That's Free Trade, for You.

It has happened before. Our forefathers lived through it. And they fought so that we could be spared.

It's happening now, but nobody cares. It's far away, you don't know these people, you can't see the images.

And it can't happen to us. After all, we are so fucking smarter and we deserve so much more.

And, boy, do we like cheap shit, don't we?

Well, maybe I'm mistaken; but if I'm right, it will happen again. And perhaps it will happen much closer to home next time, to people we care about.

Laugh if you like.


WARNING: Extremely disturbing images.

Economists and (Ugly) Models

Well, you know what they say: economists do it with models.

But, no. This is not about Cindy Crawford-like miracles of human genetics (or, if that floats your boat, hunks like ___________; help me out here: fill in the blanks) and little, ugly, nerdish, boring, old men.

No, I'm talking about economic models of the simple variety, which recently appear to have become quite popular in the economic blogosphere and media.

Greg Mankiw (Harvard) proposed one:

"You have a driveway covered in snow and would be willing to pay $40 to have it shoveled. The boy next door can do it in two hours, or he can spend that time playing on his Xbox, an activity he values at $20."

Uwe E. Reinhardt (Princeton), who, as Mankiw, also likes that model, summarizes its conclusion thus:

"So if you pay him $30 to shovel your driveway, you will both be better off by $10. (...) As far as economists are concerned, how can anyone argue with that?"

Don't look at me: I can't argue with that! The conclusion follows from the premises, however unrealistic.

Reinhardt goes one step further, adding competition to the example, presumably to make it more realistic:

"Another boy from the neighborhood comes along and offers to shovel your driveway for $10. (...) You pay him $15. Now you are very much better off [my comment: precisely $25 better off], and that other boy gains, too, because he would have done the job for $10 [my comment: so he's better off by $5]."

As Reinhardt explains, now the first boy is not happy; but the second boy is.

Again, I don't object. However, now I feel a lot less sanguine about the whole thing: following that logic one concludes that the neighborhood kids will be accepting $20.01 $0.01 to do the job. And, believe it or not, one can still say that everybody is still better off!

I am not sure what Reinhardt had in mind with his extension: however, it argues the not surprising point that competition among workers reduces their wages, which is not considered in Mankiw's version.

What seems curious to me is that one could build an obvious variation yielding entirely different outcomes.

Let's modify the example: Anthony and Benjamin need their driveways cleared. Anthony is willing to pay $40 for that; Benjamin, $50. Anthony and Benjamin are, let's say, economics professors and hate shovelling snow.

Charlie, their young neighbour, is willing to do it for $20.

As in Mankiw's scenario, after talking to Anthony, Charlie agrees to do the job for $30.

However, seeing this, Benjamin calls Charlie: "Psst, boy! Over here! I'll pay you $40 to clear my driveway".

Clearly, Charlie is ecstatic (20 bucks ahead, not bad!) and Benjamin is happy, too. Anthony, on the other hand, is not so happy: he's gotta grab the shovel.

This result, diametrically opposed to the Mankiw/Reinhardt's example, isn't surprising either: bosses' competition for labour increases wages.

What's the difference between this situation and the Mankiw/Reinhardt one? In the latter the kids were made to compete against each other to get the job; in the former, it's the economics professors who compete to get the worker.

The first point I'm trying to make is this: Mankiw's example is frankly misleading. By ignoring competition, it doesn't show the kids are really better off with trade.

With Reinhardt's more realistic modification this becomes clear: $0.01 above the monetary equivalent of doing nothing either Mankiw's equivalence worth of playing Xbox ($20), or above $0,  is not an improvement (See Update 22/02/2011).

However, in both cases the economics professors are not only measurably better off, but the worse off the kids are, the better off the professors.

Now with my second point: things don't need to be like that. In my modification, Charlie was measurably better off. In other words, the choice between the 3 set of outcomes is not determined by the example and is arbitrary.

The third and final point I will make is this: as employers (and in this case, economics professors), Anthony and Benjamin have not only the knowledge and incentives to steer the situation away from one where they compete against each other to hire Charlie; they also have the political means to do that.

Let me put it this way: they could talk to Daniel (Charlie's non-democratically elected and mean stepfather) and convince him that he could live quite comfortably by making his stepchildren (the whole 1.3 billion of them) work for a few cents each, which they'll pay Daniel, in exchange for living in Daniel's house.

