[ashokrajagopal]

Originally Posted by ritz3645

This is only for Market economy.
We all, when we start our day our aim is to provide services/produce effectively/ efficiently in a market. There are local, regional, national & international market where we provide our services. There is competition and competitors, competing for the same pie. If the set of billionaire is constant i.e. devoid of competition or oligarchy or Google 'oligarchy countries'. A similes as in the stock market where companies compete.

First of all, the economy's aim is not to run an efficient market. The economy's aim is the well being of those the economy represents. The market is just a tool. The market exists for the people, and not the other way. You provide your services in a market because it serves you, there is no "have to" with it.
I did not understand where Oligarchy comes here. Its part of the US capitalist literature where they show up freedom of choice and describe stuff like multiple media houses, multiple auto companies, multiple so and so.
The fact remains that there are 3-4 media houses, 3-4 automobile giants, 7-8 tech giants etc in those large economies. Obviously there would be 50 varieties of ice cream( freedom of choice), but having two or three corporations competing is not "healthy" because you are already in a monopoly where your choice is limited.

10 person earning 10 or one person earning 100. Booth have very different needs and wants. An example is the Govt providing for toilets in rural India. Survey found that the toilets were being used as store rooms.


https://www.washingtonpost.com/world...=.4daa64dc1a9e

This has no connection with economics that we are discussing. Both have different wants and needs, but there is no way the one person can end up spending 1000 for anything worthwhile.
Please understand the economics angle of this.
If I give you 1000 and ask to spend by evening, you will buy something very useful ( a shoe, or a helmet that you wanted)
If I give you 10000 and ask you to spend by evening, you will buy something very useful ( a phone probably)
If I give you 100,000 and ask you to spend by evening, you will by something less useful (an expensive TV, or a some other luxury stuff)
If I give you 10,00,000 and ask you to spend by evening, you will either not spend it or spend it on some bubble.

Excess money in limited hands always goes and creates some bubbles like real estate. Because, there is absolutely no way you can trigger the economy with excess cash. 50 lakhs spend on 10 marutis produces more economic activity than on a single BMW. The more expensive items on all categories tend to be on jacked up, prohibitive prices. They are fine to exist, but an economy moving in this direction is bound to crash.

[DigitalOne]

Originally Posted by Samurai

Hmm, China is the biggest beneficiary of globalization, much more than India. So I am not sure how you are differing from my premise.

And what will they do when automation takes away those jobs? Last year, Foxconn alone replaced .....unless China has a strong demand for their own goods.

Strong domestic market means Indians buying India made products. Indian products selling in China is not an example of strong domestic market.

How many of the electronics/software you use daily is made in India? That will give you an idea how healthy we are as an economy.

Your original post seemed to opine that Globalization has only helped the MNCs in western countries and that it brings only "temporary" benefits to the low-wage countries. My argument, which you now agree with that it has immensely helped countries like China and India. I am glad we agree.

On consuming Indian products, we have not been a manufacturing based economy and so lost out to China. But we do consume our (non-IT) services which were quite unaffordable to earlier generations, like air travel.

If you consider China, they are consuming their own made iPhones and luxury cars at increasing rate. They are on their way to become to self-sufficient.

And both above were kick-started by globalization.

I think a lot of the economic theory against globalization, like the Guardian link you shared, is written from a western perspective. The target readers of Guardian is the leftist British trade union workers who have been badly affected by globalization. So I take those opinion pieces with a lot of salt.

Originally Posted by ashokrajagopal

Income growth is just one factor ( a convenient one for the market and inflation driven economies) used to evaluate growth. A nurse in the 90s in India would have earned 1/10th of what a nurse earns today. Does that prove poverty is eradicated ?

I didn't say poverty is eradicated. All I said was inequality can rise even if all are better off than earlier. Person A upgrading from Alto to Dzire, and Person B upgrading from a Wagon R to a Jaguar is "rising inequality" though both are better off than before. Inequality is just one of the economic indicators of a country.

