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Platform Capitalism “Made in China”? Intelligent Manufacturing and the Restructuring of Work

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Platform Capitalism “Made in China”? Intelligent Manufacturing and the Restructuring of Work Platform Capitalism “Made in China”? Intelligent Manufacturing and the Restructuring of Work By Boy Luethje Volkswagen Endowed Chair Professor Industrial Relations and Social Development School of Government Sun Yat-sen University Guangzhou, P.R. China [email protected] Paper submitted for international workshop “Technological Innovations and Social Change: The History of Automation and the Future of Work in East Asia, 1960s-2010s” Hong Kong University of Science and Technology May 11 2018 First draft! Please do not cite, quote or circulate! With the demise of neo-liberalism in the wake of the world financial and eco- nomic crisis 2008-09, the revival of manufacturing and the protection of manu- facturing jobs has figured prominently on the political agenda of the U.S. and oth- er industrialized countries. Whereas protectionist rhetoric has become dominant over the neo-liberal free-market discourse, China has developed a master plan to transform its vast manufacturing base from low-cost export production to highly automated advanced manufacturing. Massive industrial modernization shall put China on equal footing with leading economies and promote global production networks under Chinese leadership. The strategy has been outlined in a comprehensive government document under the title “Made in China 2025” (MiC 2025) and the related plan to develop ad- vanced digital communications, called “Internet plus”, in 2015. At its center is the PLEASEpromotion DO NOT of ten emergingCITE industrialWITHOUT sectors, namely PERMISSION new energy, robotics OF and AUTHOR advanced information technologies, in which China has strong competitive po- tentials. The strategy picks up important lessons from China’s recent success sto- ries in more traditional industries such as high-speed railways or home appli- ances, as well as in emerging sectors such as solar energy, wind turbines, or smartphones. MiC 2025 has raised new concerns about China’s quest for global supremacy and technological protectionism. The Trump administration has made this program the key target of its “trade wars”, Secretary of Commerce Wilbur Ross called it “a threat to American genius”. 1 However, a closer look at the socio-economic conditions of manufacturing mod- ernization suggests more sober perspectives. Instead of leaping into the brave new world of digital manufacturing, the refurbishing of low-cost mass produc- tion for low- to mid-end markets with advanced information technologies seems to be the dominant scenario in China. As we will explain, the conditions of a mid- dle-income society with relatively low wages for large parts of the industrial workforce shape China’s trajectory of manufacturing innovation. Artificial intelli- gence, Big Data and China’s vast e-commerce platforms, have recently been hailed as the main drivers of China’s manufacturing innovation. Platform capital- ism seems to promise a quick fix for China’s continued weakness in quality man- ufacturing. The transformation of work, labor markets and industrial relations, however, has been largely omitted from the strategies and political decisions under MiC 2025. This reflects the ongoing social asymmetries in China’s socio-economic rebalanc- ing2 and appears as a major obstacle to sustainable manufacturing innovation. If policy makers fail to address the issue of workforce development, labor-market adjustment and the related institutional changes in industrial relations, China’s economy will likely remain stuck in what is called the middle-income trap. This article will try to shed some light on this neglected connection. We will trace basic contours of the “digital revolution” in manufacturing and explain the politi- cal and economic conditions of its implementation in China. From this context, we will look at some core projects of manufacturing automation under MiC 2025 and the related strategies to “replace humans by robots”, and relate this to Chi- na’s recent push to develop the “industrial internet”. In the conclusion, we will discuss the importance of decent work in the age of digital manufacturing and spell out policy implications for current discussions on trade and manufacturing jobs. The “4th Industrial revolution”? Today’s discussions about the future of manufacturing are awash with visions of revolutionary change. Digital technologies would create a world of smart facto- ries that are seamlessly interconnected with consumers and suppliers around the world. Consumers could create or design products to their tastes. Intelligent robots would work along with human workers at the shop floor to mass-produce PLEASE DO NOT CITE WITHOUT PERMISSION OF AUTHOR 1 Financial Times, September 27, 2017 2 See Boy Luethje and Christopher A. McNally, “China’s Hidden Obstacles to Socio-Economic Re- balancing”, Asia Pacific Issues. Analysis from the East‐West Center, No. 120, October 2015. 