And that's precisely what Anthony (or is it Benjamin?) does here:

Peter Tasker. Rising wages will burst China’s bubble. Financial Times. 10/01/2011. Requires subscription. Registration required.



UPDATE:

21/02/2011. Oopsie, I had forgotten the last link.

22/02/2011. Actually, my logic above is flawed and I noticed the mistake today.

Mankiw established that the first boy had an alternative use for his time (playing with the Xbox); that alternative use was worth the same as $20 for that boy.

But Reinhardt did not establish anything similar for his neighborhood kids; that's why the second boy was happy to work for $10!

On that assumption, the Mankiw/Reinhardt scenario leads not to a top payment of $20.01 (as I wrongly stated above), but to $0.01.

It appears the Financial Times also has a free registration option, for limited access.

So as to leave my mistake on record, I struck through the mistaken text, and added the corrected version, with a reference to this update.

Special: Hired Guns on the Cheap

Long story short: researching for a new blog on globalization and outsourcing, I came across a true gem of irony and surprising coincidences, published Sunday, September 25th 2005 on the Chilean newspaper La Nacion - Pistoleros a sueldo (mínimo). As the original text is in Spanish, this is my translation of the title and summary:

"Unknown chapters of the Chilean mercenaries in Honduras.
Hired gunmen (on minimum wages).

The untold story of the bosses, humiliating working conditions, the dangers awaiting them in Iraq and their instructors' hidden past. The aspirants to fight someone else's war may yet miss out firing upon anybody".

And this is my summary of the main body of La Nacion's story:

After the Honduran daily La Tribuna denounced the presence of 120 Chilean ex military being trained in the Lepaterique township as "private guards" by Your Solution Inc. (a Triple Canopy Inc. subsidiary), for their deployment in Iraq, the Honduran government denied entry to 48 further Chilean trainees.

The Lepaterique facilites were used in the 1980s by the feared Battalion 316 of the Honduran Army, specializing in counterinsurgency, torture, interrogation and psychological warfare.

From 1979 and until 1980, under the supervision of John Negroponte, at the time US Ambassador to Honduras, tens of military instructors from Argentine Army Intelligence Battalion 601, together with CIA staff, trained Honduran effectives in their fight against leftwing insurgents.

Mr. Negroponte was appointed US Ambassador to Iraq by President Bush, and served in that capacity from mid 2004 to early 2005.

Together with Blackwater and DynCorp, Triple Canopy was awarded US$ One billion to provide security to installations and diplomatic personnel in the 27 riskiest destinations around the world.

"Responsible sources estimate that at least 16% of armed foreign personnel operating in Iraq, servicing the coalition headed by the US, are private contractors. Twenty five thousand people, a true army on hire…"

Chilean "security guards" will be paid between US$ 900 and 1,300 per month. However, "the problem arises when comparing the incomes the company, for the same work, offers its American employees: between US$ 400 and 700 per day."

Chilean and Honduran staff sign a contract for one year, while American contractors sign up for 3 months, at the end of which the company pays them their return trip home.

American staffers are given private accommodation, while Latin American contractors are lodged in barracks. American staffers are given booze, unlike their Latin American colleagues.

As of September 2005, private contractors had suffered 268 casualties: the second largest number, after the US regular armed forces.

Who ever said outsourcing isn't a wonderful thing?

Related links:

Triple Canopy, Inc. - Wikipedia
John Negroponte - Wikipedia
Google translation

Dust in the Wind

"All we do
Crumbles to the ground, though we refuse to see".

 (Kansas, "Dust in the wind")

There once was a town called Gary, Indiana.

Founded by the US Steel in 1906, its population reached a peak of 178,320 (*), in 1960 and its health depended on US Steel's profits.

With greater opening to international trade, American manufacturers increasingly lost profitability and layoffs became generalized.

The unionized labour force, mostly white, migrated to areas where better employment opportunities still existed, just to find that these opportunities often disappeared.

By 2000, Gary's population had been reduced to 102,746 (*) [with 95,920 (*) estimated for 2008], predominantly black and impoverished [83.2% of the total (**)].

Paul Mason, from BBC, reports here what became of Gary, Indiana. More  images of Gary can be found at the "Gary, Indiana, Ghost Town" web page.

From an Australian perspective, Gary's fate, however tragic, may look as something remote, utterly alien, unrelated to us.