On poverty there a many studies which show it has drastically reduced thanks to globalization.
https://en.wikipedia.org/wiki/Poverty_reduction :

A 2012 World Bank research article, “A Comparative Perspective on Poverty Reduction in Brazil, China, and India,” looked at the three nations’ strategies and their relative challenges and successes. During their reform periods, all three have reduced their poverty rates, but through a different mix of approaches. The report used a common poverty line of $1.29 per person, per day, at purchasing parity power for consumption in 2008. Using that metric and evaluating the period between 1981 and 2005, the poverty rate in China dropped from 84% to 18%; India from 80% to 42%; and Brazil from 17% to 8%.

[Fishtail]

How are poverty and inequality measured? Do we have uniform standards across countries?

[SmartCat]

Originally Posted by Fishtail

How are poverty and inequality measured? Do we have uniform standards across countries?

Inequality is measured by something called "Gini Index"
https://en.wikipedia.org/wiki/Gini_coefficient

[ashokrajagopal]

I didn't say poverty is eradicated. All I said was inequality can rise even if all are better off than earlier. Person A upgrading from Alto to Dzire, and Person B upgrading from a Wagon R to a Jaguar is "rising inequality" though both are better off than before. Inequality is just one of the economic indicators of a country.

On poverty there a many studies which show it has drastically reduced thanks to globalization.
https://en.wikipedia.org/wiki/Poverty_reduction :

Lets twist the example slightly to a little more probable. Person A upgrading from Hero cycle/TVS XL 50 to CT100 ES. Person B upgrading from Wagon R to XUV500. I believe this is more realistic and probable. Now, can you see the inequality problem clearly ? All this development very slightly improves the quality of life of Person A, and more so for Person B. Person A has to suffer more because of the side effects like lack of infrastructure, pollution etc affects the lower strata more.
Nobody cares about the rags to riches gems in any society. Least of all Economists, because you cant find a pattern from there. Wagon R guy upgrading to Jaguar at the same time Alto upgrades to DZire is a similar story. Inequality becomes an economic problem only because the more common cases are like the examples I mentioned. And clear stats exists for this case. In East and West. The economic problem would be clear to anybody if you choose the more probable examples.

Originally Posted by DigitalOne

Your original post seemed to opine that Globalization has only helped the MNCs in western countries and that it brings only "temporary" benefits to the low-wage countries. My argument, which you now agree with that it has immensely helped countries like China and India. I am glad we agree.

On consuming Indian products, we have not been a manufacturing based economy and so lost out to China. But we do consume our (non-IT) services which were quite unaffordable to earlier generations, like air travel.

If you consider China, they are consuming their own made iPhones and luxury cars at increasing rate. They are on their way to become to self-sufficient.

And both above were kick-started by globalization.

I think a lot of the economic theory against globalization, like the Guardian link you shared, is written from a western perspective. The target readers of Guardian is the leftist British trade union workers who have been badly affected by globalization. So I take those opinion pieces with a lot of salt.

There is a fundamental flaw in your theory here. "China is consuming own made iPhones". The point of view is plane wrong.
Apple needs China to make iPhones in a cost effective way.
Apple needs Chinese people to buy the phones so they can clear their inventory.

At the end of the day, the Chinese are working for Apple in subhuman labor conditions to make it cheaper, and the higher strata of Chinese are helping Apple by buying their stuff. Thats not self sufficient at all. Here, Apple is just an agent in between. Chinese might as well create their own phone, and consume it themselves and cut the middle man. But, can they create their own phone ? Nope, because the intellectual property capital is still owned by the investor( in this case, Apple). Unless the Govt intervenes at an appropriate time to invest in their own people's human resources, any country passing thru globalization would be a net loser.

There are two more things that must be clear for people leaning to Capitalist economics.

The Corporations need consumers. Lets be clear with that, that they need India and China, not the other way around. GM which created cars only for US had to expand to Europe after 2nd world war. And had to expand to Asia in the late last century. They have to, because that is the only way they can scale.

