iPhones, Democracy and International Trade

In response to a New York Times article on conditions at iPhone manufacturing facilities, Apple has announced that it will hire an organization to investigate working conditions at iPhone factories. Apple’s situation offers a perfect example of the challenges of international trade with a mix of democratic and non-democratic trading partners, and why the long term viability of our global economy depends on the democratization of China.

The low wages, long hours and harsh conditions in the Chinese factories are similar to those Europe and the U.S. a hundred years ago, and were some of the reasons Karl Marx thought workers would eventually overthrow capitalism. But instead of revolution democracy forced an evolution, a moderation of capitalism. The political process caused a redistribution of the some of the benefits of industrialism, increasing wages for workers. Laws were passed on workplace safety and shorter work weeks. Eventually laws were passed to cause manufacturing facilities to have to clean up after their production processes. The world we live in today exists because we used democracy to insure that industrialism benefited everyone.

Needless to say, creating a better world costs money. Cleaning up the corrosive chemicals used in many manufacturing facilities can be expensive. Treating workers like humans can slow down production. Paying workers enough to live and letting them have time off to enjoy their earnings increase the cost of production as well. But would anybody really want to return to the world where workers regularly died in manufacturing plants, where rivers sometimes caught fire because of industrial waste, and millions of people lived at the edge of starvation?

Every democracy in the world has gone through this process: as workers gain a voice in the political system they use legislation to improve their working conditions and their lives. Non-democratic countries don’t go through this process. Without the right to vote, the basic right to choose their government, workers lack the lever to improve their lives. Conditions in China for most workers are harsh, wages are very low and their country is increasingly being turned into an industrial wasteland.

While this makes for a very unpleasant life for the workers, it does keep manufacturing costs down – if a company doesn’t have to worry about cleaning up after itself or paying living wages, the cost of production is significantly reduced. As a result, in a global economy manufacturing jobs will always tend to flow from democratic countries to non-democratic countries. And while the non-democratic countries capture a larger share of the global manufacturing jobs, they also contribute less to global demand – because the political system has not forced a redistribution of the benefits of industrialism, their workers have far less money to buy other countries’ goods.

Its nice to think that manufacturing jobs don’t really matter anymore, that we have moved to a “post-industrial information economy”. But all countries have to be able to keep their population employed. Making information will never create as many jobs as making things, and not all workers have the desire or proclivity to be information workers. Without manufacturing jobs our country – no country – will long be able to keep its population employed or its standard of living from dropping. A country which consumes but doesn’t produce will eventually go broke.

President Bush, for all of his difficulties, did get one thing right – we need to consistently promote the spread of democracy. Yes, it is morally right that all individuals have an equal say in their government, whether they are Chinese or American. But as importantly it is an economic imperative – the long-term viability of the U.S. economy depends on a democratic China. The international trade model only works if all of the trading partners are democratic.

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