Still, this may be the shape of things to come, not only for us in Australia, but for humankind.

(*) Gary, Indiana. Wikipedia
(**) Gary City, Indiana - Fact Sheet. US Census Bureau, 2006-2008 American Community Survey.

Despairing… progressively (II)

“Do not imagine, gentlemen, that in criticizing freedom of trade we have the least intention of defending the system of protection.

“One may declare oneself an enemy of the constitutional regime without declaring oneself a friend of the ancient regime.”

Karl Marx, “On the question of free trade”, speech to the Democratic Association of Brussels at its public meeting of 09/01/1848.

According to Linden, Dedrick and Kraemer (LDK henceforth), authors of the report “Innovation and Job Creation in a Global Economy: The Case of Apple’s iPod” higher profits and higher wages are the likely result of two factors acting simultaneously, namely innovation and free trade:

“To summarize, the iPod supports nearly twice as many jobs offshore as in the US, yet wages paid in the US are over twice as much as those paid overseas. (…) So it appears that innovation by a US company can benefit both the company and US workers, even if production is offshore and foreign suppliers provide most of the inputs.”

NOTE: The reader is advised to download that report.

That conclusion follows from these two tables, from the Executive Summary:

For instance, in LDK Table ES2, total compensation for US staff (US$ 783,803,828 million) more than doubles compensation for non-US staff (US$ 318,486,050 million).

Where do the data come from?
 
The question arises: where do that data, expressed with such precision, come from? After all, the authors themselves express in the methodological appendix: “The firms directly involved will not provide data, and we have found no systematic third-party source of data on employment by firm or by industry”.

This limitation is even more pressing for LDK who are dealing with data at an even greater level of disaggregation: a single product line.

Furthermore, as the figure below shows (taken from Wikipedia), Apple produces an extremely diversified line of goods, ranging from personal computers, computer peripherals, expansion cards, software, accessories and consumer electronics, directly and through contractors, all which  requiring a hard to precise workforce.

 

What’s more, LDK list 8 countries where iPod is produced (US, China, Philippines, Japan, Singapore, Korea, Thailand, and Taiwan), not necessarily in a single plant, performing different functions and being paid their own local wages.

Considering that Apple Inc. also needs to perform a series of corporate functions (R&D, marketing, software, and management) besides production, the problem of quantifying workforce and workforce compensation is formidable.

LDK approached the problem in the only manner that seems possible, given the circumstances: the data were generated by estimation, based on the number of iPod produced/revenue generated during 2006, regardless of their origin, on interviews and international production worker wages data compiled by the US Bureau of Labor Statistics.

Estimation, is easy to understand, involves a considerable amount of guess work. LDK are upfront about this: they report their methodology with considerable detail in the appendix.

Some estimates

It does not make sense to repeat their text here, and for the details, the interested reader is referred to the LDK report itself.

However, to give a flavor of the problems involved in producing their estimates, a brief outline follows, including comments on some of the assumptions used.

LDK estimated separately the number of jobs generated and wages paid.

As an example of the job generation procedure: 240 million flash memory chips were required for 30 million Nano iPods actually sold during 2006. A medium-sized factory, employing 1,200 staff, could produce that many flash memory chips (see the flash memory item, in LDK Table 1). Presumably in the US, around half a chip factory’s workforce is higher-paid staff, in management and engineering; the remaining are lower-paid production workers.

The same proportion is assumed for factories overseas: see the Korea item in LDK Table 2. This assumption seems somewhat questionable, it must be remarked, as R&D is performed entirely in the US. To put a concrete example, why would Foxconn, an iPod assembler located at Shenzhen require such a high proportion of engineering and managerial staff, if they only assemble components imported?

Regardless, the half/half distribution observed in US factories occurs under American workplace regulation for working conditions such as hours of work. Overseas, more “flexible”, labour legislation could result in different distributions.

The method described above (called “Factory Fraction Method”) is complemented by a second job generation method (“Revenue Fraction Method”), to estimate non-factory staff: in 2006, Amazon (one among other iPod retailers) sold US$ 1 billion worth of iPod, out of US$ 10,7 billion total revenue, employing 13,900 staff. Thus, LDK suggested, 1,300 Amazon equivalent-jobs were due to iPod sales.

