Corporate love for communism
Investment in Vietnam reveals a troubling irony.
Doing business in China is beginning to cost real money. Not that Chinese workers are buying second homes or anything like that: Their average wage is still a little short of a dollar an hour. But so many Chinese have now left their villages for the factories that the once bottomless pool of new young workers is beginning to run dry, and the wages of assembly-line employees are rising 10 percent a year.Skip to next paragraph
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Worse yet, new labor laws are making it harder for employers to cheat their workers out of their wages and benefits. Many American businesses that do their manufacturing in China had warned against those laws. But the good old days of Maoist labor discipline, when the government could send tens of millions of skilled workers down to the farms to be toughened up and periodically tortured, are gone. Mao's heirs, though not above a touch of torture here and there just to keep the system humming along, are concerned, as he was not, with achieving social harmony, even if that means compelling employers to sign, and honor, contracts with their employees.
Confronted with such appalling squishiness, what's a good, cost-cutting American business to do? Many are fleeing south of the border – not our border (Mexico costs way too much) but China's.
They're bound for Vietnam.
According to a report by Keith Bradsher in The New York Times last month, such multinational companies as Canon (the printer and copier maker) and Hanesbrands (the North Carolina-based underwear empire) are expanding or building factories in Hanoi, where they churn out products for Wal-Mart and other American retailers. Foreign direct investment in Vietnam increased 136 percent between 2006 and 2007, while it increased just 14 percent in China.
The reason for the move south is straightforward: Vietnamese factory workers make about a quarter of what their Chinese counterparts earn.
But why Vietnam and not, say, Thailand, where labor is similarly cheap?
Vietnam's edge, it seems, is political. "Communism means more stability," Laurence Shu, the chief financial officer of Shanghai-based Texhong, one of the world's leading manufacturers of cotton fabrics, told Bradsher. This view, Bradsher reports, is common among Asian executives and some American executives, too, though they have the presence of mind never to say so on the record. After all, Vietnam, like China, outlaws independent unions. Absent free speech and free elections, no radical shifts in the government's economic policies are likely to be sprung upon unsuspecting American businesses.