Wednesday, June 16, 2010

Datta Samantism in China ?

Readers of this blog may be forgiven for not being familiar with the late Dr Datta Samant. He was a fiery trade unionist in Bombay in the 1980s who changed the industrial relations scene in India. His style was extremely confrontational ; he specialized in making demands of 700% wage increases, going on strikes invariably and was prepared for an agreement only upwards of a 100% wage hike. The textile industry in Mumbai was virtually destroyed by him . A few workers benefited when managements caved in to his demands ; but on the whole most, and especially Bombay, lost.

Not as dramatic, but something on those lines is happening in China. There has been a coordinated strike in Honda’s manufacturing plants in southern China demanding wage hikes. Honda increased wages by 24%. Foxconn, the company at the heart of the unfortunate suicides in its plant in Shenzhen , has increased wages by upwards of 30% to reportedly 100% for some. Guangdong Province, the factory to the world, increased its minimum wages by 20%. Industrial disputes have risen manifold in the eastern coastal belt where much of China’s industry is located.

Industrial relations in China is very different to the rest of the world. There is no real organized trade union , unlike in most other countries. Worker rights are usually non existent or trampled upon. Strikes usually cannot happen without “approval”. The average worker has little say ; he can be sacked easily and replaced a dozen times over.

Yet a collective swell of worker activism is happening. This is also the result of demographic changes happening in China at breathtaking pace. The early boom had been fuelled by dirt poor migrant labour fleeing misery in the interior and coming to the coast for what appeared to be the Promised Land. Rapid upliftment from poverty occurred. Now that the escape from poverty has happened, the working community is looking for more. Minimum wages which appeared at first to be a fortune, now appears to be a pittance. Costs have started to rise. China is no longer a “cheap country” – pound for pound, India is now significantly cheaper, leave alone even cheaper places like Vietnam.

Tectonic changes will happen in China I believe. Industry is starting to drift westward as the coast will start to look more and more like a Japan. Some will start to drift out of China altogether. There is no country in the world with the ability to take on the scale of China, so an exodus will not happen, but a drift surely will. The interior of China is still a low cost region, but even that is rapidly changing. China’s manufacturing might is built on low costs, wafer thin margins and huge scale. It can least afford cost escalations of any significance.

For longer term sustainability, wages have to rise, but slowly. Not the Datta Samant variety , but a steady increase each year. This enables aspirations of labour to be met, without destroying the economic model that created the industry in the first place. It also enables productivity and innovation in cost management to kick in to offset wage increase.

Datta Samant is a very bad example for workers to emulate. Wage increases, yes; but sudden massive increase ? NO ! Its not in anybody’s interest.