Monthly Archives: April 2012

iPloitation: What Does It Mean to be Exploited in the iPad Age?

For the free-market oriented China-watcher, the three arguments usually come out in regards to factory workers. The first is that the factory workers are usually better off with the work than they would be without it. This was the thrust of Nick Krisftof’s controversial essay “Where Sweatshops are a Dream.” Second, factory workers, for the most part, want more working hours instead of more free time. My objection isn’t that it’s not true  – it is, and anyone with experience in China knows this.

I’m upset about how fundamentally normal exploitation has become in our discourse. Chinese factory workers don’t want to work more hours, they need more take-home pay for themselves and their families. If they have to work 28 days a week, 14 hours a day to get it they’ll do it. But making that the headline of a story has as much merit as writing the headline, “sex-trafficked prostitutes want more clients.” There’s nothing meaningful that can be taken from these statements that doesn’t imply we shouldn’t be shoveling more work on them – as they wish. Instead, we need to be finding ways that empower worker voices that don’t set up binary options like these surveys (do you want less money or more of the same?) and doesn’t require the literary assistance of Mr. Daisy. We also need a post-Pareto understanding of what exploitation means.

The China Context

A few years ago I was teaching a course on globalization and development in Shenzhen. In what was probably one of my most interesting settings for such a class, we had large windows out of our fifth floor classroom looking down on a unique construction site. The city government wanted to build a high-tech industrial zone next to its polytechnic college. The problem was that there was a mountain where they wanted the factories to be.

From that vantage point we could see hundreds of mingong, the Chinese word for sub-blue collar workers, scattered around a lunar landscape blowing up and removing a mountain bit by bit. Several times a day the windows facing the construction site would shake as they set off dynamite to bring another cascade of rock down.

In two consecutive classes, I brought up the issue of exploitation. The first was when I covered the basic neo-Marxist critique of modern economics. A curious part of that class was that when I asked if any student could summarize Marx, none could. This despite all of them having had forced politics classes teaching “Socialism with Chinese Characteristics”, “Theory of the Three Represents,” “Scientific Socialism” and other tropes Zhongnanhai invents every decade. After explaining the classic Marxist definition of exploitation, I pointed outside and asked, “is that exploitation?” Almost all of them answered no. I tried playing the Story of Stuff and met with the same results.

Variations of “this is China” and “there are too many people in China” came from the students. Many of them made comments that showed they internalized these ideas. They were graduating from a low-tier school and would be competing with students from higher-tier schools. They expected to chiku (eat bitter, a Chinese term for hardship) after graduation. Those who didn’t graduate even high school, like those workers, would have to chi even more ku. Despite it’s recent rise in total wealth, Chinese GDP per capita sits alongside Angola and Jamaica. It might be the second largest pie in the world, but a fifth of the world’s population was eating from it. The only way for my students to justify getting a bigger bite of that pie than the mingong was to also allow for people above them to get a bigger bite too.

But did the fact they came from substantially poorer areas that systematically excluded most students from a quality education play any role? “This is China,” they responded. Indeed, it is China and exploitation is prolific. Merriam-Webster’s defines exploitation as “to make use of meanly or unfairly for one’s own advantage.” Exploitation usually isn’t spoken of today, I think, because of the idea of Pareto efficiency and optimality in rational market theory. Essentially, people won’t undertake a transaction where they come out losing more than they would if they didn’t. This is the essential idea that a worker in a sweatshop is either coming out the same as other options (Pareto efficient) or better than other options (Pareto optimal). For a high-level discussion of the problem with these assumptions, see the work that won Joseph Stiglitz a Nobel Prize in economics.

For the purposes it’s being used for here, it can be knocked down pretty easily with a thought experiment or two. I’ll use an example of someone I actually knew to set-up the experiment before going into wild fictional speculation. Samantha was impregnated by her boyfriend when she was 13. She was legally married to him by the age of 14. He was a terrible husband and they lived in squalor. Even though they were in America, they had no trash service and sometimes had no electricity. Their yard was covered with their own trash. [Begin fiction] The husband grew physically and mentally abusive with time. Eventually, Samantha ran away. She wound up living on the streets and was eating out of dumpsters for food. At the end of her first month on the streets she was offered housing, food, and clothing (though not a salary) in exchange for a contract filming pornography six days a week for the next six months. If she chooses to quit at any point, she’ll be immediately returned to the same place she was found minus the new clothes. At the end of the filming she’d be given $2000 to help her settle into a new life.

Is this or is this not exploitation?

In rational market theory, it is not. She made a free choice to film the movies and her situation was, by many measures, objectively better – thus making it Pareto optimal because both Samantha and the pornographer are better off with the contract than without it. The contract might well be legal in many countries and American states. A closer look at the contract, though, shows that she’s essentially an indentured (sex) servant.

