how globalization affects equity
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How Globalization affects Equity
J o s h u a K o n o v 2 0 1 0
In t imes o f G loba l i za t ion some economies and
markets bu i ld equ i t y , however some not on l y cannot
use the i r equ i t y to improve the i r s tandard o f l i v ing
but l o se the i r equ i t y to l ack o f bus iness tha t
p rovokes de ter io ra t ion o f equ i t y o r a t l eas t
d i scount o f equ i t y .
Equ i t y i s in the foundat ion o f the economy and the
marke t : in the pas t mos t o f the equ i t y cons i s ted to
phys i ca l p roper t y but g radua l l y more in te l l ec tua l
p roper t y and sub jec t i ve marke t secur i t i e s have
become equ i t y . Thus when ind i v idua l o r corpora te
equ i t y i s eva lua ted p lus the phys i ca l equ i t y i f any
the in te l l ec tua l p roper t y , the ho ld secur i t i e s and
the pro jec ted economic growth a re
cons idered equ i t y . The t rend toward in te l l ec tua l
p roper t y and market va lued secur i t i e s ins tead o f
phys i ca l equ i t y i s more than obv ious fo r p r i va te and
corpora te equ i t y equa l l y . However , p r i va te equ i t y
f o r the ma jor i t y in the wor ld cons i s t s o f phys i ca l
p roper t y equ i t y when in te l l ec tua l and market
secur i t i e s equ i t y i s more possessed by ve ry wea l thy
ind i v idua l s and ind i v idua l s l i v ing in the mos t
deve loped economies .
There i s d i rec t cor re la t i on be tween market
ind i v idua l income and equ i t y va lue , because equ i t y
va lue re f l ec t s genera l marke t va lue o f a p roper t y
wh ich re la tes income f inanc ia l s ta tement . A
proper t y va lue suppor ted by h igher income
s ta tement i s h igher than a proper t y va lue suppor ted
by l ower income f inanc ia l s ta tement . In some cases
- a s i t happened be fore the l a s t Grea t Recess ion -
marke t p roper t y va lue became uncont ro l l ab le
p rompted by pure specu la t ions and compromised
l end ing prac t i ces . Consequent l y the exaspera t ion
o f p roper t y va lue burs t b r ing ing f inanc ia l l o s ses
and l os t o f p roper t i e s to many . Seeming l y equ i t y o f
p roper t y va lues shou ld we l l r e f l ec t the rea l marke t
p roper t y va lues wh ich re f l ec t genera l income l eve l
in th i s marke t . Ta lk ing about equ i t y no t re la ted to
phys i ca l p roper t y but cou ld be in te l l ec tua l
p roper t y , marke t secur i t y , o r p ro jec ted economic
growth w i th very h igh sub jec t i v i t y in the rea l
economy the marke t va lue o f such equ i t y i s more
re la ted to secur i t y o f in te l l ec tua l p roper t y , marke t
secur i t i e s and cer ta in ty o f p ro jec ted economic
growth . Fac tors tha t d i rec t l y a f f ec t these equ i t y a re
sc ru t in i zed h i s to r i ca l deve lopment o f the marke t ,
mos t recent economic ind ica tors showing the
d i rec t ion o f th i s marke t and cons i s tent ind ica tors
o f the d i rec t ion o f p rox ima l deve lopment , f ac tors
tha t ind i rec t l y a f f ec t these equ i t y a re the l eve l o f
r ea l ac t ing ru le o f l aw and cont rac t ing l aws o f such
market , the c l a r i t y and accountab i l i t y o f the
marke tp lace and t rad ing exchanges , the c l a r i t y and
accountab i l i t y o f in te l l ec tua l p roper t y l aws , and the
l eve l o f persona l l i ab i l i t y o f the r i sk management o f
corpora te s t ruc tures , the f i s ca l s tab i l i t y and the
respec t i ve in f ras t ruc tura l ma in tenance and
improvement , and soc ia l and med ica l secur i t y in
th i s marke t .
G loba l i za t ion has invoked the need fo r ind i v idua l
marke ts o f us ing Soc ia l and In f ras t ruc tura l
expanses fo r ba lanc ing “demand- to - supp l y” when in
the pas t these expenses were func t ion ing as
s toppers toward economic growth because the
overa l l p roduc t i v i t y was l ower and there were many
c losed fo r g loba l i za t ion markets , now the
cond i t i ons a re chang ing the produc t i v i t y i s r i s ing
cons tant l y and the a lmos t a l l marke ts a re eager to
g loba l i ze . O ther ma jor changes a t the moment a re
the Ch ina ’ s en ter ing WTO and the g loba l
compet i t i on and the cons i s tent economic growth fo r
the l a s t 20 years Ch ina has succeeded . By
a t t rac t ing the ma jor i t y o f g loba l inves tment and by
becoming economy to wh ich outsourc ing and new
s ta r tup manufac tur ing Ch ina become the indus t r i a l
power tha t might we l l t i p -o f f “ supp l y - to -demand”
in to “demand- to - supp l y” marke t con f igura t ion ; such
processes shor ten a l ready shor ten ing employment
in manufac tur ing to the res t o f the wor ld .
