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By Root 4046 0

question is whether Chinese companies can move beyond low-margin products, developing industries that require creativity and innovation. In the end, this is the greatest contrast between China’s boom and the history of the western Industrial Revolution. In Europe and the United States, the rise of industry involved radical changes in thinking, and it happened partly because of a shortage of labor. In nineteenth-century America, for example, there was plenty of land and relatively few people; anyone who saved a few months’ wages could move west and try farming. Agriculture and western expansion sapped the pool of able-bodied workers, so bosses made the most of limited labor. This need for efficiency inspired innovations that changed the world: the cotton gin, the sewing machine, the assembly line, the “American System” of standardization and interchangeable parts.

In today’s China, though, there’s little incentive to save labor. Each year the migrant population grows by another estimated ten million, and young people leave the countryside increasingly early. Formal schooling often seems irrelevant to students bound for the boomtowns, especially since traditional Chinese education offers little besides rote repetition and memorization. All of it—the high population, the lack of social institutions, the slowness of educational reform—combines to dull the edge of innovation. Inevitably, any nation is tempted to waste its greatest wealth, and in China this resource happens to be human. Master Luo’s personal story was a triumph, but he was still making nothing more sophisticated than bra rings, and for every man like that, there were dozens of others who never made it so far.

WHEN THE LISHUI BOSSES first recruited Master Luo, he told them that he already had one child and planned to have another soon. They never met his wife or his first son; like many migrant workers Master Luo lived apart from his family. But he made sure the bosses knew about his personal obligations—this was an effective way to bargain for a higher salary. Boss Wang also had two children, so he was familiar with the bribes and fines necessary to deal with the planned birth officials.

Near the end of July, Master Luo requested permission to return to Hubei in order to attend the birth of his second child. But now the bosses were smart enough to turn his financial responsibility against him.

“You need to stay here,” Boss Wang said. “It just wastes a lot of money to go home right now.”

Master Luo explained that the factory wasn’t busy, and he wouldn’t be away for long; it was important for him to be there when his wife gave birth.

“You were there for the first one, right?” Boss Wang said. “That’s all that matters. The first child is the exciting one. The second one isn’t such a big deal. When my wife had the second child I wasn’t nearly as excited.”

For over a week they continued this conversation, in the slow-burn fashion of most development zone negotiations. There weren’t any ultimatums, and nobody became angry or impatient; each man’s voice remained as calm as if he were discussing last night’s meal. But the conversation smoldered, day after day, and there were subtle signs of tension. Master Luo’s face flushed and he no longer smiled as easily. Boss Wang became less free with cigarettes. These days he stuttered more often—the bad business weighed on him and now he had the added pressure of Master Luo’s request. In normal times, Boss Wang would have granted leave without a second thought, but he feared that Master Luo would take this opportunity to flee the factory. And his worries were well founded: in the past this was precisely the kind of family event that Master Luo had used as a pretext to switch jobs.

For the most part they negotiated in passing. The worker would say something; the boss would answer; neither made eye contact. Often it was so understated that I barely caught what they said. One morning, when I was in the Machine room with Master Luo, he turned to Boss Wang and I heard the word “salary.” Boss Wang quickly looked away.

“L-l-l-later,