The Corporations need cheaper labor. That is the only way they escaped the last recession. China effectively provided shock absorbers for Europe and most of US after the Great recession. The countries that are chosen by the corporations to expand are not chosen for charity. They need these countries. What must a smart government do ? While the industry goes on, get maximum benefit for the people.

I will give a very wild ( and quite unprobable) example. If the current Indian parliament passes a bill to make every Foreign phone to contribute Rs 100 to Indian treasury for each phone sold. And strictly without passing it on to the customer. Do you think the phone companies shut shop in India ?

They need our markets. And sometimes more than we need them. Sometimes otherwise.

[AltoLXI]

Originally Posted by ashokrajagopal

There are two more things that must be clear for people leaning to Capitalist economics.

The Corporations need consumers. Lets be clear with that, that they need India and China, not the other way around. GM which created cars only for US had to expand to Europe after 2nd world war. And had to expand to Asia in the late last century. They have to, because that is the only way they can scale.

The Corporations need cheaper labor. That is the only way they escaped the last recession. China effectively provided shock absorbers for Europe and most of US after the Great recession. The countries that are chosen by the corporations to expand are not chosen for charity. They need these countries.

They need our markets. And sometimes more than we need them. Sometimes otherwise.

Couldn't agree more on this !! When the West outsourced the jobs to our country, the "side effect" was the setting up of the other companies which sell the cars, white goods and what not. In effect, the "system" is so designed that the money that flows in eventually flows back to the place it came from.

More like - give with one hand and take back using the other . At the end, for the third world countries, it is a zero sum game.

[vishnurp99]

Really love the conversation here.

Just wanted to share my understanding of the big picture here. Let me know any thoughts on this.

The Chinese routinely ask companies to make trade offs between market access and technology transfer. Essentially the companies are forced to part with technology patents/proprietary information to access the Chinese market. This is good for Chinese industry in general and in practice the Chinese state run companies benefit from this. Guess they are being smart unlike the Indian guys.

The other thing is - Electric power is apparently the cheapest in middle America. There is a school of belief that with technologies like AI , 3D printing and robotics medium to large industry will move to these locations by 2025 from China. The need for labour will progressively decrease and the bulk of people in US and rest of the world will live on universal subsidy payments since there will only be a few jobs.

Essentially there is a tussle between US and China because of this. US wants to accelerate this process while China wants to slow this for time being. US is worried about the earlier technology transfers and also the fact that China is the biggest market today.

This is where India comes in and can be a counter to China's market size. If US gets to play an influential role in India and is able to stabilize India and prevent chaos here the US industry can move back to US and some labour intensive line items could come to India too. If India grows at the current rate the market will be comparable to China in next 7 to 8 years. China cannot let this happen obiviously.

The big unknown in the mix is alternate sources of power. If we have a cost effective way of deriving solar power, then the equation totally changes and suddenly favours tropical nations like India.

[DigitalOne]

Originally Posted by ashokrajagopal

Lets twist the example slightly to a little more probable. Person A upgrading from Hero cycle/TVS XL 50 to CT100 ES. Person B upgrading from Wagon R to XUV500. I believe this is more realistic and probable.

I agree that your example is more realistic. The numbers clearly show that. Hero Motocorp is the biggest motorcycle manufacturer in the world. So millions of middle-class person A s have been created in India because of post 1991 liberalization and Globalization.

At the end of the day, the Chinese are working for Apple in subhuman labor conditions to make it cheaper, and the higher strata of Chinese are helping Apple by buying their stuff. Thats not self sufficient at all. Here, Apple is just an agent in between. Chinese might as well create their own phone, and consume it themselves and cut the middle man. Unless the Govt intervenes at an appropriate time to invest in their own people's human resources, any country passing thru globalization would be a net loser.

China has created their own phone brands, didn't you know? Even if Apple shuts manufacturing in China now, it will be a blip but not an earthquake.

Chinese IT companies like Baidu, Alibaba, Weibo, take on likes of Google, and Amazon.

I will give a very wild ( and quite unprobable) example. If the current Indian parliament passes a bill to make every Foreign phone to contribute Rs 100 to Indian treasury for each phone sold. And strictly without passing it on to the customer. Do you think the phone companies shut shop in India ?

