Manufacturing in China: Back to the Future?

I talked to Joe in San Francisco recently. Joe is 96, living with his daughter and son-in-law Jean and Fred. He talked about what happened when he was 18 years old, and wondered why it couldn’t happen now.

Good question, as you’ll see.

The Civilian Conservation Corps

Roosevelt was elected in November of 1932. In those days, inauguration didn’t happen until March – March 4, 1933. In his speech that day, he outlined his New Deal.

17 days later, he proposed the massive Emergency Conservation Work act, which would put a quarter of a million Americans to work. He sent the bill to Congress the same day.

10 days later, on March 31^st, Congress approved the bill – by voice vote. Roosevelt signed it the same day, and issued an executive order setting up the Civilian Conservation Corps.

By the end of June – just over three months since inauguration – 1500 camps had been created, employing over 300,000 people building and rebuilding infrastructure like parks, roads and conservation programs. The program lasted for 8 years, shutting down in 1942.

“The pay was $30 a month,” Joe said, “and you had to send $25 of that back home to your family.”

“So, what was $30 worth back then?” I asked.

“Oh quite a bit,” said Joe. “I wooed my wife on that money. Saturdays we’d go to the movies – a dime for the two of us. And I’d buy us both coffee, and her a piece of pie. That was a nickel. And she’d share the pie with me. We got married, and stayed married for 64 years.”

“I don’t really understand,” says Joe, “why Obama can’t do the same thing now?”

Back to the Future

Fast-forward to January 22, 2012. The New York Times started an explosive series with an article called “The iEconomy: How the US Lost Out on iPhone Work.” It’s an inside look at FoxConn City and the Chinese manufacturing nexus in Shenzhen – and why American manufacturing is completely incapable of competing against it.

“Basically slave labor camps,” shouted one US headline. FoxConn employs over 200,000 workers, a quarter of whom live in dorms, often working up to six days per week, and “many workers earning less than $17 per day.”

But notice:

• FoxConn’s $17 per day is about $350 per month.
• In today’s dollars, Joe’s $30/month would be worth $501.94/month.  Triple that for room, board and other expenses (paid by the CCC), and you’d be somewhere around today’s US poverty line.
• Assuming room and board are far less in China, these numbers are not orders of magnitude apart.

I’m not an economist. I don’t even play one on TV. But this much I can say: the distance between China today and the US just a few years ago is not nearly as great as we make it out to be.

Indeed, David Pogue, the NYTimes’ technology editor, writing about an ABC Nightline program, said, “It didn’t look like a sweatshop, frankly.” And ABC itself said, “…when I asked, ‘What would you change?,’ we heard the kind of complaints you might hear in any factory anywhere.”

Joe believes he was always a free American, never a slave. Indeed, to the American ear, his voice is an authentic one, drenched in traditional American hard-working virtues.

What a difference a few decades make in our perceptions. How easy it is to believe that the Chinese and we inhabit such different worlds.

Joe’s Question

“Why can’t we do the same thing now?” asks Joe.

Three reasons I can think of:

1. A politically significant group of Americans have come to believe that a road built as a government job is “worth” less than a road built as a private sector job. So in the name of “cutting government” we are cutting jobs in the face of a recession, adding a half-million government workers to the unemployment rolls. This is already not ending well.

2. Today’s Americans look at Joe’s CCC experience and see it as a treasured part of our history – but not relevant to today. In today’s terms, they look at a program like that and see FoxConn, not the life-forming experience that Joe had. And they don’t want any part of it.

Fair enough: but in a global market, global pay disparities will exist, and jobs, like water, will seek out the lowest level.

3. Roosevelt created 300,000 jobs in less than three months. The nation has lost its ability to move at anything remotely near that speed. There are many reasons for this, but a failure of trust is one of them.

Of all the critiques posed by the less-government crowd, the one that rings most economically relevant is the substitution of process and procedures for trust and collaboration.

The absence of trust is itself a massive economic anchor dragging us down; the belief that our system is consistently ‘better’ is an expensive delusion.

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