From Tiananmen to Wal-Mart

This month marks the 21st anniversary of China's Tiananmen Square massacre. I was a exchange student in central China during the spring '89 democracy movement and during Tiananmen on June 4th, and I still recall the crushing realization among students that "Chinese people could shoot Chinese people." Many student activists were patriots at heart, and the army's attack represented a enormous emotional defeat that probably did as much to undermine and demoralize the democracy movement as did the prospect of jail time and political persecution. (An estimated 113,000 people gathered on June 4th this year in Hong Kong, so there is hope too.)

But here's something else I learned. Failed democracy in China remains critical to creating the bonanza of cheap goods and affordable electronics that have captivated and subsidized western consumers from the 1990s onward. The series of worker suicides at iPhone manufacturer Foxconn -- ten in the last year -- is concerning, but this is the very tip of the iceberg, as I found in my book The Price of a Bargain. If you go shopping today, think of all the cool technology and cheap stuff created through locked-in labour markets and strict controls of post-Tiananmen China.  

Don't get me wrong: I love my iPhone. But it is built upon an unstable foundation, one that is not made to last. Tiananmen continues, in so far as the fact that many Chinese are still demanding more from their government. Wages are going up, the Communist Party is learning it can't control everything, and many Chinese would rather have our jobs as consumers instead of manufacturing stuff for export. And many trends, from China's management of its currency to the geopolitics of the Pacific Rim, suggest that post-Tiananmen China continues to gather power at the expense of nations like the United States, despite the deep contradictions and vulnerabilities at China's core. 

Wal-Mart doesn’t see mature consumer economies as growth centres, either. They are looking abroad too. In 2010, 60 per cent of all new square footage will be opened by Wal-Mart International, “particularly in growth markets such as China and Brazil.”

If I had to choose between America's unsure, codependent approach to China, and Wal-Mart's steely ability to choose winners and cut its losses, I'd bet on Wal-Mart's continued success. There is much that is deeply wrong about Wal-Mart, of course, but the company has appraised, correctly, that overspent western consumers and overspent western governments are probably not the future powerhouses of the global economy. Meanwhile, President Obama has to put up with being censored within China's mainland media -- and, worse, dragged down by China's obstructive strategy at Copenhagen. 

The June 4th blocking of social media site FourSquare by the Chinese government is another example of how this balance of power between East and West has become more complex. Certainly, online companies like Google and FourSquare don't need China the way that retailer-manufacturers like Apple and Wal-Mart need China. FourSquare probably did well with the extra press. But without China on their side, Apple and Wal-Mart lose their supply chains for their most profitable products, representing technology and manufacturing capacity that currently exists nowhere else.

Our dependence on human-leveraged supply chains has a shadowy side that we too seldom question. All that iPad wonderment and faith in discounting is much harder to maintain if there are real people, real problems, and looming consequences attached. 

Wal-Mart, for example, has a well-established record of deferring to the Communist Party of China, not the least its full acceptance of unionized labour within its 180-plus stores across China. And like many large companies doing business in China, Apple has sometimes whitewashed its operations to avoid diplomatic and economic conseqences. Back in 1998, for example, the New York Times reported that Apple removed the image of HH the Dalai Lama from its ads in Hong Kong. ("Our management here is Chinese, so we're pretty aware of the sensitivities," said Apple's Asia-Pacific spokesperson at the time.) More recently, Apple was accused of blocking iPhone apps within China that featured HH the Dalai Lama and exiled Uighur leader Rebiya Kadeer. ("We continue to comply with local laws," said Apple in December 2009. "Not all apps are available in every country.")

Apple is moving deeper into China, echoing Wal-Mart's own strategy to foster new consumers within its main country of manufacture. In February 2010, Apple told its shareholders that it plans to open up to 25 new retail stores across the mainland, in addition to its first retail store opened in 2008 near Tiananmen Square. That same month, it was revealed that un-named contract factories had been using child labor to manufacture Apple's products (even after child labour had been previously reported in 2008), and that 62 workers at an unrelated factory had been poisoned by neurotoxin n-hexane, some requiring hospitalization. Apple revealed that 55 of its 102 Chinese contract factories were ignoring Apple's own rule that its workers cannot work for more than 60 hours a week, that 35 per cent of factories audited were not paying staff correct wages and benefits, and only 57 per cent had correct environmental permits to operate. 

Major companies like Apple and Wal-Mart have been, until recently, very successful in sheltering western consumers from increasingly unruly and unethical supply chains, even going so far as to subsidizing shoppers by covering most labor cost increases, as well as energy and material price spikes that have helped keep inflation at bay. It's impossible to know if they can manage this role indefinitely, but as I argue, the rest of us will eventually bear the greater cost of globalization if today's trade structures become too unmanageable or expensive for major players to maintain.  

In this sense, Wal-Mart and Apple are just two aspects of the same equation: post-Tiananmen China was one of the best things that ever happened to Sam's Club and Steve's cult, yet post-Obama China may well be a time of new risk for everyone. 

And yes, this posting was written on a Mac.

 This is what democracy looked like, central China 1989 / copyright Gordon Laird