Discussion: Vietnam and the Question of "Sweatshop Wages"

(Originally posted on the Green Left Discussion List in early 2006)

Very, very belated response to a message Nemo Etomer sent the list several weeks ago. Not that I would normally reply to such an old message, but in this case he attached an url to a very interesting paper about sweatshops and exploitation of workers in the 3rd world. He introduced it with the following message:

“Read how state-capitalism in Vietnam, China and other countries join western corporations with exploitation and oppression of workers' rights.” http://www.independent.org/pdf/working_papers/53_sweatshop.pdf

Interested to find out how the “state-capitalists” do this, I opened the link, and though there was nothing there at all about this strange species called “state-capitalists”, there was plenty of information about wages paid by foreign * private * capitalists in these various countries, including in Vietnam and China as he notes above.

The first thing to note about the study is that its aim is precisely to prettify the foreign companies owning these sweatshops, so in fact it is difficult to see Nemo’s point if we only rely on the attached paper. What the paper shows, and convincingly in my opinion if we are only talking about wages, is that in most of these countries, the money wages paid by foreign capital to these sweatshop workers is equal to or higher than the average per capita income, than the average national income for workers, and than the actual average income of the population in these countries.

What the study leaves out, of course, is the grueling nature of the exploitation in many or most of these companies’ factories in these countries, things like the intensity of work, how few breaks are allowed, forced overtime and much more. Without separate studies on these companies and countries, the wages cannot tell us that much about the level of exploitation.

But Nemo obviously thinks they do. And here I believe we have a problem with the understanding of many people on the left about the concept of imperialist firms exploiting “cheap labour” in 3rd world countries. Certainly the labour is “cheap” and super-cheap compared to the cost of labour in the imperialist home countries. That is one incentive to go there (of course there are many reasons to keep away, thus over 70% of all imperialist foreign investment is in other high-wage imperialist countries).

However, that does not necessarily mean the labour-price paid by imperialist firms is cheap compared to wages in those countries. Thus when people say that “Stalinist” or “state-capitalist” or whatever Vietnam “allows” its workers to get exploited as “cheap labour” by imperialist countries, this sounds to me like cheap demagogy.

Let’s get one thing straight. No USSR anymore (and the Nemo’s despise that anyway) means poor countries, including poor countries aiming to build socialism, need investment capital from somewhere, and now it only comes from rich capitalist countries. They are not going to get any investment if they demand that imperialist firms pay their workers the same as what workers get in the imperialist countries. Moreover, even if such an absurd fantasyland became a reality, there would be little ‘socialist’ or solidarity-inspiring about a worker in Vietnam employed by a rich foreign firm getting 50 times the salary that an average Vietnamese worker gets, in fact that would be a recipe both for an astonishing level labour aristocracy and unbelievable illusions in imperialism.

It is also impossible. Let’s take Vietnam. The national income per capita is about $500 a year. That means there is around $40 per month for each person in the country. But of course, that is not all in the form of wages, only a small proportion is: that $40 per person also includes everything a society provides, such as education, health care, roads, infrastructure, irrigation etc etc, not to mention reinvestment. Thus if someone is actually getting $40 a month in Vietnam in the hand they are doing well. Meanwhile, in Thailand, for example, GDP per capita is over $2300 per year, or over $190 a month. Thus in that country, to be getting that amount is good. If a Vietnamese wage is lower than a Thai wage it is only normal; if a Thai wage is higher than a Vietnamese wage but less than 5 times a Vietnamese wage, then it is the Thai worker getting ripped off (and I can assure you Thai wages are way less than 5 times VN wages). Obviously, neither Vietnam nor Thailand can pay their workers $500-600 a week as in certain western countries.

