Monday, January 31, 2011

Globalization Part 1: A new world order

It is reported that the US is dependent on consumer spending to keep its economy going, while it continues to battle high unemployment rate and a flagging economy...

It is frequently reported that Australia is running on a "two-speed" economy. While mining-related industries do well, others lag behind...

Welcome to globalization, where economics is not what it used to be anymore. We should stop being surprised by the seeming contradictions and start to understand the impact of globalization on the economy. Western countries would like to believe they can have the cake and eat it too. That is, they can enjoy cheap made-in-China goods while still holding on to a high paying job. The simple truth is that when industries and jobs are moved offshore to a low-cost country, jobs are lost. Along with jobs, in time to come, goes the purchasing power.

In the globalized world, capitalism finally reveals its true self. It does not discriminate between countries, culture, or ideology. Capital investment goes where the company stands to make the most profit. Hence, America will have to snap out of the consumer-driven economy and try to regain the industry-driven economy (now lost to China) which once made it great. Meanwhile, resource rich countries like Australia will continue to chug along on a two-speed economy unless the government realizes that the non-mining industries are not slow-pedaling but are succumbing to the effects of globalization. Unless something is done about it, Australia will eventually become just a producer of raw materials, reversing the role with NIC's (newly industrialized countries) before they caught the globalization bug.

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