Improving Workers' Condition: From Another Perspective

The plight of factory workers, notably in China has captured the attention of many people across the world. Sights of squalid living quarters, seemingly unending working hours and absence of basic welfare in these factory towns resulted in rightful calls for better treatment for the most important people in the production lines.

In a rush to support this just cause, we appear to have forgotten one thing and unknowingly have committed a mistake, that is, of asking the workers what they really want in their working life but instead enforcing our definition of what’s best on them.

A TED presentation by Leslie T. Chang gave support to this view. In a series of interviews with workers whom she had established relationships with, Chang found out that while workers probably appreciate improvements in issues raised as examples above, they actually gain higher utility (in the words of an economist) from things/activities that may result in potentially better jobs. Some of these include the opportunity to learn computer skills and English.

As we close 2012 and embrace 2013, I thought this is a good reminder to everyone who has the good intentions of helping someone: never assume but in the words of Ernesto Sirolli (another TED presenter), shut up and listen before we come up with ways to help someone.

Happy New Year Eve!

Lessons from Winter

I received a copy of Monocle Alpino this afternoon and had been reading it for the entire evening. I do not intend to promote the publication in this post but just want to share an inspiring essays section in it.

There are ten articles about winter and related topics from so many different perspectives, each teaching me a thing or two about certain subject; on how saw-making needs to consider the “ice factor”, on the existence of a job called ice-meister who is responsible for making sure that the ice surface is perfect for skating and on how the notion of hand-knitted has changed over time.

The world is indeed a very big place and there will always be new things to learn. Merry Christmas everyone and thanks for making 2012 an excellent year. The best is yet to be!

Report Card for the 21st ASEAN Summit

The ASEAN Summit was concluded almost a month ago. I had wanted to provide a report card of the summit but was delayed until now. As I see it, there were about four main takeaways, each capable of generating endless debate as to whether it is a good or bad thing.

First in the list is the signing of the ASEAN Human Rights Declaration. For many people, it is indeed an achievement considering that the organization did not come into being with the idea of pushing for human rights. In fact, some would even argue that many of the founders of ASEAN were hardly democratically elected. Yet, some would say that the declaration fell short of expectations as many “standard” norms appear to have been excluded.

Second is the ASEAN Economic Community (AEC). As with other recent summits, ASEAN Leaders pledged their continuous commitment to the establishment of AEC in 2015 but implementation process has been hit with several problems. The decision to delay AEC from 1 Jan 2015 to 31 Dec 2015 further proves this point. Officials can argue that AEC will still come into existence in 2015 but seriously, it is not hard to see that it has effectively been delayed by one year and how that will further affect ASEAN’s credibility remain to be seen.

Third is the announcement of the start of Regional Comprehensive Economic Partnership (RCEP) negotiation. On one hand, it gives the impression that ASEAN is serious in pursuing further economic integration with its neighbours but on the other hand, people are questioning whether anything tangible will come out of this considering the proposed timeline of its conclusion, 2015. One, it essentially clashes with AEC and if you cannot even implement one thing with your existing resources, what can you possibly achieve when you need to divide the same resources to handle two things concurrently. Two, there is a potential impact of South China Sea issue on the negotiation process.

This brings us quite nicely to the fourth and last takeaway, which is the South China Sea issue itself. Unlike the above takeaways where something positive can be distilled from them, I frankly do not see anything positive in this issue. It has wrecked ASEAN unity. It has resulted in several incidents that are likely to increase tensions. It has kick-started some military maneuvers and God knows what will come next.

To conclude, this is not a perfect report card but this is not a bad one either. There are certainly troubles brewing but if the relevant stakeholders can just take one step back and look at the bigger picture, I believe ASEAN can right the wrongs and still come out blazing.

P.S: I survive the end of the world.

Economic Slowdown and Nationalistic Behaviour

Two weeks ago, I mentioned that the Chinese economy is still very much reliant on demand from the West and alluded that it was not really domestic consumption boost or successful diversification, but rather false expectations about the speedy recovery in EU and US that had contributed to the outside appearance that Asia, particularly China has successfully decoupled itself from the West sometime ago when Asia seemed to be doing pretty well as opposed to EU and US (More on Decoupling and Asia).

The latest data released on the Chinese economic slowdown and the need to clear existing inventories served to prove this point. Indeed, an article by Damian Grammaticas from BBC gave some examples of industries where the number of days to clear inventories have increased exponentially.

In that pervious post, I made a passing (and cautious) remark that the Chinese government can consider learning a thing or two from Indonesia, which has been able to drive economic growth by boosting domestic consumption. Learning from Indonesia is one thing. Question is: has the government ever considered boosting domestic consumption as an option to pick up the slack from EU and US? Judging from its past actions, it certainly has. However, boosting domestic consumption is not a free lunch. While they largely fulfill their objectives, interest rate cut and the likes also lead to inflation, default, etc, things that the government has been trying to put a lid on.

Even if they have certain mechanisms in mind to counteract these unwanted side-effects, they may want to tone it down and give the limelight for solving the economic slowdown to the new generation of leaders that are expected to take over the country later this year.

So when you want to do something that will impact your population but can’t really do it for economic and political reasons, the simplest way is to divert the attention of the population away from it. Perhaps this is the reason why China has become more nationalists with regards to South China Sea and other nearby waters in the past few months.

