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The Asian expansion

Guscus

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Hi!

I'm an 18 year old guy who study Social Science at the high school Sundsgymnasiet in southern Sweden. I'm working on a project in which I have chosen to focus on the effect the Asian expansion will have on the future of Europe. In short, I want to figure out how the lightning-fast development in the far-east, regarding business aswell as education, will affect my position on the global labour market in the future. I have been inspired by a Swedish speaker situated in Singapore who got me thinking about these issues. For example, why would a future employer even consider to hire a half-motivated, expensive European worker when there are well-educated, highly motivated labour available at a much lower cost?

Below is an example of Fredrik Härén's (the Swedish speaker I mentioned) lectures. This is just the first part of threee, in which he compares the similarities between the comunnication business 20 years ago and the energy business of today. Check it out, it's quite interesting!
YouTube - Fredrik Härén Globe Forum 2008 Part 1 - Today's Winners, Yesterday's Dreamers

Anyway, my intention with posting this is to start a discussion with participants from different countries, because it is indeed an international issue. Hopefully we'll come up with some intriguing views on this particular subject.

So, what are your thoughts?
 

MKULTRABOY

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Well, production effectivity correlates directly with wages. Meaning the western workers tend to be more effective at many things.
The degree of globalization is such that it is not large enough in most countries to affect prices and wages to such a large extent.
There is also factor mobility.
Theres tons of reasons why your wages are not actually set in china. In the states wages are offset by only a couple percent or something for most workers, and it is only low skilled workers which seem to be affected in any significant way.
 

Guscus

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Alright, so you mean that no matter the extent of the economic development in these uprising countries there will still be enough jobs and a big enough market in western countries to provide for the standard of living we're accustomed to?

Let me I put it this way: During the last decades we have seen European and American companies moving their factories to Asia, nothing new there. But we have pointed to our advantages when it comes to science and product development and taken for granted that this will be our area of work in the future. What if it's not? What if the best products are being developed in India? What if the cutting-edge science is being made in China?

Mr Härén has made sort of a formula for ideas. It basically says that to get a great idea you need creativity and knowledge. In western countries we've seen ourselves as the ones with knowledge, we have been the ones with the best universitys and the most inventive companies. But today there is an astonishing amount of people being highly educated in Asia, people with dreams and creative minds.

Maybe they are the ones that are going to be the leaders in areas we've seen as our areas of expertise. And if they prove to be, is there still a possibility that we can continue with our high-spending lifestyle?
 

repeter

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Maybe they are the ones that are going to be the leaders in areas we've seen as our areas of expertise. And if they prove to be, is there still a possibility that we can continue with our high-spending lifestyle?

Why not? Considering the state of the two upcoming Asian powers (China and India), it is much smarter for a multi-national to have its corporate HQ in America or Europe, which have the best infrastructure, and the least corruption, and have its manufacturing base in either China or India. Therefore, the highest paying jobs would stay in the West, and the low-income jobs would remain in Asia. Until China increases its political freedoms, and until India comes down on the amazing amount of corruption there, the white-collar jobs won't go there.

And then you also have to factor in the fact that Europe and the US have been the centers of trade for hundreds of years (Europe for thousands). That doesn't go away overnight, and we still boast the largest consumer economies in the world. In that respect, one China and India's standards of living rise, we won't be affected too adversely, IMO.
 

Lord Tammerlain

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Jobs in the US and parts of europe have been artificially high for the last decade to 15 years or so through bubble economics and high levels of government spending ensuring a temporary high living standard for those living in the so called west. Without the competition by cheaper asian labour, wages in the US at the middle and low levels would have been higher, and government deficits would have been lower. Corporate profits and incomes at the higher levels would have been lower due to higher costs and increased demand for scarce labour in the west

As for the future ( I will only go out for about 20 years or so)

The west will see dramatically lower living standards for the majority of the mid and lower skilled people. Anyone without a high degree of technical knowledge will see living standards drop by 20%, due to competition from asia and of course the overall need for the west to lower debt loads.