Manufac tur ing , indus t r i a l p roduc t ion cou ld we l l be
cons idered in the foundat ion o f the modern
Cap i ta l i sm tha t adds the mos t to f i s ca l r eserves o f
mos t o f g loba l economies by h igh l y pa id
employment ; the mos t advantageous re turn o f
inves tment and the mos t secure bu i ldup o f equ i t y :
the h igher growth o f indus t r i a l p roduc t ion the
h igher l eve l o f equ i t y va lue .
The Mos t Deve loped Economies a re cons idered the
Mos t Indus t r i a l i zed Economies .
In such market env i ronment o f G loba l i za t ion
(outsourc ing and mov ing indus t r i a l p roduc t ion to
l e s s expens i ve economies ) and r i s ing Produc t i v i t y
( improvements in h igh techno log ies and shr ink ing
employment marke tp lace cause th i s r i s ing
produc t i v i t y ) indus t r i a l employment i s shr ink ing
fas t a t US . Very f ew a re the economies o f Mos t
Deve loped ones tha t have succeeded under cur rent
f o rces o f indus t r i a l compet i t i on to sus ta in
indus t r i a l p roduc t ion and keep up the i r indus t r i a l
l eadersh ip : Germany and Japan a re the f ew . The
va lue o f equ i t y a s s ta ted c lose l y re la tes indus t r i a l
p roduc t ion o f the modern day economics there fore
overa l l such va lue w i l l de te r io ra te in marke ts w i th
de ter io ra t ing indus t r i a l p roduc t ion .
Modern economics does no t t ake in cons idera t ion
the va lue o f a l ready succeeded equ i t y i f economic
indus t r i a l economic growth i s no t ma in ta ined and
on l y shor t t e rm se l f - ad jus tments a re pro jec t -ab le .
Such pos i t i ons o f equ i t y d i rec t l y re la te the
f inanc ia l s y s tem o f ind i v idua l marke ts and the
g loba l f inanc ia l s y s tem wh ich l ends on re la t i ve l y
h igh in te res t ra tes and shor t t e rm, and in wh ich
corpora te s t ruc tures a re run on shor t
t e rm pro f i t ab i l i t y . Indeed equ i t y re la ted
in te l l ec tua l p roper t y and equ i t y re la ted marke t
secur i t y a re l ong te rm corpora te equ i t y however the
f luc tua t ions o f overa l l marke t equ i t y va lue o f ten
f luc tua te and re f l ec t s corpora te equ i t y va lues
v io l en t l y .
In the pas t when supp l y was l ead ing and mos t
deve loped count r i es were f i rmly ho ld ing onto the
g loba l indus t r i a l p roduc t ion such f luc tua t ions o f
i nd i v idua l and corpora te equ i t y va lues were
produc t i ve because o f p rompt ing concent ra t ion o f
cap i ta l th an prompt ing consecut i ve economic
growth , th en a l so l e s s deve loped economies were
more l i ke sa te l l i t e s to the mos t deve loped ones
be ing ab le to suppor t f i s ca l r eserves fo r soc ia l and
in f ras t ruc tura l expenses . Even some par t s o f such
indus t r i a l p roduc t ion was deve loped here and there
in d i f f e rent count r i es the ma jor i t y was s t i l l kep t by
the mos t indus t r i a l i zed economies . The equ i t y
va lues in mos t indus t r i a l i zed marke ts were
there fore h igher than these o f in l e s s deve loped
markets and these s t i l l a re , except tha t under the
new arous ing cond i t i ons o f g loba l i za t ion and r i s ing
produc t i v i t y indus t r i a l p roduc t ion has been
gradua l l y moved and outsourced to Ch ina , and now
Ind ia , Braz i l and V ie tnam which a re vas t l y
popu la ted count r i es w i th inexpens i ve l abor fo rce
and some good indus t r i a l s t ruc tures , there fore in
t e rms o f va lue o f equ i t y re la ted indus t r i a l
p roduc t ion the mos t de f in i t i ve becomes the i s sue o f
l ack o f such indus t r i a l p roduc t ion to many
economies and i f such i s r educed or l o s t what
consequent l y wou ld be the i r va lue o f equ i t y .
