- Westerners would take up jobs high-up in the value chain commanding higher wages and influential positions
- A win-win situation, the consumer in return was promised cheaper products to satisfy its ever growing appetite for electronics, textiles and lifestyle items and many more things
- The trend would fuel growth in the developing world further encouraging demand of western branded (not necessarily manufactured) goods. Western companies would have increased profits implying more affluent lifestyles and prosperous societies
There is little doubt that growth by the above
mentioned formula did happen. However growth has come with side-effects and
implications that I want to elaborate. I am based in Germany so readers might find this
article a bit euro-centric. Europe has been in
news for all the wrong reasons so this might be an interesting read for many.
Jobs High-up in the Value Chain
The transformation into a knowledge based economy has
exerted a lot of pressure on the western-manufacturing-dependent-middle-class.
Competition and cheaper prices in developing markets are forcing westerners to prepare for skilled white-collar jobs.
Knowledge based jobs generally require sophisticated training but a
functioning educational system alone isn’t adequate to produce a quality
workforce. I think education infrastructure also requires a social fabric, like
fight to exist, belief of control over own destiny and pressure from parents and peers to
compete and excel. Compared to levels I saw in my Indian upbringing (not an
advocate of the Indian education system) I find this pressure missing or not
enough in the western world. A general worry in Germany about
companies not able to find young engineers to fulfil open positions shows a
trend. Education in Germany,
at all levels, is almost free but still German companies worry about lack of
quality engineers. So definitely it indicates that free-education-to-all is not
sufficient to produce quality graduates. That is why, in the developed world, parents/mentors and teachers have a big
obligation to train people in subjects like Math and Science. The future jobs
in the west would demand sophisticated training and a high proportion of
western kids studying the “easier subjects” can be a worrying sign. Talking
about Europe, inadequate evening and weekend
courses to train people get the right skills for the changing world along with
supporting a livelihood is one aspect policy makers need to look into.
Innovation
It is becoming evident that growth can’t come just by
filling existing positions but establishing new companies. Except for American
companies like Google, Facebook, and Apple flourishing, the IT revolution has
almost escaped the developed world (especially continental Europe).
Innovation to produce new jobs has not come from every corner but new
globalized economy has exerted pressure on traditional sources of livelihood.
Reckless government spending, faulty accounting methods and irrational asset
bubbles have been counted as one of the major factors for the on-going
sovereign debt crisis in continental Europe.
However, I see lost investor confidence due to “lack-of-innovation” in recent
past in a lot of countries as one of the major causes. Factors like dwindling
demographics, stagnant domestic consumptions, huge public sectors and
inflexible labour market also play a part. United States, the largest debtor
nation in the history of man-kind continues to live comfortably due to
favourable economic indicators and investor confidence in American companies to
innovate. Of course Dollar being the world’s reserve currency has a special
role to play. It should be noted that unlike continental Europe, America doesn’t
offer free education to its citizens (and pays a huge cost in terms of social
inequality) but still it has been the birth-place for most of the high impact
innovations of the past decades. Somehow, the social fabric discussed earlier
in the article has a role to play.
Forces from the East
It appears that some of the big corporations as they
started shipping jobs overseas were not completely prepared for the future.
Exposure the low cost manufacturing hubs like Korea,
China
got in the process enabled local companies beat their western counterparts at
their own turf. Existing giants like Nokia, Phillips and Siemens (to name a
few) in businesses with low entry barriers have taken a big hit due to pace of
innovation and relentless competition from the East. Companies like Samsung,
LG, Lenovo and Huawei are no more interested in producing gadgets only for low
budget customers. High profile take overs of IBM PC manufacturing, Arcelor
steel and Jaguar luxury cars by rich companies based in relatively poor
countries shows a trend. New players from the East including sovereign
wealth funds like China Investment Corporation, Qatar Wealth Fund and big
conglomerates like Wipro, Tata, Mahindra and Reliance with deep pockets are
taking the established western giants’ head-on.
Growth in the Developing World
Not every company in the west has struggled in the
globalized world. Flourishing sectors like American technology companies,
European aviation, German cars, Italian fashion ware, French luxury items and
British services and education see new avenues of growth. As I write this blog,
luxury car maker Porsche reported record sales due to strong demand in China and America. China
would soon overtake France
to become Germany’s largest
trading partner and this trend has benefited Germany. Employment in German
manufacturing has seen enormous growth but it’s not a win-win situation for
everybody. The recent announcement by General Motors to close its Opel
factory, the bankruptcy of Qimonda (Memory division of Infineon), Financial Times Deutschland in booming Germany are some
examples. There is a huge list of companies that have ceased to exist in Germany to force redistribution of labour. Recent uproar about car and steel manufacturing
in France
is another example. Today an industry if not competitive globally, irrespective
of socialist/protective measures would meet its destiny (not necessarily
bankruptcy) sooner or later. People need to acclimatize in the new
environment to see some of the old power-houses biting the dust. Days of
starting and ending a career in the same sector (forget a company) are
over.
Pursuit of Growth
Western
companies generally operating at higher profit margins need to identify
a niche market and innovate before it’s too late. I personally feel
most of the smarter ones have already done it. Talking about Porche’s
record sales it is worth mentioning that Porsche in 2012 was one of the
first luxury car makers to open a dealership in Nigeria. This bold move
was a topic of discussion in western media but a country like Nigeria
with huge oil reserves provides the perfect clientele that any forward
looking company should crave for. Companies and individuals in the west
are set to benefit a lot from a richer globalized world but not without
an ambitious “Pursuit of Growth”. As I read somewhere, the illiterate of the 21st
century will not be those who cannot read and write, but those who
cannot learn, unlearn and relearn. The mantra to “learn, unlearn and
relearn” would be the key to sustain growth and high quality of life.
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