Globalization, as a concept, lasted barely 2 decades. It was an imperative for the strong Western Economies to cover up their weakness - rising wages and higher cost of production. Riding on the ability of their financial institutions misplaced ability to offer them unlimited credit, which was used by consumers and corporates for spending indiscriminately, pushing up the consumption and cost of goods/services, the West saw an opportunity in exploiting the cheap labour in 3rd World Countries as an alternative to get away from their high wages production scenario.
By pumping in FDI and FII, they thought they could control all the 3rd world countries through their financial might, forgetting that they were slowly getting into a debt trap themselves. The financial clout of the West was akin to a Ponzi scheme. It was bound to break down one day. And it did during the Global Financial melt down of 2008.
The West thought that their core competencies were in the areas of Finance and Intellectual superiority that led to them having a critical edge in the area of technological innovation, which they used to sell to the third world at a premium.
But the 3rd world, and mainly the emerging economies, were street smart. They invested in technical education and with slick marketing shifted the focus away from long lasting technoligally superior products to short shelf life, functional products which did not require high technology R&D. The positive balance of payments obtained through export earnings, and the shifting of the focus from high tech, ensured the West losing its edge in one stroke. And with their own unlimited credit availability at risk, due to the poor health of their financial system, the West has no place to hide.
So what is the future? West will continue to crumble as their foundations are weak. Will it mean the 3rd World countries will replace them. It is unlikely, as the consumption levels of 3rd world is very poor. There is a real fear that the 3rd world producing countries might end up with higher inventory due to poor offtake, damaging their economies.
What is required is some visionary to take the lead to improve consumption. India was ideally placed for that role. Unfortunately, typical of us, we have missed the bus, as in the past.