After about 20 years the differences in wages will be dramatically lower, with quality asian workers getting paid roughly that of comparable western workers, with differing cost structures being taken into account
 
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American

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Jobs in the US and parts of europe have been artificially high for the last decade to 15 years or so through bubble economics and high levels of government spending ensuring a temporary high living standard for those living in the so called west. Without the competition by cheaper asian labour, wages in the US at the middle and low levels would have been higher, and government deficits would have been lower. Corporate profits and incomes at the higher levels would have been lower due to higher costs and increased demand for scarce labour in the west

As for the future ( I will only go out for about 20 years or so)

The west will see dramatically lower living standards for the majority of the mid and lower skilled people. Anyone without a high degree of technical knowledge will see living standards drop by 20%, due to competition from asia and of course the overall need for the west to lower debt loads.

After about 20 years the differences in wages will be dramatically lower, with quality asian workers getting paid roughly that of comparable western workers, with differing cost structures being taken into account
Sure would be nice to see some sources for all this stuff you're saying.
 

Lord Tammerlain

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Why not? Considering the state of the two upcoming Asian powers (China and India), it is much smarter for a multi-national to have its corporate HQ in America or Europe, which have the best infrastructure, and the least corruption, and have its manufacturing base in either China or India. Therefore, the highest paying jobs would stay in the West, and the low-income jobs would remain in Asia. Until China increases its political freedoms, and until India comes down on the amazing amount of corruption there, the white-collar jobs won't go there.

And then you also have to factor in the fact that Europe and the US have been the centers of trade for hundreds of years (Europe for thousands). That doesn't go away overnight, and we still boast the largest consumer economies in the world. In that respect, one China and India's standards of living rise, we won't be affected too adversely, IMO.

Infrastructure in China's big coastal cities is amazing, Shanghai's is better then most US cities nowadays with a modern freeway system, subway, clean water and modern efficient airports. Lets not forget that up untill the industrial age hitting Europe in the late 1700's eary 1800' China had the worlds largest economy, producing more manufactured goods then Europe. The only reason China lost that position was that it was insular and thought we were all barbarians. China has been a center of trade for around 2000 years, longer if you include the various kingdoms that eventually made up China.


China is developing the talent, the skills and the knowledge to be able to compete with much of the western companies on an even basis, in just the last 10 years its locally developed and manufactured cars have improved at a far greater rate then South Korean cars did. LG and Samsung (two large Korean electronic companies) have gone from subpar providers to among the worlds best in less then 20 years in many areas. All with Korean leadership and skills. There is no reason to think China will not be able to do the same, and unlike Korea, China is not to concerned about buying the knowledge first so they dont have to reinvent the wheel (or automobile in this case)

India is a different story, it does not invest enough in the education of the vast majority of its population let alone their health. I doubt India will be a manufacturing powerhouse like China, but in services it will be a different story, its higher education systems are well funded by the state and by the people going to them. So on very high knowledge issues India will be able to compete and thrive
 

Lord Tammerlain

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Sure would be nice to see some sources for all this stuff you're saying.

You mean like the sources regarding the tech bubble, and the housing bubble pumping up the economy?

Or you mean the various government deficits of the US and europe?

Or you mean on how manufacturing jobs have generally been being lost in the US to be replace by service sector jobs in banks so the banks could supply mortgages to people in ever greater numbers?

Or how about the US government, the various european governments are complaining they can not compete with China ( or Japan for that matter ) and want China to bump up the yuan by at least 30%.

The average auto worker working in a Honda plant in China makes about $4000 year, he/she is expected to produce just as good a product as the Japanese worker, or US worker. The chinese worker will work for longer hours per day and on saturday. When it comes to consumer electronics manufacturing the chinese worker tends to live in a dormatory supplied by the company, and works 14 hrs a day, 6 days a week with national holidays being their only real freetime when they go back home ( mad rush on Chinese planes and trains at that time)

Chinese students outside of the most poor areas are spending far more time studing then the students in the west, those educated 20 years ago might be on average behind the west, but those being educated now are on par if not ahead of those in the west (a few countries being excepted like Norway)
 

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(W)hy would a future employer even consider to hire a half-motivated, expensive European worker when there are well-educated, highly motivated labour available at a much lower cost?

I can think of quite a few reasons why an employer would commit to keeping workers at home. Among them:

1. National identity: Sometimes people want a product simply because of where it's made, either because of perceived or actual quality or because it's a branded product with some cache'. For example, I'd rather have a suit or shoes from Italy than Vietnam. Chinese champaign or perfume, anyone? How about a Harley or True Religion jeans made in Bangladesh?