This seems dubious and probably greatly overestimates the number of jobs created by iPod sales: to sell an iPod priced US$ 299, arguably, uses the same manpower as a much cheaper item, like a book costing US$ 10, but generates 30 times more revenue.

From LDK Table 2, one can see that up to 31% of the iPod generated jobs are classified as “retail and other non-professionals” and, thus, are quite sensitive to this assumption. Further: over 38% of those jobs are based overseas and do not benefit the American workers potentially displaced by outsourcing.

A number of assumptions are also made when estimating wages. For brevity, only one remark will be made here: “the 2006 hourly rates [used to estimate annual production worker income overseas] were annualized by assuming 2,000 paid hours per year” could be missing the mark by an order of magnitude.

At least in the case of Foxconn, The New York Times reported on 18/06/2010 that production line workers earn US$ 0.75 an hour, working up to 13-hour-long shifts, six days a week, for US$ 235 a month or US$ 2,820 a year. The yearly wage estimated by LDK is US$ 1,540.

In fact, the employee category where wage and employment numbers appear more reliable is engineering and other professionals.

Closing remarks

Researchers performing studies of this nature will inevitably make all sorts of assumptions. This is natural, unavoidable and understandable, although a great deal of prudence is required.

It is also natural, unavoidable and understandable that some of their assumptions will be questioned, as readers with different insights go through their work.

In this sense, Linden, Dedrick and Kraemer are to be praised for their effort in making their assumptions explicit.

However, if prudence is required when making assumptions, at least every bit as much is required when drawing conclusions from studies of this kind. Sadly, the conclusions drawn by Linden, Dedrick and Kraemer appear to make little allowance for these assumptions.

An example from LDK Conclusions:

“The relationship between innovation by US companies and employment in the US is more complex than phrases such as the ‘vanishing middle class’ suggest. When innovative products are designed and marketed by U.S. companies, they can create valuable jobs for American workers even if the products are manufactured offshore.”

From LDK Table ES1 is evident that little if any replacement jobs were created by iPod for production line workers left redundant by outsourcing: their very category all but disappeared and the next category where they could be readily employed (retail and other non professional), not only employs a minuscule number, at a much lower wage, but that number probably overestimates the actual number of jobs created.

It is certainly possible for younger ex production line workers to obtain qualifications that would allow them to climb up the corporate ladder. However, this requires an investment of time, effort and money, imposed upon them without their consent, which, even if they were able to undertake, would not guarantee them a better job.

But what happens to older workers, or those with personal attachments, who will not be able to start further training and qualification? And what about those workers who due to the colour of their skins, or their religion, or their place of birth cannot realistically aspire to anything better than that job and find now that it’s gone?

In sum: to the extent that those workers were once middle class, LDK own figures (however estimated) refute their conclusion.

Because of this, readers of that report should exercise caution and common sense, virtues which often seem beyond neoclassical economists or the general media.

Thus, it would not surprise that this particular Linden, Dedrick and Kraemer report (as opposed to other research carried out by these researchers) were uncritically endorsed by the openly pro-business media: after all, they cater for their readers and the corporations that advertise through them.

Against expectations, however, mainstream and business media made very little reference to this report, the only exceptions I could find were The New York Times (and its international edition, The International Herald Tribune), BusinessWeek and a few other minor publications.

In what follows, the reader will forgive me for using a more candid, personal, non-academic language; a language more suited to me, anyway, as I am not an academic.

I would have also expected a keen support, for ideological reasons, from well-known neoclassical economists. Surprisingly, only Hal Varian (who authored the The New York Times article) has mentioned this particular report, perhaps because it was not published in any academic journal, either.

A query on Google Scholar with the string “Innovation and Job Creation in a Global Economy” returned two results: a working paper housed at SSM and a French language paper, both of which seem critical to LDK conclusion.

Well known mainstream economists like Paul Krugman, who once proclaimed that globalization had no negative effect on lower income Americans, have recanted since and now not only admit they were wrong, but also explain why.

What’s really surprising and disappointing is that a self described progressive like Prof. Mitchell has embraced this myth, not taking even the time to evaluate the report. And let’s be crystal clear on this: it doesn’t take a rocket scientist to find those warts.

It’s this readiness to accept reforms affecting other people’s lives, without question, that troubles me.

