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Wednesday 4 January 2012
Outsourcing Jobs

Steve Jobs didn’t invent sweatshop labor, of course. The Agony and Ecstasy of the CEO of the Company That Made My Toaster would have been just as unsettling about the misery of Chinese factory work, even if it likely would have sold fewer tickets. Yet there is something understandable about everyday products being built in low-cost labor markets; it is odd, though, that some of the most technically advanced products in the history of the world are manufactured in a country quite recently known for poverty and bicycle transport. We should not gloss over the strangeness of this. The match that lit the explosion of Chinese manufacturing was China’s joining the World Trade Organization in December 2001. But the fuel was entrance into the global economy of hundreds of millions of underproductive rural workers. Seventy-four percent of Chinese lived in rural areas in 1990 compared to 50 percent today, a migration roughly the size of the entire US population. Three factors made China more likely to succeed than other impoverished, populous countries like India or Indonesia: the massive scale of the country; a capitalist Chinese diaspora in Taiwan, Hong Kong, and elsewhere; and a powerful state that sought both to unleash the power of market capitalism and manipulate it to China’s advantage.

I spoke about Chinese outsourcing with a friend who used to run global manufacturing at one of the world’s largest oilfield services companies. “Why China?” I asked. It was not a particular ease of doing business there, he said, contrary to Jobs’s lecture to President Obama. The cultural and logistical barriers are immense. He also didn’t attribute the advantages of manufacturing in China to low salaries per se: shipping costs and the lengthening of supply and inventory lines negate most of the hourly worker salary advantages. What startled him over the first five years of his experience manufacturing in China were other advantages: the sheer volume of potential workers, compared to the difficulty in finding medium-skilled workers like machinists in the United States; the massive availability of an educated supervisory work force, so that one could, for instance, hire a floor superintendent with a PhD in mechanical engineering for a Chinese factory; and the crucial cost advantages of cheap raw materials obtainable from Chinese state-affiliated companies, as a result of Chinese government policies. China’s rise feels like Apple’s rise, in a way: there were always a lot of people and a manipulative state; there were always great designs and innovative technology. But a rapid, head-spinning confluence of factors—none of which seem wholly inevitable—turned the latent advantages of China and Apple into the economy that is the primary source of global growth and the company that is the largest in the world.

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