In te l l ec tua l p roper t y and market secur i t y va lues
are much more f l ex ib le and adapt i ve th an the rea l
e s ta te equ i t y va lue because in te l l ec tua l p roper t y
and market secur i t y equ i t y re f l ec t s an economy ,
count ry , marke tp lace ach ievements in educa t ion ,
soc ia l and in f ras t ruc tura l deve lopment tha t
requ i res l ong te rm deve lopment thus count r i es a s
US tha t ve ry we l l r epresent s such succeeded
deve lopment w i l l be hard to be shut away as ho lders
o f such equ i t i e s . However such super io r i t y i s a
shor t t e rm prospec t i ve even to the mighty US
because o f the In terne t and the cons tant exchange
o f in format ion and techno log ies , because o f the
outsourc ing and mov ing indus t r i a l p roduc t ion the
new emerg ing economies wou ld pop -up i f these
themse l ves deve lop requ i red in f ras t ruc ture , soc ia l
s t ruc tures , and educa t ion to respond to the
chang ing rea l i t i e s . In case o f Ch ina when in the
pas t i t s communis t soc ia l po l i c i e s were counter
p roduc t i ve to i t s indus t r i a l g rowth and deve lopment
under the mos t recent g loba l i za t ion and r i s ing
produc t i v i t y Ch ina ’ s Soc ia l and In f ras t ruc tura l
expenses proved to be very p roduc t i ve in ba lanc ing
i t s “demand- to - supp l y” and thus succeed ing
cons i s tent economic growth even when the res t o f
the wor ld went through the Grea t Recess ion , thus
China ’ s equ i t y has r i sen much because o f i t s
economic growth .
Equ i t y va lues a re ve ry sens i t i ve economic
ind ica tors more l i ke cur renc ies ; the d i f f e rence
be tween them i s tha t cur renc ies ’ va lues a re more
re la ted to shor t t e rm g loba l ad jus tments and
f luc tua t ions when equ i t y works in l onger t e rms .
Equ i t y va lues a re harder to bu i l t : r ea l e s ta te ,
in f ras t ruc ture , in te l l ec tua l p roper t y , marke t
secur i t y equ i t y va lues a re to be used in the fu ture
as economic ind ica tors fo r a count ry , economy ,
marke t eva lua t ion and underwr i t ing . To use equ i t y
va lues , economics must change the ways these
va lues a re preserved and enhanced even when
indus t r i a l p roduc t ion i s no t go ing to be the ma in
economic ind ica tor a s i t has been fo r some t ime .
Economic “ too l s ” a re to be used to sus ta in equ i t y
va lues in a “as i t comes : a s i t goes” bas i s and
approach , tha t approach d i f f e r s f rom country ,
economy , marke t to count ry , economy , marke t
because o f the i r l e ve l o f deve lopment , menta l i t y
and t rad i t i on . In some Soc ia l and In f ras t ruc tura l
expanses shou ld be reduced in shor t t e rm to prompt
economic deve lopment in some the Soc ia l and
In f ras t ruc tura l expenses shou ld be we l l enhanced
to p rompt such economic deve lopment . There a re
some economic “ too l s ” tha t a re fo r a l l and these
a re the expanses fo r p revent ing po l lu t ion and
imp lement ing renewab le energ ies , these a re
economic “ too l s ” f o r ba lanc ing “demand- to - supp l y”
on a g loba l s ca le and a re to be f inanced by the
g loba l f inanc ia l s t ruc tures o f the Wor ld Bank , IMF
and WTO through Commerc ia l Banks on a
marg ina l in te res t ra te o r subs id ies . For such
l end ing paramount shou ld be the enhancement
o f bus inesses secur i t y : o f bus iness and cont rac t ing
l aws , o f persona l l i ab i l i t y to corpora te s t ruc tures ,
o f corpora te bond ing . The g loba l f inanc ia l
s t ruc tures shou ld be g i ven the cont ro l l ing
func t ions over g loba l ba lance o f “demand- to -
supp l y” to p revent f rom in f l a t i on , the i s su ing o f
monetary quant i t i e s power to keep in te res t ra tes
l ow , the ta rge t ing count r i es , economies , marke ts
weak po in t s f o r bu i ld ing equ i t y , the cont ro l l ing
over count r i es , economies , marke ts compl iance w i th
the gu ide l ines and underwr i t ing , the cont ro l l ing
over commerc ia l banks ’ execut ion o f these
gu ide l ines and underwr i t ing matr i x .
The ex i s t ing equ i t y o f count r i es , economies ,
marke ts shou ld be the foundat ions fo r l ow
i n te res t l end ing there fore overa l l s ecur i t y shou ld
be enhanced thus count r i es , economies , marke ts
cou ld become e l ig ib le fo r f inanc ing .
In the new century o f marke t economics indus t r i a l
p roduc t ion shou ld no t be the on l y way fo r f i s ca l
r eserves but ones equ i t y tha t cou ld be bu i l t by
p roper l y ba lanc ing i t s “poss ib le demand- to - supp l y”
and proper l y and pragmat i ca l l y us ing a l l economic
“ too l s ” to ra i se i t s “ secur i t y ” .
