...[G]lobalization...was supposed to act like a rising tide, lifting all boats in poor and rich countries alike. Buoyed by hundreds of thousands of new assembly line jobs courtesy of multinationals in emerging nations, the middle class would swell, which in turn would propel higher local consumption. More factories would be needed to meet the demand, further raising local standards of living and handing the largest non-domestic companies a vast and enthusiastic new customer base. Meanwhile, in the United States and Europe, consumers would have their pick of inexpensive items made by people thousands of miles away whose pay was much lower than theirs. And in time trade barriers would drop to support even more multinational expansion and economic gains while geopolitical cooperation would flourish.The great unraveling of globalization (Washington Post)
The shortcomings of globalization manifest in any number of ways. For one thing, international trading patterns point to an increase in protectionist attitudes rather than a golden age of open borders...Moreover, the recovery in world trade volume is much slower in this post-recession period than prior ones...Somewhat surprisingly, cross-border capital flows are equally anemic...global foreign direct investment (which reflects the amount that companies earmark for doing business in other countries) has fallen to a mere 2 percent of global GDP from 4 percent before the recession.
Western corporations — hoping to find new fast-growth revenue channels and inexpensive manufacturing opportunities to augment mature, developed economies at home — moved to set up shop in far-flung regions like China, Brazil, Russia and India, where the greatest GDP gains were anticipated, as well as in so-called second tier emerging nations such as Thailand, Malaysia, the Philippines and Nigeria.
Yet despite all this activity and enthusiasm, hardly any of the promised returns from globalization have materialized, and what was until recently a taboo topic inside multinationals — to wit, should we reconsider, even rein in, our global growth strategy? — has become an urgent, if still hushed, discussion.
...vast new consumer markets in globalized nations have not emerged either. For example, Chinese household consumption accounts for about 34 percent of GDP — down four points in the past decade — compared to a healthier 70 percent in the United States....There are myriad reasons why these markets have lagged, some of them unique to specific countries or regions. For instance, China’s one-child policy has produced a penurious generation of young adults who are the sole support for aging family members. And in parts of Southeast Asia and Africa the infrastructure in rural areas, where much of the population lives, is too primitive to support extensive retail activities. But equally problematic is that the growth of the middle class in China and most other developing economies has been slow. And these newly minted consumers face volatile, often expensive prices for housing, food and other staples. “The biggest contribution to Chinese growth for many years has been government investments, about 50 percent of GDP, off the charts compared to any country in the world ever...”
To protect the marketshare of domestic firms, emerging nations have attacked foreign multinationals....In the past year, as many as 30 multinationals were placed under investigation — some were penalized and others raided — by Chinese government authorities for any number of dubious infractions...Last August, Russia shuttered four McDonald’s locations in Moscow, the chain’s busiest stores in the country, citing sanitary violations. Russian authorities produced little evidence; the step came after sanctions were imposed by the West for Russia’s role in destabilizing Ukraine.
Less visible but arguably more harmful are cyber strikes. In 2013, at least 3,000 U.S. companies were victims of data theft and network disruptions, according to published reports. In some cases, the hackers are believed to have ties to rogue regimes in Asia and Eastern Europe and their aim appears to be to destabilize global commerce...
...so-called state-owned enterprises, or SOEs... are financially backed by central and local governments and are notorious for crony capitalism in which they gain access to local contracts, markets and capital unavailable to foreign firms. ...Well over half of all companies in China, Russia, Indonesia, Malaysia and Vietnam, to name a few, count their governments as stakeholders. These enterprises — in mining, telecom, banking, construction, manufacturing and even retail — receive preferential treatment in lending rates, government investment and subsidies with little accountability for their results.
Given the corporate gutting of the West's middle classes, they have staked everything on the Chinese consumer to heroically consume enough to expand profits. The Chinese are letting them down. Maybe they need some exhortatory posters with Chairman Mao whipping out his credit card and buying buying a new iPad. "Do your part! Consume heroically for the good of us all!" Ignore the toxic air and water while you're at it.
In fact, the Chinese are living up to their reputation for inscrutability: no one seems to know how fast their economy is really growing at all. Some people studying the energy figures think it's much lower than advertised. Uh-oh!
|To the Apple Store!!!!!|