Most people have triggered a lot of thoughts about a global shift of power and the main question is: who is going to become the new great power? Americans believe China to be more economically powerful, whereas the Chinese think America is.
As seen by many economists, since 2000 the rise of the Asian economies has shown that family-owned conglomerates are adequately equipped to advance capitalism's geographical frontier. Actually, China has seen its share of world GDP rise sharply from just 1.8% in 1991 and, at the moment, its economy is growing at a pace of about 8%. The reason is that the more advanced countries of the Eastern Asia production system, such as Singapore, Japan, South Korea and Taiwan, send their advanced technology to China, where the labor force to assemble goods is cheap. And U.S. corporations do the same. Consequently, Chinese factories assemble and send their final products out of the country.
In this perspective, transnational institutions can shift their outsorcing from China to some other low-wage countries whenever they want. For instance, Malaysia, Indonesia and Thailand are other Eastern Asia low-wage countries. As mentioned by Noan Chomsky, Emeritus professor at the MIT, in Cambridge, Massachusetts, that's why "China's economic growth is a bit of a mith", although since 2005 the Asia's giant has been holding two third of U.S. national debt (a few year ago Japan held most of the U.S. debt, now surpassed by China). As long as the CEOs who manage transnational capital are happy to have very cheap labor in China, the economic growth of the Asian giant will continue.
It's easy to see that the global power is in the hands of financial institution and multinationals.
Congratulations on starting this ambitious new blog, Giorgio! These are very important topics, for all of us. But I think you are right - it seems the banks and large corporations do hold an inordinate part of the power in the world.
ReplyDeleteMy knowledge on economics is very limited but I'm aware that a lot of Australian businesses have gone off-shore for production because of labour costs. Personally, I've lost business to Chinese costume manufacturers but with a global economy there's not a lot that I can do about it.
ReplyDeleteGood article Giorgio. I have some personal dealings with China’s professional managers and engineers with the building of new generation nuclear power plants, but limited on the overall world’s economic influence. I have a lot of respect for their hard work and how they value individuals that contribute to the support and advancements of their country. After spending months with some of their professionals, they do see things different when it comes to social norms and personal values, but that is another topic. Nonetheless, I do have a few thoughts on this issue.
ReplyDeleteI am concerned that the majority of US companies have relocated a lot of manufacturing facilities to Mexico, China, and other cost saving (lower wages) countries. Between the unions and cost of living in the US, hourly wages and benefits have a significant impact to a companies’ budget. The overall trend is to build factories in low income countries for repetitive manufacturing work. On the other hand, the US is keeping the high technology and innovative jobs in this country. China is great for reproducing with their highly populated workforce, but lacks inventiveness. They can reproduce easily with proven technology, but lag when it comes to new concepts. The choke point with China is energy. China has more than enough people to accommodate a lot more work, but is restricted by energy to support the big demand of manufacturing. I suspect this is why China is forced to relocate some of their manufacturing to other countries while they wait for more energy producing facilities currently being built. They are near completion of six new generation nuclear power plants, with many more in the planning stage. Their demand for other energy resources (oil, coal,…) has been a major influence for the higher cost for these resources. Follow the energy trail.
My two cents...
The relation between China's energy demand and Chinese manufacturing sector is an economic issue emerging under the influence of pressing events. Since 1990s China has been enjoyed the largest number of small producers and, as a consequence, its demand for energy resources has been risen sharply.
ReplyDeleteIt is also interesting the mention about Mexico which is another cost saving country. In comparison with the exporting regions of China we can se a remarkable difference: Mexico agreed on trade agreement (NAFTA), which caused reduction of trade barriers through North America in manufacturing and agriculture, while between China and United States there is no Free-Trade agreement.
Thanks for sharing your thought and giving interesting information.
Remind me about your two cents ... :)