2. Political risk: In many modern manufacturing/production enterprises, the cost of plant and equipment dwarfs the labor component. If management wakes up one morning to find its Asian executives in jail and its plants confiscated, the labor cost savings might not be worth the headache.

3. Rule of law: A company wants to be certain that if it has a legal complaint it will be adjudicated fairly and within a reasonable time.

4. Protection of intellectual property: Some Asian nations, notably China, have been notoriously weak in this area. What company wants to spend millions or billions of euros developing a product just to have an Asian competitor (or former "partner") steal it? China has a knack for using access to its markets to leverage the transfer of technology and manufacturing expertise. Which brings me to my next item:

5. Assure market access: Protectionism can be a powerful motivator. European and Japanese auto companies began building plants in America only after the U.S. Congress threatened to enact so-called "domestic content" legislation back in the early 1980s. It was only later that they figured out it made good business sense. (BMW May Add Fourth Model at U.S. Factory to Take on Lexus, Mercedes-Benz - Bloomberg)

6. National defense and security: Does Europe want to depend on China for things like satellites and aircraft? Also, if European governments subsidize research and development into defense technology, do they want that technology transferred to countries like China?

7. Better service: How many Swedish-speaking Chinese or Indians are there? If a Swedish housewife loses her Internet connection or her computer breaks, who takes her call? There are plenty of English-speaking Indians, but so many Americans complained about not being able to understand them or because they offered questionable advice that some companies have moved call centers back to the U.S.

8. Innovation: The political/educational systems in many Asian countries tend to be rigid and built around a communal identity. Individualism is not something that's readily encouraged. And somehow I find it difficult to believe that a nation that doesn't want its people to know who won this year's Nobel Peace Prize will lead the information revolution.

9. Access to venture capital and support for entrepreneurs: This is another area in which I think a rigid political climate stifles progress. If you're an entrepreneur in China looking for capital, good luck if you're not in one of the industries the country seeks to advance.

I hope this gave you some ideas and contributed something.
 
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MKULTRABOY

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Alright, so you mean that no matter the extent of the economic development in these uprising countries there will still be enough jobs and a big enough market in western countries to provide for the standard of living we're accustomed to?

Well Im speaking of now, but if said countries were to develop they would also have the incomes to buy western products, development of countries in an open global economy would cause a shift in factors of production and employment. As in things would change and it would be painful in the short term, but for the better in general economic consensus.


Let me I put it this way: During the last decades we have seen European and American companies moving their factories to Asia, nothing new there. But we have pointed to our advantages when it comes to science and product development and taken for granted that this will be our area of work in the future. What if it's not? What if the best products are being developed in India? What if the cutting-edge science is being made in China?

You are talking about the west no longer being competitive in its products and thats highly unlikely given current economic situations. Maybe in 80 years that could be possible but nobody can predict out that far.

Mr Härén has made sort of a formula for ideas. It basically says that to get a great idea you need creativity and knowledge. In western countries we've seen ourselves as the ones with knowledge, we have been the ones with the best universitys and the most inventive companies. But today there is an astonishing amount of people being highly educated in Asia, people with dreams and creative minds.

More creativity can only be a good thing, fear of the prosperity of other nations is extremely negative.

Maybe they are the ones that are going to be the leaders in areas we've seen as our areas of expertise. And if they prove to be, is there still a possibility that we can continue with our high-spending lifestyle?

The way many live in the west is unsustainable something will have to change eventually. :shrug:
 

Orion

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I'm working on a project in which I have chosen to focus on the effect the Asian expansion will have on the future of Europe.

My problem with your argument starts right here. Europe and Asia are not separate continents. That is old world thinking. There has been a long history of exchange between these nations. The reason why people in "Asia" are now going into "Europe" is because there is increasing prosperity and people have the money to change locations. It's no longer one way.
 

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Well Im speaking of now, but if said countries were to develop they would also have the incomes to buy western products, development of countries in an open global economy would cause a shift in factors of production and employment. As in things would change and it would be painful in the short term, but for the better in general economic consensus.




You are talking about the west no longer being competitive in its products and thats highly unlikely given current economic situations. Maybe in 80 years that could be possible but nobody can predict out that far.



More creativity can only be a good thing, fear of the prosperity of other nations is extremely negative.