This is called import duty. Government does this frequently:

https://economictimes.indiatimes.com...w/62079342.cms

---
Simply put, China or India are not net losers in Globalization game.

You take the 60-70s when South Korea and Japan built their economy initially helped by the US. After the devastating wars, it is globalization at that helped them. If United States had put restriction on Japanese imports then, Japan would be a 3rd world country now. We woudn't have a Toyota or a Honda or hundreds of Japanese MNCs.

You seem to have an understanding that economy is a zero-sum game. If there is a winner, there has to be a loser. It isn't. Both can be winners, albeit at different rates of growth.

Simple question to you: If you had a time machine, would you go back in time to stop PVNR or Deng Xiaoping doing reforms they did? Would you say to them "Hey, globalization will give you only 'temporary' benefits. So remain the poverty-stricken third-world country, you are"?

Originally Posted by AltoLXI

Couldn't agree more on this !! When the West outsourced the jobs to our country, the "side effect" was the setting up of the other companies which sell the cars, white goods and what not. In effect, the "system" is so designed that the money that flows in eventually flows back to the place it came from.

That happens initially. But then domestic companies then start getting technology know-how, and start achieving scale, then even dominate global brands. Examples are plenty : Xiaomi, Oneplus, Tata Motors, Tata Tea (acquired Tetley), Tata Steel, Alibaba, Airtel, Hero Motocorp, Mahindra, SAIC, Lenovo.... and the list goes on.

Hero needed the crutches of Honda initially but now they are comfortably ahead of the global brands in the motorcycle segment in India.

[Samurai]

Originally Posted by DigitalOne

You seem to have an understanding that economy is a zero-sum game. If there is a winner, there has to be a loser. It isn't. Both can be winners, albeit at different rates of growth.

I don't think he said economy is a zero-sum game. It obviously isn't. But globalization is a zero-sum game. It is because it allows jobs to move seemlessly across borders while people can't do that same. If people can move wherever jobs go, then it will even things out.

Originally Posted by DigitalOne

Simple question to you: If you had a time machine, would you go back in time to stop PVNR or Deng Xiaoping doing reforms they did? Would you say to them "Hey, globalization will give you only 'temporary' benefits. So remain the poverty-stricken third-world country, you are"?

PVN Rao or Deng Xiaoping didn't start globalization, profit seeking corporations did. Don't confuse economic reforms with globalization. They are not the same thing.

[ashokrajagopal]

Originally Posted by DigitalOne

I agree that your example is more realistic. The numbers clearly show that. Hero Motocorp is the biggest motorcycle manufacturer in the world. So millions of middle-class person A s have been created in India because of post 1991 liberalization and Globalization.

Assumption: A person riding a cycle 3 KM to work in ordinary traffic is not middle class. A person riding a CT100 3 KM in choking traffic laden with big cars and SUVs is middle class. What is the logic behind this ?
Just because you are using a more expensive tool, does not improve your quality of life. In your first example, you were comparing two persons for whom, the basic quality of life was guaranteed and then one of them grew exponentially compared to the other ( both had cars to start with).
In my example I showed a case where the second person grew better from an already better place, and the first person is pretty much there or worse off. The quality of life of those lacking it rarely improved, and that is the reason for the social unrests. This is the inequality problem economists around the world ( East and West) are worried about.

China has created their own phone brands, didn't you know? Even if Apple shuts manufacturing in China now, it will be a blip but not an earthquake.
Chinese IT companies like Baidu, Alibaba, Weibo, take on likes of Google, and Amazon.

Assumption 2: Technology creation by the so called 3rd world countries is not possible. Why can't China create their own phones without Globalization of this scale ?
The second thing that I may not have been clear before is, iPhone has already taken X percent of the market, nearly only benefiting Apple. So, China can create phones, but Apple would have taken over a percentage of the market already, but will move manufacturing out as soon as they find another cheaper place/option.
It is only because of the politics created by Corporations, built into capitalism. Technology like Wifi is mostly developed by funding thru Governments. It is only because capitalism followed as a policy that the products that use these end up controlled by Corporate interests.
Chinese websites are taking on American Corporations, why are you saying that is because of Globalization ?
BTW, if Apple shuts manufacturing in China now, Apple dies within years. They wouldnt be able to break even. This may change in future.

