The biggest concern in the common man's mind about China's ascend is that more and more American jobs seem to be going to China and India. Why? The most popular answer to this (and one I think is mostly accurate) is that China and India have cheap labor. A lot of manufacturing jobs have moved to China due to their cheap manual labor. This was also aided by excellent infrastructure development by the Chinese government. On the other hand a large portion of the so called intellectual labor, such as software design work, is moving to India, due to their large pool of cheap educated labor.
So is this it? China & India takes over the world and the "rich becomes poor and the poor becomes rich" scenario plays out?
Hardly!
The eternal optimist in me thinks this is just another chapter in humanity's great march forward.
So what, you ask, is going to happen next that makes it all okay for the world's industrialized "high labor cost" nations.. I am taking America as an example in the following argument, but it applies to most industrialized rich nations.
Everyone knows the problems with the big fat American enterprises that defined the industrial revolution of the 20th century. The big auto companies, airlines and big manufacturing companies in general are all suffering from the big bloat of expensive labor that is propped up by the labor unions. It seems clear that these companies won't survive the status quo. I am not saying labor unions are evil or that the American work force is wrong in wanting more for their work. Hardly! Everyone wants to do well for themselves and they are going to protect their interests.. That is the beauty of capitalism and it all sort of balances out. Individual companies might succeed or fail based on how these imbalances as they arise are handled but a capitalist economy as a whole always marches on..
So what happens to these big bloated companies? Well, they will all die away! (mostly).. But wait, isn't that what I just said was not going to happen? No, my argument was that the nations and the people will be okay not the bloated enterprises themselves..
As American companies with large labor forces struggle to stay competitive other smaller nimble companies with a lot more automation should take their place. If you start with the premise that there is no particular advantage to people from any one region over people from another region, then there is nothing inherently more advantageous to China that is making them "inevitably" successful (as it might feel now-a-days). They are just exploiting a situation where American business grew big and fat with large labor forces and retirement commitments to a point where they cannot effectively compete in the world market place. So I think the next wave of successful businesses in America will take the next step and come up with operating models that are extremely short on labor and long on automation. If you think about it, this is really what happened during the industrial revolution - manual labor gave way to machine based labor - and now it's time to take it to the next level. Necessity is the mother of invention. So when things were good, nobody thought about taking automation to the next level. But now as this becomes a necessity for American companies to stay competitive in global market place, it is certainly bound to happen.
How about software and other so called intellectual labor? Well, I work in the IT field. I did IC design for about 10 years and now manage a group of IC designers. But my experience is that a large percentage of the work that many of my colleagues and I do on a day to day basis is repetitive drudgery. Automating the drudgery in intellectual professions so that the real labor need is significantly reduced would be the next step here.
Once this happens, all of a sudden, you will see that the world's nations are again on equal footing (China, India, etc. lose their "cheap labor" advantage). Land is not significantly cheaper in either of these countries (at least useful land). Natural resources are another story - countries rich in natural resource will always have an advantage and I think America is luckily one of them.
Now I am not saying China and India all of a sudden will go back to being poor. China and India did not become successful solely because of cheap labor.. Cheap labor was always there.. That didn't make them successful. It is an embrace of capitalism (even a partial embrace) that made them competitive all of a sudden.
So the way I see it the embrace of capitalism by some nations in Asia is making them prosperous. This is certainly causing a brief imbalance in the overall world of capitalism due to the entry of two large nations. But this will indeed be a temporary imbalance and the overall capitalist world will find its new balance and enter a new era of prosperity.
What do you think? Comments are welcome!