The way many live in the west is unsustainable something will have to change eventually. :shrug:

Germany is one such country it has a small trade surplus with China due to a variety of consumer good and industrial machines. It focus's on high value items that take a fair bit of skill to develop and build. Its products also have a good reputation in China
 

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want to figure out how the lightning-fast development in the far-east

Say what? China's development in 30 years in. Korea's in 40. Hong Kong somewhere in between them. All of them did it with strong state support. What you are seeing now was built upon decades of growth. Not exactly "lightning." True, effectively one or two generations to triple per capita GDP is pretty amazing compared to the 150 years America took, but that's not exactly over night.

As for your core question, not everything can be outsourced. Nor do you want to outsource everything. For instance, European and American firms are cutting back outsourced manufacturing of certain products and R&D centers because it's breeding competition. In the long run, it makes more sense to have lower short term earnings then create a competitior who takes market share from you. Acer and Asus started off as manufacturers for Dell, Gateway and HP. Now they have considerable market share. Sure Dell, HP and Gateway made money via outsource but it cost them quite dearly. I suspect Falconn is going to start engineering its own phones soon after learning so much from Apple.
 

Guscus

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For a starter I'd like to thank everyone for taking the time to reply! There has been a lot of interesting thoughts and ideas that will most certainly be of great help.

My problem with your argument starts right here. Europe and Asia are not separate continents. That is old world thinking. There has been a long history of exchange between these nations. The reason why people in "Asia" are now going into "Europe" is because there is increasing prosperity and people have the money to change locations. It's no longer one way.

I see your point, but if we change the from Europe and Asia to Developed and Developing countries, would your point be the same? I'm thinking that there is a danger in putting these labels on different parts of the world. Developed means done or finished, right? Developing means something that is evolving and getting better. If you ask people here in Sweden if they think that our country is going to be a better place in, say, twenty years the majority will answer that it won't. Actually quite frightening.

At the same time in developing countries there is a totally different view of the future, there are people with hope and ideas of how to make their home a better place. Obviously this is partly because of the lower standard of living they have been used to, but the effects of these differences in thinking between developed and developing countries will be that they don't only catch up with us, they might even overtake us in standard of living. And that's a good thing, don't get me wrong, but one could hope that instead of standing still and being done, or developed, our countries aswell should be aiming to improve and develop.

Here's another question for you, altough a bit less on topic. After Europe had gone through the industrial revolution and was the economically leading part of the world the french built the Eiffel Tower, at that time the world's highest building. After WWII the U.S. took over this role and built a huge number of fantastic structures, some of them the world's highest when finished. Where are these buildings today, where is the highest buildings being built? It's not in the U.S. and it's certainly not in Europe. The three highest buildings stand in Dubai, Taipei and Shanghai. Is this just a "penis-enlarger" for countries or is this a symbol of something else? Is it perhaps the symbol of dreams? Can it be a sign of that the centre of the world economy is moving?
 

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The three highest buildings stand in Dubai, Taipei and Shanghai. Is this just a "penis-enlarger" for countries or is this a symbol of something else? Is it perhaps the symbol of dreams? Can it be a sign of that the centre of the world economy is moving?

I think they're "penis enlargers." For America, it's a case of "Been there, done that." American commercial real estate firms are more focused these days on finding tenants and trying to make a profit than making some sort of fashion statement. Dubai has visions of becoming a Middle East version of Hong Kong and wants to let the world know it's open for business, even though it's essentially bankrupt and had to get bailed out by Saudi Arabia. Look a little deeper at who designed some of these buildings. For example, Burj Khalifa in Dubai, the world's tallest building, was designed by Adrian Smith (U.S.); the structural engineer was Bill Baker (U.S.); the supervising engineering/consulting firm was Hyder Consulting (Britain); and the construction project manager was Turner Construction (U.S.).
 

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I think they're "penis enlargers." For America, it's a case of "Been there, done that." American commercial real estate firms are more focused these days on finding tenants and trying to make a profit than making some sort of fashion statement. Dubai has visions of becoming a Middle East version of Hong Kong and wants to let the world know it's open for business, even though it's essentially bankrupt and had to get bailed out by Saudi Arabia. Look a little deeper at who designed some of these buildings. For example, Burj Khalifa in Dubai, the world's tallest building, was designed by Adrian Smith (U.S.); the structural engineer was Bill Baker (U.S.); the supervising engineering/consulting firm was Hyder Consulting (Britain); and the construction project manager was Turner Construction (U.S.).

