The eruption of the Indian and Chinese economies could shift the balance of power sharply in favour of capital in the rich world
At first glance, the eruption of China into the world economy seems to be just the latest example of Asian countries catching up with the leading industrial powers. China's export growth has been spectacular, but so was that of Japan and Korea in earlier decades.
What makes China (and India) fundamentally different, however, are their vast labour reserves. Total employment in China is estimated at around 750 million, or about one and a half times that of all the rich economies, and nearly 10 times the combined employment of Japan and Korea. About one half of China's employment is still in agriculture; together with tens of millions of urban underemployed, they constitute a reserve army of labour of quite unprecedented magnitude.
The effect of this reserve army has been to hold down wages. After nearly 25 years of rapid economic growth, wages in China's manufacturing sector are still only 3% of the US level; after similar periods of rapid expansion in Japan and Korea, wages were some 10 times as high.It is not too far-fetched to imagine a long period of investment stagnation in the industrialised countries, with "emerging markets" being so much more profitable. This could bring intense pressure on jobs and working conditions in Britain and elsewhere. Even sectors where relocation was not possible, like retailing or education, would be flooded with job seekers. The bargaining chips would be in the hands of capital to a degree not seen since the industrial revolution. Fluctuations in labour's share being confined to the range of 65-75% could disappear too, with Marx's rising rate of exploitation re-emerging, a century and a half after he first predicted it.
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