Sunday, June 30, 2019

Jack Ma's Catch-22

An unconventional leader of the People’s Republic of China, Deng Xiaoping, set in motion market-driven economic reforms in 1978 after almost thirty years of orthodox Communist rule. That same year, Jack Ma was a 14-year old self-taught English tour guide who bootstrapped his way to a college degree ten years later.


In 1988, China’s GDP had doubled to $US312 billion and by 2018 had shot up to a dizzying US$13.6 trillion! Meanwhile, Ma went from being an English teacher to building websites for Chinese companies, before co-founding in 1999 a business-to-business portal named Alibaba. In 2018, when he announced that he would step down as the Executive Chairman of the Alibaba Group, Ma had become one of the wealthiest entrepreneurs in China, worth over US$35 billion. In essence, Ma’s remarkable success mirrored China’s extraordinary rise as the world’s second largest economy.

In April 2019, Jack Mstirred up a hornet’s nest when he publicly endorsed the so-called 996 work schedule. This proposes that workers should work from 9:00 a.m to 9:00 p.m., six days a week. As one of the world’s most influential business leaders, Ma’s views were internationally parsed and debated, with many criticising him for claiming that “employees who worked longer hours will get the rewards of hard work." Even within China, where the labour law stipulates a 5-day schedule and no longer than 44 hours, many pushed back. Mostly post-millennials (PMs), this is a generation drawn from China’s one-child policy, that is perceived to be relatively coddled and opinionated.

Comparatively, PMs' grandparents, who lived through the Great Leap Forward (1958-61) and the Cultural Revolution (1966-76), had indelible memories of extreme deprivations. During a period characterised by central planning and collectivisation, even Confucian values - which had steered China for over 2,000 years - were jettisoned. However, by the late 20th century, Confucian work ethic had made a comeback when PMs' parents propelled China’s rapid economic growth. Predicated on the principles of hard work, loyalty, frugality, skills acquisition and education, and submission of individuality to social harmony, it was argued by some Western Protestant work ethic advocates that the Confucian emphasis on collective achievement, rather than individual initiative, might hinder China’s economic development.

In reality, blessed with an educated and diligent workforce, China became an economic powerhouse through structural reforms, infusion of foreign direct investment, and the replacement of Marxist-Leninist economic dogma with market tenets.

Now needing to reduce rural-urban inequality and to keep growing the ranks of the middle class, China faces the challenge of shifting to consumption-led growth and migration to high value-added industries. That being the case, should China be seeking to work longer and harder, or smarter?

To my mind, Jack Ma’s 996 rallying cry portends the steamrollering of China into a Catch-22 cul-de-sac, as though this dynamic nation would forever remain the world’s workshop. In any case, most Chinese workers already work harder than their counterparts elsewhere and, inevitably, low-end production will relocate to developing nations that offer cheaper labour. And, according to John Pencavel of Stanford University, “the relationship between hours worked and productivity found that employee output falls sharply after a 50-hour work-week, and falls off a cliff after 55 hours.” 

Incidentally, discussions about China’s work culture has coincided with brewing trade tensions with the US, exemplified by the furore involving Huawei, a flagship Chinese company. Significantly, some analysts have described the attempt by US trade hawks to decouple the supply networks binding the world’s two largest economies as China’s Sputnik moment (analogous to when the US doubled down after the Soviet Union launched the first space satellite, Sputnik 1). Faced with this watershed moment, what should China do?

While acknowledging that access to natural resources will remain a strategic preoccupation, the war for human talent may be of greater significance. With 1.4 billion people, China produces the largest pool of engineers per annum by a mile, but simultaneously the Middle Kingdom is contending with an ageing population. Consequently, China’s focus should be on building world-class academic and research institutions to attract Nobel-class scholars, while also diversifying its talent pool.          

Therefore, to achieve more from less writ large, China’s Catch-phrases ought to be superior creative talent, higher productivity, and cutting-edge innovation, rather than pander to numeral 996 or 9-to-whatever.

Later!

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