The American Dream: Made in China?

By Jin Kai

March 03, 2015

After thirty years of U.S. outsourcing, the economic relationship between the U.S. and China is shifting yet again. 

In a previous article, I claimed that the China Dream is a collective dream that incorporates individual dreams as well, whereas the American Dream is primarily a personal dream that particularly inspires individual creativity, proactivity, and positivity. A line from a recent Hollywood movie provides a perfect (and perhaps more entertaining) complement for my piece. In Horrible Bosses 2, Rex Hanson (played by Chris Pine) mocks the three main characters as they try to start their own business. “I hate to break it to you, but the American Dream is made in China,” Hanson says. He means that any business the men start — and any jobs they create — will be bought out by rich entrepreneurs and outsourced to China.

This wisecrack hints at thought-provoking questions regarding the new global economic order. China and the U.S., as the world’s two major economic powers, inevitably have deeply interwoven economies. But does that mean the American Dream has been outsourced?

First, let’s rewind back to 2011, the year the BBC released its two-episode program “The Chinese Are Coming.” In episode two, BBC presenter Justin Rowlatt showed the audience a closed-down steel factory in Youngstown, Ohio and interviewed people who complained about losing not only their jobs, but “a culture and a way of life.” George, one of the few local employees who still has a job in the local steel industry, complained sadly, “They’ve packed up all the machines, and they’ve moved them to China.”

The story of Youngstown has been repeated across the U.S. Entrepreneurs always seek higher profits, which can often be more quickly and more conveniently generated in the Chinese market. For entrepreneurs, the Chinese market equation has been a simple one: cheap labor plus state support equals more profit. This has been Chinese market’s competitive advantages for years.

American outsourcing has created jobs for thousands of young Chinese, mostly migrant workers leaving their hometowns and seeking new lives in cities. Except for those white collar employees who are hired as managers and administrative staffs, many of these young workers still face harsh working conditions, including long hours and unsatisfactory working environments. Ironically, these employees are hardly chasing fancy dreams – they’re simply eking out a living.

In a recent report, BBC Panorama claimed that Chinese factory workers on an iPhone 6 production line were routinely forced to work overtime, despite Apple’s pledge to protect workers. Similar stories can be found quite easily in recent years; such the reports come not only from Chinese factories but also from production lines in other Asian markets.

What we’re seeing is the outcomes of the international division of labor since China started its economic reform and joined the international economic system. There are consequences, both positive and negative. Globalization certainly creates jobs in emerging markets like China, while on the other end it may also leave economic gaps in developed countries, such the U.S. manufacturing industry. As a result, some people who lost their jobs to Chinese competitors naturally (and emotionally) complain that the Chinese are “stealing” their jobs and ruining the U.S. manufacturing industry, which is not necessarily the true story.

But the situation is slowly changing, particularly as the Chinese government has been paying more and more attention to labor rights and environmental protection. The bigger picture shows that the Chinese economy is undergoing a structural adjustment, moving from a labor-intensive and export-oriented economy to a more capital-intensive and consumption-oriented one. As part of this transition, according to Xinhua, outsourcing services in China have left the phase of high-speed growth and entered a normal development stage.

At the same time, the Wall Street Journal reports that some companies are inching back toward manufacturing in the U.S. WSJ declared, “For years, the U.S. has ceded more and more of its manufacturing to low-cost corners of the global economy. Some firms now want to come home.” We’re seeing a shift from concentrating on China’s competitive advantages such as its cheap-labor force (which is slowly disappearing as the government emphasizes improving working conditions). Now, companies are seeing a comparatively profitable advantage to be gained through homeland quality control, supply-circle management, and so on.

Could this change be the start of another economic “new normal” between China and the U.S.? Is this the return of the American Dream to the U.S. homeland – and the decline of Made in China? This change will have major consequences for both countries and the rest of the world, economically and possibly politically.