Does a labor time bomb lurk beneath the surface of the glossy new millionaires in China? See this interesting note in Slate today about the recent unrest at a Foxconn plant:

http://www.slate.com/blogs/moneybox/2012/09/24/foxconn_riot_chinese_factory_disruption_just_the_highest_profile_sign_of_growing_labor_unrest_.html?wpisrc=newsletter_jcr:content

Key quote:

“Conditions in contemporary China have much more in common, structurally speaking, with conditions during the heyday of Western labor activism than does anything about the Chicago teachers’ strike or the apparent American Airlines sick-out. The rapid pace of Chinese industrialization means the average wage in a Chinese factories has managed to lag behind the average productivity of a Chinese factory worker (roughly speaking because it’s dragged down by the abysmal wages and productivity of Chinese agriculture). This creates a dynamic ripe for windfall profits but also for labor activism. The repressive nature of the Chinese state is an unpromising ground for union organizing, but by the same token Chinese labor organizations have much less to lose (in terms of union-managed pension funds, union-owned buildings, et cetera) if they break the law with “wildcat” strikes and the like.”

The Western executives I know in China all admit privately that it’s hard to know just what is happening beneath the surface. One gets a sense that tensions are rising, as ordinary Chinese see Ferrari’s and Rolls-Royces glide around the big cities (sometimes with no license plates by the way…) and wonder what exactly is happening, peans to “harmony” notwithstanding.

The way i put it with clients is that rich and poor China are held together by a rubber band. As long as the band stretches but does not break, things will be more or less OK. If it ever breaks though, all best are off. And as we all know, the bets in the Chinese casino are some of the largest the industrialized world has ever seen.

 

 

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Posted by Carlos Alvarenga

Carlos Alvarenga is the Executive Director of World 50 ThinkLabs and an Adjunct Professor at the University of Maryland's Smith School of Business.

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