Ch ina ’ s Barb ie Do l l Economics O f t - q u o t e d , D o n g
T a o , a h e a v y w e i g h t e c o n o m i s t a t U B S i n H o n g K o n g ,
o n c e s a i d : “ A B a r b i e d o l l c o s t s $ 2 0 , b u t C h i n a o n l y
g e t s a b o u t 3 5 c e n t s o f t h a t . ” H e w a s t a l k i n g a b o u t
g l o b a l t r a d e s t a t i s t i c s a t t h e t i m e , b u t t h a t
p r o c l a m a t i o n m i g h t h e l p e x p l a i n w h y C h i n e s e
c o m p a n i e s a r e i n c r e a s i n g l y s h o p p i n g f o r a n d
s u c c e s s f u l l y a c q u i r i n g s t o r i e d b r a n d s , m o s t r e c e n t l y ,
F o r d ’ s V o l v o . T h e l e s s o n : t h e b i g m o n e y i s i n o w n i n g
t h e b r a n d , n o t j u s t m a k i n g i t f o r f o r e i g n c o m p a n i e s ,
w r i t e s t h e A P ’ s W i l l i a m F o r e m a n .
Capac i t y (Equ i t y ) bu i ld ing as a Ch ina ’ s Nat iona l
Po l i c i e s i s a ba lance be tween Free Enterpr i ses
r i s ing Produc t i v i t y and Soc ia l and F i sca l Po l i c i e s
and In f ras t ruc ture
Equi t y , capac i t y and sus ta inab i l i t y “ T h e c o n c e p t o f
e q u i t y i n t h e c o n t e x t o f c a p a c i t y b u i l d i n g i s n o t s h e e r
e t h i c a l . I t ” s m i x e d w i t h c e r t a i n p r a c t i c a l s o c i a l a n d
e c o n o m i c m e a n i n g , t h e r e f o r e i n s e p a r a b l e f r o m
s u s t a i n a b i l i t y . E q u i t y h e r e c o n t a i n s t h r e e f o l d s o f
m e a n i n g s : 1 ) e q u i t y b e t w e e n e x i s t i n g g e n e r a t i o n a n d
f u t u r e g e n e r a t i o n s ; 2 ) E q u i t y b e t w e e n d i f f e r e n t s o c i a l
m e m b e r s u n d e r t h e s a m e g e n e r a t i o n ; a n d 3 ) E q u i t y i n
r e s p o n s i b i l i t y a n d o b l i g a t i o n t h a t d i f f e r e n t s o c i a l
m e m b e r s o r g r o u p s h a v e t o a c h i e v e s u s t a i n a b l e
d e v e l o p m e n t . E q u i t y b e t w e e n g e n e r a t i o n s , t o
m u c h e x t e n t , i s s u b j e c t t o e t h i c a l a r e a . T h e c u r r e n t
g e n e r a t i o n , i n m o r a l s e n s e , s h o u l d a v o i d “ e a t r i c e f r o m
a n c e s t o r s w h i l e b r e a k f u t u r e g e n e r a t i o n s ” p o t ” . T h e y
h a v e n o r i g h t t o o v e r c o n s u m e a n d d a m a g e n a t u r a l
e n v i r o n m e n t a n d r e s o u r c e s t h a t t h e f u t u r e g e n e r a t i o n s
w i l l l i v e i n . T h i s p o i n t w a s m a d e v e r y c l e a r i n t h e W o r l d
C o m m i t t e e o n E n v i r o n m e n t a n d D e v e l o p m e n t R e p o r t . I n
i t s d e f i n i t i o n o f s u s t a i n a b l e d e v e l o p m e n t , t h a t n o t t o
h a r m t h e f u t u r e g e n e r a t i o n s t o m e e t t h e n e e d o f t h e i r
o w n w a s e s t a b l i s h e d a s a c o n d i t i o n . A l t h o u g h c a p a c i t y
b u i l d i n g o f t h e c u r r e n t g e n e r a t i o n i s h e l p f u l t o e q u i t y
b e t w e e n g e n e r a t i o n s , t h i s e q u i t y h o w e v e r i s n o t t h e
m o s t i m p o r t a n t p r o b l e m t o s o l v e i n t h e a r e a o f c a p a c i t y
b u i l d i n g . T h e e q u i t y b e t w e e n d i f f e r e n t s o c i a l m e m b e r s
u n d e r t h e s a m e g e n e r a t i o n i s c l o s e r r e l a t e d t o
s u s t a i n a b i l i t y . O n t h e o n e h a n d , f r o m t h e p e r s p e c t i v e o f
s o c i a l j u s t i c e , i t ” s n e c e s s a r y t h a t t h e s o c i e t y t a k e s i n t o
c o n s i d e r a t i o n t h e p o o r ’ s i n t e r e s t s s o a s t o r e d u c e t h e
g a p b e t w e e n t h e r i c h a n d t h e p o o r . T h i s w a s
e m p h a s i z e d i n t h e B r u n d l a n d R e p o r t . T h a t i s , T h e b a s i c
n e e d s o f t h e p o o r i n t h e w o r l d s h o u l d b e p u t a t t h e t o p
p r i o r i t y . O n t h e o t h e r h a n d , e q u i t y b e t w e e n d i f f e r e n t
s o c i a l m e m b e r s u n d e r t h e s a m e g e n e r a t i o n i s a l s o a
c o n d i t i o n t o s u s t a i n a b l e d e v e l o p m e n t . I t s e e m s t h a t
t h e r e i s n o t m u c h c o n n e c t i o n b e t w e e n e q u i t y a n d
