Globalization Here and in China, Part One

This fascinating article, comparing the effects of globalization in the US and in China, which have close parallels and wide differences, appeared in last Saturday/Sunday’s Wall Street Journal.  This blog has been keeping close tabs on globalization in America but it has not occurred to us to look at its effects abroad until we came across this piece. We can reach a better understanding of our own situation by observing what occurs in other countries.

Because of the length of this article we are subdividing it into three parts, the first part of which we present here:

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 Textile mills of Lowell, Massachusetts in the 19th century

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By ANDREW BROWN, October 22, 2016

Just about a century ago, the Boston merchants who had helped to build the textile town of Lowell, Mass., into the cradle of the American industrial revolution started pulling out. First, the spindles and looms shifted to the low-wage South. A half-century later, they migrated to the “miracle” economies of East Asia.

The Youngor Textiles Factory.

The Youngor Textiles Factory, in Yinzhou District, Ningbo. Youngor is a major textiles and apparel brand in China.

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In the 1990s, much of the global textile industry relocated yet again, to cities like Dongguan in southern China, the world’s factory floor. Now, as Chinese wages soar, textiles and apparel along with other labor-intensive export industries are on the move once more, this time to inland China and, increasingly, to fast-growing regional rivals such as Vietnam and Bangladesh.

Globalization is shortening these cycles. Technology accelerates the churn. Like Lowell and a more recent procession of U.S. manufacturing cities, Dongguan is emptying out, and the economic and social shocks are triggering a political earthquake in China just as they are in the U.S.

The political dynamics in the two countries are very different, of course, but there are striking parallels. The most obvious are the wrenching dislocations created by a world of impatient capital, footloose labor and intricate cross-border supply chains. Vulnerable workers in both countries are feeling the pinch. . .

Dongguan’s rise and fall would be familiar to any student of New England economic history. Lowell’s heyday as an industrial center lasted from the 1820s to the 1920s. Situated at the confluence of the Merrimack and Concord Rivers, the city was the manufacturing wonder of its day. The poet John Greenleaf Whittier called it “a city, springing up, like the enchanted palaces of the Arabian Tales.” It was organized around boardinghouse mills, which provided decent-paying jobs initially for New England farm girls, along with a place to stay. They operated spinning machines based on a design stolen from Britain.

Dongguan has followed a similar trajectory, only on an unimaginably vaster scale. Once a rural backwater in the Pearl River delta, it grew into an industrial colossus by drawing on a national army of 130 million or so migrant rural workers, who bunked together in cramped factory dormitories. Industries that once flourished in New England eventually ended up here, along with their tools and technology. Dongguan was Lowell (“Spindle City”), Waterbury (“Brass City”), Leominster (“Plastics City”), Gardner (“Chair City”) and Holyoke (“Paper City”) all rolled into one.

Few in America foresaw this wholesale devouring of the country’s manufacturing heartland. The threat arose from empty rice paddies. Dongguan, writes the journalist (and former Wall Street Journal reporter) Leslie T. Chang in her book “Factory Girls,” was “a place without memory.” Today, it is mimicking Lowell in another way, as its prosperity fast fades away.

At its peak in 2007, says Lin Jiang, an economics professor at Sun Yat-sen University’s Lingnan College, Dongguan’s population reached 12 million. (The official census data is unreliable.) Then the global financial crisis struck, and China’s exports dried up. Dongguan has never recovered. Its population has shrunk to just seven million, Mr. Lin estimates, a loss equal to the combined populations of Chicago and Houston.

The greatest manufacturing boom in history is fizzling, dragging down national economic growth. Henry Cui, the vice president of operations at People Group, a Taiwanese-owned shoe maker in Dongguan, says that his industry is fragmenting: Sneaker production is shifting to Vietnam and Indonesia, high heels to Brazil, ankle booties to Spain and Portugal. Margins are already wafer thin, and his workers are demanding up to 15% annual pay increases. Meanwhile, Mr. Cui’s customers on High Streets across the U.K. have been clamoring for discounts since the Brexit vote bashed down sterling. “If you go cheaper and cheaper, eventually you die,” he says.

To be continued

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