Ethical Sourcing & MEC: The Wages of Sin is Death & Excess Money Supply

"The wages of sin is death" wrote Saint Paul to the Romans. He meant if we live excessively and without moral parameters, we’ll die spiritually. He was not only bang-on concerning how we treat ourselves and one another, he was also prescient, unknowingly, about the dangers of excessiveness in the material world.

Right now there’s way too much money circulating in China and it’s created a building bubble. Speculators, motivated by abundant cheap borrowing have invested billions to build buildings, all with the dream of finding buyers and tenants. But as with all bubbles, hope and speculation rarely materialize. Along a 25 KM stretch from Shenzhen City to our factory in Pingshan Town, I counted 52 empty residential high rises and office towers. (And these were only the structures visible to the eye while driving along the freeway. Imagine what lies beyond the horizon!).  These buildings, enveloped by bamboo scaffolding and green synthetic mesh, were half finished with their structural frames complete but empty throughout. There were no construction workers or cranes in sight. It was eerie looking at rows and rows of temporarily abandoned towers.

The first time I witnessed this excess was last spring in Beijing. From my hotel room on the 17th floor, I could spy into the cavernous offices of two beautifully finished but vacant office towers in the city’s financial district. At that time I found it odd but thought no further. Just yesterday, while driving to our factory in Qingdao, I spotted similar empty or half finished buildings throughout the region, comparable to what I’ve witnessed in Shenzhen and Beijing.

Building bubbles are worrisome because they encourage inflation. Picture fifty-two buildings along a 25 KM stretch competing simultaneously for construction workers, building materials and services (e.g., engineering, architecture). The more everyone wants of one particular thing, the higher its price becomes. Eventually, this phenomenon takes a life of its own and spreads to other sectors of the economy.  

Construction bubbles also have a negative impact on the environment. They encourage wasteful consumption of natural resources (e.g., for building materials) and they unnecessarily add to global warming (e.g., carbon emissions from making building materials).

The building craze has a direct impact on factories. Every factory I’ve met on this trip, whether in the south or north, is having a hard time finding workers. Unimaginable if one considers there are over 1.3 billion people in China. But due to the construction bubble, restrictive migration policies and other economic realities, workers are becoming scarce or at least temporarily. And as workers are harder to find, wages will rise. As they currently are within our supply chain.

Saint Paul saw the light at Damascus and he immediately understood the necessity of constraint. Right now China could benefit from someone like him. Not only to encourage moral parameters but to shrink the supply of money. Because the wages of sin is spiritual death and the consequences of too much money in circulation are inflation, waste and climate change.