“Low-Cost Countries” – What Goes Around, Comes Around

In a story I heard on NPR this morning (link) it was mentioned that China’s workers are finding new power and demanding higher wages and better working conditions, walking off the job if they don’t like the way they are being treated.  The article went on to discuss the resulting rise in the prices of Chinese-manufactured goods, how that will affect their biggest customers in the West, and describe how Chinese business is working aggressively to move up the value chain into managing brands, where the biggest profits are.  It cited factory closings in South China as directly related to their rising labor costs.  So where does this all lead?

Throughout the rise of China as an economic power, I have always held the opinion that eventually Chinese businesses, facing rising labor costs, would begin to outsource to lower cost countries, perhaps Indonesia and Southeast Asia for starters.  Then, once the standard of living and health of the economies of those countries began to climb, they, too would follow the same pattern as China, and soon would be outsourcing labor themselves to … Africa?  Africa, due to its political issues and numbers of small, seemingly disorganized countries, doesn’t seem like a good candidate as a source of cheap labor, but that could change.  In any case, the end of my scenario is when, having fallen quite a distance economically, North America returns, full circle, to become the low cost labor provider to the world, and manufacturing returns  again to the United States. 

For a long time I thought this would take one or two decades, but seeing how fast China has risen, and how quickly they have begun to seriously discuss outsourcing labor, perhaps it will happen sooner.  On the one hand, the return of manufacturing-driven prosperity to North America will be lessened by the general economic leveling that is part of globalization.  On the other hand, North America’s traditional ingenuity, invention, and increased productivity will work in favor of the North American economy.  It concerns me, however, that U.S. public educational systems have fallen so far behind.  The ingenuity that has characterized American culture needs educated people to realize its promise, and it is my hope that a return to the careful experimentation with education that seemed prevalent before the 1980’s will occur and serve as the foundation for more innovation and technological development, as occurred in the past.

I welcome your comments.


One response to ““Low-Cost Countries” – What Goes Around, Comes Around

  1. Announced this week in the press: a Chinese company is opening a factory to make refrigerators in South Carolina (link) (link). It seems they found the cost structure not tremendously different from what they were seeing in China. What goes around comes around, and sooner than I expected.

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