Although President Richard Nixon once said “We are all Keynesians now,” the disillusionment with Keynesian economics policy resulted in a shift toward “monetary
economics.” From the late 1970s and on, Professor Milton
Friedman advocated financial reregulation, privatization, and
controlling the economy through the central banks.
Although now we all know deregulation went too far and
contributed to the financial chaos in 2008, this policy became a
global creed. In 1995 Professor George Shultz, advisor to both
Presidents’ Nixon and Reagan, made the following observation:
“Never in the history of the world has there been so much
economic growth in so many countries.”
Global deregulation contributed to the extra-ordinary growth of
China, India, and other previously undeveloped countries.
The low wage rates and extraordinary attention to detail resulted in
many manufacturers realizing they could not compete with China,
and thus, moving production off-shore. This had previously started
with the growth of Japan in the 1970s, and led to car production
expanding to Asia Pacific, but not much off-shoring by U.S. and
In parallel, India became the call-center masters, with Bangalore
being the call-center capital of the world. Banking and other
financial back-room operations were off-shored to India.
REAL ESTATE FROM 1980s ONWARDS
In reply to this phenomenon, manufacturing facilities all over
North America and Europe were closed, but the growth of
world trade in the form of container traffic expanded fast. Ever
larger logistic facilities appeared—sometime near ports such
as Los Angeles or Rotterdam—but also inland at rail-road
OFF-SHORING OR ON-SHORING?
There are no clear guides as to what works best; the dynamics
depend on a number of inter-dependent variables:
This chart helps to explain the variables of geographical location.
During the 1990s, the cost of manufacturing fell dramatically by
being off-shore. But the weight and bulk or volume of the product
had an influence. For example, for many decades, Switzerland
had skilled labor and made watches; very high value to weight,
but also using advanced technology.
While the time and cost of transport is important, the cost of
technology and the reliability (and security) of delivery plays a
big part. The quality and education level of the work-force may
An example of new technology is in Europe; the growth in the use
of poly-tunnels to grow food has dramatically changed agriculture.
Home grown food and farmers markets have expanded, but all
major food stores are also supplied by poly-tunnel food producers.
There is an ever-changing relationship between labor costs,
technology, and transport cost.
Since 2008, the global levels of economic growth have changed.
The dominant growth of the BRICs, (Brazil, Russia, India &
China) have slowed down, as the U.S. and parts of Europe have
started to recover.
Additionally, the labor costs in India and China have increased
and the cost advantages for off-shoring are not as dramatic as they
were five years ago.
MOVED TO ASIA
PACIFIC IN THE 1980S, AND WHY SOME ARE NOW
RETURNING TO NORTH AMERICA AND EUROPE.