A " Globalized " economy is supposed to deliver cost savings to citizens of the world. The idea is to centralise the production of goods according to the skill required and the cost structure that prevails in the country of manufacture. By that reckoning, a high wage country like Australia would concentrate on high end manufacturing, big on recouping the value added components of automation and skill research. Low wage countries would churn out goods that are labour intensive and require little in the way of development skills to be functional.
Two things came together to upset that balance. The low wage countries added robotic skills to create high quality cars at the lower end of the automobile spectrum. Vehicles from China, South Korea and India have priced traditional car manufacturing countries out of competition, resulting in a two tier system evolving. The big name car companies buy their low end product from one of these three manufacturing sources and rebadge them, while retaining the manufacture of cars in the high end of the price market. The fact that the low end is the volume end means that there are fewer car plants still operating in traditional manufacturing countries - and few jobs offering in the car trade there.
The other influencing factor is the proliferation of competition in low wage countries. Industry regulation is lax and numerous startup companies emerge to try their hand at entering the production market. In many cases, their manufacturing methods are crude and the product they produce may not reach the safety standards required in overseas consumer markets.
A case in point involved a recall notice appearing in today's newspapers. A major grocery chain is appealing for buyers of safety matches sold under their house brand to return the product for a refund. This notice states that when used, the match head may disengage from the matchstick. Obviously, a blazing match head escaping the control of the user would deliver a major safety concern.
Originally, matches would flare when struck against any surface. For safety reasons, the match head was designed to only flare when rubbed against a particular surface which became a part of the product container. It sounds reasonable to assume that a small manufacturer lacking skills started to manufacture matches and made an error in the chemical formula used, resulting in the safety issue that sparked the recall.
It seems that globalization is a mixed blessing. It will certainly result in cheaper consumer goods, but at the cost of jobs in high end countries - and we can expect a proportion of dangerous goods to reach our markets as price becomes the the main criteria in buying decisions.
In many cases the producer of an Australian made product is forced to cease production because what is offering overseas is far below the manufacturing cost in Australia. Unfortunately - as is the case with these matches - what is offered on the supermarket shelves may not attain the safety standards that we take for granted.
Such is the price of globalization !
No comments:
Post a Comment