A few days ago, I saw a quote attributed to Keynes that seems appropriate here. Talking about the reasons of the triumph of economic orthodoxy, Keynes is reported to have said:

“That it [economic orthodoxy] could explain much social injustice and apparent cruelty as an inevitable incident in the scheme of progress, [with] the attempt to change such things as likely on the whole to do more harm than good, commended it to authority. That it afforded a measure of justification to the free activities of the individual capitalist,  attracted to it the support of the dominant social force behind authority.”

As a working class Australian, the reader will forgive me if I’m less than enthusiastic about Apple shareholders making big bucks on the misery of American or Chinese workers, because I can see myself, and the likes of me, following in their steps.

Neither am I excited about Apple’s management team doing well: for all I care, they could all go to hell. And they might yet go there, if you believe anything the report says.

But something positive came out of this: as a working class Australian, I’ve learned a lesson. We, the working class, the only we that includes me, are really alone. The Australian progressive intelligentsia is a myth, not too different from the Yowie and the Tassie tiger.

PS: The text appears to contain some typos. An example is the US Total compensation in LDK Table ES2, where the value shown does not correspond to the sum of the staff categories (see yellow cell in the Table presented at the beginning of this post and compare it to their version). Likewise, the figures cited in the text (under LDK Table 4) do not correspond to those shown in LDK Table ES2.

Despairing... progressively

Socialist Alternative is launching a new journal, Marxist Left Review.

The idea is to publish articles with a deeper, more abstract, theoretical content.

In their editors' words: "Our title is deliberately chosen. We aim to produce a clear argument for revolutionary Marxism, rather than an eclectic collection of left-wing ideas. The articles will be polemical and argumentative, critiquing arguments on the Australian and international left, revisiting theoretical and political questions in Marxism which we feel need some debate and clarification".

I think this is an important initiative. Marxism has long left the ideological field empty and the results are near catastrophic, as I intend to argue here.

If the reader bears with me, I'll try to be brief.

Any left leaning blogger, I'm sure, has faced many an uneducated and alienated poster who is dead-set against socialism, and yet, has never bothered to enquire what on earth socialism is: their only references on socialism come from self-interested anti-socialist ideologues, so, it's not surprising they are radically, almost furiously, opposed.

An associated, but much more disturbing phenomenon is the self-proclaimed "progressive" intellectual. Middle class in lifestyle, if not by birth, these persons often profess to have liberal tendencies in social, cultural and environmental matters. And although I am a rather cynical guy, in general I believe their sincerity (perhaps not their commitment, though) on this, too. The readers may think of some Greenies they might happen to know: that's probably the kind of people I'm talking about.

Less often, but still common, they may use quite a leftist rhetoric, which may induce even greater confusion.

And yet, for all their education and their rhetoric, their posturing and even their good intentions, when one reads what they have to say one realizes their proposals, whatever their theoretical value from a strictly reformist point of view, are dangerous.

Have a look at "What you consume or what you produce?" for an example of a "progressive", self-described as environmentally conscious hippie, advocating globalization (a.k.a. "free trade"), on the grounds that it's a good deal for the Australian working class to export manufacturing jobs to underdeveloped countries: these jobs will be replaced by newer, better jobs in Australia (in the services sector, of all places), created not by the providence of Adam Smith's Invisible Hand (that's what a foolish right-winger would say), but by the wisdom of the Government deficit spending (so, the reader can see how different progressive intellectuals and right-wingers really are).

Now, you may ask which Government will undertake these social programmes financed by debt, like Job Guarantee? The Labor Government, already promising a budget surplus in 2013, or a Coalition one, promising a slightly greater budget surplus in 2013?

And how good are those new jobs, anyway? This is explained with a quote from an American study (after repeated attempts, I haven't been able to download the article): "the iPod supports nearly twice as many jobs offshore as in the US, yet wages paid in the US are over twice as much as those paid overseas."

-------------------------------------------------------------------
NOTE: Friday night I did manage to download the article alluded to before.
The word "wage" mentioned above is meant in the sense of "total payroll"; thus my original comment, below, is irrelevant. Worse still, for not waiting until the site was active, I failed to characterize the post "What you consume or what you produce?" accurately. For this I sincerely apologize.

To keep the record of my mistake, while calling any readers' attention to this note, I decided not to delete the text, but to change its color. A similar note will also be posted to En Passant.

