Chinese Capitalism

The electronics manufacturer Foxconn has been accused of treating its workers like machines as they toil on assembly lines. Now the company, best known for producing iPhones has found a solution: use robots instead. Terry Gou, founder and chairman, has said he wants to cut rising labour costs and improve efficiency and has vowed to expand automation in its plants by using the machines. Foxconn already had 10,000 robots and would increase the number to 300,000 next year and a million within three.

Wages in the region have risen by around a third over the past year, experts estimate, as the proportion of young workers shrinks and their expectations rise.

Manufacturers are seeking to improve productivity, or shift production inland or overseas, as Foxconn has already done, with huge new plants in Chengdu, Chongqing and Zhengzhou and one site in Vietnam. "As labour costs rise, companies will have to invest more in automated facilities. But we shouldn't get carried away; there is still a lot of cheap labour out there," said Tom Miller, of Beijing-based economic consultancy GK-Dragonomics.

Alistair Thornton of IHS Global Insight, suggesting other companies would follow suit. "Workers can command higher wages and are less willing to settle for lower ones. You can no longer just double your workforce to double your output."

"I am suspicious," said Liu Kaiming, of the Institute of Contemporary Observation, which supports workers in Guangdong. "Machines can do it, but think about the cost … overall, workers are still much cheaper. This is probably just for sensational effect, to put pressure on workers."

Prof Huang Renmin, director of the institute of labour market research at the China Institute of Industrial Relations, agreed. "This is the trick capitalists use to threaten workers," he said.

Labour costs were going up partly because they had been suppressed for so long. China Daily reported last year that wages as a proportion of GDP fell every year between 1983 and 2005.

SOYMB suspects both views have truth. What improved machinery must do for the capitalist, if it is to justify its cost, is to increase the productivity of his workers (his rate of extraction of surplus value from them) to give a rate of profit equal to, or above, the average. The greater the outlay on fixed capital, however, the more dependent such profitability is upon the continuing buoyancy of the economy. But, of course, capitalism is incorrigibly cyclical and unpredictable. Expensive machinery lying idle in a slump represents growing losses for capital, to be set against the profits made in better times. In slumps, too, the real price of labour power is driven down—as we have seen in the first half of the 1980s. This makes more labour-intensive processes relatively cheaper and more profitable, offsetting the advantages of capital-intensive methods. Moreover, labour can be dismissed with a week's notice. Machinery can not. These considerations have made capital particularly slow to introduce automation, especially when wages are low. Capitalism is in a bind – it wants to use as much labour as it can as little as possible.