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The Economist Corner – essential readings XIII

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World economy

The rising power of the Chinese worker

In China’s factories, pay and protest are on the rise. That is good for China, and for the world economy

CHEAP labour has built China’s economic miracle. Its manufacturing workers toil for a small fraction of the cost of their American or German competitors. At the bottom of the heap, a “floating population” of about 130m migrants work in China’s boomtowns, taking home 1,348 yuan a month on average last year. That is a mere $197, little more than one-twentieth of the average monthly wage in America. But it is 17% more than the year before. As China’s economy has bounced back, wages have followed suit. On the coasts, where its exporting factories are clustered, bosses are short of workers, and workers short of patience. A spate of strikes has thrown a spanner into the workshop of the world.

The hands of China’s workers have been strengthened by a new labour law, introduced in 2008, and by the more fundamental laws of demand and supply . Workers are becoming harder to find and to keep. The country’s villages still contain perhaps 70m potential migrants. Other rural folk might be willing to work closer to home in the growing number of factories moving inland. But the supply of strong backs and nimble fingers is not infinite, even in China. The number of 15- to 29-year-olds will fall sharply from next year. And although their wages are increasing, their aspirations are rising even faster. They seem less willing to “eat bitterness”, as the Chinese put it, without complaint.

Why the goons were called off

Chinese workers were never as docile as the popular caricature suggested. But the recent strikes have been unusual in their frequency (Guangdong province on China’s south coast suffered at least 36 strikes in the space of 48 days), their longevity and their targets: foreign multinationals.

China’s ruling Communist Party has swiftly quashed previous bouts of labour unrest. This one drew a more relaxed reaction. Goons from the government-controlled trade union roughed up some Honda strikers, but they were quickly called off. The strikes were widely, if briefly, covered in the state-supervised press. And the ringleaders have not so far heard any midnight knocks at the door.

This suggests three things. First, China is reluctant to get heavy-handed with workers in big-brand firms that attract global media attention. But, second, China is becoming more relaxed about spooking foreign investors. Indeed, if workers are upset, better that they blame foreign bosses than local ones. In the wake of the financial crisis, the party has concluded, correctly, that foreign investors need China more than it needs them. Third, and most important, the government may believe that the new bolshiness of its workers is in keeping with its professed aim of “rebalancing” the economy. And it would be right. China’s economy relies too much on investment and too little on consumer spending. That is mostly because workers get such a small slice of the national cake: 53% in 2007, down from 61% in 1990 (and compared with about two-thirds in America). Letting wages rise at the expense of profits would allow workers to enjoy more of the fruits of their labour. Read the rest of this entry.

Climate change

Warming world

A clearer picture of global warming since the 1850s

CHARTS showing the warming of the Earth normally look like spaghetti thrown across the page. This chart, adapted from a compendious “State of the climate” report  published by America’s National Oceanic and Atmospheric Administration this week, simplifies things by offering only decadal averages, and making clear the uncertainties by showing the 95% confidence ranges on those averages.

Wealth, poverty and compassion

The rich are different from you and me

They are more selfish

LIFE at the bottom is nasty, brutish and short. For this reason, heartless folk might assume that people in the lower social classes will be more self-interested and less inclined to consider the welfare of others than upper-class individuals, who can afford a certain noblesse oblige. A recent study, however, challenges this idea. Experiments by Paul Piff and his colleagues at the University of California, Berkeley, reported this week in the Journal of Personality and Social Psychology, suggest precisely the opposite. It is the poor, not the rich, who are inclined to charity.

In their first experiment, Dr Piff and his team recruited 115 people. To start with, these volunteers were asked to engage in a series of bogus activities, in order to create a misleading impression of the purpose of the research. Eventually, each was told he had been paired with an anonymous partner seated in a different room. Participants were given ten credits and advised that their task was to decide how many of these credits they wanted to keep for themselves and how many (if any) they wished to transfer to their partner. They were also told that the credits they had at the end of the game would be worth real money and that their partners would have no ability to interfere with the outcome.

A week before the game was run, participants were asked their ethnic backgrounds, sex, age, frequency of attendance at religious services and socioeconomic status. During this part of the study, they were presented with a drawing of a ladder with ten rungs on it. Each rung represented people of different levels of education, income and occupational status. They were asked to place an “X” on the rung they felt corresponded to where they stood relative to others in their own community.

The average number of credits people gave away was 4.1. However, an analysis of the results showed that generosity increased as participants’ assessment of their own social status fell. Those who rated themselves at the bottom of the ladder gave away 44% more of their credits than those who put their crosses at the top, even when the effects of age, sex, ethnicity and religiousness had been accounted for.

The prince and the pauper

In follow-up experiments, the researchers asked participants to imagine and write about a hypothetical interaction with someone who was extremely wealthy or extremely poor. This sort of storytelling is used routinely by psychologists when they wish to induce a temporary change in someone’s point of view. Read the rest of this entry.

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Written by Theophyle

August 4, 2010 at 8:30 am

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