"Those [wages] paid overseas", according to The New York Times, means "about [US$] 75 cents an hour". Including overtime loading, this makes for "$235 a month" for 13-hour-long shifts, six days a week (but the meals, costing $0.65, are subsidised or free, woohoo!). And that was before Foxconn, the company actually manufacturing iPods, decided this year to almost double the wages of their employees, after a wave of suicides, obviously completely unrelated to their working conditions. And, let me warn the reader: one must realize that Foxconn is probably one of the best employers among the large Chinese contractors! So, if Chinese workers have it that easy, imagine how happy American workers involved with iPod must be, making on average "over twice as much money" (or how Australian workers in similar situations should be). --------------------------------------------------------------------


My point after all this digression: the author of the post, for example, specializes in labour economics and is an advocate for "progressive policies", believe it or not.

People like this self-styled progressive are probably among the most left leaning we can find in the Australian intelligentsia today.

Now, that's a sobering thought.

NOTE: A version of this post, slightly edited, was sent to En Passant.

iJump

The iPad is out! I can die in peace now, knowing that human kind is in its way to a better future. Yes, siree.

Newspapers all over this sunburnt land were jubilantly reporting “long lines in Europe and Asia to buy Apple's iPad”. Oh boy, oh boy, oh boy! What excitement!

You probably saw the images on TV: long queues of customers snaking outside Apple shops in Australia and Japan hours before their opening and similar huddled masses turned out at stores in six European countries.

Is there anything more emblematic of this brave new world we live in? Think about it: ordinarily, people hate queuing, as any unfortunate “customer service” officer will readily tell you. I know that, I’ve been there.

Yet, here we have thousands of anxious people, happily queuing for the opportunity of coughing up at least US$ 499 for the latest miracle gadget.

And remember: we’re supposed to be just leaving the greatest global recession since the 1930s, with Europe in the grip of what could easily turn out to be the second chapter in the GFC (or should I say iGFC v2.0?)


So, what’s so great about the iPad, anyway?

Frankly, I haven’t laid my hands on one of those gadgets. And, there ain’t no person less qualified to review it than yours truly. God, I’m yet to own my first garden-variety, no-frills mobile phone!

So, I’m ready to accept anyone’s word that this contraption is great, beautifully designed and user-friendly, too. In other words: the best thing since the invention of sandwich bread.

Still, I have difficulty understanding this generalized enthusiasm. Maybe I’m just a bitter old fart, but to me this all looks kinda childish.

Of course, some people have plenty reasons to feel genuinely excited about the iPad.

For starters, the good people at Apple, obviously. Judging by their 8GB iPhone, which started selling at US$ 599 in July 2007, but now costs US$ 99 (hopefully, still profitable), they could make a buck or two. [1]

And we might be justified to lay our worries to rest, because the market, in its infinite wisdom, provides the best testimony to Apple Inc. financial health: its 52-week low was 52 weeks ago ($132.03 precisely on the 28/05/2009) while its last closing price was on the 28/05/2010, at $256.88. 94.56% up! [2]

Another person who may feel legitimately excited about the iPad is Rupert Murdoch:

“The multi-functional device is tipped by some pundits to revitalise media and publishing, with many major newspapers and broadcasters launching applications. (…)
Newspaper mogul Rupert Murdoch has said the iPad has the potential to save the newspaper industry”. [3]


“Not happy, Jobs!” Or is it “no happy jobs”?

Still, I don’t know how happy Chinese workers ought to feel about this whole thing.

You see, Apple Inc. contracts the production of its wonderful gadgets to overseas factories.

The iPhone itself is assembled in China by Foxconn (whose parent company is the Taiwan-based Hon Hai Precision). In fact, a host of other large corporations have extensive dealings with Hon Hai, including Hewlett-Packard, Dell, Sony, Nokia, Motorola and Nintendo.

As you might imagine, although the products exhibit the customer’s logos, they were produced by the same people!

Between 01/01/2010 and 27/05/2010, 11 Foxconn workers killed themselves, at or near their workplaces. Apparently, by jumping from buildings.

Some people could be tempted to conclude that this suicide wave might be indicative of severe industrial relations problems in Foxconn. After all, the media has reported on young workers having to work 12-hour long shifts, 6 days a week, for a monthly pay of $300 (overtime included). [4]

However, as the editorial team of The Wall Street Journal online (which belongs to Mr. Murdoch's media empire) stated: “suicide is too complex an issue to rush to conclusions”. [5]

According to the same WSJ article, these suicides are best explained by non-work related causes: “love affairs gone wrong”, “adjustment difficulties” created by a mass-society, lack of family support.

