8527621.stm

BBC News 02 Feb 2010 ‘Chinese migrant workers live in toilet’, http://news.bbc.co.uk/1/hi/world/asia-pacific/8493743.stm

BBC News 08 Sep 2009 ‘China's workers return to cities’, http://news.bbc.co.uk/1/hi/business/8244599.stm

Guardian 24 Jan 2008 ‘Beijing to evict 'undesirables' before Games’, http://www.guardian.co.uk/international/story/0,,2245620,00.html

BBC News 01 Mar 2007 ‘China 'facing migrant underclass'’, http://news.bbc.co.uk/1/hi/world/asia-pacific/6404977.stm

Amnesty International 01 Mar 2007 ‘China's growing underclass’, http://www.amnesty.org/en/news-and-updates/report/chinas-growing-underclass-20070301

Forced abortions and infanticide in China

Sunday Times 12 Dec 2004 ‘Chinese abortion outcry saves life of prisoner’, https://www.timesonline.co.uk/article/0,,2089-1399900,00.html

Sunday Times 18 Sep 2005 ‘China shamed by forced abortions’, http://www.timesonline.co.uk/tol/news/world/article567921.ece

Guardian 03 Feb 2006 ‘Under house arrest: blind activist who exposed forced abortions’, http://www.guardian.co.uk/world/2006/feb/03/china.jonathanwatts

Guardian 25 Aug 2006 ‘China jails human rights campaigner’, http://www.guardian.co.uk/world/2006/aug/25/china.jonathanwatts

Independent 8 Jan 2008 ‘China expels 500 from party over illegal births’, http://www.independent.co.uk/news/world/asia/china-expels-500-from-party-over-illegal-births-768806.html

Times 15 Apr 2009 ‘Women rebel over forced abortions - Anger at the regime's extreme birth control regime is growing’, http://www.timesonline.co.uk/tol/news/world/asia/article5733835.ece

Times 12 Jan 2010 ‘One-child policy condemns 24m bachelors to life without a wife’, http://www.timesonline.co.uk/tol/news/world/asia/article6983716.ece

Peasant farmers forced off land by property developers and Chinese government

Guardian 4 Apr 2007 ‘Chinese couple bow to the bulldozers’, http://www.guardian.co.uk/international/story/0,,2049377,00.html

Guardian 12 April 2005 ‘Chinese village protest turns into riot of thousands’, http://www.guardian.co.uk/international/story/0,3604,1457243,00.html

Washington Post 05 Oct 2004 ‘China's Land Grabs Raise Specter of Popular Unrest’, http://www.washingtonpost.com/ac2/wp-dyn/A6968-2004Oct4?language=printer

Asia Times 20 Mar 2007 ‘Property law denies farmers the good earth’, http://www.atimes.com/atimes/China/IC20Ad01.html

Christian Science Monitor 21 Mar 2007 ‘China's great leap forward on property’, http://www.csmonitor.com/2007/0315/p01s04-woap.html

BBC News 2 Aug 2005 ‘China faces growing land disputes’, http://news.bbc.co.uk/1/hi/world/asia-pacific/4728025.stm

General human rights abuses, torture etc in China

Guardian 09 Dec 2008 ‘Chinese petitioners forced into mental asylums, claims report’, http://www.guardian.co.uk/world/2008/dec/09/china-human-rights-asylums

Guardian 24 Jan 2008 ‘Beijing to evict 'undesirables' before Games’, http://www.guardian.co.uk/international/story/0,,2245620,00.html

Amnesty International 10 Nov 2009 ‘Hasty executions in China highlight unfair Xinjiang trials’, http://www.amnesty.org/en/news-and-updates/news/hasty-executions-china-highlight-unfair-xinjiang-trials-20091110

Channel 4 (UK) Dispatches 31 Mar 2008 ‘Undercover in Tibet’, http://www.channel4.com/programmes/dispatches/episode-guide/series-20/episode-1

Times 02 Apr 2009 ‘Chinese teenagers die in jail from routine police torture’, http://www.timesonline.co.uk/tol/news/world/asia/article6018439.ece

