Saturday, October 14, 2006

Reverse colonialism


Reverse Colonialism

In the colonial era it was possible for the colonizers to rob the colonies of their natural wealth in the name of king, queen, god or nation. This is how these nations accumulated most of their national wealth, which is something they enjoy even today. As these colonies regained their independence , it was not possible to get these natural resources for free anymore. The erstwhile colonizers could however still get access to these resouces for almost next to nothing. The low standard of living in these impoverished nations compelled them to sell their resources cheaply. And as the 'developed' countries sold back the finished products to the 'developing' world for higher prices, they got even richer.

The low standard of living was mostly was a curse to these poor nations but was also a blessing in some ways. With rising literacy they could provide a source of cheap skilled labour. Globalization and information technology meant that these reservoirs of cheap labour could be tapped by the developed nations, resulting in the migration of labour and capital in opposite directions.

The migration of capital from the richer to the poorer nations had mostly positive implications. While the rich nations could tap into the cheap labour resources, the poorer nations also benefited because millions of jobs were created. As standards of living rose, consumption also increased and resulted in the creation of 'emerging markets'.


While movement of labour however had positive as well as negative outcomes, on balance, at least looking at the world as it is today, one might say that the negatives outweigh the positives. While the source nations suffered from brain drain as the best minds left for greener pastures abroad, the receiving nations suffered from problems related to the integration of these aliens into their society. Naturally the developed nations wanted to make more money out of the flow of capital and labour. They preferred to let the labour stay outside, did not mind if the capital had to go out so long as it was protected as long as the money was coming in.

Capital and labour are the two fundamental building blocks of all economic activity and what makes them work together to create any measurable outcome is leverage. If they work together they creative positive leverage and if they work against each other you have chaos.The direction in which they work relative to each other is determined by self interest. Most of the troubles of the present day originate from the fact that we prefer to see only one side of the story and not the other.

Looking at things as they are today, it would be an interesting exercise to extrapolate current trends to see what the world might look like 20 years from now. Are we going to see more chaos as the negative effects of migration overwhelm the positive effects of globalization? Will the rich nations raise more barriers to protect their wealth as they have successfully done in the past? Will the emerging economies succeed in bridging the gap from the haves to the have-nots? Are we going to see greater disparity or will globalization create a win-win scenario and result in creation of new wealth? What happens if some of the most populous countries in the world join the club of rich nations? Will they change the direction of economic power and leverage? What will fuel the next step of progress for the developed world?

The answers to these questions will determine the state of our world in the days to come. When we go out in search of truth, sometimes the journey itself is the destination.

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