Ways & Means: The China Syndrome What's behind a brand name? Less and less every day. By Carl Pope
March/April 2008
WHEN CORPORATE AMERICA tied its future to globalism, it made a deal with the devil. The record profits reaped by outsourcing U.S. manufacturing abroad came at a high price: the risk to the good names of the country's biggest companies.
Last year nearly 4 million toys and pieces of costume jewelry were recalled after they were found to be contaminated with lead. Some were gumball-machine trinkets, but others bore top-of-the-line names. In addition to the nationwide recall, California filed suit against Mattel, Fisher-Price, Toys "R" Us, Wal-Mart, Target, Sears, and many other manufacturers, importers, and retailers under Proposition 65. That citizen initiative (which I coauthored 18 years ago) requires companies to warn customers about toxic products.
The defendants will doubtless argue that they had no way of knowing their products were toxic. Many are strongly motivated to keep lead paint out of their goods, having spent years cultivating reputations for safety and quality for their valuable brand names. It used to be that when I saw a Mattel toy, I presumed that Mattel made the toy in a factory the company built and manages, with workers it hired and supervises, and that it would not be so crass or dumb as to save a fraction of a penny on a $30 toy by using lead paint.
But Mattel and other businesses know something they are not willing to tell us: In today's globalized economy, top companies have lost control of the quality of the goods that display their logos. They are powerless to prevent a recurrence of the toxic-toy tragedy--and they are terrified that their brands could be dragged through the mud when the next epidemic of dangerous products strikes.
The problem is not China. The problem is a business model in which companies outsource manufacturing under short-term, low-cost contracts to the firm that will follow their design standards most cheaply. All that is really Fisher-Price about Dora the Explorer is the design--the product itself is made in a factory over which the company has almost no control. It doesn't manage the working conditions, environmental standards, or safety practices. As a result, it no longer controls the product itself.
I first encountered this problem in 2004 when trying to persuade the Gap to get its Mexican bluejeans factories to stop sending highly toxic effluent from their stone-washing facilities directly into streams, which they did to avoid the cost of sewage treatment. The company agreed that sewage treatment would add almost nothing to the cost of its jeans. But, it explained, to maintain flexibility and get the best prices from its contractors, the Gap has no long-term commitments with these factories and typically buys only a fraction of what any one manufacturer produces. Company officials explained to me that since they have no obligations to the manufacturers, they have correspondingly almost no control.
That's exactly the source of the toxic-toy catastrophe. Fisher-Price didn't want lead used in its products. But it did want to drive the best bargain it could with toy manufacturers in China and to be able to shift to new suppliers if it found a lower price. Faced with this pressure and already located in the cheapest labor market in the world, subcontracting manufacturers realized the only way to cut costs was to cut corners, and lead is a cost-effective corner to cut.
So brands no longer mean what they used to: Globalism has turned brand-name manufacturing into a fraud. Many of the knockoff handbags and other luxury goods you can buy on the street in Shanghai--or even New York City--are actually made in the same factories as the real thing. We're not really paying for quality goods anymore--we're paying for high-priced marketing and design combined with low-wage, exploited workers producing inferior products using shoddy safety and environmental standards. Often we have no choice--we can't find products made under decent conditions by the companies that market them. Yet as long as we allow this business model to continue, we are complicit in a system whose ineluctable outcome is the poisoning of our children.
WHEN CORPORATE AMERICA tied its future to globalism, it made a deal with the devil. The record profits reaped by outsourcing U.S. manufacturing abroad came at a high price: the risk to the good names of the country's biggest companies.