It's the Wild, Wild East
Posted Nov 16, 2011 in Publisher's Page
Though China is still ruled by the Communist Party, its priority since the late 1970s, when it opened its doors to trade, is economic growth. In 2002, that priority was gold-stamped by China's incoming new president and cemented China's comfort with capitalistic pursuit and its rise to a world power. It also turned China into a boomtown.
The China of today is much like the U.S. of the Industrial Revolution and the Gold Rush that punctuated that era. Like the U.S. in that era, thirsty for money and power, China struggles with an insufficient infrastructure to protect its citizens from all sorts of environmental, health and safety hazards.
Once-sleepy fishing villages in the Pearl River Delta region of China have been transformed--seemingly overnight--into modern industrial megalopolises as more and more foreigners and domestic residents flock to China's coastal cities to seek their fortunes.
Buildings are being demolished left and right and high-rises are going up in their place; cars drive willy-nilly on the too-crowded city streets; and new highways and toll ways built, in part, to funnel tourists to sightseeing destinations, are empty because local residents can afford neither the tolls nor the rent for these new properties. The speed of change requires multiple layers of infrastructure and, without them, come a host of problems, including widespread corruption, created by greed.
It truly is the wild, wild East.
A Look in the Mirror
Lest we forget America's own history, people originally lived in small villages as farmers or craftsmen. With the onset of the industrial age, laborers flocked to cities to work in factories.
In 1848, the California Gold Rush brought some 300,000 people to the state and the small settlement of San Francisco, population 200, grew to 36,000 in four years! To keep up with the intense growth taking place, in 1862, the U.S. government authorized construction of the Central Pacific railroad against the will of some local politicians.
In 1865, the U.S. arranged for the import of thousands of Chinese laborers to help build the transcontinental railroad because they were "reliable and worked without complaint, even under poor conditions."1,2 Once here, they faced racial discrimination in the form of anti-Chinese sentiment and legislation and were not permitted to bring their wives and female family members.
In fact, once the railroad was complete, and the Chinese laborers stayed, there was massive public outcry that they were taking jobs away from U.S. citizens. Prompted by American laborers, our government imposed stiff immigration laws to prevent more Chinese families from coming here to "take away their jobs."
Why bring this up in LMT? History repeats itself and I believe a historical perspective helps all of us better understand that what's happening abroad is a repeat of what happened right here on our own shores 100 to 150 years ago. Today, though racial tensions have largely dissipated, we still hear similar complaints when it comes to who has the right to take a job from an American citizen.
Where Does the Money Go?
According to the Federal Reserve Bank of San Francisco, 55 cents of every dollar we spend on a China-made item goes to U.S. businesses that supply the marketing and sales segment of the cost. What's good for us as business owners isn't necessarily good for employees. Or is it? Just as America is exporting jobs there, we're also selling our goods there to a market of 1.3 billion new consumers--an export growth rate of 468% between 2000-2010.3These exports create a lot of jobs here--particularly in the export of American-made semiconductors and agricultural products. (The potential for exporting dental restorations overseas will be discussed at the NADL's upcoming Vision 21 meeting in Las Vegas this January.)
Why Should You Care About What's Going On in China?
For decades, all Chinese citizens endured unbearable hardships in the form of poverty, sickness, destruction to their way of life and even slaughter. With the opening of trade to the free world, impoverished Chinese farmers see hope in the form of their teenage offspring who they send to find work at factories or other businesses in coastal cities.
In the coastal cities of Zhuhai or Shenzhen, for example, a high school student can get room and board while being trained in dental technology and then can earn about $1,200 to $1,500 U.S. a year which is enough money to support his farming family living in rural China.
Many students come from great distances and are able to go home--by overcrowded, often sold-out trains--only once a year for the Chinese New Year.4 Picture importing all the high school students in Kansas and Iowa for employment in New York, Los Angeles or Miami and multiply by 10.
As is the case in America, employers provide training only to lose their new trainee to another laboratory for a higher wage as soon as the training is complete. New laboratories spring up every day as it becomes easier in China to own a business. Everyone is jockeying for position and an elbow in the market of faster, cheaper delivery. It's quite a familiar story. History repeats.
Let's clear the air here before going any further: though sweatshop laboratories exist, the laboratories we visited* are not sweatshops by any stretch of the imagination.
The ability of offshore laboratories to offer restorations at such extremely low rates has long been a point of contention here in the states. That's why it's important for us to offer this historical perspective: China's cost of labor is low. Period. Though its workforce is upwardly mobile and pushing for more benefits and pay, labor will remain impossibly low in comparison to pay scales in America. And this is why, in China, American business owners are like kids in a candy shop.
You may not like the idea that business that could be yours is leaving the country or you may be grateful there is an offshore outlet for your excess workload. You can choose to go offshore or seek domestic solutions. What it comes down to is what works best for you and your business and to make that choice from a well-informed vantage point.
1 Norton, Henry K. (1924). The Story of California From the Earliest Days to the Present. Chicago: A.C. McClurg & Co., pp. 283-296.
2 Corruption in America's Gilded Age, Harvard Business School, 2003, http://hbswk.hbs.edu/archive/3614.html
3 USA Today, August 25, 2011
4 Last Train Home, a 2009 documentary depicting the 130 million migrant workers who head home for the Chinese new year, by Lixin Fan
- Veden Dental Labs, Inc., Zhuhai, China, and Modern Dental Laboratory Co., Ltd., Shenzhen, China.
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