China, India And America-- Discovering A Contagion Beyond Bird Flu: The New Global Depression

I loved Slumdog Millionaire. It, Frost/Nixon and The Curious Case of Benjamin Button, both of which I also loved, were the only Oscar nominees I've seen. And I'm glad for them that they all won some of the awards. OK, so Slumdog wasn't exactly, as Salman Rushdie was quick to point out, cemented in reality. But the universality of the movie was one of hopefulness, the kind of hopefulness you get in a fairy tale. And this morning the nation of India, despite some reservations, exploded into the kind of joy the country feels when their team wins a big cricket match (if not the world cup).

Its depictions of filth and brutality fueled angry blogging and stray street protests. It drew unusually intense scrutiny, from how much its child actors were paid to what the composer A.R. Rahman would wear to the Oscars. But on Monday, as India woke up to news of the spectacular wins by Slumdog Millionaire at the Academy Awards, this movie-mad country went “Jai Ho.”

The victory by Slumdog was embraced as India’s own.

“What a day it has been for India!” gushed a television news anchor mid-morning. It dominated television news throughout the day. News of a hepatitis B outbreak in western Gujarat State and a southern politician’s threatened hunger strike seemed minor news by comparison.

“We rocked the world,” an Indian percussionist named Sivamani declared... “The winners have done India proud,” [Prime Minister Manmohan] Singh’s office said in a statement...

Never mind that “Slumdog” tells a story of stunted, shafted slum children, precisely a story that promoters of the New India have diligently sought to obscure with tales of prosperity and bling. India seized on its Oscar wins as a sign of its arrival on the world stage.

Since 1969 I've been to India 5 times, once for nearly a year and last year for just a week. At the very minimum, the New India exists very much side by side with an Old India that New India isn't eager to see portrayed for foreigners. When I reported back from Delhi in December, 2007, I talked about the two worlds living side by side in a very physical way:

I guess they're so small because they don't eat any protein-- or much of anything-- and neither did their parents, grandparents or ancestors. I'm not in India anymore; I'm in Thailand. You don't see much of that kind of grinding, horrific poverty in Bangkok. Nor do you see the levels of garish displays of conspicuous consumption like you see in Delhi. You see some and you do see some people in appalling poverty. But it isn't anything like the extremes you see in India. In Delhi wherever I went on the streets there were always clusters of small, very dark, very skinny people. They're everywhere, and no one seems to notice. There are hundreds of millions of them-- more of them in India than the entire population of the United States! And no one seems to notice them. They don't own anything but the rags on their backs and I've never been able to figure out how they exist. The begging can't possibly support them, even if every tourist and every trendy call center-walla give (far from the case; no one notices them)... Families laying in the filth and dust with stray dogs night after night, wrapped in their rags, bundled around a little fire burning garbage. Delhi's cold. I've being see it since I started coming to India in 1969. It's just unfathomable. Has anyone cared about these millions and millions of people since a right-wing religious fanatic assassinated their champion, Mahatma Gandhi 60 years ago?

By chance, I'm in the middle of a book by Robyn Meredith, The Elephant and the Dragon: The Rise of India and China and What It Means for All of Us. We took a look at one aspect of it a week or so ago as Americans were told that China's economy, which has been largely bolstering our own, is very shaky.

This morning Ken wrote brilliantly about the negative synergy, much of it based on anti-union policies, between the U.S. and China plunging the world economy down into what Harold Meyerson referred to as "a bottomless pit." The offshoring of our manufacturing jobs has also meant the offshoring of some of our unemployment problems-- and this is having catastrophic consequences in both China and India, referred to in The Elephant And The Dragon as, respectively, "the brawn and the brains" of the newly globalized economy. "In China, where exports dropped 17.5 percent in January, tens of thousands of factories have closed, and the government estimates that 20 million migrant workers -- rural Chinese who moved to manufacturing zones for the work -- have lost their jobs." Their main customer, U.S. consumers, can't buy what they're producing because decades of anti-worker/anti-consumer governance-- through Reagan, 3 horrific Bush terms and a bit more benign Clinton terms-- have left Americans in debt and our economy collapsing, while right wing politicians refuse to come to grips with the dangers for our society as they play out their divisive political strategies for grabbing power at whatever cost... to the rest of us and to the nation.

This morning's NY Times includes a story about China's economic meltdown by Andrew Jacobs that I fear not enough people will bother to read or grasp. The implications, however, go way beyond China's borders.

As the global economic crisis deepens and the demand for Chinese exports slackens, manufacturing jobs in the Pearl River Delta and all along the once-booming coast are disappearing at a stunning pace. Over the last few months, more than 20 million migrant workers have been cast into the ranks of the unemployed... and wages have been cut by a third as orders from the United States dry up. Last year, 2,400 factories in and around Guangzhou closed.

The international economic collapse that is fueling unrest across the globe (governments in Iceland and Latvia fell and this weekend saw 120,000 angry protesters marching in hard-hit Dublin), is spreading to rural China. Prime Minister Wen Jiabao told his Cabinet the worst is ahead and that "The country's employment situation is extremely grim."

