China's ascendancy

This is the first time I've heard anyone say just 'give up' , you won't be able to compete with cheaper workers overseas, particularly you IT workers :

For individuals: You can avoid competition with Chinese workers by doing place-based work, which ranges in value from highly skilled (emergency-room surgery) to menial (pouring concrete). But the many people who do information-based work, which is most subject to competition, will have to get dramatically better to be worth what they cost. For government leaders: Improve U.S. education above all.


Of course he throws in the obligatory 'more education' argument , but leaves out the critical part: What industry/jobs should anyone pursue education in that can't be done overseas and cheaper ? He does mention that we should do 'place-based' work ... so maybe he wants everyone to go back to school to learn to work in 'emergency-room surgery' ?

The vast majority of the new jobs and industries that will be created in the coming years will be work that is digitized. Because of this, it can be performed anywhere in the world . So new technologies do NOT hold hope for Western workers .

Even a lot of medical work is moving overseas (perhaps not emergency room work) from analyzing test results that are digitized and sent around the work in seconds to doing surgery and dental work overseas for a fraction of the cost.

And teachers are viewed as place-based work but teaching may soon shift dramatically to being online or at least having some significant component of coursework being online.

There is not enough 'place-based' work to substitute for the mass of work being shifted overseas and at the same time, even if this could happen , there would be a surplus of people competing for 'place-based' work leading to significantly lower wages.

The only things that will slow this globalization down are:

1- Political instability in the world (good chance)
2- Energy getting expensive makes the world larger , not smaller (happening now)
3- Unchecked markets destabilizing countries (happening now with food and also oil)




April 30, 2008: 5:41 AM EDT

You have 7 years to learn Mandarin
Forget cheap imports. China's rise will soon be a force on Wall Street and Main Street and in Silicon Valley.
By Geoff Colvin, senior editor at large


(Fortune Magazine) -- Back in 2001 when the International Olympic Committee chose Beijing as the site of this summer's games, the event was meant to mark China's debut as a player on the global economic stage. But a recent study by the economist Angus Maddison projects that China will become the world's dominant economic superpower much sooner than expected - not in 2050, but in 2015.
While short-term investors are already cashing in on China's growth by playing the global commodities boom, smart long-term thinkers are contemplating what happens when China matures from an exporter of cheap goods to a competitor in sectors where the U.S. is dominant - technology, brand building, finance. China has almost wiped U.S. makers of low-value items like toys and socks, but by 2015 it may threaten Apple (AAPL, Fortune 500), J.P. Morgan Chase (JPM, Fortune 500), and Procter & Gamble (PG, Fortune 500). It will increasingly influence the S&P 500 and the mutual funds in our 401(k)s. So it's worth looking at how that will happen, what it means, and what anyone can do in the seven years before the baton is passed.
Just using the exchange rate to convert China's GDP into dollars isn't helpful in comparing the two economies, because China controls its exchange rate; by that method, China's economy might not pass America's for decades. Exchange rates apply only to tradable products and services; they aren't very useful in valuing nontradable goods in a country like China that is much poorer than the United States. So we need some way to compare the real value of China's economic output with America's, and economists have developed one. It is called purchasing power parity.
For example, Chinese construction workers earn a whole lot less than Americans do, yet they can still build top-quality buildings. If we used the exchange rate, the value of a new skyscraper in Shanghai would count much less toward China's GDP than an identical building in Chicago would count toward America's, which makes no sense. Purchasing power parity corrects the problem.
Will China take the crown?
Angus Maddison's forecast (which uses purchasing power parity) isn't built on outlandish assumptions. He assumes China's growth will slow way down year by year, and America's will average about 2.6% annually, which seems reasonable. But because China has grown so stupendously during the past decade, it should still be able to take the crown in just seven more years.
If that happens, America will close out a 125-year run as the No. 1 economy. We assumed the title in 1890 from - guess who. Britain? France? No. The world's largest economy until 1890 was China's. That's why Maddison says he expects China to "resume its natural role as the world's largest economy by 2015." That scenario makes sense.
China was the largest economy for centuries because everyone had the same type of economy - subsistence - and so the country with the most people would be economically biggest. Then the Industrial Revolution sent the West on a more prosperous path. Now the world is returning to a common economy, this time technology- and information-based, so once again population triumphs.
So how should we make the most of our seven-year grace period? For companies: Focus on getting better at your highest-value activities. Just because the Chinese will be fighting you in the same industries doesn't mean you'll lose. (Investors, remember that China bought $3 billion of Blackstone (BX) at the IPO price of $31 last summer, and the firm is now trading at $19.) It only means you'll have to work harder to win.
For individuals: You can avoid competition with Chinese workers by doing place-based work, which ranges in value from highly skilled (emergency-room surgery) to menial (pouring concrete). But the many people who do information-based work, which is most subject to competition, will have to get dramatically better to be worth what they cost. For government leaders: Improve U.S. education above all.
Those are the issues in China's becoming No. 1 that we most need to focus on. And as with so much else in China's recent history, we'll need to worry about them much sooner than we expected.