Few people today, except for a few out-and-out socialists, would argue against free markets in principle. Most people now recognize that capitalism provides the common man with a vast array of quality goods at affordable prices, thereby improving his lot, whereas state-controlled economies, such as that of the former Soviet Union, inevitably produce shortages of necessary goods (let alone luxuries) even for the elite.
At the same time, however, few would also argue for a completely laissez faire approach to markets. After all, were it not for government regulations, most people believe the following would occur:
- Businesses would exploit workers, paying them wages far below what they deserve and forcing them to work under grueling sweatshop conditions.
- Businesses would force customers to pay exorbitant prices for shoddy merchandise.
- Outsourcing and importing would transfer jobs from wealthy countries to poorer countries, with neither population benefiting.
- Many hiring, firing, and promoting decisions would be based on connections in the old boys' network rather than on productivity and merit.
The most notorious alleged example of these practices is, of course, Wal-Mart, whose very success has bred contempt for it among Americans of all classes and political persuasions. Wal-Mart's importing of so many goods from China seems to be one of the primary bugaboos of all Wal-Mart haters, for it encapsulates in their minds most of the above supposed problems with capitalism.
Fortunately, Time magazine, not the most likely of sources, has come to the rescue of the barons of Bentonville with an outstanding and upbeat piece on the positive effects of Wal-Mart's doing business in China. The result is an essay that not only helps rescue the reputation of one of the world's most maligned corporations but also goes a long way to prove that capitalism improves everyone's lives without any government intervention whatsoever.
First let's consider the issue of the alleged exploitation of workers in factories. While it is true that the wages, hours, and safety standards are not at the level with which Americans would feel comfortable, it is also clear that they are all improving. Remember that Western labor conditions started out in a relatively poor state and improved over time, owing mostly to increased productivity. In the same way, as China's workers become more productive, their wages and working conditions will improve. If wages were not improving, after all, it would make little sense for Wal-Mart to open stores in China since they could not expect their potential customers to have the money to purchase anything. As it is, they've opened 46 stores and plan to open the same number in the next two years. Furthermore, in the next year, Wal-Mart "will train some 25,000 new employees in the art of delivering those everyday low prices to China's growing middle class," according to the Time report.
It seems that just as the Chinese government, still officially communist, is learning that opening up its markets to international trade benefits the Chinese people as a whole, many in the United States are drawing the lesson that closing our markets to international trade, especially from China, would somehow help American workers. Of course, all it would do is force consumers to pay more for goods, thus worsening their lot further. As Joe Hatfield, head of Wal-Mart's retail operations in China, told Time, "If you stop stuff from [abroad] coming into the U.S., it would mean $180 blue jeans. Is that what Americans want?"
As to labor standards, it's obvious that the Chinese government doesn't regulate them much, if at all, or the sweatshop conditions that do prevail in many factories wouldn't exist. Therefore, we can expect the Chinese people to continue to labor under such conditions for year to come – or can we? Not if Wal-Mart has anything to say about it. According to Time, "[s]uppliers, including those who sell to Wal-Mart indirectly through other companies, must limit their work week to 40 hours plus no more than three hours of overtime a day, meet safety requirements and provide decent accommodations for workers." "To enforce the standards," continues the Time article, "Andy Tang, Wal-Mart's Far East manager for ethical standards, travels across China, making unexpected visits to all of the company's suppliers. In 2004, more than 6,500 representatives of suppliers and factories underwent standards training." In other words, what the government is failing to do to improve working conditions, capitalism is doing of its own volition.
Everyone knows that the rallying cry of Wal-Mart is "always low prices." The question is: Does the quality of the merchandise on Wal-Mart's shelves suffer as a result of its relentless drive to reduce prices? Andrew Tsuei, another Wal-Mart official, says no. "We drive prices down," he told Time, but not "to the point where factories are making losses. We're helping them to become more efficient." This only makes sense, for if Wal-Mart forced prices so low that factories lost money, those factories would go out of business and Wal-Mart would be left without products to sell. Sng Lai Kee, head of the Catalina lighting factory in Shenzhen, agrees. As he recounted to Time, "Wal-Mart's requirements are very tight – on quality, ethical standards, production lead times. They've pushed us to achieve better in all ways." Again, Wal-Mart can't afford to put either expensive or low-quality goods on its shelves, or else its business will suffer. For Wal-Mart to succeed, its suppliers must succeed. Exchange in the free market is indeed mutually beneficial.
What about the dreaded outsourcing? As everyone "knows," it clearly benefits China at the expense of the U.S. Actually, though, as the Time article points out, most of the manufacturing jobs left America long before Wal-Mart became a major player. They went to other places in Asia, such as Taiwan, Hong Kong, and South Korea, and those countries are now seeing some of those same jobs lost to China even as their own populations' living standards continue to rise. Meanwhile, as discussed earlier, the increased number and quality of jobs in China are helping to produce a burgeoning middle class, and people in both China and other countries served by Wal-Mart are enjoying higher quality goods at lower prices, thus improving their standards of living. Also as noted earlier, Wal-Mart's outsourcing to China has brought improved working conditions to the employees of its suppliers, a clear benefit to said employees.
Finally, Wal-Mart is helping to break up the old boys' network in China. Wal-Mart brings "respect for the individual," as Time put it, adding that "[u]nlike in most Chinese companies, the system is transparent – guanxi, or personal connections, don't matter . . . ." It is a management style that, says Time, many of Wal-Mart's "young Chinese employees find liberating. In most Chinese companies, managers typically share little information with employees, and promotions usually depend on whom you know." At Wal-Mart it's different; merit rules the day. As Alan Li, deputy manager of the Beijing Sam's Club, told Time, "It doesn't matter who you know here. All that matters is your work."
China has gone from a completely state-controlled economy to one of more or less unfettered capitalism. The results are exploding economic growth; more and better jobs, especially among those dealing with Arkansas's dukes of discounts; and a rising middle class. Meanwhile, the economies of the West grow much more slowly, if at all, while onerous regulations such as Sarbanes-Oxley are piled on one after another and governments continue to spend and go into debt as if there is no tomorrow.
Perhaps we are right to fear China, not so much for its potential military might as for its economic might. As the Chinese continue to learn and apply the lessons of economic history – namely, that capitalism and free trade are always and everywhere good things and that the best thing government can do is get out of the way – the West drifts ever closer to socialism. As the capitalist countries of the West helped to sweep Soviet socialism into the dustbin of history, so the capitalist countries of Asia may sweep Western socialism into the same dustbin. By then some poor country in Africa may be making the brooms used to finish the job while the Chinese move on to bigger and better things.
June 27, 2005
