how globalization affects equity
DESCRIPTION
In times of Globalization some economies and markets build equity however some not only cannot use their equity to enhance their standard of life but lose their equity to lack of business that provokes deterioration of equity or at least discount of equity.TRANSCRIPT
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 ,