Monday, July 12, 2010

Export mania does not work every time

Nayan Chanda has interesting piece on jobs creation and export mania. Some excerpts:

  • I was recently in Paris for the French release of my book on globalisation and was asked repeatedly by liberal and well-meaning interviewers how Europe could stop Chinese and Indians from taking their jobs. "Isn't it unfair?" they asked, conveniently forgetting that export-driven economic growth was what the western doctor had prescribed for Asia. Structural change means they are exporting their labour in the form of assembled western goods.

  • Events surrounding the recent launch of Apple's iPad tablet computer provides a nice example of this new kind of labour export. While Apple enthusiasts in Paris mobbed stores to grab the latest gizmo, news reports from China talked of workers' unrest and a string of suicides in the military-style Foxconn factory that assembled the iPad. Long hours, sleeping in barracks within the factory with little pay, the workers who produced the technological wonder were driven to desperate action.

  • A recent New York Times analysis of what goes into producing an Apple bestseller is the economics of outsourcing. For assembling a $600 iPhone 4, the Chinese factory gets 7 per cent of the profit margin, and some 30 per cent goes to pay the suppliers of components in South Korea, Germany, France, Japan and others. Apple's profit margin is over 60 per cent. Consumers worldwide enjoy Apple products, profits go to the parent company in California and crumbs fall on the plates of the Chinese workers who toiled to assemble them. American workers are out of this supply chain. This is a structural change that may not have many fans among the growing ranks of the unemployed.

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