Current global trends in Asia and Latin America

Feb 15, 2006

There is considerable interesting commentary in the press on recent developments in Asia and Latin America. In both of these parts of the world the top priority is the promotion of sustained economic growth that benefits all social classes and in particular diminishes the growing gap between the rich and the poor. This is an age old debate in development economics and much of the conflicting ideology of the last century was preoccupied with these sorts of problems.There is clearly no perfect answer that masters the challenge of high rates of economic growth, sustainable development that protects the environment, promotes more equitable sharing of the fruits of development including a more equitable distribution of wealth and income and life chances and enhances democratic participation in society. Each of these desirable goals sometimes conflict with one another. The trick is to find a synthesis of approaches that maximizes the overall output while minimizing the negative consequences.

China is at a critical crossroads. One telling article appeared in today's Financial Post under the headline Unemployment woes to worsen in China: study. The author Jacqueline Thorpe quotes Chen Zao of BCA research in Montreal
who predicts that even if growth continues at the breakneck rate of 9 % per year unemployment or unemployment will continue to grow in China. Labour saving technology is the culprit.

These technological innovations greatly increase productivity but in the short run they displace workers from their jobs and do not as of yet create enough alternative employment to absorb the newly unemployed workers. This is the old dilemma first posed by Marx in the nineteenth century when he wrote about the tendency for the organic composition of capital to grow leading to the substitution of capital for labour and to his controverial assertion about the tendency for the rate of profit to fall.

Of course, numerous critics since have pointed out that this result did not necessarily hold in value terms. Much ink has been spilled since about this theory.

Keynes argued against some of these claims in his General Theory pointing out that effective aggregate demand fuelled by consumption and capital investment could produce relatively full employment under proper circumstances. It will be interesting to see if the Chinese rediscover the virtues of Keynesian economics rather than the gloomy views   of Marx on the future of their rapidly growing economy.

Of course the challenge facing China also has major spillover consequences for their trading partners like Canada and the US. Both in terms of resource provision and competing on a more level playing field we can expect ongoing developments in both the US and Canada in response to developments in China.In fact, todays business press also contains an article documenting that President Bush inresponse to criticism in the American Congress is going to take steps to monitor more closely labour practices in China as well as intellectual property protection. Undoubtedly the Chinese will not welcome protectionist interference in China's domestic affairs. But we can expect more of this sort of pressure in the future. Certainly enhancing labour rights everywhere in the world, including North America is good social policy.

In Latin America we have some very intriguing political developments. A growing number of Latin American countries have chosen to elect left populist governments .This trend will probably continue for some years to come. Once again, the challenge is balance. How do we avoid the political polarization of the radical left versus the radical right and still make significant progress on economic development, growing equality of life chances, the diminuation of extremes of poverty and wealth and the lessening of corruption. These are large challenges for Latin America and in the years to come Canada will undoubtedly be asked to play a role in promoting democracy and progress in the Americas.