s u s t a i n a b i l i t y , o r n o t s o d i r e c t . H o w e v e r b y s o m e
a n a l y s i s , c a n y o u f i n d t h a t d i f f e r e n t s o c i a l
m e m b e r s ” u n e q u a l l y p o s s e s s i o n o f t h e r e s o u r c e s i s a n
i m p o r t a n t r e a s o n f o r d i f f i c u l t s u s t a i n a b l e
d e v e l o p m e n t . T h i s i s b e c a u s e t h a t e v e n t h o u g h t h e
s o c i e t y i n g e n e r a l i s r i c h i n r e s o u r c e s
a v e r a g e l y s p e a k i n g , y e t t h e g a p i n t e r m o f r e s o u r c e s
p o s s e s s i o n w i l l f o r c e t h e s o c i a l m e m b e r s s h o r t o f
r e s o u r c e s t o o v e r u s e o r a b u s e t h e i r l i m i t e d r e s o u r c e s t o
m a k e a l i v i n g . S i n c e t h e e n v i r o n m e n t a l p r o b l e m s a r e
i n t e r r e l a t e d a n d i n t e r e f f e c t e d , s o m e p a r t o f
u n s u s t a i n a b i l i t y i n t h e s o c i e t y w i l l l i k e l y l e a d t o a n
o v e r a l l s u s t a i n a b i l i t y . T h e r e f o r e , e q u i t y i s a l s o a
c o n d i t i o n t o t h e s u s t a i n a b l e d e v e l o p m e n t p r o c e s s .
S u s t a i n a b l e e n v i r o n m e n t a n d e q u i t y o f s o c i a l
r e s p o n s i b i l i t y a n d o b l i g a t i o n h a v e b e e n a n i s s u e t h a t
d e v e l o p e d c o u n t r i e s a n d d e v e l o p i n g c o u n t r i e s k e e p
d e b a t i n g o n . W h o h a s p o l l u t e d t h e e n v i r o n m e n t ? W h o i s
m a k i n g t h e e n v i r o n m e n t w o r s e a n d w o r s e ? T h i s i s a n
i s s u e o f r e s p o n s i b i l i t y a n d o b l i g a t i o n . E v e n t h o u g h
i t ” s a n i s s u e o f e q u i t y b e t w e e n d i f f e r e n t s o c i a l m e m b e r s
o r g r o u p s u n d e r t h e s a m e g e n e r a t i o n , i n e s s e n c e , i t ” s a
p r a c t i c a l i s s u e i n i n t e r n a t i o n a l p o l i t i c s a n d e c o n o m i c s .
H o w e v e r , e v e n i f e v e r y s o c i a l m e m b e r o r g r o u p i s
w i l l i n g t o a s s u m e t h e o b l i g a t i o n , d o e s h e h a v e t h e
c a p a c i t y t o r e a l i z e t h e c o m m i t m e n t ? T h e r e y o u f i n d t h a t
e q u i t y , c a p a c i t y a n d s u s t a i n a b i l i t y a r e c l o s e l y r e l a t e d
w i t h o n e a n d a n o t h e r . ”
Sta te Employment i s used as a ba lance fo r h igher
wages in Non S ta te Employment ins tead o f used by
the Economics o f Cap i ta l i sm (mos t l y and on l y )
Employment Market Forces .
Ⅲ . T h e I n s t i t u t i o n a l T r a n s i t i o n U n d e r t h e D u a l L a b o r
M a r k e t F r o m o u r a n a l y s i s o f t h e f e a t u r e s o f e m p l o y m e n t
a b s o r p t i o n a n d w a g e d e t e r m i n a t i o n i n t h e t w o p a r a l l e l
u r b a n l a b o r m a r k e t s w e c a n m a k e t h e j u d g m e n t t h a t t h e
l a b o r m a r k e t i n t h e n e w l y e s t a b l i s h e d s e c t o r
d e t e r m i n e d b y m a r k e t f o r c e s r e p r e s e n t t h e f u t u r e
d i r e c t i o n o f d e v e l o p m e n t . I n o t h e r w o r d s , t h e p r o c e s s o f
t r a n s f o r m a t i o n f r o m t h e S O E ” s e m p l o y m e n t s y s t e m t o
N E S ” s i s t h e p r o c e s s o f t h e f o r m a t i o n o f t h e l a b o r a n d
w a g e s y s t e m o f t h e m a r k e t e c o n o m y . H o w w i l l t h i s
s y s t e m t r a n s i t i o n t a k e p l a c e ? S i n c e t h e t w o s y s t e m s o f
l a b o r a n d w a g e i n t h e t w o k i n d s o f s e c t o r s d o m i n a t e
t h e i r r e s p e c t i v e l a b o r m a r k e t , t h e c o m p e t i t i o n f o r
l a b o r e r s b e t w e e n t h e s e t w o k i n d s o f e n t e r p r i s e s a n d
t h e r e f o r e t h e e x p a n s i o n o f o n e l a b o r m a r k e t a n d t h e
r e d u c e m e n t o f a n o t h e r w i l l r e a l i z e t h e t r a n s i t i o n f r o m
o n e s y s t e m t o a n o t h e r . T h i s i s t h e f i r s t f o r m t h a t t h e
t r a n s i t i o n o f e m p l o y m e n t s y s t e m w i l l t a k e . I n t h e
p r o c e s s o f e x p a n s i o n a n d r e d u c e m e n t s o f t h e t w o l a b o r