The higher the wages paid by foreign capital, the higher the wages that have to be paid by domestic state and private firms as well. OK, that’s a good thing. Actually, in Vietnam, despite domestic firms having a legal minimum wage only half that of foreign firms, in reality most state-owned firms actually pay more than foreign firms. Yes that is also a good thing. However, given we are talking about a country where just under 60% of the workforce is employed in agriculture, ie are small-holding peasants, that only 10% of the workforce are employed in state-owned firms, that only 1.5% are employed in foreign firms, and the bulk of the remaining 28% in “private firms” are actually in the tiny “household sector”, the informal petty economy, rather than the real capitalist sector (maybe employing 5%), then we probably only have about 15-17% of the population in the formal waged economy. The greater their wages are compared to national income, the * less * there is available to the real poor, who are not formal workers, but peasants and informal sector workers.

Thus wages in these foreign factories that are way below the average income are certainly exploitative, but wages that are too far above may also reflect very deep inequality and more extreme rural poverty, and reflect nothing about how the bulk of the population lives. Which leads me to say that where Vietnam is situated in these graphs – around the upper middle – is over all a good result. Yes I realize that may sound self-serving, but I’d be interested to hear anyone actually take apart the argument I just made.

It is not just the UFO’s around the place who don’t get all this either. For example, in his article ‘The Final Battle’, in his Hidden Agendas, Pilger is sarcastic about a Vietnamese leader talking about “inexpensive labour” which is “competitive” when correcting Pilger’s assertion that today’s “cheap” labour for foreign companies is the same as in French colonial times. There is no doubt that many (by no means all) of the VCP leaders, especially then in the mid-1990s, had a way of discussing such things that suggested the worst was to come and grated on the ears of any socialist or even vague progressive (and especially the particular rightist leader he interviewed then). Yet on the fundamentals I’ll say it boldly: the guy was right, and Pilger was wrong (all due respect to Pilger, but there is not a great deal of value in the rest of the article either – relies too much on second-hand nonsense from people like Chossudovsky).

The question is: given the actual relationship of forces in the world, to what extent does a government (such as a “state-capitalist” one) try to ensure that the level of exploitation is not so extreme that workers are in conditions below the level that society can actually afford. And I found Nemo’s url to be particularly valuable.

Let’s look. First, a Vietnamese worker working 40 hours a week earns just under 200% of the average national income, a higher percentage than workers in China, Costa Rica, El Salvador, and much higher than in Bangladesh or Indonesia, where workers earn considerably under 100%. On the other side, workers in Haiti, Honduras and Nicaragua earn from 300% to over 400% of average income. Lucky for those workers, I suppose. But what percent of the population of those countries are they? The fact that an impossibly impoverished country like Haiti is in that group would want to immediately make one suspicious – by any indicators, the health, educational, poverty and every other indicator in Haiti for the mass of the poor are so dramatically below Vietnamese levels that it is almost unimaginable. In other words, the wages simply reflect extreme inequality. Not to begrudge the workers of course – good for them.

However, average income includes all people, workers and poor peasants and others alike, who are poorer. So the next chart compares wages in these garment firms with average workers wages. Of course it points out that these average wages don’t include informal sector wages, so therefore the average wage it is being compared to is somewhat higher than the real average wage.

On that chart, a Vietnamese garment worker working 40 hours per week earns a little less than 100% of an average wage, and this is higher than the percentage earned by similar workers in China, Costa Rica, Dominican Republic and El Salvador, and again much higher than in Bangladesh and Indonesia, where they earn less than 50%. Again, in Haiti, Honduras and Nicaragua these workers earn a higher percentage than in Vietnam, and once again I’m doubtful in the extreme what that means for the masses in these countries.

Again, when it came even to the particular sweatshops in each country that had been specifically protested, the Vietnamese workers there were still earning around 120% of average national income, again higher than in Bangladesh, China, Costa Rica, Dominican Republic, El Salvador and Indonesia. Only when compared to average wages in these countries (and again, note this excludes the informal sector wages of the majority), does a Vietnamese worker in one of these protested factories earn only 60% of the average wage, not surprising given the very high wages that I have personally observed in many state-owned enterprises; yet even this 60% figure is higher than all the others, including Honduras this time, except Haiti and Nicaragua.