This is called import duty. Government does this frequently:

https://economictimes.indiatimes.com...w/62079342.cms

Assumption 3: Who said it is about import cases only ? Import duty is when you import a part. I did not point at imported phones only. I said every phone sold for a foreign brand. Could be made in India, could be outside. The idea is "Hey corporation, we let you build it in India for cheap, our people will buy it from you so you can clear your inventory, and we are a large country so you will have a huge market, so you pay the Indian treasury". I also said Weird example.

---
Simply put, China or India are not net losers in Globalization game.

Its not just an assumption, a very very long logical jump with no backing. You cant measure an economy by a few decades. Wait for some more years to see how it pans out. I am not stating its otherwise -- I think its too early to say.

You take the 60-70s when South Korea and Japan built their economy initially helped by the US. After the devastating wars, it is globalization at that helped them. If United States had put restriction on Japanese imports then, Japan would be a 3rd world country now. We woudn't have a Toyota or a Honda or hundreds of Japanese MNCs.

It would be really naive to look at Japan and South Korea without the points about US attack on Japan in 2nd world war, and the later Cold war political backdrop. Its not like US put the "Globalization" rule book into play and magically it transformed; they politically played a reparation game to rebuild the economy and consolidate a position against Communism. It was a political need.
The globalization rule book was played on many other countries. African, and South east like Philippines. They did not yield much of a difference. Of course there would be some per capita $X at that time vs $Y at this time, but that has been pointed out many times here that its just a statistic.

You seem to have an understanding that economy is a zero-sum game. If there is a winner, there has to be a loser. It isn't. Both can be winners, albeit at different rates of growth.

Lets put my thoughts aside because that is not really an economics argument.

Simple question to you: If you had a time machine, would you go back in time to stop PVNR or Deng Xiaoping doing reforms they did? Would you say to them "Hey, globalization will give you only 'temporary' benefits. So remain the poverty-stricken third-world country, you are"?

There are ways in which business is done and that is what we are discussing here in this thread. All thru, I believe the talk has been about government taking advantage of globalization the way the country needs, and not the way the corporations or another country wants. Your assumption here is that any country that did not work with US led globalization team is a poverty stricken third world country. You could say that with some per capita $ number, but it is again just a capitalist convenience.
Cuba has been the poster child of anti globalization; it has a high HDI. High literacy rate. Economies develop in different ways, depending upon how good their governments are. The capitalist side of it is usually saying, how about you getting rid of all these and becoming some hell hole. Economics and politics is not binary -- there can be a middle path with Governments protecting its people rather than following a capitalism bible.

I, for one think that PVNR and the Indian governments following him should have extracted a little more from the S/W corporations around the world to develop our skill set. And tried to create a s/w market advantage in India.

Lets just make Globalization this "hippie, open door" thing that capitalists seem to explain AS, but is really practiced as an intellectual property preservation thing.

That happens initially. But then domestic companies then start getting technology know-how, and start achieving scale, then even dominate global brands. Examples are plenty : Xiaomi, Oneplus, Tata Motors, Tata Tea (acquired Tetley), Tata Steel, Alibaba, Airtel, Hero Motocorp, Mahindra, SAIC, Lenovo.... and the list goes on.

Hero needed the crutches of Honda initially but now they are comfortably ahead of the global brands in the motorcycle segment in India.

You are choosing the sectors you have examples in. Domestic small scale industry, retail, garments, shoes, software, electronics, cosmetics, there are tons of examples from the opposite spectrum where the domestic industry has been killed by the invader.

[DigitalOne]

You say this.

Originally Posted by Samurai

Hmm, China is the biggest beneficiary of globalization, much more than India. So I am not sure how you are differing from my premise.