m a r k e t s , c a u s e d b y t h e c o m p e t i t i o n b e t w e e n t h e t w o
k i n d s o f e n t e r p r i s e s , t h e t r a d i t i o n a l s y s t e m o f t h e s t a t e
s e c t o r w i l l r e s p o n d a c c o r d i n g l y , n a m e l y b y i n t r o d u c i n g
r e f o r m i n o r d e r t o s u r v i v e i n t h e c o m p e t i t i o n a n d s h i f t
t o a m a r k e t e c o n o m y . I n t h i s w a y t h e s e c o n d f o r m o f
s y s t e m t r a n s i t i o n t a k e s p l a c e . F i r s t , w e w i l l l o o k i n t o
h o w t h e f i r s t s y s t e m t r a n s i t i o n t h a t i s c h a r a c t e r i z e d b y
e m p l o y m e n t t r a n s f e r s b e t w e e n t h e t w o k i n d s o f
e n t e r p r i s e s o c c u r s a n d t h e f e a t u r e s o f i t s
t r a n s f o r m a t i o n . I f w e s u p p o s e t h e u r b a n l a b o r m a r k e t i s
c l o s e d o f f f o r o u t s i d e r s , l a b o r e r s a r e d i s t r i b u t e d m e r e l y
b e t w e e n t h e S O E s a n d N E S s . C h a r t 1 i n d i c a t e s t h e
c o m p e t i t i v e r e l a t i o n s b e t w e e n t h e s e t w o s e c t o r s a s w e l l
a s t h e p r o c e s s o f e x p a n s i o n a n d r e d u c e m e n t o f t h e t w o
l a b o r m a r k e t s . T h e h o r i z o n t a l a x i s s t a n d s f o r t h e l a b o r
v o l u m e . F r o m O 1 t o t h e r i g h t , t h e l a b o r v o l u m e o f t h e
S O E s c a n b e m e a s u r e d ; f r o m O 2 t o t h e l e f t t h a t o f t h e
N E S s c a n b e m e a s u r e d . T h e d o m a i n b e t w e e n O 1 a n d
O 2 s t a n d s f o r t o t a l s u p p l y o f l a b o r . T h e v e r t i c a l a x i s
s t a n d s f o r t h e m a r g i n a l p r o d u c t i v i t y o f l a b o r s o r t h e
w a g e l e v e l . T h e c u r v e t i l t i n g d o w n w a r d s f r o m t h e r i g h t
t o t h e l e f t i s t h e c u r v e o f m a r g i n a l p r o d u c t i v i t y o f
l a b o r s i n t h e N E S s . I t t i l t s b e c a u s e t h e i r m a r g i n a l
p r o d u c t i v i t y o f l a b o r s d e c r e a s e s w i t h t h e i n c r e a s e o f
t h e e m p l o y e d l a b o r ” s s i z e . A t t h e s a m e t i m e , t h e
m a r g i n a l p r o d u c t i v i t y o f l a b o r s i n t h e S O E s i n c r e a s e s
w i t h t h e n u m b e r o f w o r k e r s l e a v i n g t h e i r
e n t e r p r i s e s . T h u s , t h e c u r v e t i l t i n g d o w n w a r d s f r o m t h e
l e f t t o t h e r i g h t i s t h e c u r v e o f m a r g i n a l p r o d u c t i v i t y o f
l a b o r s i n t h e S O E s . T h e c u r v e t h a t i s s t e e p e r , i s t h e
c u r v e o f m a r g i n a l p r o d u c t i v i t y o f l a b o r s i n t h e
S O E s u n d e r t h e a s s u m p t i o n t h a t t h e i r w a g e l e v e l i s
d e t e r m i n e d b y t h e m a r k e t ( s e e n a m e i n q u o t a t i o n
m a r k s ) . I n t h i s s i t u a t i o n , t h i s c u r v e i n t e r s e c t s a t t h e
p o i n t A w i t h t h e c u r v e o f t h e m a r g i n a l p r o d u c t i v i t y o f
l a b o r s o f N E S s d u r i n g t h e i r e m p l o y e d l a b o r v o l u m e
e x p a n s i o n . T h i s m e a n s t h e w a g e l e v e l o f t h e t w o k i n d s
o f e n t e r p r i s e s a r e e q u a l t o t h e p o i n t W a , a n d t h e
e x p a n s i o n o f l a b o r s ” v o l u m e i n N E S s n o l o n g e r
c o n t i n u e s . T h e n t h e l a b o r ” s v o l u m e i n t h e S O E s i s
O 1 A w h i l e t h a t o f N E S s i s A O 2 . S i n c e t h e S O E s a r e
o v e r s t a f f e d a n d w a g e i s n o t d e t e r m i n e d b y t h e m a r g i n a l
p r o d u c t i v i t y o f l a b o r s , h o w e v e r , t h e i r c u r v e o f m a r g i n a l
p r o d u c t i v i t y s h o u l d b e m o r e f l a t ( m i g h t b e a h o r i z o n t a l
b e e l i n e w i t h o u t e l a s t i c i t y ) , i . e . t h e c u r v e w h o s e n a m e
i s w i t h o u t q u o t a t i o n m a r k s t h a t i n t e r s e c t s a t t h e p o i n t
B w i t h t h e c u r v e o f t h e m a r g i n a l p r o d u c t i v i t y o f l a b o r s
i n t h e N E S s . I t i s a t t h i s p o i n t t h a t N E S s s t o p
e x p a n d i n g t h e i r l a b o r v o l u m e , h e r e t h e w a g e r a t e i s W b .
