Has globalization failed? It depends on how you look at it. From the international perspective there are many successes. Over the past two decades as China increasingly joined the global economy millions of Chinese have been lifted out of poverty. In India there are still 300 million people without access to enough electricity to burn a single light bulb. Freeing up the flow of capital and trade seems the quickest way to help the poorest of us in the world. Our global economy has made us interdependent. That can be a good thing. It is no coincidence that we fight less with those countries that we trade most with. Economic ties lead to peace.
Looking out at globalization from here in Medicine Hat the answer is more complicated. Hatters have greater access to better made products. It’s incredible to think back to my childhood and to see now the vast array of things I can buy. Everything I could conceivably want is available at my fingertips. We have globalization to thank for that. But that has come at the cost of many manufacturing jobs at home. Walking around Medicine Hat this is all too evident. The Historic Clay district right here in town once made 75% of all ceramic products in Canada. Our brick and glass factories have been shuttered. Ogilvie’s Flour Mill and the Puffed Wheat Mill are gone. Does the loss of those jobs make up for the amazing things we can buy today? Depends on who you ask.
A revealing example of why Western countries have lost manufacturing jobs in the 21st century global economy. In 2012 Charles Duhigg and Keith Bradsher of the New York Times explored why the iPhone isn’t manufactured in America. I would have guessed the issue is the cost of labour. Duhigg and Bradsher report that a made in America iPhone would cost $65 more/device, but I would bet that Americans would pay that for a homemade product. But according to Tim Cook, CEO of Apple, the issue isn’t labour cost, but rather the ability to scale up or down.
I’m going to quote Duhigg’s and Bradsher’s reporting. A few weeks before an iPhone iteration was to hit the shelves Apple redesigned the screen. This necessitated a last minute assembly line overhaul. “New screens began arriving at the plant near midnight. A foreman immediately roused 8,000 workers inside the company’s dormitories, according to the executive. Each employee was given a biscuit and a cup of tea, guided to a workstation and within half an hour started a 12-hour shift fitting glass screens into beveled frames.” “[Foxconn Technology] (the Chinese company that makes the iphone) could hire 3,000 people overnight,” said Jennifer Rigoni, who was Apple’s worldwide supply demand manager until 2010”. The implication is that 3,000 people could conversely be fired overnight. She continues, “What U.S. plant can find 3,000 people overnight and convince them to live in dorms?”
The answer is none. Why? Because labour rights are strong in the West. ‘Scaling up and down’ is a sterile expression for a disturbing reality. What Mr. Cook, the CEO of the world’s most profitable company, is implying is that because labour rights are weak in China (because people are poorer and more desperate) it’s easier and cheaper to make our magical iPhones there.
When companies move jobs oversees they don’t cite weak labour law as a motivating reason rather they cite cost of labour or efficiency. But exporting jobs oversees because you can hire and fire easily, i.e. scale up and down, is not efficiency it’s exploitation. Saving on labour cost is one thing, after all a living wage in China is much less than a living wage in Canada. But is it economically efficient to manufacture things in the developing world because those workers have a fraction of the labour rights Canadian workers now take for granted?
In 2013 1,130 Bangladeshi workers died when a garment factory collapsed because of substandard construction and lax safety regulation. They were making clothes for the West. Having a safe workplace costs money. It’s no wonder that those companies that do remain in Canada find it hard to compete with companies operating in the developing world. This isn’t fair to the Canadian workers that lose jobs here, nor foreign workers who labour under conditions we would find deplorable here. Stories from workers in the developing world sound like Dickensian England.
Mark Zuckerberg was ridiculed last week for posting a picture of himself jogging through the thick Beijing smog. Once again is it efficient for companies to move jobs overseas because environmental regulations are lax in China? For sure that will make manufacturing cheaper, but it is another illustration that Canadians are not competing on an equal field. The ill-advised photograph was an apt illustration of the trade offs big companies are willing to make. But should we continue to make this trade?
Donald Trump and Bernie Sanders have both spoken out on how globalization has failed America. They have whipped up their supporters, but their answer is to retreat from the world. I don’t believe that is a realistic solution for our modern world. A quick look at history will demonstrate that isolationism has not worked. You cannot hide from the world. There is a better solution – fix the rules by which we compete. It is not globalization that has failed it’s that the rules by which we compete have not been fair.
Medicine Hat News. April 2, 2016