Times 26 Dec 2009 ‘International outcry after Chinese dissident Liu Xiaobo sentenced to 11 years’, http://www.timesonline.co.uk/tol/news/world/asia/article6967856.ece

Times 21 Jan 2010 ‘Chinese democracy leader Zhou Yongjun jailed for fraud’, http://www.timesonline.co.uk/tol/news/world/asia/article6994862.ece

Amnesty International World Report 2009 – country report – China, http://thereport.amnesty.org/en/regions/asia-pacific/china , (see http://www.amnesty.org/en/region/china for press releases by date)

Human Rights Watch World Report 2010 – China, http://www.hrw.org/en/node/87491

Food shortages and hunger caused by ‘free trade’ policies imposed by ‘developed’ countries

Guardian 25 Nov 2002 ‘Child hunger deaths shock Argentina’, http://www.guardian.co.uk/world/2002/nov/25/famine.argentina

Guardian 29 Oct 2002 ‘IMF policies 'led to Malawi famine'’, http://www.guardian.co.uk/business/2002/oct/29/3

Peter Hallward (2007) ‘Damming the Flood : Haiti, Aristide, and the Politics of Containment’, Verso, London, 2007


BBC 20 Sep 2006 ‘Thai PM deposed in military coup’, http://news.bbc.co.uk/1/hi/5361512.stm

BBC News 16 Mar 2010 ‘Thai red-shirts splash blood in anti-government protest’, http://news.bbc.co.uk/1/hi/8569483.stm

BBC News 17 Mar 2010 ‘Profile: Abhisit Vejjajiva’, http://news.bbc.co.uk/1/hi/world/asia-pacific/7780309.stm

Wikipedia - 2006 Thai coup d'état, http://en.wikipedia.org/wiki/2006_Thai_coup_d%27%C3%A9tat

Wikipedia - 2008–2009 Thai political crisis, http://en.wikipedia.org/wiki/2008%E2%80%932009_Thai_political_crisis

Wikipedia - 2007 Constitution of Thailand, http://en.wikipedia.org/wiki/Next_constitution_of_Thailand#Prime_Minister

Amnesty International 13 Jan 2009 ‘Thailand: Torture in the southern counter-insurgency’, http://www.amnesty.org/en/library/info/ASA39/001/2009/en

Human Rights Watch 4 Aug 2005 ‘Letter to Thai Prime Minister Thaksin Shinawatra - Emergency Decree Violates Thai Constitution and Laws’

, http://www.hrw.org/legacy/english/docs/2005/08/04/thaila11592_txt.htm

Human Rights Watch world report 2010 (covering 2009) – Thailand, http://www.hrw.org/en/node/87403

HRW 15 Apr 2009 ‘Thailand: End of Protests Is Time for Accountability’, http://www.hrw.org/en/news/2009/04/15/thailand-end-protests-time-accountability

HRW 20 Jul 2009 ‘Letter to Thai PM Vejjajiva on the Situation in Burma’, http://www.hrw.org/en/news/2009/07/20/letter-thai-pm-vejjajiva-situation-burma

HRW 20 Jan 2010 ‘Thailand: Serious Backsliding on Human Rights’, http://www.hrw.org/en/news/2010/01/20/thailand-serious-backsliding-human-rights

HRW 23 Feb 2010 ‘Thailand: Migrant Workers Face Killings, Extortion, Labor Rights Abuses’, http://www.hrw.org/en/news/2010/02/22/thailand-migrant-workers-face-killings-extortion-labor-rights-abuses

Bio-fuels and industrial and agricultural pollution as causes of food shortages, deforestation and climate change

guardian.co.uk 23 Feb 2010 ‘China's soil deterioration may become growing food crisis, adviser claims’, http://www.guardian.co.uk/environment/2010/feb/23/china-soil-deterioration-food-supply

guardian.co.uk 09 Feb 2010‘Chinese farms cause more pollution than factories, says official survey’, http://www.guardian.co.uk/environment/2010/feb/09/china-farms-pollution

Guardian 20 May 2005 ‘Rainforest loss shocks Brazil’, http://www.guardian.co.uk/news/2005/may/20/brazil.environment

Guardian 28 May 2004 ‘Lula seals deal to feed China's booming cities’, http://www.guardian.co.uk/world/2004/may/28/china.brazil

Guardian 10 Jan 2010 ‘China becomes world's biggest exporter’, http://www.guardian.co.uk/business/2010/jan/10/china-tops-germany-exports (2nd sentence of 6th paragraph reads ‘Soya bean imports hit a record 4.78m tonnes in the month, with a surge in supplies from the United States and Brazil.’)