A s t h e w a g e i s d e t e r m i n e d i n s t i t u t i o n a l l y N E S s n e e d t o
p a y h i g h e r w a g e t o a t t r a c t l a b o r e r s ; a n d t h e
t r a n s f o r m a t i o n o f t h e l a b o r e r s f r o m t h e S O E s t o N E S s
b e c o m e s s m a l l e r . I n t h e r e a l l a b o r e r ” s d i s t r i b u t i o n , t h e
l a b o r e r ” s v o l u m e e m p l o y e d b y t h e S O E s i s O 1 B i n s t e a d
o f O 1 A , t h a t f o r n e w l y e s t a b l i s h e d e n t e r p r i s e s i s
B O 2 i n s t e a d o f A O 2 . S o t h e N E S s a r e l i m i t e d b y t h e i r
a b i l i t y t o p a y h i g h e r w a g e , t h e d i f f e r e n c e b e t w e e n l a b o r
v o l u m e t h e y r e a l l y e m p l o y a n d t h a t t h e y s h o u l d
e m p l o y i s i n d i c a t e d b y t h e d i s t a n c e b e t w e e n A a n d B i n
t h e c h a r t . C h a r t 1 L a b o r T r a n s f e r s b e t w e e n T w o S e c t o r s
O u r t h e o r e t i c a l a n a l y s i s r e f l e c t t h e r e a l i t y
o f t r a n s f o r m a t i o n o f l a b o r e r s b e t w e e n t h e t w o s e c t o r s .
O n e c h a r a c t e r i s t i c o f N E S s i s v e r y l a b o r i n t e n s e . I t i s
n o t f e a s i b l e f o r N E S s t o p a y v e r y h i g h w a g e t o a t t r a c t
e m p l o y e e s f r o m S O E s i f N E S s a r e t o k e e p t h e i r
a d v a n t a g e i n l a b o r e r ” s r e s o u r c e . S o c o m p e t i t i o n o f
e m p l o y m e n t i s l i m i t e d b y t h e s c o p e o f t h e i r a b i l i t y t o
p a y h i g h w a g e s . W i t h i n t h i s s c o p e , h o w e v e r , N E S s c a n
c e r t a i n l y a t t r a c t r e l a t i v e l y h i g h q u a l i f i e d w o r k e r s t o
f o r m t h e b a c k b o n e o f t h e i r e n t e r p r i s e s w i t h o u t t a k i n g
c o s t i n t o a c c o u n t . A s i t i s n o t p o s s i b l e f o r t h e N E S s t o
o b t a i n a l l t h e l a b o r e r s t h e y n e e d f r o m t h e s t a t e s e c t o r
i t i s n e c e s s a r y t o h a v e o t h e r c h a n n e l s t o f i n d l a b o r . I f
N E S s h a d n o t h a v e o t h e r s u c h c h a n n e l s , t h i s s e c t o r
w o u l d n o t h a v e b e e n a b l e t o d e v e l o p t o t h e p r e s e n t
s t a g e . O u r a n a l y s i s a b o v e w a s m a d e u n d e r t h e
a s s u m p t i o n t h a t t h e u r b a n l a b o r m a r k e t w a s c l o s e d o f f
f o r o u t s i d e r s , i n o u r f u r t h e r a n a l y s i s w e w i l l g i v e u p
t h i s a s s u m p t i o n . N E S s o b t a i n h i g h l y q u a l i f i e d w o r k e r s
f r o m t h e S O E s b y p a y i n g h i g h e r w a g e i n o r d e r t o s a t i s f y
t h e i r n e e d s f o r t e c h n o l o g y . T h e o t h e r s o u r c e i s l a b o r e r s
w i t h c o m m o n s k i l l s f r o m t h e r u r a l a r e a s .
China has d i scovered tha t g loba l i za t ion and
in te rna t iona l compet i t i on work in i t s f avour .
