Monday, February 7, 2011

How China is making globalisation REALLY work to its advantage

Consider China's approach to development. It takes a long-term view -- a strategy that aims to effect a sustainable outcome. The cornerstone of this strategy is a concept that goes by the term "indigenous innovation". In the report "China's Drive for 'Indigenous Innovation': A Web of Industrial Policies" commissioned by the United States Chamber of Commerce, the scope and extent of industrial policies being formulated and rolled out by the Chinese Government to both fast-track and secure its rise as the dominant global economic and industrial powerhouse of the future is assessed.
Indigenous innovation is a massive and complicated plan to turn the Chinese economy into a technology powerhouse by 2020 and a global leader by 2050. The landmark document that launched the campaign carries the bureaucratic title "The National Medium- and Long-Term Plan for the Development of Science and Technology (2006-2020)" (now known in the West as the MLP). Bland as the title may be, the MLP describes itself as the "grand blueprint of science and technology development" to bring about the "great renaissance of the Chinese nation."

The MLP preamble calls for the Chinese people to "seize the opportunities and meet the challenges brought by the new science and technology revolution" ... because ... "despite the size of our economy, our country is not an economic power, primarily because of our weak innovative capacity."

This flies in the face of other "development models" that gloss over the need for too-hard measures to ensure a sustainable approach such as, in the case of the Philippines, mitigating the reality of a cultural character of ineptitude at creating capital indigenously and making optimal use of resources and capital once these are acquired.

In the report's Executive Summary, the impression China makes on its American observers is quite evident, invoking both awe...
The result is an indigenous innovation political and economic campaign that amounts to an all-hands-on-deck call to action for the Chinese nation to roll up its sleeves and complete the mission of catching up and even surpassing the West in science and technology that began 200 years ago when foreigners with modern weaponry and transportation technology came calling as the Chinese dynastic system was dissipating.

The campaign is focused on employing China’s fast-growing domestic market and powerful regulatory regime to decrease reliance on foreign technology and develop indigenous technologies that will enable China to solve its massive environmental, infrastructure and social problems, and as a result enhance both its economy and national security.

... and fear...
[...] the plan is considered by many international technology companies to be a blueprint for technology theft on a scale the world has never seen before.

The Wall Street Journal similarly reports angst coming from US industry as they behold the sheer weight of Chinese bargaining leverage, sharpness and singularity of its focus on results, and vast scale of its planning horizon.
To hear U.S. business executives describe it, Beijing's mammoth new industrial policy is like the Borg in "Star Trek"—an enormous organic machine assimilating everything in its path, in this case the inventions of other nations. Notably, China's road map, which is enshrined in the "National Medium- and Long-Term Plan for the Development of Science and Technology (2006-2020)," talks in those terms. China will build its dominance by "enhancing original innovation through co-innovation and re-innovation based on the assimilation of imported technologies."

"It's a huge, long-term strategic issue," says a top executive at a U.S. technology firm operating in China. "It isn't just the crisis of the day for U.S. business. It's the crisis."

So it is that Mr. Obama, fresh from wrangling with Chinese President Hu Jintao over these issues, made U.S. innovation—China-beating innovation—a centerpiece of his State of the Union speech. China and India are "investing in research and new technologies," he warned. "We need to out-innovate, out-educate and out-build the rest of the world."

China seems to be effectively beating the West with the very one-sided rules of the "globalisation" game it played with less-savvy parts of the Third World. While many developing countries lapped up the idea of assuming the spreadeagle position to welcome the entry of foreign capital and, along with it, a flood of colourful consumer goods manufactured in immense surplus by the First World's awesome industrial machine, China is using its vast consumer market as part of an offer the West simply cannot refuse.

And indeed, it seems to be a win-win arrangement shaping between America's elite industrialists and the Chinese "Borg" -- with the average American schmoe left with the short end of the stick. China provides an opportunity to leave the American worker outside the winning equation. Blogging for The Huffington Post, Robert Kuttner takes stock of how Business Doesn't Need American Workers...
Once again, the job numbers are dismal. In January, the U.S. economy created just 36,000 domestic jobs, far below the roughly 145,000 that economists had forecast. The unemployment rate fell, to 9 percent, but only because more and more discouraged workers are giving up and leaving the workforce.


Meanwhile, corporate profits continue to set records. Profits in the third quarter of 2010 were 1.659 trillion, about 28 percent higher than a year before, and the highest year-to-year increase on record.

What's going on? Very simply, America's corporations no longer need America's workers.

Americans may already be paying for what is now clearly an unreasonable sense of entitlement to getting things faster, cheaper, and better.

Unlike the rest of the Third World who are quite happy to prostitute themselves in the name of the "Foreign Direct Investment", China applies its renowned business acumen at a grand macro scale that only a society like China could pull off...
Companies are made to take on Chinese partners, to transfer sensitive proprietary technology, and to shift their production and R&D to China. In exchange, they get government subsidies and docile workers. Eventually, much of their production is displaced by their Chinese partners, but in the meantime they make a lot of money.

In the past two decades, company after company concluded that the U.S. government didn't really care if we lost our manufacturing base. The Chinese government was making them an offer they couldn't refuse, so one by one they made a separate peace with Beijing.

At the latest U.S.-China summit, there was clucking about its overvalued currency, though last week the Treasury, out of solicitude for the feelings of Beijing's leaders, once again declined to name China as a currency manipulator.

Perhaps, on that note, the question of how sovereign a nation the United States really is becomes a relevant discussion point today. And with the strong role the government of China takes in management of the country's economy serving as a context for the debate surrounding this question, maybe it is also about time we put the power of big corporations to shape and impact ordinary people's lives under closer scrutiny.

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