Undoubtedly, low pay and terrible working conditions commonly associated to sweatshops are too simplistic an explanation to be taken seriously, even though the article also revealed that “a young manager killed himself last July [i.e. July 2009] after an Apple iPhone prototype went missing, and his final messages to friends suggest he had been interrogated and beaten”.

Nor that this was an isolated incident, either. The same WSJ editorial team goes on to say: “In a separate incident the following month [i.e. August 2009], the company confirmed its guards beat employees after the incident was caught on video.”

However, if one gives credence to the WSJ (and I have no particular reason to doubt it), Foxconn is far from your garden-variety sweatshop. The campus contains a hospital and a bookstore. Karaoke contests are organized for its workers and local streets are palm-tree lined. [6]

More importantly, management has taken measures to remedy the situation. For starters, nets have been installed around its buildings, so that workers would be caught if they do jump. As importantly, workers have been asked to sign a letter pledging they will not try to harm themselves and “saying that workers or their families, wouldn't sue Hon Hai if a worker died or was injured in a suicide attempt”. [7]

Furthermore, on the 29/05/2010, Hon Hai/Foxconn management decided to increase wages to its Chinese workforce by an average of 20%, in a measure described by Hon Hai/Foxconn management as “unrelated to the suicide wave” and to the enquiries made by their foreign clients (among whom was Apple). I just hope such generosity will not endanger Hon Hai/Foxconn’s financial health. Time and markets shall tell.

So, it is entirely possible that pay and working conditions in Hon Hai/Foxconn are not exceptionally worse than in the whole of China. In fact, they might be among the best.


The road to Monowitz.

Most readers probably have never heard of Monowitz. I can’t blame them.

Monowitz was built as a work camp, in what today is Poland, at the request of IG Farben.

In this pioneering Public-Private Partnership, the private sector contribution made by IG Farben consisted on the installations themselves, equipment and raw material.

Other large corporations, eager to fulfil their patriotic duty, like Siemens and Krupp, also arrived at similar agreements. In fact, the Auschwitz-Birkenau complex had 45 subcamps.

And the public sector, that is, the Nazi Government, through the SS, agreed to provide onsite security, and slave workers (charging IG Farben 3 Reich Marks a day for each unskilled worker, 1.5 for children, and 4 for skilled workers) to work in IG Farben’s synthetic rubber production facility.

The products, obviously, had IG Farben’s name attached to them.

Workers who did not perform satisfactorily were beaten to death on the spot (sometimes at the request of visiting executives) or sent to Birkenau, where they would end sooner or later, anyway, as a result of overwork, starvation, disease, mistreatment and cold. [8]



I suppose no sweatshop today can really be compared to Monowitz: undoubtedly we have come a long way.

But I fear for the future and I hope apologists of globalization and outsourcing, some of whom describe themselves as leftists, are right. They better be.

[1] iPhone Wikipedia entry. Accessed 29/05/2010.
http://en.wikipedia.org/wiki/IPhone
[2] Data from http://online.wsj.com
[3] Carole Laundry. iPad-mania as thousands queue for global roll-out. SMH. 29/05/2010.
http://news.smh.com.au/breaking-news-technology/ipadmania-as-thousands-queue-for-global-rollout-20100529-wlsj.html
[4] I promise not to kill myself: Apple factory workers 'asked to sign pledge'. SMH. 26/05/2010.
http://www.smh.com.au/technology/technology-news/i-promise-not-to-kill-myself-apple-factory-workers-asked-to-sign-pledge-20100526-wddd.html
[5] The Foxconn Suicides. 28/05/2010. WSJ online. Accessed on 29/05/2010.
http://online.wsj.com/article/SB10001424052748704269204575270031332376238.html
[6] Jason Dean and Ting-I Tsai. Apple, H-P to Examine Asian Supplier after String of Deaths at Factory. 27/05/2010. WSJ online. Accessed 29/05/2010.
http://online.wsj.com/article/SB10001424052748704026204575267603576594936.html
[7] It appears that workers are no longer required to sign the letter.
[8] Monowitz concentration camp. Wikipedia entry. Accessed 29/05/2010.
http://en.wikipedia.org/wiki/Monowitz