Rise of the rest

In June, I touched on the issue of China’s ascendancy into the global economy and how, though it is both a credible partner and competitor, it remains a long way from being America’s equal economically. But China is not the only country growing in economic stature and performing much of the manufacturing formerly performed in the U.

07/01/2008


In June, I touched on the issue of China’s ascendancy into the global economy and how, though it is both a credible partner and competitor, it remains a long way from being America’s equal economically. But China is not the only country growing in economic stature and performing much of the manufacturing formerly performed in the U.S. Brazil, Russia (and much of eastern Europe), India, and several other Asian countries now conduct much of the basic manufacturing formerly handled in North America.

These countries now play an important role in the world market, and they have come to this point due in large part to our own promotion of democracy and capitalism worldwide. But this does not mean that the U.S. will be relegated to the sidelines in the process.

Effectively detailing this issue in his book, “The Post-American World,” author Fareed Zakaria explains how the U.S. can continue to play integral economic and political roles on a global basis as the rest of the world rises. Addressing manufacturing in particular, Zakaria notes that “Asian manufacturing must be viewed in the context of a global economy in which countries like China have become an important part of the supply chain—but just a part.”

To illustrate his point, Zakaria cites an explanation of how global manufacturing now takes place along a U-shaped curve. The top left of the curve represents the product idea and high-level design. Lower down on the left-hand side of the curve is the detailed engineering plan. At the bottom of the curve is the actual manufacturing, assembly, and shipping. On the right side of the curve are distribution, marketing, retail sales, services contracts, and sales of parts and accessories. In almost all manufacturing sectors, other countries now take care of the bottom of the curve and America handles the left- and right-hand sides—which happen to be where the most money is.

Though other countries have largely taken over manufacturing production, their ability to build their economies by connecting to ours is helping to create peaceful alliances—wars are far less likely between countries with connected economies—and more potentially prosperous times for everyone. And despite its altered role, the U.S. still plays a key role in sustaining the global manufacturing industries, with U.S. engineering addressing many of the most critical points.

Next month we’ll look at how, despite reports to the contrary, the West still holds the lead in engineering and, therefore, its preferred place on the left end of the curve.

david.greenfield@reedbusiness.com





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