Decentralization in China: Lessons from Gu Kailai

Gu Kailai, wife of Bo Xilai, a former rising star of the Chinese Communist Party, was sentenced to death with a two-year delay last Monday. After the announcement, the focus of the media was on how it was a foregone conclusion and speculations arose about when Bo himself will be charged and if so, what his likely sentence will be.

What’s interesting to me is that no one actually bothered to analyze something that is very much the norm in most countries but is different in China, especially when it comes to court cases; that is the location where Gu was charged. Generally, the accused is charged by the court in the jurisdiction where the alleged crime took place. But here, we have someone who allegedly committed the crime in Chongqing, but charged by the court in Hefei, Anhui, which is a totally different city and province altogether. Why is this so?

When I read the book entitled “The Party” by Richard McGregor, I found that this action has precedent in the case of Chen Liangyu, the former Party Secretary of Shanghai who was charged in 2008. Chen was charged in Changchun, Jilin, also a totally different city and province from the alleged crime. The explanation given in the book was that Changchun was far away from Shanghai and that Shanghai judges could not be trusted to follow Beijing’s order. If this is indeed true, then Beijing has valid reasons for assigning the court in Hefei to charge Gu.

However, I have not brought up this observation simply to explain Beijing’s decision. Rather, what I want to say is that decentralization in China has reached a level where the perception that Beijing still has a strong grip on whatever that is going on in the country is no longer true. The system has been structured in such a way that the highest position in a specific region has a say in almost everything that goes on that he/she is effectively the “ruler” of that fiefdom, up to the point that it is beyond the control of Beijing. Isn’t it ironic for a Government who likes to portray that it has everything under control?

More on Asia and Decoupling

About a year ago, when US and Europe were down, Asia had rebounded and many people were saying that it was a sign Asia had successfully decoupled itself, I cautioned against such a view in a post “Have We Arrived?”

Just about a month ago, China reported that its growth has slumped to a three-year low of 7.6 percent in the second quarter and one main reason was the continuing bad news coming out from Europe amid a slow US recovery. If my argument then was not convincing enough, surely the arrival of these statistics would add substance to it now. It is however not the intention of this post to do just that. Rather, I would like to speculate on why the data a year ago would have misled many people into thinking that Asia had decoupled from the West when it didn’t.

Central to my speculation is the concept of expectations. Few people in China would have expected the crisis in US and Europe to drag for so long considering all the actions taken by the respective governments. They had continued to produce and stockpile their products ready to be exported when the West demanded them. This act of production and stockpiling could have contributed to the rebound observed a year ago. Obviously, this expected demand never materialized. Since the existing stock had not been cleared, there was no need for new production and hence the observed current slowdown.

If domestic consumption had increased substantially over the same period, it would have cleared at least some of the existing stock but this was not the case. Apparently, domestic consumption either remained stagnant or did not increase sufficiently to replace the demand from the West. In fact, if manufacturers were to factor in expected increase in domestic consumption into their production decision a year ago, their existing uncleared stock would have been even higher than if they did not do so. In other words, both the expected increase in demand from the West plus domestic consumption that never materialized has resulted in the current slowdown.

Right about now, people who disagree with this speculation would say that it depends on which part of Asia you are looking at and would point to an Asian country further south of China to make their point: Indonesia. Growth of domestic consumption in Indonesia has been phenomenal, an excellent example of one way a country could decouple itself from the West. Perhaps, China could learn a thing or two from Indonesia about boosting domestic consumption. Is it?

Well, I would again warn against jumping straight to an unsubstantiated conclusion. Indonesia tomorrow could be China today. Indonesia as part of Factory Asia is a supplier of parts and components to China, the final assembler. The current increase in domestic consumption could have been driven by expectations that China will continue to demand parts and components, which is highly unlikely if recent statistics can serve as reliable indicators of how things will evolve.

Growth With Redistribution

I read a book on UN ideas recently and one idea that caught my eye is “growth with redistribution.” I think it is an appropriate idea in light of current instability and push towards a more sustainable growth. The book has it that if we are to continue with the current system of growth where everyone is pretty much doing things for themselves, no doubt the rich will continue to experience impressive growth in the size of their wealth, but the poor also has to reach a certain minimum level of growth in their wealth or earnings in order for them to be able to afford their basic needs.

This inter-connectedness between the rich and the poor can be explained by their demands for goods and services. The fact that much of the world now run on market economy means that prices of goods and service will adjust based on demands and supplies. The rich with their wealth will surely be willing to pay more for a certain good and if many of them do so, it will push the price of the good up if supply is limited. If the poor also demand the same good, then there would be a chance whereby the poor may not be able to obtain this good. And if the good turns out to be a basic necessity, then you have a situation whereby the poor cannot afford their basic needs.

Is this really true? Well, surely you have read about the increasing food and fuel prices lately. In some cases, governments indeed step in to subsidize these goods for the poor but is this sufficient? Perhaps not and with fiscal austerity in their minds, how long will this last?

The concept of “growth with redistribution” is about meeting basic needs for everyone. The rich with their resources can certainly grow more but with basic needs in mind, they perhaps do not need to grow their wealth at the current rate. The poor need to grow their wealth but with redistribution from the rich in mind, they perhaps do not need to slog so hard to the point that it affects their health. It is all about not overspending and using excesses for the benefits if those who are lacking.

It is a beautiful idea in an utopian society and certainly is worth trying in our society but in such a “real” society, is this another idea that is destined for the bookshelves?