April 15, 2005

News & Opinion: More from Friedman

By: Jack @ 3:59 PM – Filed under: Management & Workplace Culture

I also liked this quote from The World is Flat by Thomas Friedman: "In 1977, Chinese leader Deng Xiaoping put China on the road to capitalism, declaring later that to get rich is glorious. When China first opened its tightly closed economy, companies in industrialized countries saw it as an incredible new market for exports. Every Western or Asian manufacturer dreamed of selling its equivalent of 1 billion pairs of underwear to a single market. Some foreign companies set up shop in China to do just that. But because China was not subject to world trade rules, it was able to restrict penetration into its market by those Western companies through various trade and investment barriers. And when it was not doing it deliberately, the sheer bureaucratic and cultural difficulties of doing business in China had the same effect. Many of the pioneer investors in China lost their shirts and pants and underwearand with Chinas Wide West legal system there was not much recourse. Beginning in the 1980s, many investors, particularly overseas Chinese who knew how to operate in China, started to say, Well, if we cant sell that many things to the Chinese right now, why dont we use Chinas disciplined labor pool to make things there and sell them abroad? This dovetailed with the interests of Chinas leaders. China wanted to attract foreign manufactures and their technologiesnot simply to manufacture 1 billion pairs of underwear for sale in China but to use low-wage Chinese labor to also sell 6 billion pairs of underwear to everyone else in the world, and at prices that were a fraction of what the underwear companies in Europe or America or even Mexico were charging.