Asian expansion... penis enlargers... :2rofll:
 

Missed AB

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I'm an 18 year old guy who study Social Science at the high school Sundsgymnasiet in southern Sweden. I'm working on a project in which I have chosen to focus on the effect the Asian expansion will have on the future of Europe.
From the US. Congratulations on being so interested in global economics at a young age. I started my economic studies when I was 16. I own a company which does about 100k/ year in sales, I have a regular job, I have made a good deal of money in the stock market... I think you have a good future in your sights if this is what you are thinking of now.

In short, I want to figure out how the lightning-fast development in the far-east, regarding business aswell as education, will affect my position on the global labour market in the future.
That depends on what you see your part you see your self playing in the global labor market. Developing nations have historically caused the same concerns at home and have gone thought the same tribulations away. This is nothing new.


For example, why would a future employer even consider to hire a half-motivated, expensive European worker when there are well-educated, highly motivated labour available at a much lower cost?
The first issue to consider is the wording here. Why would anyone hire a moron if there is a better skilled person who could be hired? As you get older you will realize the bulk of the population fits into a nice standardized bell curve. There's a few really good people on one end, a few really bad people on the other, and most fall in the middle some place.

To answer the question, it depends on the task that is needed. Where does the job need to be done in China or the EU? What is the required language for the job? What is the required experience for the job? All other things being equal, the difference in a few thousand dollars to a multi billion dollar corporation does not come into play. It really comes down to who is the best person for the job. A better question for you is why would you want to work for lower wages in substandard housing in an oppressive country?

This is just the first part of three, in which he compares the similarities between the comunnication business 20 years ago and the energy business of today.
If you listen he says there is no way to know what the next 20 years will hold - just as there was no way to predict the previous 20 years. Become an astute studier of history, because we do repeat ourselves. You just need to see the patterns.

Anyway, my intention with posting this is to start a discussion with participants from different countries, because it is indeed an international issue. Hopefully we'll come up with some intriguing views on this particular subject.
There is a global economy, a local economy, and a regional economy. If you look at the prospects for you jobs using those different glasses, you may have a more practical outlook.
 

Missed AB

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Developed means done or finished, right? Developing means something that is evolving and getting better.
Kind of... developed does not mean finished, it refers to the infrastructure, laws, government, and stability. Developing means not quite there yet.

If you ask people here in Sweden if they think that our country is going to be a better place in, say, twenty years the majority will answer that it won't. Actually quite frightening.
Nothing new here. This is the drive to improve things. It is counterintuitive, but the pesimisim produces drive. The drive produces results.


At the same time in developing countries there is a totally different view of the future, there are people with hope and ideas of how to make their home a better place.
Many developing countries rely on the government for the improvements in quality of living. optimism does not drive improvements, it is government sanctioned.

one could hope that instead of standing still and being done, or developed, our countries aswell should be aiming to improve and develop.
The concept you have of being stale or no longer developing needs to be re-assesed.

In developed countries, 20 years ago, there was a phone. 15 years ago there was caller ID. 10 years ago there was the cell phone. 5 years ago every home had broadband. Today every phone has mobil broad band.

There's a lot of different examples, but they all lead to the same point, that there is no standing still. When I was your age, there was no Ipod, satelite radio, gas electric cars, or youtube.

where is the highest buildings being built? It's not in the U.S. and it's certainly not in Europe. The three highest buildings stand in Dubai, Taipei and Shanghai... Can it be a sign of that the centre of the world economy is moving?
No.

Gross Global product is not driven by any of those countries. They are coutries that have a lot of capital with very few citizens. Also to build anything in Dubai, Taipei, or Shanghai does not carry the same building code enforcement as one would need to build these buildings in another country like the US or in the EU. For example to rebuild the World Trade Center in NY has been ongoing for 7 years so far, and it's no where near completed. It may be the tallest building in the world when completed. Using your theory, does that mean the tide has shifted yet again?

Building height means very littlefor the richness of the country. The type of car one drives means very little for how much money one has. Actually, the more expensive the car, the less money in the bank account.
 
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