Institute of Science in Society 11/12/06 ‘Biofuels: Biodevastation, Hunger & False Carbon Credits’, http://www.i-sis.org.uk/BiofuelsBiodevastationHunger.php

Reuters 05 Mar 2010 ‘EU drafts warn of biofuels' link to hunger’, http://www.reuters.com/article/idUSTRE62420Y20100305

WFP Crisis Page: High Food Prices, http://one.wfp.org/english/?ModuleID=137&Key=2853


James Nelson said...

Another good, comprehensive, post.
From December 2006 until September 2008 I worked in China and in that time saw most of the country. It leads me to drawing an analogy; many Chinese will tell you that when Mao was in power for the first time in their history the Chinese did not go hungry, while also not quite true, that would nevertheless have to be tempered by the fact that up to 100 million people died during the 'Cultural Revolution' from 1966 to 1976. Similarly, today more Chinese are probably "better off" than they were at any other time in their history and that despite a number of the things which you mentioned.
Migrant workers in the cities have no residence permit and are second class citizens in their own country, wages in the factories in the mushrooming cities are improving but not so that it stops workers deciding that it is better to return to their village and try to get by rather than survive on 1,000 rmb (about 100€) that they are earning, sometimes working under deplorable condtions. The entrepreneurial spirit you mention in your post is in abundance but it is not representative for what is happening. No,cheap production is moving away to the poorer provinces and to other countries. In a sense China is going through a process not too unlike the one that the Europeans went through in the 19th and 20th centuries.
Pollution is a problem but it is not being ignored. Moreover, while there are parallels with Britain and elsewhere in the 19th centuryand the move from the countryside to the city, the scale of this process in China is mind-bending. At the end of the Yangzte trip.
Finally,Centralism and not a lack of "western democracy" is the very real problem in China. This is what stifles a lot of what is going on and a lot of what is going on would really make all of us question our "China Bild".
The corruption in Sichuan that led to the schools collapsing more readily than they should have has seen lawyers for the first time in Chinese history actually take government officials to court and even when the party told Xinhau (the state news agency) to stop reporting, they didn't. Of course, Xinhau itself is the party and they are only going to go so far. Human rights activists are having some success and it is not all as clear cut as the western media would like us to believe.
Your post has brought up so many interesting points that it has led to my revisiting China and trying to bundle my thoughts on it together. However, it should be emphasised that the country remains to some extent an enigma; a country where you can live a western lifestyle in Shanghai's "Zhongshan Park" or French Quarter, supping your cafe in Costas and watching the new Chinese middle classes on their wireless laptops and a country where you can see poverty of the sort, and sometimes you wouldn't have to leave Shanghai to see it, that you would see in the slums of Calcutta.
Another point worth making is that the "party" has up to 100 million members, it is to be expected that in a country where "guanxi"(networking, connections) is everything, you might expect many of those to be the students we see at universities in the UK and elsewhere. Having worked with these kids for seven years, I would have to say they are good kids for the most part and they too are the party. Therefore, finally, while China is an enigma it is too important an enigma for this not to offer all of us, and not only the Chinese themselves more than a modicum of hope. Although, I am already tempted to temper that hope with a dollup of pessimism. As long as all the major decisions are made in Beijing we will have major problems for all sorts of reasons and, unfortunately, even among the more progressive, liberal, inhabitants of what is after all, "the middle kingdom", a real devolving of powers away from the centre is not on the agenda.

James Nelson said...

sorry, about the sloppy editing job: had to cut down on what i originally wrote and it would appear that i forgot to cross my "tees" and dot my "eyes"