From poverty to power - Oxfam-Québec

FROM POVERTY TO POWERtheir comparative advantage. Thirty-five years ago, they wereprotecting themselves from imports of US steel in order to buildup a domestic industry. Today, it is the USA that seeks protectionfrom East Asian exporters. The reason: government policiesproduced changes in comparative advantage.CHINA AND THE FUTURE OF OTHER DEVELOPINGCOUNTRIESThe much commented-upon rise of China since the late 1980s hasprecipitated a tectonic shift in the global economy. China is fastbecoming the world’s factory:• The city of Shunde in the Pearl River Delta has a single giantfactory that produces 40 per cent of the world’s microwaveovens.• Shenzhen makes 70 per cent of the world’s photocopiers and80 per cent of its artificial Christmas trees.• Three out of every five buttons in the world are made inQiaotou, a dusty, dirty town in Zhejiang province that alsoships more than two million zips a day.China’s unique combination of massive scale, rock-bottom wages,high literacy, highly developed infrastructure, and political controlover labour enables it to out-compete most of its industrial rivals.China has driven down the prices of most manufactured goods, to thebenefit of consumers the world over, but has undercut other developingcountryexporters in the process.With 150 million unemployed workersconstituting an effectively infinite reserve army of labour, China cancontinue to be the world’s factory without approaching full employment(at which point wages rise and other competitors can enter themarket), leaving few crumbs for other developing countries.The impact of China may also be refuting the received wisdom thatgetting out of commodities into industry is the route to development.Booming Chinese demand has reversed the long-term decline incommodity prices and in what economists call the ‘terms of trade’between raw materials and manufactured goods, sometimes presentedas the number of bags of coffee (or barrels of oil) needed to buy a188