Grea t expor ta t ions “Ch ina over takes Germany
t o become the b igges t expor te r o f a l l ” “ C H I N A ’ S
r i s e h a s l o n g a p p e a r e d i n e x o r a b l e . D e s p i t e a d e c l i n e
i n t o t a l w o r l d t r a d e , C h i n a h a s s e e n i t s e x p o r t s f a l l
l e s s t h a n t h o s e o f o t h e r b i g p o w e r s . A n e w r e p o r t b y
t h e W o r l d T r a d e O r g a n i s a t i o n c a l c u l a t e s t h a t t h e t o t a l
v a l u e o f m e r c h a n d i s e e x p o r t s f e l l b y a s t a g g e r i n g 2 3 %
i n 2 0 0 9 . A m o n g t h e t o p t e n e x p o r t e r s , J a p a n ’ s
s h i p m e n t s w e r e w o r s t a f f e c t e d ( f a l l i n g b y 2 6 % ) .
A l t h o u g h C h i n a ’ s e x p o r t s a l s o f e l l ( b y 1 6 % ) , t h e
c o n t r a c t i o n w a s l e s s p a i n f u l t h a n i n G e r m a n y ( d o w n
b y 2 2 % ) . A s a r e s u l t C h i n a i s n o w t h e s i n g l e l a r g e s t
e x p o r t e r . T h e g l o b a l d o w n t u r n h a s h e l p e d t o r e d u c e
g l o b a l i m b a l a n c e s ; t h e l e a d i n g t h r e e e x p o r t e r s
a c c o u n t e d f o r 2 6 . 7 % o f t o t a l w o r l d e x p o r t s i n 2 0 0 9
d o w n f r o m a t h i r d o f t h e t o t a l i n 2 0 0 8 . T h e
W T O e x p e c t s t r a d e t o r e b o u n d b y n e a r l y 1 0 % t h i s
y e a r . ”
The Rea l Reason Ch ina Res i s t s on the RMB “ A s I
s e e i t , C h i n a i s a s k i n g a q u e s t i o n t o w h i c h t h e r e i s n o
e a s y a n s w e r ; w h a t r i g h t d o e s t h e U S h a v e t o l e c t u r e
a n y o n e o n e c o n o m i c m a t t e r s n o w , h a v i n g p l a y e d s o
l a r g e a p a r t i n c a u s i n g t h e c u r r e n t g l o b a l r e c e s s i o n
t h r o u g h l o o s e m o n e t a r y p o l i c y , p o o r r i s k m a n a g e m e n t
b y s o m e o f o u r m o s t p r e s t i g i o u s c o m p a n i e s a n d
m o n u m e n t a l r e g u l a t o r y f a i l u r e s ? T h e y a r e r e s p o n d i n g
t o t h e c o n t i n u e d U S b e l i e f i n A m e r i c a n
e x c e p t i o n a l i s m , t h a t w e c a n d o w h a t e v e r w e d o , r i g h t
o r w r o n g , a n d i g n o r e t h e c r i t i c i s m s a n d d e m a n d s o f
o t h e r c o u n t r i e s w h o o f t e n b e a r t h e c o n s e q u e n c e s o f
o u r a c t i o n s , w h i l e w e c o n t i n u e t o i n s i s t o n o u r r i g h t
t o c r i t i c i z e a n d m a k e d e m a n d s o n t h e m . A s B r a d
D e l o n g a n d S t e p h e n C o h e n h a v e p o i n t e d o u t , t h e U S
s i m p l y n o l o n g e r h a s t h e e c o n o m i c c l o u t t o g e t a w a y
w i t h t h i s a n y l o n g e r , a n d w h o b e t t e r t h a n C h i n a t o
s t a n d u p t o i t ?
The prob lem o f the Res t o f the Wor ld i s the
ideo log ica l a lmos t b l ind fo l l ow ing o f Marx ’ s ’ “Das
Kap i ta l ” f inanc ia l s y s tem cont ro l l ed by the ru les o f
“ t r i ck le -down” Cap i ta l i sm tha t happen to be qu i te
imprac t i ca l even when th i s s y s tem bu i l t Nor th
Amer icas , Grea t Br i ta in , F rance and Germany : Grea t
Powers env ied by anyone in the Wor ld , however
l ook ing in H i s tory th ings somet ime have to change ;
i t happened to Rome , Pers ia , V i c tor ian Empi res ,
and e tc . , thus change cou ld be cons idered as
ongo ing now a f fec t ing d i f f e rent count r i es and
markets in d i f f e rent ways , bu t the t rend i s qu i te
s imi la r ( In the Wor ld shor t t e rm h i s tory : once
mos t l y agr i cu l tura l l y d r i ven GDP changed in to
mos t l y indus t r i a l p roduc t ion dr i ven GDP , now i t i s
about to change in to mos t l y “a r t i f i c i a l l y ” ba lanced
“Demand- to -Supp ly” Market Economics GDP not the
ideo log ica l one fo l l owed as a mantra by the wes t ,
top related