GLOBALIZATION LOCALIZATION

Fashions come and go. Currently globalization is all the rage. But there are already signs that its days, though still many, may be numbered. Several different factors may be called in evidence.

1. Labour Cost.

Why does the west import everything from clothing to electronic gadgetry from China when we can perfectly well make it ourselves? Why, likewise, to we pay Indians to fill in our insurance forms on the phone and answer customer queries when, once again it's nothing we can't do on our own doorstep?

The answer of course, is “labour cost”. The wages are lower. Apart from tropical fruits which won't grow in northern climes, and those natural resources we don't have, the cost of labour is the main reason why we import so much. And will it last? Yes, for some considerable time. But it is not by any means a longterm, indefinite phenomenon.

It happened in Japan, it happened in Korea, Singapore and Indonesia: labour costs simply became uncompetitive. Already western firms with factories in China are having to move inland seeking fresh fields of cheap labour because the favoured coastal areas have become too expensive. And as for China itself, once a nation of peasants and primitive village industries, its people constantly hovering around starvation level, it is now showing all the signs of affluent capitalism – a growing gap between rich and poor, inflation, new millionaires every day... and the wealth is spreading steadily throughout its vast country. In Europe, Canada and USA, Chinese tourists are everywhere, swarming by the busload as they spin round the major tourist sites.

India too is growing rapidly in terms of wealth, its burgeoning middle class can match the best of the west in wealth, lifestyle, home comforts, fashion and travel.

The days of cheap labour are numbered. The writing's on the wall, right there before our eyes, in the tourists from India and China, in everything from the world wealth tables, to the sales figures for high-end motor cars.

2. Our Jobs.

The developing countries fill our shops with their goods, but they want something in exchange. The days of colonial slave labour are long gone. And here at home we need employment, otherwise we don't earn and don't spend. Every day we hear stories of jobs flying off to China, as factories and offices outsource pretty much anything they can. But once again, it's not a sustainable trend.

Europe struggles to find new sources of employment, while the United States pays for its Chinese imports with ever more paper IOUs.

We in the West need to focus our attention at home. More specifically, how we can create productive employment on a regional basis, developing local potential, seeking gaps in the market, specialist products which require a quick turnaround in response to changes in demand.

We need reliable finance for new and expanding business, and the rigorous application of standards and benchmarking to ensure that whatever we are doing, it cannot be done better. And we need to trim the excesses of capitalism. The shareholder as king of the castle, who demands outsourcing to gain a marginal price advantage – and perhaps so that a profit can be realized by selling off the domestic factory premises – must begin to share the power with other 'stakeholders', employees, local suppliers and the host community.

Globalization has brought about major changes in our lives. We need major responses.

3. The Dangers of Interdependence.

Japanese companies are building cars in Europe and USA, but a few vital parts are produced in Japan, and with production interrupted by the Japanese earthquake/tsunami disaster of 2011, car-makers in countries not physically affected were put on short time, or factories closed. Even when natural catastrophies do not dramatically cut off supply of vital parts, many companies find by experience that more domestic production provides greater reliability both of production and delivery, as well as greater flexibility in terms of design changes.

4. Environmental concerns.

Fuel is running out and the cost is going up. And as long as it lasts, burning it has a negative environmental impact. Already those with environmental concerns are calculating the environmental impact cost of items in stores which have been shipped across the globe. The time may come when we get a little more serious about carbon emissions, and wake up to the environmental impact of world trade.

5. The Neighbourhood Effect.

Local farmers' and craft markets are spreading. People are experiencing the pleasures of local produce, home-made products from cakes and jams to wild-flower wines, pottery and hand-crafted items of clothing. In the kitchens of up-market restaurants we find the chef exploring local growers, encouraging production of out-of-season or long-forgotten species of fruit and vegetables, promoting “fresh local produce” on their menus.

It's not going to make a major impact on world trade, but it's a trend nonetheless, and one which is proving increasingly and justifiably poplar.

We need not be looking at import controls, closing our own country to the rest of the world. But the mad rush to produce anything and everything abroad needs to be counter-balanced with focused efforts to maximize employment at every local and regional level.

The alternative is unemployment and welfare, neither of which is desirable personally, socially or economically, and which in any case is a costly luxury we simply can't afford.

6. Global Strategy.

Western nations need to get themselves up to date. A basic attitude of colonialism in Europe and the USA still survives, though now more of a lingering memory. This approach assumes the West is wealthy, the rest is poor and may be favoured with trade from the West providing labour costs are kept low. But this game plan is rapidly becoming history.

The "de-coupling" of the far-eastern economies from the West has already happened: when the US sneezes, the far east, once dependent entirely on US largesse, barely notices. China, the Far East, and to a growing extent India, are increasingly generating their own consumer demand to keep their domestic production rolling. And let's face it, there is little or nothing the West can do for Asia that Asia can't do for itself, more cheaply and probably better.

China particularly is moving into a position of much greater world influence. Its “rare earth” policy provides a glimpse into the future and China's view of itself in the world. Rare earths are used extensively in high-tech products, and China accounts for 97% of current production. It is using this position to induce foreign technology companies to set up in China by restricting exports, a strategic threat to high-tech companies worldwide.

Globalization has its up-side, but every up-side has a down-side. Globalization works. But it should always be combined with localization.


The Economics of Prosperity

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