Overall, the real basket cases for wages are Bangladesh and especially Indonesia, the latter particularly significant as it is in the same region as Vietnam and considerably richer.

All in all, looks pretty good for Vietnam. So now let’s look at Haiti and Nicaragua, where workers in the garment industry ‘sweatshops’ seem to earn better than Vietnamese workers. As I said before, good on them. However, how does that relate to the mass of people in those countries who are not workers? Does this industrial development with relatively good wages have any spin-off effect on society? Or does it simply reflect larger inequality?

Significantly, on one of the charts, it showed that 80% of people in Nicaragua live on less than $2 a day, compared to 63% of Vietnamese. That is despite the fact that in 2003, Nicaraguan GDP per capita was $US 745, compared to Vietnam’s $US 482, indicating a much better spread of income overall in Vietnam. In Haiti it was only $US 346 (no figures in study for Haitians on under $2 a day but I believe the number is enormous). Honduras, the other country usually paying better than Vietnam, had GDP per capita of $US 1000. So Nicaragua and Honduras both have significantly higher national income than Vietnam, and Haiti somewhat lower (and this is only a recent phenomenon due to Vietnam’s phenomenal economic growth – in the late 1990s, Vietnamese and Haitian GDP per capita were very similar).

So considering all this, let’s now look at how most people live in those countries:

Infant Mortality Rate per 1000 births:

Haiti - 76
Nicaragua – 30
Honduras – 32
Vietnam – 19

Adult Illiteracy rate (aged 15 and over):

Haiti – 48.1%
Nicaragua – 23.3%
Honduras – 20%
Vietnam – 9.7%

Simply amazing in my opinion. Damn the “state-capitalists” all you like, and make all the legitimate criticism you like, much of which I would agree with, but try telling me there’s no fundamental difference.

(All figures from UNDP’s Human Development Report 2005)

In fact, let’s look for all the countries on the list, starting from poorest to richest based on GDP per capita. Note the odd country out that is with the poorest but somehow manages to create a lump in the figures sticking out from both poorer and richer:

Cambodia (GDP pc $315) – IMR: 97, Adult Illiteracy: 26.4%
Haiti (GDP pc $346) – IMR: 76, Adult Illiteracy: 48.1%
Bangladesh (GDP pc $376) – IMR: 46, Adult Illiteracy: 58.9%
Vietnam (GDP pc $482) – IMR: 19, Adult Illiteracy: 9.7%
Nicaragua (GDP pc $745) – IMR: 30, Adult Illiteracy: 23.3%
Indonesia (GDP pc $970) – IMR: 31, Adult Illiteracy: 12.1%
Honduras (GDP pc $1000) – IMR: 32, Adult Illiteracy: 20%
China (GDP pc $1100) – IMR: 30, Adult Illiteracy: 9.1%
Dominican Republic (GDP pc $1893) – IMR: 29, Adult Illiteracy: 12.3%
El Salvador (GDP pc $2277) – IMR: 32, Adult Illiteracy: 20.3%
Costa Rica (GDP pc $4352) – IMR: 8, Adult Illiteracy: 4.2%

Thus, the only country in the group (Costa Rica) to have better indicators than Vietnam is one with nearly 10 times the GDP pc of Vietnam! And that was one of them which consistently had lower wages as a comparison of national income and national wages than did Vietnam. It is also interesting that Costa Rica, despite having such a high national income, had by far the highest number of people in the study living on less than $2 a day – 94.5%! Which just goes to again emphasise the futility of the measure of how many “dollars a day”. Costa Rica’s secret however is to have no army since 1948, being given a ‘security guarantee’ by the US in order to create a social democratic example for the 3rd world. For Vietnam to be so lucky as to not need an army, and imagine what it could achieve.

Bring on more ‘state-capitalisms’ I say.

MK