Aside from how you feel about the morality of pornography, is it fair? I think almost everyone would agree that it isn’t. Samantha would not have agreed to that contract if it weren’t for a horrible situation that was mostly not of her making. Much of her situation was institutional. Upper-middle class white kids where I grew up don’t get pregnant at 13 or 14 with any regularity. They don’t live in trailers without trash service or electricity. Police there arrest eighteen year olds who prey on pre-teens. Fifteen miles away in Green Cove Springs, where I worked at McDonald’s with this eighteen year old mother of a five year old, these situations are a lot more common for a lot of complex reasons (her mother lived next door and worked with us and, so far as I could tell, saw nothing awful about the situation).

Choices

I’m also reminded of a quote from a Benjamin Barber book;

 [We are] seduced into thinking that the right to choose from a menu is the essence of liberty, but the power is in the determination of what’s on the menu. The powerful are those who set the agenda, not those who choose from the alternatives it offers.

If one’s choice is sex work or living on the streets, that’s not much of a choice, is it? So what of Chinese construction workers or the Foxconn workers who build iPads? For your typical factory worker, it’s a choice of factories, the service industry, or back to the farm. I’ll speak of the latter in a moment, but within those the factory and service industry jobs, for wages, it’s a choice of working 70 hours a week or 50. 28 days a month or 25.

At the spa where my wife and I used to get massages, the masseuses would get roughly 13rmb for every 40 we paid to the cashier and they only got paid when they had customers. Apple is thought to pay between 1-3% of the final retail price of an iPhone on wages at the pre-retail level. I’m not a business student or a businessman, but I think it’s an extremely difficult argument to make that Apple couldn’t afford to even double the pay at the bottom and still have a healthy profit. In fact, a recent New York Times story was about how their most difficult choice lately was where to spend their $100 billion in cash. Sending bonuses down the commodity chain was never an option.

I’m arguing that it is explicitly the case that (a) companies have a choice to pay more without threatening the survival of their business, and (b) that most workers in bad work situations have few meaningfully better choices but that almost all of the work is Pareto optimal. Yes, workers are usually are “better off” ways that they value but that the situation is built of institutional unfairness where almost any option is better. In my fictional case of Samantha, it is only the absolute clarity of her background situation and choices available that make the exploitation clear to the average reader. As I want to show in more detail, I don’t think the average factory worker is coming from a much better situation as Samantha.

The Institutional Context

The argument that exploitation is rampant, if not the bedrock of our economic order, only makes sense in context to the prevailing conditions that workers are coming from. My example of Samantha might seem clear to a lot of readers: she was poor, suffered misfortune, was victimized by common gender issues in development (i.e., early pregnancy to an older, dominating, often abusive spouse), and the things that went wrong in her life happened before she was old enough to have much agency over them.

Undoubtedly, factory workers are in an analogous situation – meaning, they’re in bad jobs because they came from poor places. I don’t like the term poverty, so let’s use a better terms: marginalized and vulnerable. They are intuitionally marginalized in ways that make it look like the purpose of the education system is to create a pliant (if not grateful), low-skilled, cheap labor force. Less than 2% of rural Chinese students make to tertiary education. Because they are marginalized so effectively, they are vulnerable. I find Mark Mason’s argument that school systems are often “designed to fail students” persuasive.

An education system deliberately designed for failure may seem a contradiction, but the policy ensured this through the desperately poor resourcing of black education. Black teachers [in South Africa] were under-qualified and overworked: in rundown schools with no electricity, no water, hardly any desks, and virtually no textbooks or stationery, they often had to deal with classes of up to 80 or 100 students, almost all from poverty-stricken backgrounds. Authoritarian teaching styles, dominated by transmission modes of teaching and rote learning of content, were consequently the order of the day.

This would only be a slight exaggeration of the educational conditions most mingong are coming from. The larger point though was that they’re not supposed to make it through to college, as there’s already too many of those. While South Africa might have chosen skin color to sort and brand students, the Chinese system uses the hukou to sort rural students from urban students. It doesn’t matter what changes you make to the gaokao, it will remain a “neutral” instrument to sort students by social class, at least at the aggregate level. The few poor rural students who actually take the test will almost always fail it. Most of them are getting swept up in these factories in what has become the largest peacetime migration in human history.

And what will have to be another post, the rural context most of these workers come from needs to be explored in detail. It is not, as many like to argue, that farms are simply boring and cannot sustain livelihoods. Most governments have an active agenda to suppress food prices, which help the urban poor at the expense of the rural poor. The Green Revolution, despite its rhetoric, was never meant to help poor farmers. It helps large landowners and urban factory workers and slum-dwellers. As a few hours in Manila or Jakarta will attest, it’s often decided by the rural poor that moving to the slum is a better idea than involuntarily being at the ‘helping’ end of an intervention to feed slum-dwellers and prop-up cheap industrial labor. The cheaper food is, the less you have to pay workers, the more competitive your labor prices…

Further, the nature of the current development paradigm makes it almost impossible to be a subsistence smallholder farmer. Instead of being public services, health care and education come with fees despite the numerous laws and UN declarations for “free and compulsory basic education”. Paying fees requires growing cash crops. Cash crops leave you dependent on and exposed to the wild swings of global markets. The price of rice, for instance, has hit a twenty-year high and a twenty-year low in the space of four years.

