Thursday, August 30, 2007

Chinese scandals

Recent scandals in China with respect to contamination of food products and lead paint in children's toys tell a business morality tale. Competition by becoming a producer of commodities, seeking the lowest possible commodity price, is not a good long-term business strategy.

The better way to go is by adding value, moving up the value chain.

Chinese difficulties show once again that low prices demand cheap inputs, low wages, exploitation of some factor of production, ignoring externalities. Seeking to compete with low prices is a road straight to some kind of dysfunction. One of those low-cost inputs will, in time, bite you badly. Avoidance of long-term responsibility in lowering costs over and over again does not bring sustainable success.

Steve Young

1 comment:

Anonymous said...

As bad as the economic situation in China is with regard to product quality, environmental damage and the exploitation of workers we need to understand that this is the result of our current economic system what people call "neo liberalism". This system is enforced mainly by the WTO and IMF and the financial market and above all by the greed of people in power for more, regardless what it means to the workers, the society and the environment. As long as we don't have a global agreed framework and rules, which strive for a social, ecological and free economy and which can be enforced and where people take responsibility for everything they do, things will move to the worse. We are in a "race to the bottom" (lower cost, lower wages, lower working standards, lower envir├│nmental standards, lower tax and ....) and China is only playing the game which they learned from the global players. This is the real scandal!
We have the Global Compact, but how much is really lived by all who signed.The UN and the CRT and other NGOs need more support in order to get the world economic order changed.

Prof. Heribert Schmitz, Germany