2 of 14 quality goods at incredible speed and varieties. Factories would be integrated into the platforms for new generations of products and sharing of services and resources, driven by artificial intelligence, cloud computing and big data applica- tions. This brave new world has been described with concepts such as digital manufac- turing, Internet of Things (IoT) or Industry 4.0. The latter is seen as the most ad- vanced vision of manufacturing automation, created and proposed by the ma- chinery-making industry and the government of Germany. Industry 4.0 describes the digitalisation of manufacturing as the “fourth indus- trial revolution” after the advent of the steam engine in the early 19th century, the combustion engine and electricity around 1900, and information technology in the 1950s. Production would no longer be performed by machines and assem- bly lines, rather than “cyber-physical systems”, as presented in an increasing number of experimental factories around the world3. German sports shoe maker Adidas, for example, runs a model plant which re- ceives data of individual customers’ shoe size and foot anatomy from 3D scan- ners in sales outlets. Highly flexible production equipment can produce the shoes according to the customer’s order and deliver them in record time. In aircraft manufacturing, world leaders Boeing and Airbus make rotor blades for jet en- gines by a new technology called 3D printing. The physical part is created direct- ly from the digital blue print, eliminating all mechanical work and process con- trol. In China, home appliance makers Haier and Midea let customers design re- frigerators or air conditioners according to their specifications on fancy websites. The products are delivered from “Internet factories” with highly developed capa- bilities of customer-specific manufacturing and ordering of supply parts. Promises and concerns Whether these new technologies will really spearhead a comprehensive industri- al revolution remains to be seen. The different concepts describe diverging strat- egies and pathways by governments and industry in the respective countries. Yet, a globally dominant paradigm has not emerged. For the moment, it seems most appropriate to define digital manufacturing as an emerging socio-technical paradigm of production. One can compare it to Henry Ford’s system of mass production in the 1920s or the Japanese system of Lean Production in the late 1980s, which at their time became best-practice models propagated by business and engineering schools. Such a paradigm develops through different economic and social conditions in manufacturing regions around the world, and is shaped by the political power relations in the respective PLEASE DO NOT CITE WITHOUT PERMISSION OF AUTHOR 3 Acatech - National Academy of Science and Engineering, Securing the Future of German Manu‐ facturing Industry. Recommendations for Implementing the Strategic Initiative Industrie 4.0. Spon- sored by the Federal Ministry of Education and Research. Berlin, 2013. 3 of 14 countries .4 The promises are huge, and so are the concerns. Concern no. 1 is the fear of massive job losses. Popular literature on the “new machine age”5 predicts a new round of jobless growth and massive attacks on middle-class jobs, blue-collar as well as white-collar. Such concerns have also emerged in developing countries that form the main manufacturing centres for global production networks. For South East Asia the potential of job reductions in export manufacturing industries has been estimated as high as 45% (Thailand) to 70% (Vietnam), according to a recent study by the ILO6. Concern no. 2 is the impact on production systems and value chains. Some stud- ies promise a partial return of manufacturing to industrialized countries, since digital production drastically reduces wage costs and favours proximity to end- user markets. At the same time, the “middle men” in global production networks, such as the big Hong Kong trading houses that coordinate suppliers for global brands and retailers, may be eliminated, as e-commerce giants like Amazon or Ali Baba connect small and large producers directly to the consumer. However, this may also reinforce the control over suppliers by brand-name and e-commerce firms, resulting in even more competition between manufacturers and workers at the low-end of global supply chains. A key question, therefore, is whether digital manufacturing will go along with be restructuring of global and regional value chains that allow manufacturing inno- vation in economically, socially and ecologically sustainable ways. The conditions of this process will decide about the impact of the new socio-technological
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