Karl Marx would not have been surprised by China's astonishing two decades of growth. His analysis of capitalism, describing how an “industrial reserve army” holds down wages and boosts profits and capital accumulation, would have noted that nowhere is the pool of unemployed but employable workers greater than in this nominally communist yet voraciously capitalist state.
The protests and wage demands at Foxconn's and Honda's China plants, however, show how rapidly this analysis is becoming outdated. For a while, China's reserves of cheap workers from the rural hinterlands seemed inexhaustible. But sooner than most expected, two limits have come into view. One from workers' heightened expectations in the manufacturing cities of China's coastal provinces. The other from the mounting stress rural-to-urban migration puts on China's physical and social environment – and on migrants themselves, who enjoy little protection under their country's anachronistically place-bound legal system.
So the flow of migrants from inland China can no longer be counted on infinitely to expand manufacturing capacity on the coast. Business has taken the consequences. As the FT reported yesterday, Foxconn is preparing to move production of some Apple gadgets (it makes iPods, iPads and iPhones) to a future factory in inland Henan, China's most populous province.