As Robyn Meredith put it in her book, written in 2006, well before the economy began to implode, "China's most pressing social problem is the fast-widening gap between the rich and poor in a nation where a mere generation ago almost all comrades were equally poor. China's rural population, plus nearly everyone over 30, are fast being left behind by more prosperous city dwellers." This population-- plus New India's-- is what Western capitalists were depending on as the markets of the future. 220 Starbucks have blossomed across China since 1999-- selling a cup of coffee for what it costs to feed a whole family a substantial lunch. "It's all about status and being able to show off," explained a senior planner for Ogilvy & Mather in Shanghai.

There is a lot of showing off going on. Only 15 years after ration coupons were in circulation, China now has more than 400 shopping malls, including four that are bigger than the Mall of America in Minnesota.

Western companies admit that they have been counting on the naivete of Chinese consumers to sell them their products. Chinese TV viewers are impressionable and tend to believe whatever they see on TV. But those strategies are going up in smoke as the economy spirals downward, along with our own. And in their headlong rush to follow the advice from Wall Street and righting DC think tanks, "China's social safety net has frayed over the past decade. Just one in every four people in China has health insurance now, only 14% have pensions, and with 25% of education costs shifted to parents, school dropout rates are rising, particularly in low-income rural areas." It means the Chinese stop spending and save, save, save... for the rainy days that have come.

So why is this so crucial to us and how did it happen? In his post this morning, Ken talks about the trampling on the rights of workers-- by crushing the effectiveness of their unions-- in both China and under the right-wing governments of the U.S. That has helped enable capital's dream scenario of jobs moving around the world in search of ever lower wages. Meredith again:

The aim is to lower costs, and few schemes would be considered too elaborate in the pursuit of that goal. Consider Ford's assembly line. In 2006, the Ford Motor Company paid its American workers $27 an hour-- $52 if you include the cost of health insurance and other benefits [enough to live a middle class, consumerist lifestyle and buy the products Ford and other companies make]. These highly skilled members of the United Automobile Workers union are perfectly capable of building dashboards, for instance, along Ford's assembly lines. But if Ford instead hires a unionized Michigan auto parts supplier to deliver the dashboard, then pays the Ford employees only to attach it to the rest of the car, it will be much cheaper because the supplier pays its workers about $15 an hour, or $25 an hour including benefits. And if Ford hires a non-union supplier, say, in North Carolina, to build the dashboard, wages are closer to $10 an hour, $16 with benefits. That gives Ford a cheaper way to get its dashboards [although those workers won't be able to buy its products]. If Ford's supplier subcontracts to other companies around the globe to build pieces of the dashboard, it can deliver the dashboard to Ford for even less. So the supplier might buy speedometers from a factory in China that pays $2 a day, have the behind-the-dashboard wiring sent from a $4-a-day factory in Mexico, and buy the heating vents from yet another Chinese factory, where workers earn a dollar a day.

And what John Kerry referred to during the 2004 presidential election, "Benedict Arnold CEOs" certainly didn't have their single-minded sociopathic avarice satiated by wrecking the country's (ours) manufacturing base. They moved right along to the service sector as well, the sector of the future we were told would free us from the drudgery of manual labor. Marcus Courtney, president of the Washington Alliance of Technology Workers: "We are talking about our highest-paying and best-skilled jobs that corporate America is getting ready to export. It will only lead to increased unemployment, lower wages, and fewer benefits for America's middle class." That was in 2003. It's all come true since then-- with a bang. And now we're being asked to bail out the titans of industry and greed-obsessed banksters who put these policies into play.

[M]ost Americans and Europeans don't realize that hundreds of thousands of low-wage white-collar workers are being hired overseas. The public is unaware because companies conceal their new hiring practices. Companies sending jobs overseas often insist that workers there be trained to camouflage their accents to sound more like their Western customers. Many telephone calls are answered by eager young Indian college graduates who try to blend in by adopting American or British accents, using fake western names and talking about football or soccer scores from the caller's region... Ford Motor Company has two hundred accountants based in Chennai who prepare corporate tax returns worldwide, jobs that were not visible to Ford customers before they went to India.

And now American taxpayers are being forced to bail out these Benedict Arnold corporations that have proceeded with these schemes so that shareholders would get fattened dividends and managers obscene bonuses (while destroying America's economy). Economist Alan Blinder, chairman of Princeton's Economic Department, who served as the Deputy Assistant Director of the Congressional Budget Office and on Bill Clinton's Council of Economic Advisors and as Vice Chair of the Federal Reserve, is as big a fan of offshoring as less idealistic and more greed-driven Republicans. He has claimed offshoring won't cause massive unemployment; he was mistaken, although, in his defense, he has claimed that the policies he advocated would require massive economic and social adjustments. The policies proceeded-- without the massive economic and social adjustments. Let me end on another sobering note. White collar workers in India making a few dollars an hour (as low as one-tenth of what an American worker makes) have been making the decisions for banks in America about which mortgage loans to finance and which to reject and what rates insurance companies will charge which customers.