So this is the end game of capitalism—the pool of cheap labor being drained by an insane quest for profit at the expense of people. Retailers like Walmart realize that their customer base has no money to spend because America has been financially raped by the banksters, so Walmart’s profits are in jeopardy. Their only solution, then, is to make the things they sell cheaper, which they can reliably do by counting on manufacturers that use the cheapest labor possible. It’s an attempt at having “capitalism”—but without giving anyone any real capital. Here’s the latest from the Wall Street Journal on draining the cheap labor pool until it’s a parched hole in the ground:
Several clothing giants are beginning to source in Africa. VF expects to start getting some of its pants sewn in Ethiopia this year. Calvin Klein and Tommy Hilfiger parent company PVH Corp. has been making some of its clothes in Kenya for at least four years. Others with sourcing in sub-Saharan Africa include Wal-Mart Stores Inc., J.C. Penney Co. and Levi Strauss & Co.
Whether or not Africa’s role as a supplier expands, those efforts show the lengths to which big apparel makers are willing to go to find new, low-cost sources of production. Consumers have been conditioned to expect a plentiful supply of cheap clothing, which has pressured the margins of companies like VF and PVH.
“In the global economy, light manufacturing is constantly moving,” said World Bank’s Guang Z. Chen, who was the country director for Ethiopia until last month and is now a director for several countries across southern Africa. “We see the possibility of this kind of industry moving away from Asia, because the labor cost is rising in China rapidly.”
Remember all the justifications for this type of thing? One big one was that the people in China and Vietnam are happy to be able to work for a living, and big companies like those mentioned in the quote above are very altruistic for giving these people a chance to work for a living, even if only for subsistence wages. Hey, that’s a lotta money for those people, the story went. Here’s a fairly recent (from December 2013) example of such logic:
There’s been, as we know, a tidal wave of companies coming in looking top employ rural Chinese on assembly lines. To the point that there’s no more rural Chinese to persuade to come into the big city to work in those factories. Companies now hire agents to try and go and find people. Bonuses are paid to workers who bring along a friend to work in the same factory.
And wages have risen, oh my how wages have risen. Back in 2000 annual Chinese manufacturing wages were around $1,000. Today they’re more like $6,500. I agree, that’s not much by the standards of us lucky ones who managed to get born into a rich country. But it’s most certainly one heck of an improvement. That improvement all having come about because Apple and the others wanted to try to exploit those workers but the net effect of those attempts being to make them vastly better off.
In fact, if the result of attempting to exploit workers is that their wages rise by over 6 times in only 15 short years, shouldn’t we be trying to do more of such exploiting?
So the focus is that the already laughably low wage has gone up by “over 6 times.” You could make the same argument if the beginning wage is a penny and 15 years later, the wage has risen to 6 cents. Hey, the wage went up 6 times—why are people starving and complaining? Because you know what else went up many times over that same 15 years? Inflation. If wages don’t keep up with inflation—and they don’t in China or anywhere else, as a rule—then wage increases are only nominal, not increases in purchasing power, which is the only factor that matters.
But now, that meaningless six-fold increase in wages is causing at least clothing companies, if those in other industries, to relocate to locales where they can again pay subsistence (or less) wages. Which was the excuse for these same companies to relocate their manufacturing out of the US, because the workers in the US cost them too much and got too uppity. Read it and weep:
Levi Strauss & Co., the California Gold Rush outfitter whose trademark blue jeans have been an American clothing staple for generations, on Thursday closed its last two sewing plants in the United States.
The financially troubled company has been steadily shifting production to overseas contractors for several years to cut costs and invigorate drooping sales in the ultra-competitive apparel market.
About 800 workers at the 26-year-old San Antonio plants have lost their jobs in the move, which was announced in September. Jeff Beckman, a Levi Strauss spokesman, said the 150-year-old company was making a delayed but ultimately unavoidable business decision.
“We tried to do our best to maintain manufacturing in the United States, but we have to be competitive to survive as a company,” he said.
The article goes on to point out that Levi Strauss also closed its Canadian plants and moved to China. Now we see from the WSJ article at the beginning of this post that Levi has decided that both the US and China cost them too much and is now in Africa for that reason. When Africa starts costing too much, where will Levi Strauss and others like them turn?
This is the central question, the central dilemma of so-called capitalism: how to have cheap labor yet simultaneously have those same people be able to afford the products sold by companies like Walmart and Levi Strauss. They managed to square that circle for some time, but it’s clearly becoming harder and harder to do so and won’t be long before that’s impossible to do. Walmart has acknowledged this before, showing that the façade is crumbing:
While it posted a profit in its third-quarter earnings report and beat analysts’ expectations, the company trimmed its forecast — citing persistent unemployment within its customer base, jitters over the government’s health care plans and tight budgets all around.
“Their income is going down while food costs are not,” William S. Simon, chief executive of Walmart, said of the company’s customer base. “Gas and energy prices, while they’re abating, I think they’re still eating up a big piece of the customer’s budget.”
Capitalism without capital—never gonna work out. That’s called crap-italism.