I am no economist. I can’t believe I am writing yet another post on the areas of interest to economists!
Look at this globalization and outsourcing phenomenon.
- Some countries (somehow) became more prosperous
- That means more people of those countries had higher standards of living
- This led to aspiration of further higher standard of living in those people – in somewhat accelerated fashion
- This led to low birth rate
- This led to labor shortage in those countries
- This pushed wages higher in those countries
- This created the cost arbitrage
- This created the outsourcing boom
- The hope is that destination of outsourcing like India and China, will also become prosperous and their cycle will start from point #1 again, with countries like South Africa and others gaining in the next turn
However, there is a key difference in the second cycle. That has to do with where point #1 for China/India is and where point #3 could be.
For example, fatalist attitude and caste-ridden structure of Indian society may lead to a situation where a part of society never dreams higher. [I have some experience of such people from the Eastern side of the Kanpur-Chennai line.]
If large enough part of Indian society doesn’t dream big, it would defeat point #3. Then as a result, population never decreases (#4), labor shortage never happens (#5) and economy activity may become a hostage of Indian society. Once economical gains become limited to a section of a society, modern thinking goes for a toss.
Is it me or you also think this way?