Another cheap labor on global market - North Korea to repeat the Chinese strategy

North Korea is preparing for a step-by-step opening of its economy to alter the 64-year communism system. German specialists are invited to advice the government. The Party leader in his New Year speech even mentioned about improving the relationships with South Korea.

Obviously another Asian poor economy with $20-30 monthly salary is preparing to repeat the Chinese model of going out of poverty by using foreign markets and export. The microeconomic mechanisms will be some different from the Chinese ones, but the idea and the strategy is the same - North Korea will offer cheap labor to attract investors that are looking for cutting costs. This is the system we see for 25-30 years, and not only in China, but in other new young economic "tigers" (including some of the BRICS). The result of this system are fleeing jobs from developed countries that more and more become only a market, and lose the characteristic of a producer.

This is an economic nonsense. To be functional an economy must consist of units that are simultaneously producers and consumers. People must  produce the goods that the same people are buying. Tearing this connection means an economic catastrophe.

Most of the global industry is already in China and the process of moving factories is continuing. Corporations like lower salaries and prefer workers in poorer countries. In long term this leads to destruction of the markets of the same corporations, because jobless or lower paid people are a worse market. But corporations don't think about this. They think about current profit and current survival. If fact in this situation they even have no choice than to outsource. When their competitors are doing this, they must also do it. Or become uncompetitive.

This chaotic globalization will lead to an entire global crash. Developed countries will go bankrupt by losing their economy. After that this will hit the developing countries that will lose their markets. At the end all countries will become poor.

The right decision is the neo-protectionism concept. The world must be divided into regions with close or equal economic development. That must develop, based on their internal market and with the help of richer countries. When poorer regions become richer they can join the richer ones. This way the stability of richer countries will be saved and in fact there will be richer countries. This system presumes an increase of global wealth and production. Current system presumes more redistribution of wealth and less growth in wealth. In fact current system is moving the incomes of developed courtiers down to the level of developing. The poorer countries are going up, but both moves will meet somewhere closer to the level of poorer. Redistribution we do, not growth.

If the developed (still) world does not implement the neo-protectionism and continues with this crazy uncontrollable globalization of markets, in 20-30 years time we will have to search help even from North Korea. Just like now we are waiting for help from China to save us from the financial and debt crisis. Just 30 years ago China was undeveloped and poor communist society... :)

Jan 7th 2013

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