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What Foxconn Says About American Upward Mobility

Posted: 09/25/2012 11:00 am

By now you've heard about the riots at Apple supplier Foxconn. We must let the news cycle play its course, but there are two big questions here: What does this mean for Apple, and what does this mean for China's economic and political future?

Specific to Apple, barring any widespread escalation I don't believe events will affect investors or consumers much. The company's stock recently hit an all-time high above $700 a share on enthusiasm over the iPhone 5, and Apple sold $2 million iPhone 5 models in the first 24 hours. Those phones have already been made and shipped, and as history shows that first push is the most important to fulfilling demand.

The bigger question here, however, is a philosophical one and not a fiscal one. It involves the role of consumers, investors and businesses in areas of global politics and social justice.

Anyone who is familiar with Mike Daisey or has seen a report on suicides has surely thought about Foxconn on these levels. Critics say Foxconn is an Orwellian compound where workers are underpaid and treated like animals. Supporters say it is a leg up that many Chinese would never have otherwise.

So who's right? And what do we do about it?

Foxconn Offers a "Better" Life

Unfortunately, you can't simply shut Foxconn down - no not because of the juggernaut that is Apple, but simply because of the "opportunity" these jobs provide. Believe it or not, there are many workers who prefer this Chinese electronics plant to the alternative.

What's the alternative? Well, consider this stark 2009 column from global activist, Nicholas Kristof, where he refers to the "dream" of working in a sweatshop.

If you're too lazy to click through here's the gist: In Phnom Penh, Cambodia, there is a mountain of festering garbage and human waste. Some families live on top of the filth, sifting through the trash to survive. For these unfortunates, Kristof writes, "a job in a sweatshop is a cherished dream, an escalator out of poverty, the kind of gauzy if probably unrealistic ambition that parents everywhere often have for their children."

In the West, of course, we think that neither option here is a good one. But that's the thing - these conditions do not exist in the West; we are spoiled. Anyone who has travelled internationally should be keenly aware that the comfort and wealth in America. We are the 1% after all...

Context is everything.

Progress, Not Foxconn, the Big Story

Here's where the Foxconn issue, then, becomes about far more than iPhones or hourly wages. That's because any discussion of "fair" compensation or a "good" job is dependent on the prospect of a better situation than the alternative, and the hopes of an even bigger opportunity in the future. The specifics are academic, as long as the directional movement is higher.

You could call this the warped morals and self-justification of a wealthy westerner. Maybe so. But hear me out, because I think viewing businesses and jobs in this way provides a very important perspective - one that's important to both the Chinese and American workforce these days.

That's because most impartial observers think that claims of upwards mobility in China are dubious at best. So no matter what Foxconn workers were getting paid, the situation will not equitable because the next rung up the socioeconomic ladder remains out of reach.

After all, higher wages or better conditions at one factory will not fix corrupt officials and command-and-control policies in Beijing. Nor will it correct a Chinese information superhighway stuck in second gear thanks to blocked websites and censorship, or provide social safety nets for the poor or the elderly in China.

THIS is where the moral outrage should come in. Foxconn is getting attention because it's the highest rung many Chinese can grasp right now, but the bigger problem is the ladder itself that only goes so high.

Forget China - Is Upward Mobility Possible in America?

And speaking of moral outrage, the Foxconn narrative can be instructive for Americans with stagnant wages who see limited opportunity right in their back yards.

Consider that BMW workers in rural South Carolina get $10 an hour or so nowadays, now that globalization has gutted the auto industry. Is this a "fair" wage?

Before you answer, remember that one man's sweatshop is another man's salvation... and before BMW came to town, jobs were mighty hard to come by.

Therefore it's academic to weigh whether $10 an hour is enough considering your own family budget. Instead, the big issue here -- as in China -- is progress. To wit: Will those Carolina workers have the opportunity to better themselves and will their children will have more opportunity than they did?

The answer to that question is the only one that matters.

If the opportunity is there, then these workers are employed by choice. But if not... well, there is a much bigger problem here than BMW executives looking for bigger profit margins, and any focus solely on these workers and this specific company is willfully ignoring the big picture.

Economics and globalization are slippery, complicated topics. There's no shortage of data points or policy reports on either side - but let's never forget that the direction of progress should trump all the headlines, all the time.

The question for the people of China then is not about Foxconn, but about social mobility.

And Americans watching this news unfold should be painfully aware that come November, the very same question is one that we will have to think about, too.

Jeff Reeves is the editor of InvestorPlace.com and the author of "The Frugal Investor's Guide to Finding Great Stocks." Write him at editor@investorplace.com.

 

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