Fast Boat to China: Lessons from Shanghai; Corporate Flight and the Consequences of Free Trade;
Andrew Ross; Random House, 2006
Reviewed by Graham Mulligan
This book examines the history and the consequences of corporate free-trade (globalization) with a moral imperative. What are the responsibilities of governments, West or East, for wealth distribution and environmental stewardship? The free-trade story is generally well known from the early 1990’s beginning with the garment industry, through China’s joining the WTO in 2001 and following to the time this book appeared in 2006. “Outsourcing”, the catchall term used to describe this business model really meant “a way of cutting costs and shedding benefit burdens” (p.31). The model followed the 1950’s garment industry practice of “putting out” ready-cut garments to be made up in journeyman’s small shops or in workers homes as a strategy to avoid paying higher wages and benefits won by unions for their workers.
Ross details the growth of Shanghai’s export trade especially in the 1990’s when foreign investment was driven by the dream of selling to 1.3 billion Chinese, if only they would buy! Two historical references serve to highlight the issue of buyer reluctance further. In 1793 Emperor Qian Long wrote to King George III “Our Celestial Empire possesses all things in abundance and lacks no products within its border. There is no need to import the manufactures of outside barbarians in exchange for our own produce.” In 1973 American advertising executive Carl Crow wrote, “No matter what you may be selling, your business in China should be enormous, if the Chinese who should buy your goods would only do so.”
Ross interviewed and lived among the corporate expatriates based in Shanghai to gain insight into their worldview. The conflict between domestic US cities, with their industries suffering from outsourcing effects, and the short-term profits gained by the big corporations doing the outsourcing, led to US political alarm at the growing trade deficit. National interest and corporate interest diverged and the expats were in the middle.
Ross develops the theme of America’s self-image mission to change the world and “make things better”. In the post-Cold War this anti-communist agenda focuses on China. Themes like having good business ethics, the rule of law, and human rights become part of the corporate self-image of “raising the bar” in China. Globalization became the vehicle that would bring about change “for the better” both home and abroad. The expat cold block the idea of job loss at home with the idea of “no pain, no gain” and “America will be stronger and more creative as a result”. Economic studies of value chains are cited by expats to show low value added on the China side of the corporation and high value added at home in the US where things like product design, brand recognition, marketing and retailing all paid greater proportions. The only problem with this, says Ross, is who gets the money? The Congressional Budget Office reported (2004) that more than half of corporate profits went to the wealthiest one percent.
Back in China, meanwhile, corporate managers bemoan the unreliability of their Chinese employees (technology engineers and programmers in this case). They work hard but lack creativity (“thinking outside the box”). Ross recounts his interviews with Western managers but retorts, “They were justifying to themselves why they did not have a workforce of ideal corporate employees… who would also come at a discount price” (p.104).
From the Chinese perspective the young managers displayed fleeting loyalty. “Urban Chinese… had been asked to reprogram their attitudes to work four times in the past half-century: first, to direct their minds toward serving the new communist state; second, to reduce the gap with the peasantry; third, to question the authority of their bosses during the Cultural Revolution; and most recently, to learn the ways of Western business” (p.130).
Ross devotes a chapter to comparing India and China and particularly Mumbai and Shanghai. Globalization has brought both cities concentrated wealth and outsourced jobs. His interviews with managers of Chinese and Indian companies reveals stereotypical attitudes to “the Chinese mind” and “the Indian mind”, one seen as process oriented, the other as more solution oriented but neither really more than a stereotype.
The final 3 chapters look at corporate expansion on the move inside China, first “up river” to Suzhou, then inland to Sichuan. He also looks at the relationship with Taiwan, particularly in the high-tech production of semi-conductors. The industry was ‘managed’ by Washington, Beijing and Taiwan, particularly as it had implications for weaponry. There was little influence from the supposed ‘free market’ here.