By Hunter Wallace
From the Prestowitz book:
“The reality that the advocates of Globalization 2.0 had continually failed to acknowledge was that most of the rest of the world, and particularly Asia, had not truly bought into the Washington Consensus. As we have seen, not only had Japan decided to pursue the opposite path, but so also had the Asian Tigers, the Chinese Dragon, and the Indian Elephant. All copied Japan in oje fashion or another, and propelled by export-led growth strategies, all were getting rich during the 1990s and early 2000s at an unprecedented rate.
The most important new development in this time was China’s takeoff followed by that of India. Like Japan, China maintained strong incentives for saving, a currency managed to be undervalued versus the dollar, strong export incentives, and state-aided development of strategic industries. But unlike Japan, China welcomed amd even subsidized foreign investment. Inducing global companies to build factories in and transfer technology to China, a tactic the Chinese learned from Singapore, became a major element of Beijing’s growth strategy. By making China an export platform for multinational companies that already had distribution capabilities and brand-name recognition in overseas markets, China hoped greatly to accelerate its development. In 1992, Motorola, which was suffering from the Japanese semiconductor onslaught and looking for a means to reduce costs but also attracted by the vision of a billion-plus Chinese consumers, was one of the first U.S. companies to respond to the Chinese strategy; it did so by establishing a plant in Tianjin. It was a huge instant success and was therefore soon imitated by many other global companies. Soon, Chinese exports were flooding the world and China was racking up 10 percent plus annual growth rates on its way to becoming the world’s fourth-largest economy by the late 199ps.
Although India did not adopt the targeted manufacturing strategy of East Asia, the nation’s large reservoir of highly skilled, low-paid professionals married to the instant communications capabilities of the internet made Bangalore, New Dehli, Bombay, and other Indian cities ideal locations for the outsourcing of call centers, back-office operations, and any kind of business that could be done digitally. Tb
Thus, India became an export platform of an entirely new kind with growth rates approximating that of China. Whereas China was rapidly developing as the new workshop of the world by becoming the location of choice for global manufacturing, India was becoming the service center of the world by becoming the location of choice for the offshoring of services.
This development was unexpected and challenging. For years as manufacturing had migrated from the United States to Asia and Mexico, most economists had hailed the new international division of labor in which the U.S. economy would be concentrated on services and high technology to complement the manufacturing of Asia. Americans had been reassured over and over that their economy was moving to “higher ground,” where there would be better jobs in sophisticated services, design, investment banking, high technology, and R&D. That comforting mantra now began to sound a bit hollow as GE, IBM, and a host of others outsourced more and more of this kind of higher-level work to Asia.
The result of these developments has been the current hybrid global economic structure in which the world is half free trade and half neomercantilist. This flat world is tilted so as to slide production and provision of tradeable goods and services and the jobs attached to them away from the economies of economic orthodoxy to those of neomercantilism.”