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Redistributing Wealth in a Globalized Economy

May 19, 2014

Updated June 5, 2016

Skyline

One of the four major forces that is changing society–and for the better–is the redistribution of wealth that has been accelerating over the past two decades. Western Europe, Great Britain, Canada and the United States have become accustomed to an ever rising standard of living, in part gained from resource exploitation from what has been called developing countries or The Third World in years past.

No more.

There are new kids on the block, and boy are they ever hungry! They want a piece of the wealth action.

So who are these kids?

The list is long: South Korea, Brazil, India, China, Singapore, Indonesia, Taiwan, Mexico, Turkey…. These countries have worked tirelessly at building their economies over many years. South Korea is an outstanding example of a country–growth economy– which, only a couple of decades ago, was a dictatorship. Now look at its prominence as a recent democratic nation that produces world-class consumer and heavy industrial products. The names Samsung, Hyundai and LG are now part of our vocabulary. South Koreans live on average 26 more years and earn 15 times as much as North Koreans.

And the Chinese? They live an additional 28 years and are 10 times wealthier compared to 50 years ago.

What’s been happening over the past two decades is the growing assertiveness of these once poor countries. Coupled with this has been an increasingly intimate planet, where people half a world away from North America want a piece of the wealth action. Facilitated by technology and the West’s insatiable need for instant gratification, the traditional have-nots want democratically elected governments to enable: a) a voice for the people and b) the path to creating meaningful jobs that produce income and enhanced consumer buying power.

Placed against this scene is the trend in America, Canada and many parts of Western Europe of the expanding gap between the very few rich and the declining middle class and working poor.

Bull

Years before the 2008 financial meltdown and ensuing Great Recession, North America’s and Europe’s manufacturing sector had begun to shrink, losing in the process typically well-paid jobs, replaced with call centers and other service-related employment which often pay much lower wages. Business people, public policy wonks and economists claimed that manufacturing was a has-been industrial activity, in contrast to the “knowledge jobs” that the service sector would create.

Those who drank the Kool Aid came to realize that the hype from various think tanks that spouted off the benefits of offshoring jobs to a long list of new economic players was just that.

The genie of an emerging multipolar world can’t be shoved back into the bottle. It’s striking when one looks in the rear-view mirror of the past two-plus decades. The intertwined nature of geo-political, economic, technological and environmental events has taken the world to where it is today.

A world characterized with increasingly distributed wealth is more democratic when it comes to economic power (yes, political democracy is slipping globally based on recent analyses). Citizens in such countries as Indonesia, Vietnam and Brazil are more enabled to lead decent lives. Out of a population of 1.3 billion people, China has a middle class estimated at 300 million, and growing. That’s almost the population of the United States. One of China’s priorities is to shift from a reliance on exporting manufactured goods to the West, to meeting rising domestic consumer demand.

Before one comments that these countries, along with dozens of other emerging economies, have significant gaps between the haves and have-nots, just look at the United States and its deteriorating condition with respect to income disparity. Anyone recall the 99 Percent? Canada, incidentally, has one of the fastest growing income disparity gaps in the world.

With a redistribution of wealth, driven by a global rebalancing, come new threats and alliances. Rather than wring one’s hands in anxiety, the more appropriate response would be to identify the challenges and opportunities and then act on them strategically and quickly.

Enter leadership.


Predictions are good therapy, arising from a human thirst for certainty. That might have been reasonable in some ancient world, but is hardly right for today’s.

– Nassim Nicholas Taleb (The Economist, The World in 2013)


Leading in Multipolar World 2nd editionClick here to download my complimentary e-book Leading in a Multipolar World: Four Forces Shaping Society, 2nd Edition.


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Jim TaggartTake a moment to meet Jim.

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2 Comments leave one →
  1. May 19, 2014 5:43 pm

    Interesing read, Jim. I did not know about South Korea’s rapid rise and the burgeoning middle class in China. The world is indeed changing, and the fact that more people are able to enjoy a better life is a promising development.

    I read an article yesterday in which a business leader with questionable ethics said, “It’s not enough for me to fly in first class. I need to know that my competitors are flying in coach.” Classic haves vs. have nots attitude.

    • May 19, 2014 11:26 pm

      Indeed, Susan, pretty shallow comment by the dude in biz class. We’ll see long he can afford flying. Maybe he’ll be checking bags one day.

      Yes, South Korea’s rise from a dirt poor country with a repressive dictatorship has been impressive. Along with Finland, South Korea is see as having the most robust education system on the planet. However, South Korea’s education system also has some serious social costs, eg, stressed out children and an unhealthy suicide rate among young people.

      Ten years when my oldest daughter taught English as a second language south of Seoul, her students went to school all day and then studied English in the evening. South Korean parents desperately want their kids to succeed, and the popular route was, and probably still is, to go to Canada and the U.S. to attend university. Economic hunger drive success, something that has disappeared to a large extent in our two countries.

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