America is facing the biggest battle of her life in the next three decades. No, I’m not talking about Islamic terrorism; I’m talking about global competition. A recent Business Week cover story tells us to “Be Afraid, Be Very Afraid” of global competition. That’s a smart headline. Why? Because fear is an awesome emotion. It functions as a wake up call, a sort of slap across the face that says, “Wake up. Pay attention.” Indeed, America will need to wake up and pay attention if we are to prevent ourselves from becoming a third rate economic power in the world.
Have you ever heard of a company called Foxconn? No? Well, don’t worry, I hadn’t either until recently. But what I heard about Foxconn created fear and wonder in my life, and I imagine it will do the same for you.
Here’s the story: a top engineer for Cisco Systems recently returned from a trip to visit Foxconn, a Chinese circuit board manufacturer based forty-five minutes outside of Hong Kong. He asked me to guess how many people a single Foxconn manufacturing plant employs. I guessed 30,000. He said, “No, to be exact, it’s the largest plant in the world and employs 190,000 people in one location.” Ninety five percent of the employees are young women between the ages of 18 and 24. They come with a work permit for four years, after which they are burned out and required by contract to return to their villages of origin. They live in dorms. They eat together, sleep four to a room, and work six days a week, taking only Sundays off. The plant runs three shifts, twenty-four hours a day with the efficiency of a military operation.
Think of this – a factory campus five times the size of the University of Texas. And Foxconn is growing rapidly. Apple, Cisco and Dell all have contracts with Foxconn. It is only one example of the growing technology sector springing up in China. Both inland China and Taiwan have been copying the Silicon Valley, creating Science Centers for both hardware and software. Hundreds of plants, people, researchers and supporting universities are being built in “clusters” to maximize ideas and efficiency. This is exactly what Michael Porter, the renowned business strategist from Harvard, tells countries to do in order to develop a competitive edge in a specific sector.
One other key factor. The young women are grateful for the work. They are focused on opportunity and will work for a very low wage, but it is much better than living on less than a dollar a day in their farm village (remember most Chinese citizens work as peasant farmers, just barely earning enough for their own subsistence). The one challenge China faces is that when they send the women back to their villages, they are now city savvy and bored. They have money but no place to go. The men in the village are no longer attractive to them. They participated in manufacturing an entire Dell circuit board in less than twenty minutes and now they go home to milk cows and tend a small garden for the rest of their life. Yes, China has a problem here, but the women are lined up to secure a job at Foxconn – as deep as the eye can see. (They don’t hire men because they believe men are not able to stay as focused as women on the manufacturing line.)
Here’s what else we know about China. As a seasoned business professor from the Massachusetts Institute of Technology told me, “They play for keeps.” He said, “If you as an American build a plant in China, they don’t give you protection of intellectual property. They gradually start taking workers from your plant and build another plant just like it. They sell to your customers and undercut your price. They then buy your plant back from you for a dollar.” Obviously this is an entirely different way of thinking about business than what we are used to as Americans.
As Orville Schiell, a Chinese expert at the University of California, Berkeley said to me, “Marxism wiped out the traditional ethics in China. The one overriding value today is making money. Other ethical principles are subordinate to this value.” He pointed out that as a middle class takes hold and the culture grows, the values will begin to change, but right now, making money is the overriding driver.
So we Americans are left to compete with someone who has minimal regulation, low wages, and an ethic that is very focused on the power of economic growth. The Chinese are hungry and want to make their way in the world. In the meantime we are passing more rules, regulations and laws, at the federal, state, and local level that make it difficult for America to compete.
See the problem?
If we don’t wake up now and respond with constructive fear, we will bury ourselves. We will do it by trying to “take care of” every outspoken stakeholder in America, except the marketplace, which has the final vote on where dollars and investment flow.
So what do we do? First step – wake up. Second, step – initiate four key initiatives which I plan to cover in my next article on Townhall.com.