Behind the Present Crisis of Globalization Yet�Another Possibly Greater One is Shaping

The world is absorbed in the �War against Terror� and America�s unceasing promotion of Globalization in the midst of spreading monetary collapse from previous efforts in the field. And meanwhile new menaces are appearing on the horizon.

Basically Globalization was imposed on the world by Washington with a simple rationale. By getting simpler manufacturing processes done in Third World, the US would benefit by lower labour costs to keep the price of the end product low. �Inflation� could thus be tamed by exporting less skilled jobs rather than by raising interest rates. High interest rates at home are increasingly unacceptable to the financial elite that have come to dominate the American scene. For Deregulation has involved banks and other financial institutions in every aspect of the stock market and thus makes them vulnerable to high interest rates. The export of simpler industrial processes has helped at least temporarily to overcome some of the foreign exchange crises that that have afflicted the Third World since the seventies.

A further attractive feature of the Globalization scheme for American transnationals was the constant possibility of seeking a more wretched country with still lower wages if workers in the initial host land grew demanding. The investors always had a foot out the door and a further list of accommodations available in other countries.

The costs and destructive aspects of the Globalization program were evident from the beginning. They destroyed extensive portions of the subsistence economies of the host lands, created a further need for expensive infrastructures that were not met, since tax concessions were usually the part of the inducement package that attracted the investment. Playing off one wretched country against the other was a core part of the scheme.

But the entry of China into this picture has dramatically changed the topography of the game. American massive investment in China may contribute to China heading towards a technical competence that will eventually convert it into a formidable competitor not only of Third World countries, but of the US itself.

The Wall Street Journal (14/03, �China�s Secret Weapon: Smart Cheap Labor for High-Tech Goods� by Peter Wonacott) wrote, �All over the factories along this stretch of China�s southeastern coast the same extraordinary scenario is unfolding: workers move into more and more sophisticated jobs, while their pay stays relatively low. It�s not what�s happening in other developing nations, as pay jumps as workers get smarter � driving employers away to nations with cheaper labor. But China�s population is so vast that that it can stay smart and cheap � a formula that�s making it a new superpower in high-tech manufacturing.

�It�s also key to China�s challenge to modernize and still keep social unrest to a minimum. As worker protests become more common at creaky state-run industries, Beijing moves toward a free-market eco�nomy that has produced years of double-digit growth and an increasingly mobile, ambitious and better-educated work force. For many, the opportunities in coastal areas favored by foreign investors are a step up no matter how low the wages.�

China a Future High-tech Land?

�The result: other countries are increasingly ceding high-tech industries to China as well as low-tech ones. That spells trouble for impoverished garment producers in Pakistan and for software developers in Japan. Foreign direct investment in China last year totaled $46.8 billion, according to the UN Conference on Trade & Development. That was a 15% gain over 2000, the highest FDI total the country has seen yet and the most received among developing countries. The comparable figure declines last year for South Korea, the Philippines and Malaysia. Taiwan stayed about the same, and Indonesia saw some divestment.

��I tell my customers that we don�t have to worry about China for the next ten years,� says Ash Bhardwaj, president for the Asia-Pacific region for Flextronics. The Singa�pore-based company, the world�s biggest contract manufacturer, makes phones, circuit-boards and other gear for a long list of electronics companies. �There�s enough talent in the poor interior that prices will stay really low.�

�Flextronics has become a leading investor among a belt of factories around Zuhai largely because of the low labor costs. These plants have tapped not only cut-rate engineers, but also some of the cheapest unskilled workers in the industrialized world. Mr. Bhardwaj compares the rate of 60 cents an hour for unskilled labor in China to $2.50 in Malaysia, $5 in Singapore and $25 in Japan. Flextronics has slashed jobs in places such as Singapore while expanding its campus just outside Zhuhai. Next month it starts construction on a $100 million plant in Shanghai.

�The phenomenon of persistently low wages amid fast growth defies the laws of economics. It begins with farmers who abandon farming or menial jobs in small towns and provide a constant stream of cheap factory labor. Vocational schools have responded to the rise in tech jobs by offering more engineering classes. So have universities, where 37% of the graduates in 2000 were engineers, compared with about 6% in the US.�

China, in the area of education at least, does not disregard the importance of human investment as is happening in the US. Given China�s huge population and motivation, Washington is making a bad mistake to be relying on starwar hardware to keep ahead of the high-tech technological giant that China may become.

�More than two decades of reforms have relaxed Chinese residence-permits, left from the days when the communists wanted farmers rooted in the land and workers welded to state factories. Flextro�nics head-hunters now drop by struggling state enterprises in the north and travel west to top-flight universities that turn out more engineers than local industries can absorb. As a result, starting salaries at Flextronics have barely budged in three years.

�The Flextronics plant has gone from making simple mobile-phone chargers to advanced miniature printed circuit boards. The workers electronically design the boards now and cut them with lasers, underlining the shift to skilled labor at toy-assembly prices. Flextronics might even start producing Microsoft Corp.�s sophisticated games console, Xbox. If it does, employees boast they�ll make it more cheaply than plants in Mexico can.