In the East it is no longer enough to pay the workforce the pittance that enticed them from a starvation existence in the countryside to the new manufacturing and population centres of the city.

Some time ago an article appeared about a vision of the future that was called “The Fourth World.”
That vision asked us to consider what was happening to the manufacturing ability of the West in the face of the deluge of cheap imports that were overwhelming our markets from the East.

The example used was the Maglite, a high quality torch that at the lower end of the market retailed between £12.99 and 16.99. Before the arrival of the LED torch, this was the torch of choice for anyone with a serious purpose, robust, reliable, effective, it was the market leader.

Then the pattern for that torch found its way to the East and soon torches, looking very similar to the original Maglite, were on our petrol station forecourts retailing at £2.99. Not the same as the original but very close, just as reliable and just as effective.

In the past the influx of cheap imports had not worried the quality end of our market but now the cheap Eastern product was so good and so cheap that Western manufacturers were increasingly unable to compete.
The article “The Fourth World” described a Western manufacturing ability collapsed so completely that when the opportunity arose to compete with the East, the West lacked the people, the knowledge, and the infrastructure to allow them to do so.

Today that opportunity to compete has appeared, and it is not too late.
The strength of the East lay in the massive amount of cheap manpower that was liberated from a subsistence existence on dwindling land stocks by the new focus on manufacturing for export that provided for many families their first ever wage. Heady days indeed.

As time passed this naïve workforce became accustomed to having money and began to look for new ways to spend it. It was becoming possible in the East to buy the sorts of things that a peasant would previously have never aspired to owning. Now the Eastern manufacturing machine has created a home market for their products and the expectations of their workforces have grown as they become increasingly more able to afford their own products.

In the East it is no longer enough to pay the workforce the pittance that enticed them from a starvation existence in the countryside to the new manufacturing and population centres of the city. The new industrialists had to start paying a wage that would allow the workforce to start buying the same appliances that were being exported to the West.

Now we see the growth of a spiral that is pushing up the labour costs of the East to the point that they are no longer able to make anything they want in the certain knowledge that whatever they did, the West would simply not be able to compete.

The average wage in Urban China in 2009 was over six times the same figure in 1995 (https://www.clb.org.hk/en/node/100206), Their inflation is reaching record levels, industrial disputes are becoming more frequent and costly against a background of bullying and violence towards workers by the increasingly beleaguered employers. Their wage spiral is not going to go away and one consequence is that it is becoming increasingly difficult to maintain the margins that made their dominance of Western markets such a forgone conclusion.

Today we have the opportunity to take our markets back as Eastern costs continue to rise.
Outscourcing is no longer the universal panacea.

We may be witnessing the end of the era of the cheap imports from the East but unless we take that market back for ourselves we run the risk of being sucked into their spiral of rising prices.