THE BIG PICTURE
The WSJ has a piece today discussing the massive contraction going on in the Indian textile business, as a result of the global economic slow-down. Some highlights:
"Textile factories -- including India's notorious garment-making
sweatshops -- are among the country's first manufacturing businesses to
suffer as American and European clothing retailers slash orders amid
slumping consumer spending.
India's second-largest employers after agriculture, textile concerns employed 35 million workers last year. But the companies have already shed 700,000 jobs this year and at least 1.2 million textile employees are expected to be out of work by March, according to the government's Ministry of Textiles.
The sector is crucial to the country's economy. The textile industry contributed 4% of India's gross domestic product in the year that ended March 31, and accounted for 13.5% of Indian exports, bringing in $17.6 billion."
Similar stories are playing out in China as well, as millions of workers are being out of work in low-end manufacturing jobs as the global economy goes through this severe cycle.
What we're seeing here is the other side of globalization, and how the complete picture is sometimes obscured by sovereign borders and the way we typically look at economic statistics by country.
In another era, several decades ago, hundreds of thousands in these type of jobs would have been lost within our borders, adding to our national unemployment statistics. The textile jobs cuts for instance would have been as big news for many of our southern states as the current woes of our "Big Three" auto companies is for Detroit and Michigan.
In a perverse way, the developed countries like the United States are getting a bittersweet benefit from a negative globalization cycle, where a lot of the manufacturing job losses are outside our borders and as a result a bit "out of sight and out of mind".
This unrelated Bloomberg piece takes a look at the other side of this:
"What’s good for General Motors may not ultimately be best for the global economy.
The Bush administration’s $13.4 billion rescue of GM and Chrysler is a fitting finish to a year in which governments around the world expanded their role in the economy and markets after three decades of retreat.
The intervention comes at what may prove to be a steep price. Future investment may be allocated less efficiently as risk-averse politicians make business decisions. Whenever banks decide to lend again, they are likely to find new capital requirements that will curb how freely they can do it. Interest rates may be pushed up by government borrowing to finance trillions of dollars of bailouts.
“We’re seeing a more statist world economy,” says Ken Rogoff, former chief economist at the International Monetary Fund and now a professor at Harvard University in Cambridge, Massachusetts. “That’s not good for growth in the longer run.”
There's no question that we're more inter-connected than ever due to Globalization. But we do need to be mindful of the negative implications of national economic policies in a cyclical downturn, and see the forest for the trees.
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