Cycles of Globalization and Manufacturing

We live in a tangled web thanks to globalization.

Korea’s economic growth in the early days of industrialization has come as a byproduct of globalization to any significant degree, taking advantage of its diligent cheap labor. Since the 1997 financial crisis, its manufacturing base has been weakening.

The U.S has shipped much of its manufacturing overseas while financial services have risen as America’s chief product. The credit boom has created false demand in the U.S.

Production on real goods had been shifted to Asian tigers, and then some is being shifted to South Asian countries.

As the domestic economies of the off-shore countries grow, their middle class populations will grow and demand for products will grow along with them.

Global wage arbitrage has been driving the transfer of manufacturing from the developed nations to developing ones. MNCs relentlessly relocate production off-shore. Some (like Marc Faber and Andy Xie) have argued that low interest rates in the U.S. have pushed the money to go to the developing nations. We understand how the credit boom and bust in the U.S. has been.

It is contended that the world economy can’t bottom until the rest of the world goes through the similar process

To make matters worse, the world economy is facing the deflationary forces the world hasn’t seen for some time.