Capitalism Failing in China

For a while now real estate speculation has been a looming danger for Chinese capitalism. A real estate bubble has been forming for some time now due to the rapid recovery of China from the global economic collapse. The problem is that this bubble is too large and is threatening to have the same effect as the sub-prime mortgage bubble that devastated the US markets in 2008.

Chinese authorities have responded to this increasing threat by tightening credit. Less credit is being made available as many factories in China are being closed. The manufacturing sector is taking a good hit right now, especially in Dongguan. There, two major factories have closed leaving thousands of working class people unemployed.

A two large textile producers closed their doors in June causing 2,000 workers to be without work. These closings were only the injury, the insult was still coming. Both facilities closed without paying the debts the company owed and still owing millions of dollars in wages to employees. It is interesting to see capitalists who claim they earned their money, and claim it is their right because they pay people, turn around and fail to pay them. I think this starkly shows what capitalism is really all about, and shows how the sense of entitlement works out in really existing capitalism.

The closing of two such large factories is causing some concern in investor circles. As China begins restricting liquidity, more and more investors are becoming worried about a wave of closures. As investors become skittish and invest less or withdraw investments, the market becomes affected to an even greater degree. According to Xinhua News Agency 10% of the textile industry is suffering and risking bankruptcy.

Typically, this increase in financial instability is being blamed on the working class. The Small and Medium Enterprises Association is scapegoating in increase in the minimum wage Guangdong as the cause. The poverty level wages of workers in China are barely enough to survive and the capitalists are claiming it is too much for them to bear. Hearing capitalists complain about their supposed hardships reminds of the quote from Lenny Leonard of the Simpsons, “…that’s one less ivory backscratcher.”

As these jobs are disappearing and more and more workers are becoming destitute, social unrest has been growing. The Chinese government has publicly admitted that strikes and protests have steadily been on the increase. Violence has broken out several times, as well as a major truck driver strike in the shipping cities along the coast.

The Chinese government has responded to these incidents with a “vinegar and honey” approach. First they deliver the “vinegar” by sending in riot police to brutalize the population and crack down on social media and microblogging sites. Then they apply the “honey” approach by offering small token reforms and promises of further reforms that will achieve little if anything at all.

Here a major contradiction of capitalism is being exposed. These Chinese firms require more money to operate their businesses, however American (and other Western) importers have refused to give more money for the products. As a result the Chinese firms have to lower costs in order to operate. Since the manufacturers can’t lower the cost of materials and equipment (constant capital) they have to lower the cost of the labour (variable capital). As Western firms refuse to pay more for the dirt cheap commodities they already purchase, that difference is being paid for by the workers in China. This means they are being exploited twice. Once to produce the commodities and not receive the full value that they created; and second by making up the difference in a dispute between two different capitalists.

Here is an example from a Chinese report: An Apple iPhone retailed for $600 in 2010. Now the cost of components was $187.50 and Foxconn received $6.45. That meas Apple profited $406.05 per iPhone. That’s a 209% profit rate for Apple. That’s an astounding rate of profit. Even if Apple doubled the amount they gave to Foxconn, it would have an almost negligible effect on their profits. Thus Foxconn has no choice but to raise the rate of exploitation of its workers. This is something Foxconn is very good at, they have possibly the single worst human rights records in history.

Last year 14 young workers committed suicide due to the harsh conditions, 3 more have occurred this year. In May an explosion killed 3 more workers. The employees of Foxconn are forced to sign documents promising they won’t kill themselves, they are forced to live without air conditioning in single rooms that they are forced to live in if they want a job. They are even forced to sign documents telling them they are not allowed to have sex so that women won’t become pregnant and thus have to take maternity leave.

The inhuman conditions faced by workers in China are reaching a boiling point that may cause the collapse of its capitalism. The social contradictions are took stark to be ignored and cannot be addressed by the phony “Communist” Party. This has the possibility of breaking out into a new socialist revolution.