In one of your early quotes, you have said that you have personally gained from globalization. So have thousands of other Indians (including me) in the IT services industry also have benefitted.

Originally Posted by Samurai

I don't think he said economy is a zero-sum game. It obviously isn't. But globalization is a zero-sum game. It is because it allows jobs to move seemlessly across borders while people can't do that same. If people can move wherever jobs go, then it will even things out.

PVN Rao or Deng Xiaoping didn't start globalization, profit seeking corporations did. Don't confuse economic reforms with globalization. They are not the same thing.

Now you say that Globalization is a zero-sum game. I take it that you mean that the gains for Indian/Chinese workers was a loss for American/West European workers and thus it is a zero-sum game ? If so, there is a 'redistribution' from American to Indian/Chinese workers that has happened. And as @ashokarajagopal put it correctly in another post - it is better for smaller amounts to be in large number of people than for it to be concentrated in smaller number of people. Globalization has thus helped the world economy on the whole.

[Samurai]

Originally Posted by DigitalOne

In one of your early quotes, you have said that you have personally gained from globalization. So have thousands of other Indians (including me) in the IT services industry also have benefitted.

Yes, I have personally gained from globalization. That doesn't mean I should ignore the flaws of globalization. While I was lucky to be in the industry which benefited from globalization, I know people who were in manufacturing that became victims of globalization, losing their jobs to China.

Originally Posted by DigitalOne

Now you say that Globalization is a zero-sum game. I take it that you mean that the gains for Indian/Chinese workers was a loss for American/West European workers and thus it is a zero-sum game ? If so, there is a 'redistribution' from American to Indian/Chinese workers that has happened.

Redistribution of wealth means excess wealth moving from rich to the poor. What globalization does is move middle class jobs from high labor-cost countries to low-labor cost countries. Taking away middle class jobs from one country and giving it to another country is not redistribution of wealth. In fact, globalization made middle class Americans poorer, and American companies much richer.

[ashokrajagopal]

Originally Posted by DigitalOne

You say this.

In one of your early quotes, you have said that you have personally gained from globalization. So have thousands of other Indians (including me) in the IT services industry also have benefitted.



Now you say that Globalization is a zero-sum game. I take it that you mean that the gains for Indian/Chinese workers was a loss for American/West European workers and thus it is a zero-sum game ? If so, there is a 'redistribution' from American to Indian/Chinese workers that has happened. And as @ashokarajagopal put it correctly in another post - it is better for smaller amounts to be in large number of people than for it to be concentrated in smaller number of people. Globalization has thus helped the world economy on the whole.

Let me try to clear it up. 1000s have benefitted 20%. Lakhs have benefitted 2%. Lakhs havent benefitted at all. While everybody lost 5%( environment, quality of life etc etc). Now, is the inequality clear ?( Numbers just figurative).

The second thing, the smaller amounts to the larger number of people is being assumed directly as a benefit. I have been saying that the cost did not justify the benefit for many people and many sectors. Of course it benefitted some people and some sectors. All the while, the Globalization literature just simply ignores the people who did not benefit. And the future where the people who already benefited losing out. ( eg. future loss of jobs).

[AltoLXI]

Looks like even the MNCs are unable to tap into the Indian middle class.

Article

[Nav-i-gator]

As Samurai puts in - Globalization in current form (where jobs move freely but people cannot) is not globalization in the literal sense. It's just cost optimization. Basically, consumerism (with consumers being the companies/businesses/corporations).

Let me put one point to ponder for all - What would have been the scene of globalization IF the value of all currencies across the world be the same?

In a way EU was the closest to Globalization - free movement of goods, services and people with single currency. And as we can see, one of the Champions of Globalization, UK, chose Brexit!

In a real global/Free market, money (and prosperity) will spread from high concentration to low concentration regions, until a uniform spread is achieved (like Osmosis). What we have instead, is RO (reverse Osmosis). Every country is trying to manipulate the flow of money to maintain differential flow inwards (Inflow>Outflow).