Who to Blame and What to Do About It

The first time I heard an example of the fragmented nature of postmodern ethics, it was Mark Mason describing the accidental bombing by NATO planes of Afghan weddings (where families shoot automatic weapons into the air in celebration, which look quite a bit like Taliban soldiers from 30,000 feet). Do we blame the pilots? The forward air controller who gave permission to drop the bombs? The wedding celebrants firing guns? Osama bin Laden for starting the war that brought the American jets there? George Bush for fighting it as he was? “All of them, in part” is just as easy an answer as “none of them, individually.”

My first instinct is to blame Foxconn and other manufacturers, but they’re running very tight profit margins. Because Apple wants all the profit. As the New York Times reported:

Apple typically asks suppliers to specify how much every part costs, how many workers are needed and the size of their salaries. Executives want to know every financial detail. Afterward, Apple calculates how much it will pay for a part. Most suppliers are allowed only the slimmest of profits.

So blame Apple, right? Not so fast. I buy the argument that corporations are, by their nature, sociopathic. The structure and purpose of the modern corporation is the make money for shareholders within the bounds of the law. That’s it. At that, Apple is doing remarkably well. They’re breaking few, if any, laws while reaping a market share larger than the GDP of Hong Kong. Part of this comes from the fact that they moved to places where the laws are much more relaxed or only loosely enforced.

Should we blame the consumer? I don’t think individualizing responsibility will get us anywhere and I think it detracts from the larger problem, the system itself. We need to think like citizens, not just consumers. In the words of Annie Leonard, of Story of Stuff fame:

Let’s stop thinking like consumers and think like citizens. By all means let’s shun products from companies whose behavior offends. But let’s also realize we can work to change not just the way they act but the way they’re allowed to act. Only when every manufacturer of Stuff is required to make it safely and fairly will we know that no matter what we buy, the important choices have already been made.

David Harvey says in The Enigma of Capital that when we think of class struggle we often imagine workers rising up against the forces of capital, “when, in fact, it’s the other way around.” The global economic system has brought increased earnings to the rural poor, but at nothing near a fair share of the value of the products they’re creating. The entire system is set up against them from taking any more than the minimum markets would allow for. So, yes, we see wages rising across China – but it’s only because of labor shortages. The political voice of the workers has been intentionally castrated, such that we all clamored to our headphones and speakers when Mr. Daisey said he’d actually heard from a few of them.

So blame the system, then get to work fixing it by demanding higher legal standards across the commodity chain. It’s not “free” trade, much less fair trade, if an American company is outsourcing to a country that jails labor organizers and crushes any attempt to build civil society amongst the most marginalized members of society. The difference between being empowered and disempowered can be the difference between life and death, or health and sickness. The Pearl River manufacturing machine is ripping off 40,000 fingers a year. While Australian miners make upwards of $100,000 a year for their labor (and their companies remain competitive), Chinese coal miners died at war-like rates. 7,000 died in 2002 alone. The situation, of course, has gotten much better. Only 2700 died in 2009. Which averages to seven a day and more than the total of all US military deaths in Afghanistan.

I’ll end with my preferred policy prescription. We either need to be rethinking minimum wages or thinking about maximum wages. Either idea would need to be connected more closely to actual market conditions. In my alternative minimum wage scenario, the final retail price of product makes it way back down the value chain. You would set a percentage, perhaps 20%, which would be required to work its way back to the people who made the product. With the iPad, that would ne the miners, cargo ship workers, the factory workers, and even salespeople who are absolutely essential but are altogether disposable and replaceable in market-thinking. Distributing $80 of every iPad purchase away from Apple’s shareholders and towards workers at the bottom of the commodity chain would do more for economic fairness and development than any aid program ever dreamed of. Even a smaller number like 10% would raise wages (and fairness) by orders of magnitude.

The maximum wage idea would be similar, you would follow the full value chain from miner to CEO and set a cap – any cap – on how much more the highest paid worker can make compared to the lowest. It could be extremely high, say even 10,000, and still bring a lot of money back down to the workers. If a CEO is making $20m/year, then the lowest paid worker on the commodity chain would need to make at least $2,000/year. This would force us to confront the inequity when we actually set the number. How much is one human being actually worth compared to another? Those are precisely the kinds of conversations we’re not having right now when we let market conditions and personal backgrounds set prices for us.

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