The New Threat: China and India
Singh (2007) revisits an international facet of the de-industrialization question, focusing on challenges that highly developed economies face from the rapid industrialization of India and especially China. Early impacts include the widening of competitively interlinked world labour markets, the outsourcing of skilled jobs, and dramatic increases in the number of newly trained engineering graduates competing for technology jobs. Whether workers in the earlier industrialized nations have been harmed or benefited by this new competition has been vigorously debated. Singh asks whether the expansion of Asian industries has been complementary to, or competitive with, advanced nations’ economic activity. He argues it has been expansionary on the whole, but does not pin down the locus of spillover gains—for example, to what extent Australian iron-ore miners, Middle Eastern oil producers, American electronic component makers, and German precision machinery makers have benefited from the increased demand, as compared to the job displacement caused by increased Chinese and other newly industrializing nations’ finished manufactured goods exports. Singh notes that exports of cheap Chinese and Indian consumer goods have reduced inflationary pressures and raised standards of living (what some characterize as the Wal-Mart effect) for less affluent American consumers, but the overall balance of benefits is left in doubt. Singh cites work by Baily and Lawrence (2004) that manufacturing’s falling share of the US workforce was attributable mainly to productivity gains outracing income elasticity effects, and that increased import competition had considerably weaker share-reducing effects. Since the time of his paper, the Chinese renminbi has risen in value relative to other major world currencies, reducing export price pressures, but on the broader implications of this most important development, the final verdict remains to be written.[1]
- [1] For a recent and more pessimistic analysis, see Autor et al. (2013).
