Economic vicious circle
Every country wants to enhance the living standard of its people. One of the means to do so is to induce other industrial countries to invest their capitals, especially in labor intensive projects, so that the people have more employment opportunities.
Let us take, for example, China. Owing to its large population of more than one billion, which implies an abundant work force, available at low wages, industrious workers, and relatively inexpensive land, which naturally attracts many investors. About two decades ago, conditions were so bad that a famine occurred and many people in villages lived below subsistence level.
At present, cities near the coast, such as Shanghai, enjoy high prosperity, owing to the present free market and global economy. It is even said that, after a decade from now, China will attain an important position among the Asian-Pacific countries.
So, there are--de facto--three important factors, namely, cheap labor, diligent workers and cheap land which are the best inducements for foreign companies to invest their capital in China. I believe that this goes not for China alone, but also for other developing countries.
However, as time goes on, the standard of living becomes better and better, and naturally, the workers will demand higher and higher wages and it is a matter of course that a man's demand is unlimited; the sky is the limit, as the saying goes.
Prosperity of the people brings about complacency, and complacency is the mother of laziness. Also, when people become prosperous the price of land goes up, so much so that the three factors are not enough for an investment.
The cost price of goods produced will be so high that it will no longer be competitive and the goods produced will no longer be saleable. So the factory has to pull up its stakes and produce in another country, where the above-mentioned three factors are available. A company which produces goods it cannot sell is bound to go bankrupt. So the vicious circle will be repeated.
A. DJUANA
Jakarta