Another brief interlude from my musings about economic cycles.
Globalisation, to my mind, is a trend, not a policy. Nobody decided on it - most countries fought against it - but it has happened nonetheless. There have been some positive outcomes: rising living standards in the Third World; cheaper products in the developed world. But there have also been negative outcomes. Wages have been compressed as a result of what Stephen Roach (formerly Morgan Stanley’s chief economist, now head of their Asian business) called the ‘global labour arbitrage‘. Put simply, the developed world’s wages are too high to compete with the developing world in labour-intensive industries - they’re poor enough that a pittance is more than they had before. That’s the primary reason why wages for the vast majority in the developed world have stagnated over the last ten or twenty years.
So how do we manage this transition? To my mind, education is the key - we need to teach our children to be better technicians, better logicians, better organisers, if we are to sustain our standard of living.
But education is taken very much for granted in the developed world. We don’t quite realise that a couple of billion people are catching up to our level of knowledge and sophistication very, very quickly.
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While I agree that education levels are catching up fast, I wonder if emerging markets’ inferior structures for economic exploitation / organisation will take much longer to overcome. Look at China: how many managers will need to be executed before the system achieves the level of disciplined pluralism seen in the West?
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